PERTH (miningweekly.com) – Coal developer Bandanna Energy has lowered its operating cost estimates for the Springsure Creek project, in Queensland, after the optimisation of operating plans.

The project was now estimated to have a free-on-board operating cost of A$59.80/t down from the previous estimate of A$65.61/t.

The optimisation work was driven by an increased confidence in the mining conditions, as a result of additional drilling and geotechnical assessments, which had increased the probable reserve to 174-million tonnes and the probable marketable reserves to 165-million tonnes.

This was up from the previous estimates of 162-million tonnes and 154-million tonnes, respectively.

“Additional drilling has confirmed the consistent quality and thickness of the target Aries 2 seam, and the ability for greater production from a single longwall,” said Bandanna MD Michael Gray.

“The resultant reduction in forecast operational costs further enhances the competitive position of the Springsure Creek project, compared with much existing thermal coal production.”

With the optimsiation of mine planning and production schedules now complete, Bandanna would look to finalise the capital cost estimates for the project.

The 2012 definitive feasibility study (DFS) predicted that the Stage 1 project, producing some 5.5-million tonnes a year, would require a capital investment of A$743-million.

A further A$437-million investment would be required to ramp-up production to 11-million tonnes a year, the DFS estimated. However, since that time, there has been a substantial weakening in the Australian mining construction market.

Gray said the company was confident that there was significant opportunity to reduce Springsure Creek’s capital costs as a result of this, as well as the optimised project design.

Meanwhile, Bandanna on Wednesday also announced the appointment of ASX-listed Ausenco to provide project management advice, engineering support and procurement services for the Springsure Creek project.

Ausenco would deliver an engineered budget, schedule and execution plan to allow Bandanna to finalise the design and capital cost of the project by the end of June.

In November last year, the Queensland government approved the environmental-impact statement for the Springsure Creek project, satisfying a key investment criteria for several potential customers and joint venture partners.

The project was on track to deliver its first coal by mid-2015, subject to the grant of a mining licence, initial project funding, and the scheduled completion of the Wiggins Island Coal Export Terminal Stage 1 at Gladstone.