Go ahead for $25m Solid Energy mine on West Coast

Coal producer Solid Energy is to invest $25 million developing a new extraction area at its Spring Creek Mine north of Greymouth, ensuring the future of about 130 jobs.

The state-owned enterprise announced today it was to go ahead with a five-year plan at the new area to gain access to a further 3.1 million tonnes of coal.

Detailed work on a 15-year plan for another part of the mine to gain access to 15 million more tonnes of reserves is also about to start.

Had the company decided against the new project, the mine could have been closed and about 130 jobs lost, but Solid Energy is now seeking to recruit up to 15 experienced mineworkers.

Chief operating officer Barry Bragg said the company planned to invest $25 million over three years in new equipment for the mine.

Work would include an upgrade of the coal washery to produce a low ash, low sulphur coal for international thermal and steel making markets.

"After many months of work we now have a credible mine plan which has been externally peer reviewed by an Australian mining consultant," he said.

The company appreciated that uncertainty about the mine had been difficult for staff and their families, but it had been necessary to carry out a rigorous assessment of the mine plan and the mine's financial viability.

Solid Energy believed the mine could be viable if it met development, production and market targets.

It had talked with potential new and existing customers, in this country and overseas, and had letters of intent to purchase the coal production from the new area, Mr Bragg said.

"We now have to convert these commitments into contracts over the next few months."

Coal extraction in the current mining area would finish at the end of this month, with work then starting on opening up the new area ready for coal extraction to begin in the last quarter of 2007.

About 7000 tonnes of coal a month would be produced during the year-long development phase with production ramping up to 65,000 tonnes a month after that.

"Since May this year, when we moved into coal extraction in the first block of thick coal at Spring Creek, extraction has exceeded all productivity expectations," Mr Bragg said.

"This, and testing of the proposed washery upgrade, has given us the confidence that we can extract and process low ash, low sulphur coal which should attract a premium price in international markets and as a result secure a long-term future for the mine.

"Underground mining remains challenging; as a price taker we will need to secure customer contract prices which reflect the forward projections for thermal coal and ensure that the mine continues to meet development and production targets going forward."

- NZPA