The operating profit will be lower than initial projections due to delays in the build-up of production at the Cascade coal mine near Westport in New Zealand, resulting in lower than expected earnings.
Eastern attributes the slower sales to delays in gaining competitive access to port and rail facilities to achieve the forecast export revenues, and reduced local offtake due to operational issues experienced by the mine’s largest domestic customer.
Eastern Corporation chairman Gordon Smith said despite these difficulties, Cascade will record a profit before tax estimated at $350,000 for the year and annual production is expected to reach 65,000 tonnes.
“This is well above historical levels and the mine is now capable of meeting its production target going forward of 100,000 tonnes per annum,” he said.
Cascade continues to build a strong customer base and work is continuing on a number of options to resolve the freight issues necessary to establish an ongoing export market.
The high coal inventories on hand at year-end are expected to contribute to an improved result in the coming year.
Smith said expenditure in the second half of 2006 will be higher than during the first six months, with the commencement of the drilling program at Whareatea West, the Broughton Stage 2 feasibility study and exploration drilling at Ohai as part of the due diligence study.
Eastern believes that its New Zealand strategy is progressing satisfactorily and that its policy of maintaining profitability and positive cash flows while simultaneously developing additional projects through acquisition and exploration remains appropriate.
In accordance with this approach, drilling has commenced both at Whareatea West Exploration Permit near Westport and at Ohai, where Eastern has acquired the option to buy the mining operations of Straith Industries.
Results from both programs will be released to the market once they have been received and assessed.