Last financial year was a bumper one for Hunter Valley winegrowers. Already acknowledged nationwide as one of the best sources of reds, the message seems to be sinking in offshore and exports were expected to increase again this financial year.

Conversely, for the neighbouring coal industry, the current market was so bad most have been driven to drink. The multi-billion-dollar New South Wales coal industry soldiered on last year only to see the productivity improvements hard won by rationalisation and smarter mining all but wiped out thanks to a plunge in contract prices.

Despite contract price cuts many miners have continued with their new mine or extension approval processes.

The tough road that has been trudged was evidenced in a survey report conducted by PricewaterhouseCoopers which showed the NSW coal industry had recorded an overall profit in 1998-99 of $178 million, a significant turnaround on the $186 million loss reported in 1997-98.

But, according to the NSW Minerals Council’s chairman, Bob Humphris, the latest performance was not indicative of the real state of the industry. “Contract prices for export coal fell significantly from April 1 1999 and so the 1998-99 results only capture three months of these lower prices,” he said.

“The average operating profit of $3.43 per tonne in 1998-99 was a major improvement on the $0.09/t loss in the previous year. However, with the decline in prices, profitability has deteriorated seriously since April 1999.

“Export prices for NSW coals averaged $49.15/t in 1998-99 but only around $42.30/t in the first six months of 1999-00 — a drop of about 14%.” This scenario was exacerbated last month by the settling of benchmark thermal prices for the coming year at a further reduction of $1.20/t — representing an 18% fall over two years.

The NSW coal industry recorded a $178 million profit in 1998-99. While an improvement on the previous year, it belies the true state of the industry.

The PricewaterhouseCoopers survey was also interesting in the sense that 22 companies responded, making up 86% of the state’s coal producers, yet the distribution of profits was highly skewed to three companies. If the results of those three companies were excluded from the survey, the balance of the industry would have made a loss.

Such poor bottom line figures have made it difficult for new project finance and go-aheads, while the NSW coal industry has had an average return on shareholders funds of less than 5% for the past 10 years. “In terms of the last decade, I don’t believe the industry has made anywhere near enough return on shareholders’ funds, and that has to be worrying looking out,” Humphris said.

“I think you can see it reflecting in the Australian coal industry in the number of mines for sale.”

Humphris said positives included an increase in employee output per year of 18.4% on the previous fiscal year and a smooth operational performance from the Newcastle loading terminals.

In the longer term Humphris said miners should benefit from a more competitive rail-freight regime. “We are expecting further improvements in access charges this year with final phase-out of the monopoly rent.”

While the severe price cuts have forced miners to sprinkle mothballs on a number of new projects, it hasn’t stopped them going through the motions of obtaining governmental approvals or examining expansion plans. Also worth noting is that in the next decade about four open cut mines could close in the Hunter Valley, causing the need for replacement mines.

As at the start of 2000, the NSW Department of Mineral Resources had eight mines on its books seeking to expand existing operations and 16 possible new mines.

The bulk of these projects are located in the Hunter coalfield. When married with projects in the Gunnedah and Newcastle coalfields, there is potentially an additional 50 million tonnes of coal per annum production capacity. However, about 35Mt of that was likely to come on stream in the next decade.

The rundown of mines and projects being considered for expansion or development included:

Hunter coalfield

* Bengalla: Shipped first coal last April and has ramped up to 1Mtpa, building up to 5Mtpa by 2003.

Glennies Creek: Trial mining started in May last year and would determine whether a full-scale longwall mine can be developed or whether continuous miners would be used.

* Mt Pleasant: A big deposit earmarked to generate 5.5Mtpa. The project could be subject to stringent operating conditions.

* Carrington/Chestnut: Rio Tinto planned to extend these operations in order to maintain current production levels.

* Glendell: Liddell Coal Operations had approval to develop a 2.7Mtpa open cut.

* Nardell: Another LCO project, Nardell could become a 2Mtpa underground operation by late this year or early next year.

* Ravensworth: Peabody Resources was keen to develop another open cut west of Ravensworth and has development consent.

* Swamp Creek: Peabody bought the Swamp Creek colliery and renamed it Ravensworth East. An EIS was under consideration for the area.

* Mount Arthur North: Coal Operations Australia will supply 3Mtpa to Macquarie Generation for five years from 2003.

* Sandy Creek: Muswellbrook Coal Company will begin underground mining at Sandy Creek in about 2004.

* Lemington/Howick: These mines have been granted extensions which would allow them to keep producing at current levels.

Gunnedah coalfield

* Boggabri/Maules Creek: Both these deposits have had development consent for many years, however, because of their distance from Newcastle they were unlikely to mined in the near future.

* Vickery: Whitehaven Coal Mining has applied to trial mine near Vickery with a view to finding a replacement for its Gunnedah colliery which is in its twilight years.