Solid Energy Records Half-Year Surplus After High Export Prices

Coal producer, Solid Energy New Zealand Ltd, produced a record half year net surplus following high export prices, although international prices are expected to weaken in the coming year.

Solid Energy recorded an after tax net surplus of $38 million for the half-year ending December 2005. This was mainly due to exceptional export prices, which offset the continuing high New Zealand dollar in that period, according to the company's interim report.

This result is more than double the $17.5 million surplus for the same period of 2004.

Overall coal production was down, due to 17 days of industrial action at the beginning of July, with revenue for the period a record $257.1 million, 41% up on the same period the previous year. Total sales reached 2.18 million tonnes (mt) against 2.24 mt.

Exports increased to 1.15 mt, fractionally above last year, but 40,000 tonnes lower than forcast due to the July industrial action. The shutdown meant that Solid Energy was unable to take full advantage of the exceptional export prices up by 150% on the same period in the previous year.

New Zealand sales were down 13% to 1.03 mt.

Solid Energy chairman, Tim Saunders, says: “The company's financial position that had been weakened by the large asset write-downs in June 2005, has been significantly improved by the strong half-year result. Demand for Solid Energy coal within New Zealand and internationally remains strong. The short term outlook for the company is positive on the back of good international coal prices for hard coking coal.”

Chief executive officer, Dr Don Elder, says; “International prices will weaken in the coming year, with falls of up to 30% for thermal coal already signalled in current negotiations between Australian producers and Asian steelmakers.

“Longer term, proving resources and developing new mines to meet customer demand remains our major challenge, together with the rising cost of mining in New Zealand relative to large international competitors,” he says.

Coal production at the main export mine at Stockton in the Buller, again exceeded 1 mt in six months, due to the upgrade in the annual carrying capacity of the aerial ropeway.

Development of the new Awaroa 4 pit at Rotowaro Opencast Mine, Waikato, is now largely complete with the first coal in production. Solid Energy recently agreed to transfer the contract for overburden stripping and coal extraction at Rotowaro to a subsidiary of Leighton Contractors Pty Ltd which has bought the Australian and New Zealand mining business of Henry Walker Eltin Pty Ltd. HWE was placed in voluntary administration in January 2005.

Coal extraction at Spring Creek underground mine, near Greymouth, recommenced in August with 215,000 tonnes produced for the half year. A 12-month mine plan for development and extraction through to February 2007 is currently being implemented. Solid Energy is assessing the long-term viability of extending the mine to the west and expects to make a decision in April 2006 on whether to proceed with a further five-year plan from the beginning of 2007.

Production at Huntly East (Waikato) and Terrace underground (Reefton) mines, along with Ohai opencast mine, in Southland, fell short of forecast, Solid Energy says.