Solid faces imports challenge

SOLID Energy’s biggest challenge is to develop new mines and contain costs so its thermal coal can complete with imports, the New Zealand producer said this week as it announced a $NZ35.1 million 2006 half-year profit.
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Coal ship arriving at Port of Lyttelton. Courtesy Solid Energy.

Angie Tomlinson

For the six months to December 2006, the company’s revenue was up 7% but profit slipped slightly due to decreased export prices.

Coal production was up to 2.34 million tonnes, exports remained in line at 1.12Mt and domestic sales increased 18% to 1.22Mt.

“International coal prices have remained strong with the anticipated drop in hard coking coal prices slower than expected, although the high New Zealand dollar will increasingly impact our export revenues,” Solid Energy chairman John Palmer said.

“Proving new economic resources and developing new mines remains a challenge for the company, as does containing costs, particularly to ensure that our thermal coal can continue to compete with imports into New Zealand.”

Chief executive Don Elder said the company’s current priority for the next period was to resolve the uncertainty around some of its operations.

“At Huntly East (Waikato) we are in negotiation with New Zealand Steel to renew our supply contract; at Ohai (Southland) the future of the mine is tied to the contract with Fonterra for its Clandeboye plant near Temuka; and the future of our smallest mine, Terrace, is under review as it continues to face a number of operational challenges,” he said.

On the upside, Cargill’s investment last week at Spring Creek was a significant boost for the future of the operation.

Looking ahead Solid Energy will look at the potential of Southland’s lignite resources and has started a drilling program in the Mataura area to further define the coal resource.

Huntly East and Spring Creek underground mines produced 227,000t and 283,000t respectively for the half year, while volumes at Terrace underground mine were below expectations at 29,200t.

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