Yancoal has flagged the possibility of an underground operation at the Mount Thorley Warkworth thermal and coking coal project in New South Wales.
The company has identified a coal resource that could support an estimated annual production of around five million tonnes.
The Mount Thorley Warkworth operation comprises two open-cut mines, which produced 3.1 million tonnes saleable coal during the December quarter.
Yancoal is progressing its underground potential into a pre-feasibility study for submission to the board.
It is also considering to jack up open-cut production at the Moolarben operation in New South Wales to 16 million tonnes a year.
Should the expansion go ahead, Yancoal’s annual run-of-mine (ROM) production at Moolarben would increase from 21 million tonnes to 24 million tonnes.
But Yancoal stressed that this was dependent on its decision to increase its capacity at the coal handling and preparation plant.
“As always, our focus is on the controllable elements of our business; particularly optimising production and operating costs wherever possible,” Yancoal chief executive David Moult said.
“… While coal price uncertainty remains, the outlook is improving with coal indices recently recovering to the levels of 12-18 months ago.”
Yancoal noted that demand and prices for thermal coal had improved as Asia was hit by a colder than usual winter and exports from Newcastle were disrupted.
The company stated that coal price indices improved during the last quarter of 2020, with the difference between China’s domestic and import prices remaining above $US20 ($26) per tonne, “notionally supporting the demand for imported coal.”
Although Moult said the recent improvement in coal price indices was encouraging, Yancoal has further diversified its markets into India, Pakistan and South America during the second half of last year.
The company stated that it would continue with this diversification strategy.
During 2020, Yancoal delivered on its production target with around 38 million tonnes of attributable saleable coal production.
However, it produced 3 per cent less run-of-mine coal during the December quarter compared with the previous period with 17.3 million tonnes.
Its sales were also down by 7 per cent from the previous quarter at 9.4 million tonnes, mainly driven by disruptions at the Newcastle Coal Infrastructure Group coal terminal in New South Wales in December.
Across the Moolarben and Mount Thorley Warkworth mines, coal volumes have been affected by unplanned maintenance.
Yancoal reported no material impacts on production due to COVID-19 during the quarter and expects to catch up on its scheduled exports early this year.