Some Hunter and regional NSW companies are owed more than $500,000 after a geological fault left the colliery supplying only a fraction of contracted coal to Vales Point from July, 2016, while earning significantly lower than the market rate for its coal under a contract with the NSW Government in 2013.

The government has signed off on a sale which guarantees coal to Vales Point after power station owners Trevor St Baker and Brian Flannery bought it from the government for $1 million in November, 2015.

The Lake Macquarie underground mine's 245 employees have retained their jobs and entitlements and Delta continued to work with small and medium companies after appointing receivers to protect its interests on October 3, but the unsecured smaller companies remain the deal's biggest losers.

Delta said $15 million owed to smaller companies were the previous owners' debts, but Delta had provided $1.5 million to unsecured creditors as part of the sale although it was not legally obligated to do so.

"We understand that this money has, or will, be distributed to unsecured creditors in accordance with the normal distributions in an insolvency situation," Delta company secretary Steve Gurney said.

Administrator reports detailed the swift decline of a mine that opened in 1962.

The colliery had two fixed-price contracts to supply 1.3 million tonnes of coal per year to Delta to meet half Vales Point's annual coal needs. The contracts were signed in 2013, before the government's power station sale, and in 2016. The colliery also had a sub-lease with Centennial to provide 300,000 tonnes of coal per year.

The contracts, with their considerably lower than market value price per tonne, were "a significant burden" to the colliery, administrator Ernst & Young told creditors in a report on February 22.

In mid 2016 the Lake Macquarie mine encountered a number of geological faults in its northern area that increased costs and drastically reduction. By 2018 the colliery produced about 380,000 tonnes of coal despite being contracted to provide 1.6 million tonnes.

Vales Point power station was required to make up the shortfall by purchasing coal at the much higher market rate from late 2016. By late 2018 Delta claimed damages of more than $30 million for the period from July, 2017 to October, 2018.

Chain Valley Colliery owners Lake Coal, LDO Coal and Fassi Coal recorded profit before tax of $828,000 in financial year 2015, $4.31 million in 2016 and losses before tax of $17 million in 2017 and $56 million in 2018.

By November, 2016 a major colliery shareholder injected $40 million to provide stability, but in 2017 the Department of Planning rejected a proposal for mining in the south of the lease area and by mid 2018 only one major colliery shareholder remained.

Ernst & Young told creditors that by 2018 Delta and the remaining shareholder entered an agreement where the shareholder continued to fund mine operations as long as Delta reimbursed the shareholder.

Ernst & Young acknowledged "the ongoing operation of the mine was important to the operations of Delta" which was required to provide power to the national grid, particularly in the wake of the closure of Victoria's Hazelwood power station.

Ernst & Young said discussions were ongoing through 2018 about Delta buying the mine but did not go ahead because agreement could not be reached with "key third parties".

On September 30 Delta advised the shareholder it would not continue to reimburse the mine's operations, Ernst & Young said. On October 3 Delta appointed receivers to protect its interests and the colliery's owners appointed Ernst & Young as administrator.

Mr Gurney said Delta paid $6-7 million per month to keep the mine operating but "this funding was not unlimited".

"Delta's stepping in to fund the mine cost $50 million. These costs will never be recovered," he said.

By October 30 receivers initiated a marketing campaign to sell the colliery while Delta submitted a proof of debt of $234 million, including a contingent claim of $188 million for potential future losses if the coal supply agreements to 2029 were terminated.

While some of the debt was secured under an agreement between Delta and the colliery, many tens of millions were unsecured. Challenging Delta's figures would be "complex and costly", Ernst & Young told unsecured creditors in its February report.

The amount due to Delta "has a significant impact on unsecured creditors" because a large portion of its claim would be paid "in priority to other creditors", Ernst & Young said.

Delta's secured debt was a "critical component" of the sale price paid for the mine assets, the administrator said.

Delta was the only bidder during the sale process that included approaches to 49 other potential buyers.

"Delta can only draw the conclusion that there was no other interest in buying a distressed coal mine," the company said.

On Friday Delta said it had "not sought to capitalise on the situation" but took "prudent steps to protect its own business and the essential service that it provides".

"Delta has tried, to the extent that it can, to support the business while administrators and receivers pick through the mess left" after the collapse, Delta said.

"Delta could have let the mine close and then endeavored to purchase the assets from a 'fire sale'. This would have saved Delta $50 million that it sunk into the mine in funding operations since 3 October. However, Delta chose to incur those costs."

Unsecured creditors approached by the Newcastle Herald did not respond to a request for comment.