Solid Energy secures future for coal exports

7 September 2009

Solid Energy secures future for coal exports with alliance agreement and further $75 million investment at Stockton

Solid Energy has announced a further $75 million investment at Stockton Mine, bringing its total investment in the mine this year to about $200 million, and concluded an agreement with Downer EDI Mining NZ Ltd to jointly operate the mine in an alliance arrangement from 3 October 2009.

Solid Energy has placed orders for $75 million worth of new heavy mining equipment which will form the core of the new mining fleet. The company has ordered four Hitachi excavators (110 tonne and 180 tonne) through CablePrice (NZ) Ltd and seven excavators (35 to 110 tonnes), 27 trucks, two loaders, three graders, two wheel dozers and two bulldozers from Caterpillar through Gough Gough & Hamer Ltd for delivery from December this year. Decisions about additional equipment will be taken next year when plans for mining the Millerton and Cypress areas of the mine are more advanced.

The alliance agreement was signed in Christchurch on Friday, 4 September by Solid Energy Chief Executive Officer, Dr Don Elder, and Downer EDI Mining Chief Executive, David Overall. The alliance will also hire some existing equipment and services from the mine’s current contractors.

Dr Elder says: “We’re extremely pleased to confirm that the Stockton Alliance will take over mining operations on 3 October. At Stockton we have a world-class coal resource of premium coking coal which can deliver substantial export earnings to New Zealand over the next 20 years. To maximise the mine’s value and to operate it safely we needed a step change in operational performance. This required a substantial investment in skilled people, in new fit-for-purpose plant and equipment, and in systems. The Stockton Alliance, a new and innovative approach to mining in New Zealand, will bring together one group of people in one team committed to achieving a common set of objectives.

Downer EDI Mining Chief Executive, David Overall, added: “We are delighted to have been selected by Solid Energy to partner them in this alliance arrangement, with the many opportunities that this presents. Solid Energy is a new client for us, and New Zealand is a new market for our mining business. Our work at Stockton will enable us to build on Downer EDI’s already strong presence in New Zealand through our Works, Engineering and Consulting divisions.”

Barry Bragg, Solid Energy’s Chief Operating Officer, says that the Stockton Alliance can now start making firm offers of employment to prospective staff. Over the last month about 470 people, many of who already work at the mine, have been interviewed and undergone skills assessments. The Stockton Alliance expects to have up to 650 people working at the mine, employed directly or seconded from Solid Energy and Downers. Up to 100 people will continue to work for contractors who provide specialist services at the mine. In addition Brightwater Engineering of Nelson has a workforce of 50 constructing a new coal handling and processing plant at the mine.

Barry Bragg adds: “We believe that working with Downers in the Stockton Alliance we will be able to deliver the performance improvements that we need to secure the mine’s long-term future.”

The $75 million investment in new plant and machinery, together with the $110 million investment in the coal processing plant, and mine expansion development and site infrastructure upgrades of approximately $14 million, brings Solid Energy’s total investment in Stockton Mine to about $200 million this year.

Background: Stockton Mine is Solid Energy’s largest mining operation, producing high-quality hard coking coal for export to steelmakers. The Stockton Alliance agreement concludes a year-long process to identify new operating arrangements at the mine. In December 2008 Solid Energy sought expressions of interest from mining companies to work in an alliance arrangement to develop and operate Stockton. Solid Energy selected Downer EDI Mining as its preferred partner in May. A team from both companies has been working since then to negotiate the agreement and implement the transition arrangements which come into effect on 3 October, when the existing main contracts at the mine expire. The Stockton Alliance will run for up to five years.

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