MARKETS

Gympie floats plans to split coal from gold

AT GYMPIE Gold’s annual general meeting on November 22, shareholders were told Gympie aimed to separate its coal and gold businesses within a year.

Staff Reporter

Over the next 12 months Gympie would be exploring separating the coal and gold businesses. Some possibilities include merging Southland with another coal company or separating the businesses into two listed companies.

Despite what was described as flat financial results, Gympie chairman Michael Darling said the activities of the past year would establish both the coal and gold businesses for substantial contributors in the coming year. This focus meant Gympie was expecting an operating loss for the half-year to December 31 and a large profit for the second half-year, he said.

“Exploration and development expenditure is an indication of the effort that has been made. For the year, it was $23.5 million, over double the previous year. At Southland Coal this expenditure was directed primarily at setting up the new longwall mining block, SL2, which is our first block in the Bellbird South leases. Mining in these leases has been our primary objective ever since we made our investment in Southland Coal,” Darling said.

Longwall mining began at the Southland mine based in NSW, earlier in November (reported previously on ILN) Darling said the decision to start up Southland Coal was based on the long-term potential of the high quality coal in the Bellbird South leases. The coal seam in these leases is much thicker, and mining conditions more favourable. Gympie expects to mine more and better coal at lower costs.

Mining is projected to move quickly up to an annual rate of 1.5Mtpa, an increase of over 50% on the tonnes mined last year. The infrastructure that currently exists has the potential to mine over 2Mtpa.

Darling said the commencement of the SL2 longwall panel coincides with a period of better market prospects for coal.

“Asian steel production has been strong and, as a result, coking coal demand has strengthened. Southland believes it can sell today all the coal it produces. For un-hedged producers the fairly dramatic decline in the Australian dollar against its US counterpart has been very helpful. Southland is hedged at 63 cents Australian to the US for about 12 months.

“Although this hedging seemed prudent at the time - a small rise in the Australian dollar could have been very damaging for the company - it is a substantial lost opportunity in the coming year. We are discussing with our bankers the re-structuring of our hedge book to achieve at least some of the potential gains from a lower Australian dollar over the next 12 months,” Darling said.

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