Terrace Mine to close following lengthy review

28 April 2009

Terrace Mine to close following lengthy review

Energy producer, Solid Energy has confirmed it will close Terrace Underground Mine in Reefton at the end of June 2009.

The future of the company’s smallest coal mine has been under review for some time as the operation struggled to remain viable in the face of increasing production costs. A 2008 review concluded that the then high international coal prices justified continuing production for a further 12 months, however the mine is no longer sustainable in the current market.

Terrace’s closure will affect 16 staff but Solid Energy hopes to attract most of the mineworkers to its Spring Creek Underground Mine near Greymouth. Solid Energy’s Reefton Distribution Centre is not affected by the closure and will continue to blend and distribute coal from Spring Creek and local private mines.

Solid Energy (then trading as Coalcorp) bought a controlling stake in Terrace Mine in 1988. The mine has produced about 45,000 tonnes of thermal coal per year, mainly for the South Island industrial market. In recent years mining has reached depths of 230 metres, involving considerable engineering challenges which Solid Energy’s South Island Operations Manager, Simon Doig, says have now become economically prohibitive.

“Mining costs have been climbing at Terrace for several years but record thermal coal prices have helped keep the mine open until now. Unfortunately we’ve reached a point where the costs of going deeper safely cannot be met by the lower returns for thermal coal,” he says.

“The fact that the miners at Terrace have brought us this far in what is challenging geology is a testament to their skill and it’s why we hope to persuade most of them to stay with the company.”

Terrace coal is valued for its low ash, though in recent years it has been blended with other coals to balance climbing sulphur content. Blends that contain Terrace coal will be replaced in the market by an alternative blend made to the same low-sulphur specifications.

Mr Doig says that while the mine’s closure will be felt by the Reefton township of 1100 people, the company retains commercial interests in the area and will continue to offer community sponsorship support.

“It will be business as usual at the Reefton Distribution Centre and, from a mining perspective, we are interested in exploring other prospects near the town. We are also considering options for the resumption of mining at Island Block – which contains a semi-soft coking coal resource of up to 5 million tonnes,” he says.

Following the mine’s closure, Solid Energy will remove equipment and then allow the mine to naturally fill with groundwater. The offices will be left in place for now but most other surface infrastructure will be removed from the site so we can undertake rehabilitation.

ENDS

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