Every Day Mine Services Limited (EDS) is pleased to advise that it has today received confirmation that Shenhua Watermark Coal Pty Ltd, a wholly owned subsidiary of China’s largest coal producer China Shenhua Energy, has signed the contract for drilling at their Watermark project south of Gunnedah, NSW. The contract calls for 6 surface rigs to be mobilised on a staged basis with the first three rigs commencing work on 15 June 2009. The balance of the rigs will commence work 10 days later on 25 June 2009. GOS estimates that the first stage of the drilling program will run for up to 9 months and realise up to $5.5 million in revenue depending on drilling productivity and ground conditions.
China Shenhua Energy acquired the Watermark area exploration licence from the NSW state government in August 2008. China Shenhua Energy expects Watermark to contain shallow coal resources with thermal coal of domestic and export quality totalling more than 1 billion tonnes. The Watermark area can be linked up to the Port of Newcastle some 270km away via a branch railway passing through its north eastern side.
Whilst rig utilisation is currently 50%, it is noted that its larger drill fleet which account for approximately 61% of its drilling assets by value are deployed on long term contracts. There are several possibilities that it is pursuing for further work in both the surface and underground areas that we it is still seeking to conclude before 30 June 2009. In addition, it is examining new opportunities outside the metalliferous sector for its modern underground fleet and will also continue to convert underground rigs for surface work should demand continue for our services.
The programs have targeted annual cost savings of approximately $2.2m from reduced overheads in the business. It is the intention of the directors to operate the business with the current overheadstructure in place until such time that rig utilisation exceeds 85%.
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