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New Zealand’s Solid Energy releases Q3 2012 report

Oilfield Technology,

Solid Energy New Zealand Ltd has released its quarterly report for Q3 2012, with details about coal production, sales into the international and domestic market, resources and the company’s corporate restructuring.

The company’s coal production for Q3 2012 was 988,000 t, in line with the same quarter of 2011, but coal sales were down by 11% due to weakened export demand. Export sales were down 27% to 434,000 t. Domestic sales, however, were up 6%.

In other developments, Solid Energy’s underground coal gasification pilot plant has been successfully producing syngas at the company’s Huntly site since mid-April 2012. During this time the key operational test programme objectives have been met and as planned, the controlled shutdown of the pilot is now underway to enable completion of post-operational analysis and monitoring. This is last remaining objective in the life cycle analysis of the pilot project. The focus will move to analysis of the operational and post shutdown data to validate the feasibility of a commercial-scale plant. A coal-to-fertilizer (CTF) feasibility study to confirm the economic viability, including environmental and social acceptability, of a Southland-based coal to urea development is underway. This phase of the project includes identifying project partners and selecting the company’s preferred development partner. The Huntly coalbed methane (CBM) demonstration plant was completed successfully, but show down as the CBM focus moved to seeking investment partners for the much larger Taranaki resource.

Resource exploration and proving, and future mine planning, were slowed considerably in response to the major downturn in coal prices, but progress has been made:

  • Resource drilling for the proposed Liverpool mine was completed.
  • At Tararu mine, 18 million t of measured to indicated metallurgical coal resource and 12 million t of inferred semi-soft coal resource was confirmed.
  • Exploration began of a potential opencast resource near the privately-owned Roa mine boundary.
  • Estimates of the the Denniston resource was completed, confirming 6.5 million t of indicated metallurgical coal.
  • A drilling programme was completed at Deep Creek block, provisionally estimating 5.2 million t of metallurgical coal.
  • An opencast mine study was completed for Burkes Creek, indicating inferred resources of 18 million t.
  • Reddale mine has an ongoing expansion project.
  • The mining potential of a small opencast block in the Ohai coal mining licence is being assessed.
  • Potential expansion of Rotowaro mine’s Awaroa 4 pit is being assessed.

A number of additional business changes and measures to minimise the impact of the deteriorating global coal markets were announced, including:

  • Spring Creek mine: The economic viability of the mine has been steadily decreasing due to poor development rates and weakening export coal markets. Solid Energy proposes to put the mine into care and maintenance. All underground work at the mine, except essential safety and maintenance work, remains suspended. The company expects to confirm the future of the mine shortly, having consulted with staff.
  • Huntly East mine: During the quarter, the company confirmed its proposal to reduce long-term coal development to ensure the mine’s immediate financial viability. This included ceasing further capital investment in the ventilation shaft and reducing total workforce numbers from 234 positions to approximately 171.

Corporate: As a result of refocusing its business strategy and scope, the company reduced the requirement to support underground mining operations and, in further response to the rapid deterioration in coal markets including reduced plans for near-term coal exploration and mine planning, has confirmed a proposal to cut corporate, support services and development staff positions from 313 to approximately 150 positions.

Adapted from press release by Lauren Bryant.

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