Fonterra confirms proposed coal mine at Mangatangi is on hold

Fonterra Cooperative Group [NZX: FCG], the country's largest milk processor, has confirmed it has put on hold a proposed coal mine at Mangatangi while it assesses its energy options.

The Coal Action Network Aotearoa (CANA), which is trying to stop coal mining in New Zealand, said Fonterra sent a letter last week to local residents confirming the decision, which the cooperative put down to its economic position and that of the dairy industry generally.

CANA's Jeanette Fitzsimons said the initial deferment of the mine was said to be due to environmental conditions and then to coal prices, and now was being explained away with economic reasons.

"No doubt all three have something to do with it," she said.

The group is still campaigning to cut Fonterra's use of coal, claiming it is the country's third-largest coal user. Ms Fitzsimons has estimated the dairy giant consumes 520,000 tonnes of coal a year at its various milk processing plants, an increase of 38% since 2008. That figure includes Ms Fitzsimons's estimates for likely coal usage at the planned Studholme plant, in South Canterbury, which has yet to be granted a resource consent.

Fonterra won't confirm its total coal use for commercial sensitivity reasons and Ministry of Business figures provide only annual sector usage rather than individual company.

Solid Energy's 2014 annual report said the Huntly power station and NZ Steel remained its two biggest customers and that it had signed a contract for 100,000 tonnes with an unnamed customer. Ms Fitzsimons said the only possible user for that amount of coal would be Fonterra, which also sources coal from Bathurst Resources in the South Island for its Edendale plant in Southland and the Clandeboye factory in South Canterbury. In the South Island, Fonterra uses coal because, unlike in the North Island, natural gas is unavailable as an alternative.

In February, Fonterra subsidiary Glencoal denied CANA's claims it had put its plan for the open cast mine on hold indefinitely following public opposition and falling coal prices. Glencoal said at the time there had been some delays due to the need to minimise environmental impacts.

Consent to mine 700,000 tonnes of coal a year from the proposed Mangatangi mine was given in late 2013, subject to a number of conditions addressing environmental and health concerns. The planned mine was allowed to extract coal over eight years and the land had to be returned to pastoral farming once the mining is completed.

"While local residents are celebrating the reprieve for their community, none of this reduces the coal that will be burned, nor the carbon dioxide used. That's why CANA is still campaigning on Fonterra's use of coal," Ms Fitzsimons said.

Fonterra said in an emailed statement that it was "committed to optimising its energy mix toward cleaner, more efficient forms of energy, and continues to investigate secure, cost effective alternatives to reduce emissions intensity and contribute to our energy efficiency."

A key part of its energy strategy has been trialling new types of energy generation and different energy sources, including small scale trials of miscanthus, a grass, as a fuel, and the assessment of technologies that allow it to co-fire biomass in a number of its newer plants, the company said.

Miscanthus NZ chief executive Peter Brown is trying to establish an industry for the north Asian grass, which has one of the highest biomass properties of any plant, in New Zealand. Carter Holt Harvey's Kinleith mill is the major user to date.

He said Fonterra had allowed two hectares of its land at Darfield to be planted in miscanthus, which helped prevent nitrate leaching in the soil but had not progressed beyond early stage trials as a fuel in its factories.

Mr Brown said he recently alerted Fonterra to miscanthus cubes he's produced, which would fit the feeder systems in the milk plants and could more easily be used with coal.

(BusinessDesk)