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A giant multi-national company has bought a 49 per cent stake in Solid Energy's Spring Creek coal mine, securing the long term future of the biggest underground mine on the West Coast.
The mine, 12km northeast of Greymouth, is in a development phase. It was mothballed in 2001, just 11 months after opening, and again in 2004 after concerns about development rates and coal quality.
In a surprise announcement today, State-owned enterprise Solid Energy said the Geneva-based trading arm of US agricultural, food and trading company Cargill Inc agreed to buy 49 per cent of all future coal from Spring Creek and would also take up a 49 per cent investment stake.
It said the purchase for an undisclosed price would help extend the life of the mine from five to 20 years.
Cargill is a private company that is becoming heavily involved in biofuels in the US.
Solid Energy will retain the majority shareholding and will continue to operate the mine and employ all 140 staff.
The news was broken to staff at meetings this morning.
Solid Energy will market the coal in New Zealand and both parties will sell into the international market.
The agreement is conditional on approval of the New Zealand Overseas Investment Office and the Associate Minister of Energy.
A new area of the mine is being developed to open access to more than 3 million tonnes of coal under a five-year plan agreed to in October.
Coal extraction is expected to restart late this year, when the current coal output of just 7000 tonnes a month will ramp up to 65,000 tonnes.
Chief operating officer Barry Bragg said Cargill had 149,000 employees in 63 countries and extensive experience in thermal coal trading.
"When we made the commitment last year to go ahead with a new five-year plan at Spring Creek, it was backed up by letters of intent to purchase the output from potential new and existing customers.
"In converting those letters into sales contract, Cargill expanded the discussion by offering to purchase equity in the mine to secure a long-term share of this high quality coal."
A 15-year plan for the Rapahoe sector of the mine will now be worked out, accessing an additional 15 million tonnes of reserves. The mine will then have a future out 20 years, as opposed to the current five, as long as targets are met.
Cargill Asia vice-president Bruce Blakeman told NZPA Cargill bought the stake because its coal trading was getting larger and larger and it needed to secure supply.
The quality of coal allowed it to be used for both thermal and coking and its low sulphur content meant it was more environmentally friendly.
He said more of Cargill's customers were in the Asia-Pacific region and shipping it from New Zealand improved the economics.
Cargill Coal managing director Patrick Bracken said the investment marked its first steps into coal production.
"It expands our presence in the Asia Pacific region, creates a number of opportunities and allows us to better serve our customers in Asia and elsewhere, offering them premium quality coal."
Over the next three years, the joint venture will invest $25 million in new equipment for the mine, including two new road headers and an upgrade of the coal washery to provide a low ash, low sulphur product for international thermal and steel-making markets.
Export coal will continue to be transported by rail to the Lyttelton port.
Cargill will transport coal to its international customers using its existing ocean transport business.
Solid Energy already has strong interest from a number of customers for its export share of the production, in addition to its New Zealand sales.
Spring Creek was originally developed by Greymouth Coal, a joint venture between Solid Energy and Todd Coal, and opened in March 2000. Two years later, Solid Energy bought out Todd's share.
The Engineering, Printing and Manufacturing Union, which has 100 members at Springs Creek, welcomed the news.
Union secretary Andrew Little said workers had worked hard for the past few years to keep the mine viable and those efforts had been rewarded.
He said it was good news for the West Coast with jobs staying in the community.
- NZPA
