30 Aug 2012

Solid Energy has overhaul to cut spending by $100m

10:43 am on 30 August 2012

Solid Energy has taken its first major step to combat plunging global coal prices, by cutting jobs, suspending mining operations and reviewing other businesses.

The company is cutting 140 jobs at Huntly East coal mine in Waikato and its head office and suspending work at Spring Creek Mine on the West Coast pending a review.

The state-owned coal miner plans to cut spending by $100 million as part of changes designed to absorb the impact of the global coal market downturn.

The company says international prices for high-grade coking coal have fallen more than 40% in a year to their lowest point in years.

While many in the industry expect Asia-driven demand to pick up in 2013, Solid Energy says it needs to plan to withstand the market conditions.

Chief executive Don Elder says the restructuring was not aimed at maximising the value of the company ahead of its partial privatisation.

He says the company had previously planned to move forward with its strategy and is consequently reorganising the company through until June.

Mr Elder says the strategy is about balancing long term value, the best short term cash position to get it through a severe downturn and how to keep all options open and preserve best core capability.

He says the easy days of coal mining are over and the company is now focussed on two methods to access deeper coal; underground coal gasification and conversion of low value lignites to other products.

Solid Energy says it will continue opencast mining operations and press ahead with plans for Southland Lignites as well as focussing on underground coal gasification projects in Huntly and overseas.

It plans to sell or close its biodiesel business, while its Nature's Flame wood pellet business is now a stand-alone operation.