Cumnock Coal owns and operates the Cumnock longwall mine in NSW. The company reported that longwall panel 19 (South) has been abandoned after severe geological conditions hampered production.

“Initial investigation of the geology in the adjacent areas to longwall panel 19 (south) have indicated that there could be significant risk to the longwall equipment if an attempt was made to continue to extract coal from these areas. Consequently, these areas have been removed from a new interim mine plan pending further investigation,” Cumnock Coal said in an ASX statement.

The new mine plan will be confirmed by the end of 2002 once the results of a drilling programme are interpreted. The company said this long term plan envisages that there will be a need to move into, and start new major development work in the eastern area. This will enable longwall blocks to be developed for extraction after the remaining scheduled minable reserves in the western area have been exhausted by August 2003.

“Due to the distance that needs to be developed and the time required to complete the development of the first long wall panel in the eastern area, combined with the decision not to mine the longwall block 19 (south) and the adjacent areas, it is expected that there will be period of time in which there will be no longwall production because of additional development requirements,” the company said.

Because of this the company is anticipating additional funding requirements, and is examining raising the funds by way of a rights issue.

“Pending the outcome of this assessment the company's major shareholder, Xstrata Coal Australia Pty Limited has agreed to continue to provide interim funding to enable the company to meet the short-term funding requirements,” the statement said.

Previously capitalised development costs of $21.3 million have been written off as a significant item. This has increased the loss from ordinary activities before income tax for the half year to $32.9 million.