One-off cash injection for Spring Creek mine ruled out

UPDATE:

The state services minister has categorically ruled out a one-off financial injection for Spring Creek mine.

Miners from the West Coast joined union delegates and Greymouth mayor Tony Kokshoorn at the steps of parliament today to meet with minister Tony Ryall.

The meeting follows mine owner Solid Energy’s plans to cut nearly 450 jobs from its Spring Creek and Huntly east mines, along with others from its Christchurch head office.

Mr Kokshoorn and union delegates want the government to help out with a $36 million injection, but this was ruled out by Mr Ryall.

He has sympathised with the miners involved and their families but in a press conference after the meeting  he blamed the current weak economic market for coal.

He also blamed the indebtedness of the company, which had ballooned from “about $30 million four years ago to more than $300 million today”.

“This is what happens when international coal prices collapse ... that has affected the viability and the economics of the mines and the company as a whole.”

The international price for coal is between $120 and $150 a tonne. Figures suggest the company needs about $200 a tonne to break even.

Mr Ryall also ruled out any suggestion this had anything to do with preparing the state-owned enterprise for a partial share float.

“This has got nothing to do with the potential float of Solid Energy and everything to do with the collapse of international coal prices. Even if there was no plan to float shares in Solid Energy, these decisions would very likely have been made.

"The economics of Spring Creek and the company have been dramatically affected by the drop-off in international coal prices.”

He is also confident the low prices will not put off investors, as the sale process for Solid Energy is likely to be a three- to five-year process, whereas he believes the coal prices are expected to bounce back within the next two to three years.

Mr Ryall is at pains to assure the public he will be closely monitoring the performance of the SEO's board. And he has hinted at potential changes to it, although he would not go into detail.

12.45pm:

Grey district mayor Tony Kokshoorn has been assured Spring Creek mine will be back in production if world coal prices bounce back.

Solid Energy yesterday announced it is cutting nearly 450 jobs from its Spring Creek and Huntly east mines, as well as some at its Christchurch headquarters.

The remaining staff are preparing the site for care and maintenance, at which time about 20 people will continue to work at the mine.

Today, about 20 miners from both operations marched on parliament and six representatives, including the Engineering, Printing and Manufacturing Union’s Jed O’Connell and Mr Kokshoorn are to meet state services minister Tony Ryall.

The group of miners was almost outnumbered by reporters waiting at parliament's forecourt.

Mr Kokshoorn says there is a very sombre mood on the West Coast today.

Solid Energy chairman Mark Ford yesterday said Spring Creek needed $200 per tonne of coal to break even. The current price on the open market is between $120 and $150.

Mr Kokshoorn does not want a knee-jerk reaction to the drop in coal prices, as it could lead to miners being lost to Australia permanently.

“As coasters, we understand the coal price has collapsed, but in 2008 the price collapsed and it bounced back straight away. This could happen again.”

He was planning to ask Mr Ryall for a cash injection and a fast-track of the resource management act to help the company open cast the mine.

But a cash injection has all but been ruled out by prime minister John Key.

Mr Kokshoorn says he has spoken to Solid Energy ceo Don Elder today about the possibility of a rebound in the price of coal.

“He assures me that if the price gets back to $200 plus, they’ll start looking at taking Spring Creek out of care and maintenance.

"It’s around $120-$150 at the moment, so that’s important to us. It is achievable but we don’t know what the world markets will present us with in the next year or two.

"We’re hoping it will kick back, and as soon as it does we’ll be reminding Don Elder of his obligations.”

bcunningham@nbr.co.nz