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Asset sales give Coal & Allied's H1 profit a lift

Esmarie Swanepoel

August 1,2010

PERTH ( - ASX-listed Coal & Allied on Tuesday reported that its profits for the first half of 2010 surged on the back of the divestment of two undeveloped coal projects, in the Gunnedah basin.
First-half profits soared 54%, to A$498-million as a result of the divestments, but fell by 50% to A$161-million when the divestment figures were excluded, compared with the first half of 2009.
Revenue for the period was also down by 25,7%, to around A$929-million, compared with the first half of 2009.
MD Bill Champion said that wet weather and rising overburden strip rations across all its operations had a negative impact on the company's production in the first half of the year.
However, he added that Coal & Allied's strategy to focus on higher priced semi-soft coking coal led to strong semi-soft coking coal production volumes.
Earlier this month, the Rio Tinto subsidiary reported a 10% increase in its saleable coal production during the June quarter, reaching 4,64-million tons, compared with the previous quarter.
During the same period, the company reported an 18% increase in its production of semi-soft coking coal, in order to take advantage of the high coal prices, relative to thermal coal prices.
Semi-soft coking coal production increased to 1,32-million tons.
Champion said that Coal & Allied's share of production during the first half of the year increased by 2%, compared with the same period of last year.
"The overall increase in saleable production was assisted by the progressive commissioning of new heavy mobile equipment at Mount Thorley Warkworth, and through mining a more productive coal seam at Bengalla."
Champion noted that semi-soft coking coal sales production increased by 87%, contributing 26% of Coal & Allied's sales volumes, compared with the 13% in the first half of 2009.
While the semi-soft coking coal production process reduced overall yield, this was more than offset by the increased margins on sales.
"We continue to expect a strong second half in 2010 and are targeting full year production of 27-million tons, with a higher proportion of thermal coal in the mix relative to the first half.
"Second half semi-soft coking coal production tonnage is likely to be slightly lower than that achieved in the first half," Champion said.
He added that the company was currently in the process of accelerating waste removal to lift its mine production to match plant capacity.
"We are progressively commissioning new heavy mobile equipment and increasing the number of operators and maintainers for our additional waste stripping requirements. These actions have resulted in additional cost pressures for the business," he said.
Railing delays and higher-than-anticipated ship queues in the first half of the year also contributed to a build-up of inventories, however, Champion said that this additional stock would be depleted early in the second half of the year.