Spring Creek Mine secures international commitment

15 MARCH 2007

Spring Creek Mine secures international commitment

Coal producer, Solid Energy, has secured a significant international commitment to Spring Creek Underground Mine, near Greymouth, from Cargill, a major international company in the food, agriculture and energy sectors. The conditional agreement, announced today, helps secure a long-term future for the mine, provided the mine continues to meet development and production targets.

Under the agreement between the two parties, Cargill Coal will purchase 49% of all future coal from the mine and will take a 49% investment stake in the mine. Solid Energy will retain the majority shareholding of 51% and will continue to employ all the 140 staff and to operate the mine. Solid Energy will market the mine’s coal in New Zealand and both parties will sell into the international market.

The agreement is conditional on approval of the New Zealand Overseas Investment Office and of the Associate Minister of Energy in relation to the Spring Creek Coal Mining Licence and associated permit.

Solid Energy is currently developing a new area of the mine to access more than 3 million tonnes (mt) of coal under a five-year plan agreed in October 2006. Coal extraction is expected to restart in late 2007 with the current coal output of 7,000 tonnes a month ramping up to 65,000 tonnes (800,000 tonnes pa) a month thereafter.

Solid Energy Chief Operating Officer, Barry Bragg says: “We’re really pleased to have Cargill on board. Cargill is a major international company – 149,000 employees in 63 countries – with extensive experience and expertise in thermal coal trading which they can bring to our operation, as most of our experience in over 30 years of exporting has been in steel making and specialist carbon markets.

“When we made the commitment last year to go ahead with a new five year plan at Spring Creek, it was backed up by letters of intent to purchase the output from potential new and existing customers. In converting those letters into sales contract, Cargill expanded the discussion by offering to purchase equity in the mine to secure a long-term share of this high quality coal.

“We have a major capital investment programme at the mine which needs to be funded. Cargill’s participation will help fund that and the joint venture company can now begin detailed planning of a subsequent 15-year plan for the Rapahoe sector of the mine, accessing an additional 15 mt of reserves. Provided we continue to meet our targets, this will give the mine a future which goes out 20 years, as opposed to the current five.”

Cargill Coal’s Manager Director, Patrick Bracken, says: “For Cargill, the investment in Spring Creek marks the company’s first steps into coal production. It expands our presence in the Asia Pacific Region, creates a number of opportunities and allows us to better serve our customers in Asia and elsewhere, offering them premium quality coal.“

Over the next three years, the joint venture will invest $25 million in new equipment for the mine, including two new road headers and an upgrade of the coal washery to provide a low ash, low sulphur product for international thermal and steel making markets. Export coal will be transported by rail to Lyttelton Port of Christchurch. Cargill will transport coal to its international customers using its ocean transport business.

Solid Energy already has strong interest from a number of customers for its export share of the production, in addition to its New Zealand sales.

ENDS

Background Notes

Cargill is an international provider of food, agricultural and risk management products and services. With 149,000 employees in 63 countries, the company is committed to using its knowledge and experience to collaborate with customers to help them succeed. For more information, visit http://www.cargill.com.

Cargill’s global coal operations, headquartered in Geneva, were established in 2002 primarily as a trading and marketing business. It now has a number of long-term supply agreements and works with the company’s ocean transport business, in shipping around the world. As well as Geneva, Cargill’s coal business has employees in Singapore, Russia, South Africa, the United States and India. This is Cargill’s first investment in a coal mine in New Zealand.

Spring Creek Underground Mine was originally developed by Grey Coal Limited, a joint venture between Solid Energy and Todd Coal, opening in March 2000 with an expected annual production of 500,000 tonnes. The mine was placed in ‘care and maintenance’ in February 2001 after unforeseen and complex geology was encountered. Solid Energy bought out Todd’s share of the joint venture company in June 2002 and coal extraction restarted later that year. In late 2004 Solid Energy suspended mining due to concerns about development rates and coal quality issues; a comprehensive review of the mine was undertaken and a number of initiatives implemented to improve performance. Mining resumed in August 2005.

2006 saw Solid Energy exploring options to produce a higher quality coal at Spring Creek which would suit both thermal and steel making markets and it was at this point discussions began with Cargill, first as a potential customer and then as an investor in the mine.

--

Embargoed, not for publication before 2pm, 15 March 2007 www.cargill.com/today/press.htm

Cargill to acquire 49-percent shareholding in New Zealand coal mine

GENEVA, SWITZERLAND — 15 March 2007— Cargill is to purchase a 49-percent stake in the Spring Creek Coal Mine from Solid Energy New Zealand. Located in Greymouth on the west coast of New Zealand’s South Island, this marks Cargill’s first investment in the country in recent years and brings an expanded and sustainable presence for Cargill’s coal business in the Asia Pacific region. The acquisition is subject to governmental and other approvals.

Solid Energy, owned by the New Zealand government but operating independently as a “state-owned enterprise“, retains a 51-percent shareholding and will continue to operate the mine. Cargill and Solid Energy intend to enter into a joint marketing agreement for the high quality coal produced from the Spring Creek operation, which is ideally suited to both the thermal and metallurgical markets.

Comments Patrick Bracken, managing director of Cargill’s coal business: “We’re delighted to be making our first steps in coal production with Solid Energy, a highly-respected operator. This move creates a number of opportunites and allows us to better serve our customers in Asia and elsewhere, offering them premium quality coal from this established mining operation.“

Barry Bragg, chief operating officer, Solid Energy New Zealand Ltd, says: “This tie up with Cargill represents a positive chapter in the development of the mine. Cargill will bring to the partnership its many years experience in global trading in each part of the energy complex, while Solid Energy brings long experience of operating Spring Creek and other underground mines. The synergies of the partnership are exceptional and will help us meet our expansion plans both on the ground and as we bring the product from Spring Creek to an increasing customer base.“

ENDS

Editor’s Notes:

Cargill
Cargill is an international provider of food, agricultural and risk management products and services. With 149,000 employees in 63 countries, the company is committed to using its knowledge and experience to collaborate with customers to help them succeed. For more information, visit http://www.cargill.com.

Cargill Coal
Cargill’s global coal operations, headquartered in Geneva, were established in 2002 primarily as a trading and marketing business. It now has a number of long-term supply agreements and, by working with Cargill’s ocean transport business, can apply freight knowledge to ship to other parts of the world. As well as Geneva, Cargill’s coal business has employees in Singapore, Russia, South Africa, the United States and India. Cargill’s coal business also owns a minority stake in Worldwide Coal Carolina, a black empowerment coal mining company in South Africa.

Solid Energy
Solid Energy is a New Zealand state-owned enterprise with three underground mines and four opencast mines in New Zealand, producing 4.5 million tonnes of coking and thermal coal per annum. Solid Energy is New Zealand’s second-largest producer of indigenous energy and also has a major investment in biomass energy for residential and commercial/industrial use.

© Scoop Media