The decision comes after substantial expenditure in one of Cumnock's longwall areas, which has since been abandoned due to the difficult geological conditions.

A new interim underground mine plan has been introduced, pending the results of a drilling program currently being carried out to confirm the plan's long-term viability.

Results are expected by the end of 2002.

Cumnock said the long-term plan envisages major new development work in the eastern area of its tenements to develop longwall blocks for extraction after the remaining scheduled reserves in the western area have been exhausted.

Current reserves in the western area are scheduled to be extracted by August 2003.

"By doing this, we hope to ensure the long-term viability of our operations," Cumnock operations manager Lawrie Ireland said.

He said that in the past year semi-soft coal prices have fallen by more than 10%, and workers compensation premiums are set to increase by around 60% and will equate a per employee cost of more than $16,500 a year.

"The combination of all of these factors has impacted significantly on our operating margin," Ireland said.