Solid Energy proposes to cease production at uneconomic Huntly East Mine

Solid Energy is proposing to permanently cease production at its Huntly East Mine in Waikato because the mine has no prospect of returning to profitability and is unsalable.

The proposal was outlined to staff members of the underground coal mine this morning. They have 10 days to provide feedback on the proposal. The company management will consider any feedback and make a final decision by Thursday, 22 October.

Today’s decision follows Solid Energy’s voluntary administration and the creditors’ vote last month to begin a programme to sell assets over the next two-and-a-half years pursuant to a Deed of Company Administration. Part of that process is to determine if any assets are un-saleable.

Chief Executive, Dan Clifford, says the mine has been struggling financially for some time and its loss-making position has deteriorated further recently.

“In September 2013, Solid Energy undertook a major restructuring at Huntly East Mine. The company said it would keep the mine going in a small way, at least-cost, because at that time the view of industry analysts was that the market would start recovering in a year or two.

“In fact the situation has continued to deteriorate and Huntly East Mine is now deeply unprofitable, costing in the order of $500,000 a month to keep open,” Mr Clifford says. “Because the company does not need the mine’s production to meet our current or expected customer demand, and because there is no prospect the mine can be run profitability, we have determined it has no chance whatsoever of attracting a buyer. We therefore must act to stem these losses.”

Solid Energy Board Chair, Andy Coupe, says the proposed stopping of mining at Huntly East Mine would end almost 140 years of underground coal mining in the Huntly district. “Directors recognise that if this goes ahead as proposed, it will be the end of an era, and not just for our staff members at the mine. Many, many people have connections to Huntly’s underground coal mining history and mining in the past has played a very important part in the economy of the region. This is but one of many difficult but important decisions that directors have had to make in recent months.

“This decision, however, should not be read as the end of underground coal mining in New Zealand. This individual mine has been in work for almost 40 years and over that time the working faces have moved further and further from its portals and deeper underground. So while this mine has no prospect of returning to profitability, that is not to say that underground coal mining may not be profitably done again in the future with a different set of conditions.”

Since the September 2013 restructure, Huntly East Mine has been producing 100,000 tonnes of coal a year, with a staff today of 68. Since this morning’s announcement, all but safety-critical underground work has been suspended and employees will be tasked with surface work.

If, after considering employees’ feedback, the decision is to proceed substantially as proposed today, all but three staff members’ roles would be disestablished and the people made redundant. The company would re-employ a small group of people on fixed-term contracts to undertake the mine closure work.

Full planning of a closure has still to be done, but it is likely the mine’s underground workings will be flooded and its entries permanently sealed.

Huntly East Mine began producing coal in 1978. Its peak production was 465,000 tonnes in the 2003/04 financial year.

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