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Resource Pacific said it would purchase 93,000t of third party coal for $A7.7 million. Newpac bord and pillar operations produced 157,000t for the quarter, yielding 110,000 saleable tonnes.

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This, together with lower coal prices from April 2006, will reduce EBITDA from $A21m to $A9m.

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The company this month held negotiations with several Asian steel mills, which resulted in agreements in principle for the supply of 20% of expected sales in the 2006 financial year at prices averaging $US55/t.

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The company is also in an advanced stage of negotiations with Korea Electric Power Corporation (KEPCO) involving 5% ownership of Newpac, 5% placement of new shares in Resource Pacific and a 10-year, 1Mtpa coal offtake agreement.

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While longwall expansion work had an adverse impact on bord and pillar production during the December quarter, Resource Pacific said sufficient funds remained to cover longwall development costs. The longwall remains on schedule for January 2007 ramp-up.

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Longwall development through the block fault zone was completed during December and mining operations recommenced on January 16 following installation and commissioning of a new conveyor over Christmas.

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Work has continued on the installation of a new ventilation fan following completion of a new upcast shaft. The fan will be commissioned in February.

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“Implementation of the longwall has gained greater significance with a recent weakening of semi-soft coking coal prices, as conversion to longwall technology will position the company as a low cost producer. Production costs are expected to decrease by approximately 35% on commencement of longwall mining,” Resource Pacific said.