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Bathurst hopes to be mining Escarpment by next July

Tuesday 28th August 2012

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Bathurst Resources is optimistic it will be mining coking coal on the Denniston Plateau above Westport by July next year, assuming it prevails in appeals against resource consents granted in August last year.

Managing director Hamish Bohannan disclosed the July target date in an online presentation to investors on Aug. 20, several days before the High Court ruled against an appeal that sought to require the climate change impacts of coal mining to be considered in granting resource consents.

While Bathurst expects that decision will be appealed further, the most important hearings ahead of it start on Oct. 29 and are due to run through to mid-December, with the Royal Forest & Bird Protection Society and West Coast Environmental Network challenging the mining resource consents for the Escarpment open cut mine on the Denniston Plateau.

Bathurst has agreed to a range of environmental initiatives intended to offset or mitigate the impact of the Escarpment mine, which is expected to produce one million tonnes of coal a year for export to steel mills, where the exceptionally high grade coal is used in the steel-making process rather than burnt to produce electricity.

However, the company expects only to be able to take around 800,000 tonnes of coal a year for the first couple of years of operation, while it seeks additional resource consents to construct an aerial conveyor system to take coal from the plateau to a railhead at sea level.

From there, the company will either send coal for export through New Plymouth, via lighter from Westport, or move the coal by rail for export from Lyttelton Port, using up to 500,000 tonnes of annual capacity negotiated with the state-owned coal company, Solid Energy.

While Bathurst could also spend between $7 million and $9 million adding to production from the Coalbrookdale mine, which is already in operation and adjacent to the site of the proposed Escarpment project, the company was debating whether to make that investment or concentrate on the larger prize offered by Escarpment.

Delays in the consenting process for Escarpment have led particularly Australian investors in Bathurst, which hails from Western Australia, to question their investment and seen the share price slump to as low as 36 cents in recent months, compared with a high point of $1.52 in the last year.

However, Bohannan said that even with international prices for coking coal falling to around US$200 a tonne, there were still "substantial margins" available for Bathurst, because of the project's proximity to coal-handling infrastructure.

Production costs would run at around US$115 per tonne while it was trucking coal from the plateau, falling to US$85 a tonne once the conveyor system was in place. With A$40 million of cash in the bank and some earnings from small, existing coal operations, Bohannan said the company was well-funded for the near term.

It has NZ$36 million of up-front capital expenditure committed for a partial upgrade of Westport coal-loading facilities, a wash plant, and a spur line from the main railway. While the conveyor system will cost around $60 million, the initial deposit of up to $15 million will not be required for another 18 to 24 months, depending on resource consent timings.

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