Solid Energy interested in Pike River coal resource

14 March 2011

Solid Energy interested in Pike River coal resource

Solid Energy has confirmed its interest in the Pike River coalfield and says that it is almost certainly the only company with the credibility - knowledge, experience and track record - to mine the resource safely and economically.

However Solid Energy is warning that this will be one of the most challenging coal resources in the world to develop and that there are a number of current issues that have to be resolved. Further substantial exploration and other work are needed to confirm a credible mine plan. The company also says that the existing mine assets may not form a significant part of any future mining operation, leaving only the coal permit and access agreements as the primary assets of value.

Solid Energy Chief Executive Officer, Dr Don Elder, says that as the receiver prepares to sell the assets and recover value for the creditors, the company is taking the unusual step of laying out its views and concerns about the future of the resource because it believes there is only one more opportunity to develop this coal resource.

“Obviously as a potential purchaser of some of Pike River assets, we have a vested interest, but after what everyone has been through it is time for reality. We know everyone on the West Coast and in New Zealand would be concerned if the assets were acquired with great aspirations, but with a lack of the knowledge, understanding and experience to deliver in these conditions.

“Mining the Pike River resource in a way that is safe, economically viable and meets and respects the wishes of the community and the families of those who died has many challenges. Solid Energy is committed to meeting all those should we find ourselves responsible for this resource and we expect anyone else to be held to the same expectations.” Dr Elder says.

“As a non-negotiable part of that, the wishes of the families have to be a priority in considering all options including potential recovery, if feasible, of the 29 miners’ bodies. The same applies to the unsecured creditors on the West Coast; any solution to invest in and work the mine needs to address that issue as a top priority,” Dr Elder says. “We’re very concerned that this resource has been the subject of unrealistic expectations for too long. Continuing this will lead to more disappointment, and another set of mining and financial issues further down the track.

“New Zealand is one of the most geologically, geographically and environmentally challenging environments in the world. The West Coast of New Zealand is the most difficult coal mining environment in New Zealand, by far. We’ve spent the last 110 years learning that, often the hard way. Our current operating mines at Spring Creek just down the road, and Stockton to the north, have 60 years’ experience in this geological environment, yet we’re still being hit with surprises and learning hard lessons every day. But Spring Creek mine is still open after 10 years and producing half a million tonnes of coal a year which is testament to what we have learned.

“Pike River was projected to quickly exceed one million tonnes annual production as an underground mine. Yet Pike has huge geological challenges that are no different to Spring Creek or anywhere else on the Coast. We believe this resource is not characterised, nor is the geology understood, to anywhere near the level required in these conditions, even in the areas already mined. Before we consider a coal resource well enough to develop a safe and economic mine, we expect drill holes to be at minimum spacing of 100 metres. Even this doesn’t avoid continual surprises with faults and other unexpected geological features, each of which can cost days to weeks of lost production.

“Public information suggests drilling at Pike River is currently less than a tenth of that minimum density, and that is only in the part of the resource that was the initial target. The rest of the resource, although suggested by some to be well upwards of 50 million tonnes is, by international standards, inferred at best. Several years of intensive drilling, resource and geological characterisation, and mine planning are needed before a good conceptual mine model could be developed – and that assumes the best mine concept is also compatible with all the geographic and environmental constraints that will have to be addressed. We’d be extremely concerned if anyone planned to start mining again in that environment without first doing all this work.

“Parts of the Pike River resource could be opencast mined. However, even if allowed, this would be among the most difficult and challenging opencast operations anywhere in the world considering the resource, access, infrastructure and the absolute requirement above all to do it safely. The area best suited for opencast mining is likely to be the area of the coal resource about which least is known and which presents most risks – geologically, geographically and environmentally. Parts of the resource might be mined underground but we have major reservations about suggestions that the existing underground mine operations could simply continue with some changes.

“There are many very good underground mine operators around the world, including some with experience in exceptionally difficult conditions. But this is not a relatively straightforward small operation that can move to production fairly quickly. Neither would it be acceptable for the West Coast, or New Zealand, for someone to come in and strip out the quickest easiest coal (if there is any) – by either opencast or underground mining. If the value in this total coal resource is ever to be realised, it will only be through a very carefully planned and developed long-term integration of underground and opencast mining. Anything other than this will risk sterilising a significant part of this valuable coal resource.”
ends

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