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22/11/18

15:25

Post #: 36605053
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Originally posted by Tricar ↑

For UG coal mining, whether B&P or longwall, unless you do a major restructure of the running of the operation the costs are largely fixed and variable costs are a relatively minor proportion of overall. Correlation coefficient is typically >95% and I have probably looked at more than 50 Australian operations. Therefore from a unit cost perspective, unit cost is almost solely driven by production (excluding abnormals e.g. new panel conveyor installation and relocation from one panel to another costs or for a longwall operation excluding the LW move cost).

So based on your comment, the impact is 2 fold (double whammy) - both the "fixed" costs are double and they aren't achieving production targets (potentially many reasons for this including (a) production ramp up and/or targets set too high and (b) machinery availability) and so unit cost is significantly above both Prospectus and target level.

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Thank you for sharing some insight based on your research!

My comments about costs being twice may not be accurate given what you've mentioned. Raising production may help bring them down more than I'm anticipating given the fixed / variable cost interplay. But still lots of improvement needed!

B2Y Price at posting: 17.5¢ Sentiment: None Disclosure: Held
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