Centennial looks to sell smaller mines

CENTENNIAL Coal said today it was looking to sell off its smaller operations including Awaba, Newstan, Myuna, Mannering and Berrima so it could concentrate on its larger mines.
Centennial looks to sell smaller mines Centennial looks to sell smaller mines Centennial looks to sell smaller mines Centennial looks to sell smaller mines Centennial looks to sell smaller mines

Centennial Coal chairman Bob Cameron

Angie Tomlinson

The company said it was conducting a review of several mines following a number of approaches expressing interest in certain mines.

Macquarie Bank will assist Centennial with the assessment of three options that are under consideration: being the retention, partial sale or full sale of Awaba, Newstan, Myuna, Mannering and Berrima.

“We believe there are significant benefits in concentrating our efforts on larger, world-class mines which have the capacity to become the engine of the company’s long-term growth. Accordingly, we are assessing whether we should re-balance our portfolio of mines,” managing director Bob Cameron said.

“There are substantial opportunities available to Centennial to add value at operations such as Anvil Hill and Mandalong,” he said.

Also under review are key alliances with major overseas customers for thermal coal exports from Anvil Hill.

“This process should result in long-term contractual export coal supply arrangements, possibly involving the establishment of an Anvil Hill Joint Venture,” the company said.

Centennial will also look at further expansion alternatives for the Mandalong longwall on the NSW Central Coast, which currently supplies about 3 million tonnes per annum to local power generators. These alternatives include the washing and export of high quality thermal coal to the global market.

Centennial will also look at options to maximise the synergies between the Group’s western district longwall mines as well as their adjoining opencut areas.

Centennial today announced a $A3.1 million net profit after tax for the six months to December 31, 2005, a disappointing result thanks to problems last year at its Newstan mine.

Losses at Newstan were partly made up by new production from Mandalong (commenced longwall production in January 2005) and Tahmoor (acquired in April 2005).

“The main contributors to second-half and future profitability are expected to be Tahmoor and Mandalong, together with Clarence, Springvale and Angus Place,” the NSW producer predicted.

In addition, longer-term profitability will be aided by the ramp-up of the Anvil Hill opencut in early 2008.

Centennial’s equity share of ROM production for the first half was 7.2Mt, 13% above the prior corresponding period. The company’s equity share of sales for the six months was 7Mt, 3% above the prior corresponding period and split 70% domestic, 30% export.

The impact of underperforming mines in the first half is expected to show some ramifications on the second half of the financial year.

“Although Newstan is now operating in normal conditions, the physical impact on the mechanical integrity of the old armoured face conveyor continues to impact the mine’s performance, such that Newstan is not expected to make a contribution to group profitability until it commences mining on its next longwall block. A new AFC will be installed during the next longwall changeover scheduled to commence in April 2006,” Centennial said.

Despite this, Centennial’s directors remained confident there would be a substantial uplift in profitability for financial year 2007.

“Given the improved outlook for the second half and the 2007 financial year, the directors have maintained an interim dividend of 6c per share [unfranked],” Cameron said.

“Looking forward, we expect group profitability to be driven by our larger mines over the next 18 months, with our exciting development project at Anvil Hill providing further earnings growth over the longer term.”

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