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Solid Energy delays decision on Spring Creek

28 April 2006

Solid Energy delays decision on Spring Creek until July

Solid Energy will make a decision about the future of its Spring Creek Underground Mine in July. In the meantime the company will investigate one last option it has identified to make the mine economically viable.

Solid Energy Chief Operating Officer, Barry Bragg, today updated Spring Creek staff on work carried out to date to establish the feasibility of extending development and extraction into a new area of the mine.

“Based on current productivity rates, the costs of operating the mine and current ten-year thermal coal price predictions, there is no credible, economically viable plan for the new mining area, says Barry Bragg.

“There is, however, an option which has been identified over the last few weeks that might secure higher prices and underwrite a continuation of mining. Over the next three months we will explore the feasibility of processing coal to produce a higher quality product for international thermal and steel making markets. This work will involve finalising a mine plan to access thicker coal seams, along with tests to confirm the feasibility of an upgrade of the coal washery to produce an improved product. However we would need to have a high level of confidence that the international market would pay a premium for this higher quality product.

“At the same time we will complete the mining feasibility study at a cost of about $1 million. This will include some geological drilling to confirm the final mine design. When current development work finishes at the end of May, crews will move into a new area to the north west (known as panel 6). This will cost a further $3 million, although there is no certainty that we will be able to secure the revenues needed to begin extraction in this area.”

Solid Energy will keep Spring Creek staff updated regularly and meet again in July to advise them on the outcome of this further work and before making a final decision about the future of the mine.

Background Note

Solid Energy’s Spring Creek Underground Mine is located north of Greymouth on the West Coast. About 130 people work at the mine which replaced Strongman Opencast Mine when it reached the end of its life in August 2003. Spring Creek was originally developed in a joint venture between Solid Energy and Todd Energy, opening in March 2000. In February 2001 mining was suspended due to difficult geological conditions; Solid Energy bought out Todd’s share of the mine and reopened it in October 2002.

Coal extraction at Spring Creek Mine was suspended in November 2004 due to concerns about slow development rates and coal quality issues. Solid Energy carried out a comprehensive review of development and mining systems and practices at the mine and implemented a number of initiatives to improve operational performance, restarting coal extraction in August 2005.

The current 12-month mine plan, through to February 2007, was approved in November 2005. At that time the company said it would make a decision about the future of the mine in April 2006.

ENDS


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