Two new underground coal mining projects on the West Coast of New Zealand's South Island may serve as a catalyst to lift the country's export coal trade from current levels of around 1.5 million tonne per annum to over 3 Mtpa. The Pike River coalfield development and the Spring Creek mine at Rapahoe, 35km NE and 10km north of Greymouth respectively, share many characteristics and challenges. Both projects will produce specialised blending coals, both have very low cost structures, both share the challenge of finding an economic way of transporting their coal, and both will use hydraulic mining methods. Where they differ is in size and stage of development.
The Spring Creek coal mine, jointly owned by Solid Energy New Zealand and Todd Coal, opened in March this year and is expected to reach an annual production level of 500,000 metric tons by 2002, reaching anywhere from 1.5-3Mtpa thereafter, depending on market conditions. Spring Creek will produce semi-soft coal for export, sought after for its low sulfur and ash characteristics.
The Pike River Coal Company is owned by ASX and New Zealand-listed New Zealand Oil & Gas Ltd (75%) and private investors (25%) and aims to produce around 1 Mtpa of export quality semi-hard coking coal.
The method of hydraulic mining is currently used at the Solid Energy's nearby Strongman mine to produce around 400,000 tpa. It is a method best suited to thick and steeply dipping seams. (The technique is under assessment for introduction at the Burton mine in Queensland.)
Graeme Duncan, the managing director of Sydney-based AMC Resource Consultants, which produced the feasibility study for Pike River, is confident the hydraulic technology can be maximised to produce up to three times more tonnage than Strongman.
"New Zealand has not been able to achieve the equipment availabilities and productivities of Australian mines," Duncan said. "We believe that using Australian management techniques and Australian mining systems we will achieve higher availabilities. The difference is between what we're trying to achieve and what Strongman are achieving at the moment. And that can be explained by getting the efficiencies right."
Hungry Australian contractors such as Roche, Clough and Transfield recently visited New Zealand in droves in the hope of cornering new contracts in an otherwise flat market. Greymouth Coal contracted out a range of big ticket jobs including stone drivage, awarded to Downer, and the construction of the wash-plant, awarded to Sedgman.
"A significant benefit is that labour costs in NZ are about half what they are in Australia, so in dollar per tonne terms if you achieve the same productivity then your labour cost is half," Duncan said.
Hydraulic mining appears deceptively simple and uses techniques common to other mining methods. Initial mine development is carried out with roadheaders and continuous miners while seams of between 1.5-7m are mined by bord and pillar methods. Roof support utilises conventional roof bolting techniques - Pike River will utilise 6 x 2.1 chemically anchored roof bolts installed at 1.5m intervals with steel mesh and cable bolts where necessary.
To mine a block of coal requires the drivage of two conventional parallel roadways on a rising gradient of about 5 degrees. A typical coal block could be 15-20m long and the same dimensions wide. The seam height could be anything from 7m up to 15m. Hydraulic mining utilises energy, in the form of large quantities of water, piped to a hydro monitor at the coal face. High pressure pumps (3-4MW) provide cutting water pressure at 160kg/cm2 which is directed by nozzle onto the coal seam. Production is roughly 4 tonne/minute, or somewhere between a continuous miner and a longwall.
Operating costs for hydro-extraction are approximately equivalent to a longwall, Duncan said. After coal is extracted controlled caving of the resulting cavity occurs. "The secret is control of the extraction process and maintaining a small coal pillar in the mine area. That is the last thing to take," he said.
Broken coal in the face area is removed down the gradient by the flowing water from the face. Coal clearance is typically through underground steel flumes and then by conveyor to the surface. Pike River has a significant advantage over Greymouth in that the deposit lies near the top of the Paparoa mountain range. No underground conveyor is therefore necessary and coal clearance will be gravity driven as the slurry passes through a 300mm diameter steel pipeline, about 10km downhill to a dewatering station. Greymouth will dewater the slurry underground before it is conveyed to the surface.
According to Duncan, the biggest technical issue is working in a fairly complex geological environment.
"We're talking steep seams, frequency of faulting that is generally more than in Australian operations and we're talking changes in gradient that are unpredictable. We believe one of the real challenges will be predicting geological conditions ahead of mining. We're proposing using in-seam drilling as a matter of course."
While the almost simultaneous development of the two projects is coincidental, there are many synergies which could potentially be explored down the track. The most logical is co-development of transport infrastructure, though this is by no means assured. Solid Energy signed a 10-year coal transport agreement with Tranz Rail in February. Joint venture partner Todd looks likely to spurn Tranz Rail and the Port of Lyttelton and barge any future export coal production through the Port of Marlborough.
Pike River is meanwhile involved in discussions with the Port of Marlborough where a new $15 million wharf was opened in May. This is New Zealand's only port capable of handing 100-180,000t, Cape Size bulk carriers which are viewed as essential for the profit development of the West Coast coal resource. Pike River general manager, Gordon Ward said no formal discussions between the two coal developers had occurred but said they were both aware of what the other was doing.
Ward said NZOG will eventually spin Pike River off as a separately listed entity on the NZ and Australian stock exchanges, possibly as early as year-end. Total development cost for Pike River is estimated at around $NZ55 million, and after allowing for working capital would require fund raising of $NZ70 million. Ward said the lack of infrastructure such as a conveyor and a wash-plant - an in-line jig will remove stone dilution - made the project economically very robust.
"We are offering very high return to investors," he said.
With about 20 Mt marketable reserves, these figures suggest the project could be developed for as little as $NZ3.60 of capital per tonne of marketable reserves. This places the project in the lowest quartile of development costs and below some of the cheapest mines recently developed in Queensland, such as Foxleigh and Coppabella. Greymouth's fundamentals are believed to be similar, though the company declined to provide further details.
Hydraulic mining is not of course an alternative method to longwalling but it does offer distinct advantages. Properly run hydro mining is virtually continuous with changeouts to the next block rapid and easy. According to Duncan, a hydro monitor system could be established for about $NZ8-9 million for output of 650,000 tpa. This compares favourably with modern longwalls which can cost in order of $50-60 million for output of 3-4 Mtpa.