8 Oct 2015

Huntly mine closure 'end of an era'

6:17 pm on 8 October 2015

Solid Energy has confirmed it plans to close its underground Huntly East coal mine.

Huntly East mine.

Solid Energy managers are meeting workers at Huntly East mine before making an announcement. Photo: RNZ / Kim Baker Wilson

Company managers met workers at the mine this morning to give them the news.

Solid Energy chief executive Dan Clifford said the mine had been struggling financially for some time and its loss-making position had deteriorated further recently.

The company will consider any feedback and make a final decision by 22 October.

One worker, who has been at the mine for 30 years, said all crews were at the meeting, and that workers had expected the closure.

Labour Party MP Nanaia Mahuta said the closure was a sad day for Huntly and a big blow to the community.

A Huntly East worker leaving the meeting with Solid Energy management.

One of the Huntly East workers leaving the meeting with Solid Energy management. Photo: RNZ / Kim Baker Wilson

The mine employs 68 people. It suffered significant financial setbacks this year, losing the contract to sell coal to Genesis Energy for its Huntly Power Station.

And it took a big cut in the income it was receiving from the coal it sells to New Zealand Steel's Glenbrook plant when the contract was renegotiated.

Solid Energy is in voluntary administration after failing to be able to pay debts of $400 million. Last month, its creditors approved a progressive sell-down of the company's assets over the next two-and-a-half years.

Mr Clifford said Huntly East mine had been kept open since a restructuring in September 2013 in a "small way, at least-cost" because industry analysts' views were that the market would start recovering in a year or two.

"In fact the situation has continued to deteriorate and Huntly East Mine is now deeply unprofitable, costing in the order of $500,000 a month to keep open," Mr Clifford said.

"Because the company does not need the mine's production to meet our current or expected customer demand, and because there is no prospect the mine can be run profitability, we have determined it has no chance whatsoever of attracting a buyer. We therefore must act to stem these losses."

Since this morning's announcement, all underground work other than that needed for safety has been suspended. Full planning of a closure has still to be done, but it is likely the mine's underground workings will be flooded and its entries permanently sealed.

Solid Energy board chair Andy Coupe said the proposed closure would be the end of an era. There had been almost 140 years of underground coal mining in the Huntly district.

Acting CEO Tony King left and board chair Andy Coupe.

Acting CEO Tony King left and board chair Andy Coupe. Photo: RNZ / Kim Baker Wilson

"Many, many people have connections to Huntly's underground coal mining history and mining in the past has played a very important part in the economy of the region."

Mr Coupe said the decision should not be read as the end of underground coal mining in New Zealand, which he said "may be profitably done again in future with a different set of conditions."

He admitted it was unlikely that anyone would be able to come up with a plan to save the Huntly East coal, even though workers had been given the chance to try.

"The board's made a decision to propose that the mine be closed, but we've got an obligation to discuss this with affected employees.

"It's fair to say that the circumstances are so challenging, we've got an open mind, but I guess it will be difficult to come up with a business case that would allow us to not want to proceed with our decision."

The Huntly East Mine.

The Huntly East Mine. Photo: RNZ / Andrew McRae