The revelation follows a strategic review kick-started by Noble Group, which became Gloucester’s biggest shareholder in June with an 87.7% stake.
Gloucester operates coal mines at Stratford and Duralie in the Gloucester Basin to produce 2Mtpa, made up of 30% coking coal and 70% thermal coal.
Gloucester chief executive Barry Tudor said the review highlighted the untapped potential of the Gloucester Basin and identified near-term growth.
“We have a clear opportunity to expand production, particularly of our high-value coking coal. This can be done within existing and new pits and allows for the better use of our infrastructure,” he said.
“We believe we are on track to becoming a larger producer of superior coal products with substantially increased JORC reserves and an extended mine life through a relatively modest investment in exploration and infrastructure.”
Under-explored coal seams within existing tenements will be sought, targeting resources between 180Mt and 275Mt of additional coal with the aim of achieving JORC reserves of more than 130Mt within three years.
Gloucester will spend $A8 million a year on exploration, appoint a dedicated exploration manager and double drilling capacity to six drill rigs, with plans to increase to 10 rigs next year.
“Drill sampling has indicated large amounts of unexplored coal in readily accessible seams within our existing tenements,” Tudor said.
“We believe an enhanced exploration program should bring substantial additional reserves to JORC standard and underpin the company’s extended mine life.”
Gloucester has its sights set on production of 3.5Mtpa from 2014, including a four-fold increase in coking coal to 2Mtpa.
The company’s current program will increase saleable coal production from 2Mtpa to 2.8Mtpa from July 2010 with the Duralie mine extension project.
A northerly extension at the mine and new Clareval pits will increase ROM production from 1.8Mtpa to 3Mtpa and extend the mine’s life by nine years.
The extension also allows Gloucester to blend Duralie and Stratford, and the Clareval coal will allow the company to improve the product mix with a greater proportion of coking coal.
Gloucester plans to increase its strip ratio to an average of 5:1. The company said while this would increase production costs per tonne, the resultant increase in volume and life of mine was expected to more than offset any reduction in margin.
The company also plans to better market its coal through blending and managing production.
“As a result of the strategic review, Gloucester has successfully repositioned its higher ash and sulfur thermal coal at a lower discount to the benchmark price, and has secured forward sales in Australian dollars for 50 per cent of its thermal coal production in 2011-14 at historically high margins of $A20-45 per tonne,” the company said.
Coking coal exports will continue to be centred on five major Japanese steel mills with additional strategic markets developed as production increases.
Phase 2 of the review, which is in progress, is focusing on external growth opportunities outside the Gloucester Basin.
Gloucester was trading up 0.79% mid-morning today at $6.37.
