The Ohai opencut mine in New Zealand’s South Island produces about 200,000 tonnes of coal per annum, with half the annual production railed to Fonterra’s Clandeboye dairy plant under a five-year supply contract which expires in August 2008.

After an extensive request for proposal process involving a number of energy companies, Fonterra advised last week that Solid Energy had been unsuccessful, instead granting the contract to Eastern Coal Supplies, a wholly owned subsidiary of Queensland-based Eastern Corporation.

Solid Energy chief operating officer Barry Bragg said the company was disappointed and confirmed that Ohai operations would be downsized in August.

“While we had only expected to mine Ohai until around 2012, we had proposed to Fonterra that we transition to supplying coal from our recently acquired, nearby, New Vale Mine,” Bragg said.

“We’ve been talking to Ohai staff today and outlining what we’ll be doing over the next few months to assess how best to optimise the remaining coal reserves at Ohai to meet demand from new and existing customers.”

From September 2008, Eastern will supply approximately 130,000 tonnes of coal each year to Fonterra Clandeboye from its Takitimu mine, near Ohai.

Eastern’s New Zealand general manager, Campbell Smith, said the contract with Fonterra would underpin the production of the company’s Takitimu mine.

“Eastern is pleased to be associated with one of New Zealand’s premier companies and we recognise this agreement as a significant step in our New Zealand coal strategy,” he said.