MIM has been pursuing a program of growth and cost reduction, developing new mines and improving and expanding existing operations. All the mines developed in the current program have had a low capital cost per annual tonne of new coal output. Newlands came in under $40 per tonne per annum and Oaky North about $60 per tonne per annum, both lower than North Goonyella, Moranbah North and the relaunched Kestrel. Much of MIM’s turnaround can be attributed to the introduction of change management and flexible and efficient work practices, the closure of the Oaky Creek open-cut and the use of contractors to overcome development bottlenecks (Oaky No.1).

However, not all large producers are making the move underground. Pacific Coal has excellent open-cut reserves and despite owning an underground mine — Kestrel, purchased from Arco in late 1998 — the company remains focused on developing its open-cut resources.

Managing director Horwood said Pacific Coal began a program of industrial reform and productivity improvement four years ago because, according to the company, it could foresee difficulties ahead and wanted to win back the right to manage its own mines. Pacific looked at leadership capabilities of people in managerial roles, introduced a team approach and addressed cultural issues.

“Our employees now trust us and that’s why they are working with us to make our mines much more productive,” Horwood said. “We set out to match the world’s best mines. At Blair Athol we are now matching the best mines in the world and Tarong is not far behind. They are by far the most productive open-cut mines in Australia.

“We started production at Kestrel just over a year ago and we got it back up to a production rate that was equal to the highest ever achieved under Arco, and we did that without any industrial dispute.”

Blair Athol is producing more than 11Mt per annum and is budgeted to operate for a further 10 years. Its successor, the Clermont open-cut, is earmarked for production start-up in the next 7-8 years. Blair Athol has just won a 10-year, 6.5Mtpa contract with Electric Power Development Corporation and Japan Coal Development, while in the south, Tarong has secured a new 10-year, 7Mtpa contract with Tarong Energy Corporation. Both mines have reduced employee numbers by 40% and increased production per employee by up to 60%.

Horwood said the proposed development of Hail Creek open-cut remained on hold. “It’s a viable project even at today’s coal prices. It’s a case of when is the right time to bring it on stream. In other words, we don’t want to add to the oversupply in the market,” he said.

At the other end of the spectrum, a new generation of mines based on minimum capital investment and stage-by-stage development is emerging in Queensland. Jellinbah East started this trend in the 1980s followed by South Walker Creek and Coppabella in the 1990s and Foxleigh this year.

Coppabella, owned by Australian Premium Resources (APR), is an open-cut, pulverised coal injection (PCI) mine, 140km west of Mackay. Developed under budget (around $20 per tonne per annum) and in record time, the Coppabella project took only five months from granting of the mining lease to the sale of first product coal. Four native title claims were resolved in three months. Using contractors has meant APR’s mine planning has not been constrained by an expensive mining fleet or mining methods.

In its first year of operation, demand for Coppabella coal has been strong and the mine has been producing three times its budgeted estimate. Europe is a significant market for APR with around 50% of its coal being supplied to European blast furnaces.

“Europe’s been using this technology for a long time but they had their own supply of high-energy, high-carbon coal. With the current changes in the European coal industry, particularly Germany, there’s a market opening up for a replacement supply. We’ve noticed that the additional demand for our coal has come from Europe,” said APR’s managing director, Dennis Wood.

Foxleigh PCI mine, 12km south of Middlemount, is owned by CAML Resources, the Aboriginal and Torres Strait Islander Commercial Development Corporation (CDC) and Itochu Coal Resources. The mine, operated by Thiess Contractors in partnership with the CDC, produced its first coal in January this year. To help contain costs, coal is extracted by truck and shovel and washed at Capcoal’s German Creek preparation plant. Foxleigh is forecast to produce 2Mt in its first year and generate revenue up to $100 million a year.

CAML’s managing director, John Thorsen, said Foxleigh coal’s very low-ash content of 6.5-7.5% gave it an edge in the PCI market. “And we don’t have to sacrifice recovery to achieve that,” he said.

Although Coppabella and Foxleigh are both contract mines, the trend towards outsourcing entire mining operations appears to be slowing significantly, according to Thiess mining manager, Murray Fox. “I don’t see any significant coal operations in the immediate term being contracted out,” he said. Why not? “That is a good question, because I have no doubt that we are able to run some of the operations in Queensland at lower cost than they are currently running.”

While the outlook for Queensland coal is more positive than it has been for the past three years, producers remain cautious. Subdued coal prices have slowed the rate of investment. Pacific Coal is planning to develop Kestrel’s 300 series reserves in 2-3 years, via an existing longwall. Togara North and Theodore aren’t expected to be developed until 2005 and Togara South and Kestrel West from 2007.

The Queensland Government’s energy policy may also delay investment. The $950 million Kogan Creek power project has been put on hold due to a looming glut of electricity and a push for gas-fired power stations.

And productivity, costs, industrial relations, markets and safety remain issues for the industry with greenhouse looming on the horizon.

“It is also likely that in the shakeout ahead, the industry will experience more mergers and acquisitions resulting in fewer and larger producers. This should, in turn, return some investment discipline into the market as high levels of optimism are balanced by a more pragmatic approach to business,” said BHP Coal Queensland president, Rick Gazzard.