The Mining Blog

Centennial Coal’s announcement last week of the results of its Strategic Review certainly sent its share price plummeting, losing over 25% of its value since the announcement. The main “shock” in the announcement was the news that Centennial was closing Newstan Colliery after years of struggling with geological issues.

Centennial have likened the Newstan closure to the closure and subsequent re-opening of Clarence Colliery a few years ago. I was employed at Clarence Colliery when it was closed. I have also worked at Newstan and at other mines within the Centennial group, so I would like to comment on this analogy.

Before I do, I want to note that these comments are my own personal comments and do not reflect the opinion of my former employer, Centennial Coal.

In many ways, I see very good parallels between Clarence and Newstan.

Clarence, like Newstan, had geological problems with their longwall.The other likeness was that both mines, because of their cost structures, had to produce a lot of coal to break even. Clarence and Newstan both had the potential to produce a lot of coal and be profitable, but the physical issues were against them.

When I was working at Clarence, we were always optimistic that we had finally overcome the problems and that we would make a profit, but it never came. The hard decision had to be made to close the mine, and in hind sight, it was the best decision for Clarence. Centennial bought the mine from Cyprus / Oakbridge and re-opened it as a bord and pillar mining operation. The subsequent positive results from Clarence speak for themselves.

The hard decision with Newstan had to be made, and has been made. The mine will no longer be dragging down the good results from the other mines. Even more positive is that some of the equipment from Newstan is to be transferred to Mandalong, which will result in further improvements in production at Mandalong.

Centennial has said that they will be assessing options for Newstan, including re-birthing it as a bord and pillar operation like they did with Clarence. Centennial have a very good track record of converting mines like Clarence into smaller but very successful bord and pillar operations. I look forward to the results of Centennial’s review of options for Newstan.

Now that Newstan’s problems are behind Centennial, I believe that the future will be brighter for Centennial.

Calvin Close
Managing Director
miningreference.com

Disclaimer: Please note that the above information only represents a personal opinion of the author and is not intended to represent any advice for existing or potential share holders