Solid Energy plans to shut unprofitable Huntly East mine, sees no prospect of finding a buyer

Solid Energy, the state-owned coal miner in voluntary administration, plans to shut down its unprofitable Huntly East mine and lay off 65 staff after deciding the site stands "no chance whatsoever" of finding a buyer.

The Waikato mine has been losing money since undergoing a major restructure in late 2013, costing about $500,000 a month to keep open, and was "deeply unprofitable," chief executive Dan Clifford said in a statement. Because of that, the company plans to permanently end production, which would see just three of the site's 68 staff kept on, with a small group re-employed to help close the mine, flooding the underground and sealing its entries.

"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 profitably, we have determined it has no chance whatsoever of attracting a buyer," Clifford said. "We therefore must act to stem these losses."

The majority of Huntly's annual production of 100,000 tonnes of coal goes to NZ Steel's Glenbrook mill, and today's announcement comes the same week the steelmaker said it was still renegotiating its supply contracts with Solid Energy. NZ Steel is on a savings drive and wants to cut as many as 100 jobs in both its blue- and white-collar work forces, which operate the Glenbrook steel mill, the Pacific Steel operation, bought from Fletcher Building last year, and ironsands exports.

Solid Energy told staff of its plans for Huntly today and will give them 10 days to provide feedback, before making a final decision on October 22.

Last month, the state-owned enterprise's creditors backed a plan to sell the company's assets in an orderly fashion over the next two-and-a-half years to try to extract maximum value.

The company was placed in voluntary administration in August after concluding it had no realistic prospect of refinancing $239 million of debt facilities due to mature in September next year.

Solid Energy's downward spiral began in 2013 when slumping global coal prices exposed its commercial error in carrying substantial debt on its balance sheet to pursue a variety of novel energy projects that a previous board and management believed would give the business a future beyond coal extraction.

(BusinessDesk)