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Coal miner Bathurst Resources [NZX: BRL] is making 29 staff redundant as it hunkers down to ride out the lowest world prices for coking coal in the last nine years, and signals a delayed start to its controversial Escarpment open-cut mine on the Denniston Plateau, above Westport.
Bathurst overcame a string of appeals to gain resource consents for Escarpment last October, more than two years after winning initial consents, but watched global prices for coking coal, used in steel-making, fall over that time from a high of more than US$300 a tonne in 2012 to around US$120 a tonne at present.
The company has said its operating costs at Escarpment would come in at around US$120 a tonne, reducing to US$90 per tonne as production ramps up. An economic "caucusing" document agreed during Environment Court hearings between economists engaged by Bathurst and scheme opponents last year, states the breakeven cost for the project is US$165 a tonne and suggests "a minimum expected price for the project to proceed is perhaps US$190."
In a statement to the NZX and ASX today, chief executive Hamish Bohannan says: "Bathurst is committed to commencing establishment of the Escarpment mine as soon as authority is granted but will defer ramping up production until such time as the market is deemed to be recovering.
"For the next period, focus will be on securing the site, establishing facilities, including water management dams and stockpile areas, and mining sufficient coal to complete market qualification for coking coal supply to steel producers, principally in Japan and India.
"Sadly, this means that about 29 jobs will become redundant, but it will ensure that the company preserves cash to continue its operating and development activity," he said.
Bathurst shares hit a high for the last 12 months of 28 cents a share last November, shortly after consents were granted, but its share price has ebbed since to close yesterday at 16 cents. There was no early NZX trading in Bathurst, the majority of whose shareholders are in Australia.
The company is also cutting directors' and executive managers' fees by 30 percent and reducing the size of its board by not replacing chairman Craig Munro, who recently retired, having appointed former electricity industry senior executive Dave Frow to take the chair.
"The key to these actions is to stabilise the company, move it into a cash positive situation, secure the Escarpment mine and develop it to the point where we can move quickly into commercial production once the market improves," said Bohannan.
Its existing three coal mines will continue to service local dairy and cement industries. Escarpment and other mines planned on the Buller uplands above Westport are exclusively focused on export markets.
Meanwhile, Prime Minister John Key yesterday acknowledged that the financially stressed state-owned coal miner, Solid Energy, was also finding current conditions "very challenging."
"We think it can survive, but its asset value is very low," he said in answers to questions about the potential for Solid Energy to be placed back on the list for partial privatisation.