Newstan issues make for Centennial profit downgrade

A LONGER than expected relocation at the Newstan longwall and slower progress through a localised zone of poor roof conditions at Tahmoor during June were the latest factors contributing to Centennial Coal’s downgraded profit guidance this week, from $A20-$26 million to $16-$17.5 million for the 2006 financial year.
Newstan issues make for Centennial profit downgrade Newstan issues make for Centennial profit downgrade Newstan issues make for Centennial profit downgrade Newstan issues make for Centennial profit downgrade Newstan issues make for Centennial profit downgrade

Centennial Coal chairman Bob Cameron

Angie Tomlinson

ROM coal production under Centennial management totalled 5.2 million tonnes for the quarter and 17.7Mt for 2006, down 6% and up 6% respectively on the prior corresponding periods.

Centennial’s equity share of ROM coal production totalled 4.4Mt for the quarter and 15.6Mt on a full year basis, down 12% and up 5% respectively on the previous corresponding periods.

Production and sales were primarily impacted by the previously reported operational issues at Newstan, which has had a 2Mt impact on the group’s 2006 results.

Centennial said the Newstan longwall changeover and the installation of new equipment had been successfully completed, with production ramp-up underway. The mine decided to relocate the Newstan longwall earlier than expected because of continuing equipment reliability problems.

Work continues on a permanent solution to seal the LW21 “goaf” (voids) area. Fly ash is being used to isolate and seal parts of the old goaf in the previous longwall extraction area. When completed, this should allow the current campaign of nitrogen inertisation to be terminated.

As a precaution for the future, the group has acquired its own inertisation plant, reducing its reliance on the more expensive large scale unit being used at present. The plant will be commissioned shortly.

Centennial said with the exception of Newstan, the group’s longwall operations all made significant contributions to profitability and continue to demonstrate growth potential with several recent production and development records achieved.

Angus Place preformed strongly during the quarter, achieving a weekly production record of 110,148t and ROM production of 861,972t.

Longwall development continued at record levels, with 3,035 metres achieved for the period – almost 30% higher than expectations. “As a result, the mine has established a favourable development float, essential for maintaining longwall continuity,” the company said.

Work continued on upgrading mine infrastructure, with Angus Place currently transitioning from its ageing fleet of rail equipment and rolling stock, for the underground transportation of personnel and materials, to a more modern and flexible rubber tyre transport fleet. This project is expected to be completed in the December 2006 quarter.

Clarence and Charbon recorded record years, boosted by strong export revenues, with another strong year expected following recent export thermal contract price settlements at similar levels to last year.

Centennial said Springvale had continued to exceed expectations, realising the benefits of recent capital investment.

Over the past 18-20 months, Springvale has invested in a longwall face extension; an upgrade to its coal clearance system - providing additional capacity and greater reliability; a replacement beam stage loader, a new crusher; and longwall face electro-hydraulics.

The resultant records (daily of 25,697t set in early June, weekly record of 97,441t set in the same week, monthly record of 370,453t set in May) demonstrate the significant improvement in productive capacity and reliability achieved.

For 2006 Springvale produced 2.98Mt - a record for the mine.

Development activities at Springvale in preparation for LW412 are well advanced and importantly on track to establish a comfortable float ahead of the next scheduled longwall relocation, anticipated toward the end of the December 2007 quarter.

The Mandalong mine produced 919,000t the June 2006 quarter, setting new daily, weekly and monthly production records, peaking at 412,982t for the month of May, with a daily record of 25,269t in late June.

Tahmoor delivered its most productive quarter of the 2006 financial year with respect to both production and development activities. The mine produced 710,000t tonnes and advanced almost 4km in development for the quarter.

“Management remain confident in Tahmoor’s stated growth objective of 3.5 million tonnes per annum raw coal production by the 2009 financial year, a 40% increase to more than 2.7 million tonnes in 2007, with the previously announced capital works to upgrade the main drift conveyor and the installation of a new mine fan continuing to plan,” Centennial said.

“In addition, a new 7-day production roster is planned to be introduced later in the year, which will optimise available operating time on the longwall panel and the development headings, providing further comfort that the mine’s production growth objective will be achieved.”

In its quarterly report Centennial said 2006 was not “illustrative of the level of the group’s profitability, with the company’s earnings outlook remaining strong”

“With improving performances from the group’s major mines and the first half of FY2007 scheduled to have only two longwall changeovers, one each at Tahmoor and Mandalong, Centennial anticipates a good start to FY2007,” Centennial said.

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