On the day of the first shipment of coal from the South Bulli mine, the Illawarra Mercury published an extensive description of the mine, its plans and its costs. Extracts are shown in panel 1.
from Illawarra Mercury (Wollongong, NSW : 1856 – 1950), Thursday 3 November 1887, page 2 “The South Bulli Coal Company”.
Capital: for 5 year, 8% interest amortisation, on 775,000 tons, cost – 19d or 1s 7d
While the costs were forecasts, they were the forecasts of informed and experienced persons of the day, and the enduring and expanded operations of South Bulli would suggest their assessments were not unduly optimistic.
The projections for the first five years of operations are interesting. A buyer had been contracted for all the mine’s output, at 6/6 per ton FOB Bellambi Jetty. That output was expected to be 775,000 tons (one year at 115,000t, and four at 165,000t). The variable cost of operation is given above:
| Miners (for hewing) | 2/4 per ton |
| Wheeling and screening | 6d per ton |
| Haulage and shipping | 6d per ton |
| Props and timber | 3d per ton |
| Incidentals | 2d per ton |
| Royalty | 9d per ton |
| Total | 4/6 per ton |
Based on variable costs alone, the total revenue from the mine would be 2/- per ton, over 775,000 tons, or £77,500. (This ignores any small coal or nuts, presumably accountable for the minor variation to the stated ‘profit’ above.). It is possible to make an allowance for at least the maximum contribution from the cost of capital, by assuming that the entire facility funding is written off over the five year period (an unlikely event, but a means of calculating the maximum capital contribution). As a reasonable approximation, assuming all funds were borrowed at 8% interest and paid back over the five year period, the total repayment would have been some £61,354. That would have equated to 19d or 1/7 per ton. The total cost can then be rephrased as below:
| Miners (for hewing) | 2/4 per ton |
| Wheeling and screening | 6d per ton |
| Haulage and shipping | 6d per ton |
| Props and timber | 3d per ton |
| Incidentals | 2d per ton |
| Royalty | 9d per ton |
| Capital charge | 1/7 per ton |
| Total | 6/1 per ton |
That implies a nett profit from the five year undertaking of 5d per ton, or £16,146 (or some 32% of the initial capital) – but with a complete set of capital facilities of some likely long life being available and completely debt-free at the end of the period.
Some observations may be made from the data:
first, the business of coal mining at that time was very profitable. The true profit figure lies somewhere between the variable-only and full-cost profit figures above – ie between 32% and 150% of the initial capital in five years.
second, labour was the dominant cost, its magnitude related to other costs being a sign towards the later pursuit of large-scale mechanisation
third, royalties were not insignificant – at 9d per ton, they represent some 17% of total variable cost, and nearly 12% of actual sale price.