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Eastern and Fonterra sign contract for Clandeboye coal supply
18 April 2007 - Queensland-based Eastern Corporation has won a major coal supply contract for its recently acquired Takitimu coal mine near Ohai in Western Southland.
A 130,000 tonne a year contract to supply the Fonterra dairy cooperative's Clandeboye manufacturing site near Timaru has been agreed by Eastern's New Zealand subsidiary Eastern Coal Supplies and Fonterra from September 2008.
The Eastern contract comes at the expense of production from Solid Energy's opencast Ohai mine which currently sells over half of its coal production to the South Canterbury dairy plant.
Eastern's New Zealand general manager, Campbell Smith, says the two year contract with Fonterra will underpin the production of the company's Takitimu mine.
He says Eastern recognised this agreement was a significant step in its New Zealand coal strategy.
Eastern Coal Supplies began producing coal in New Zealand in June 2005 when the company acquired the Cascade open cut coal mine near Westport. In September 2006 Eastern acquired the Takitimu mine in the Ohai/Nightcaps area of the Southland.
Solid Energy says its will downsize operations at Ohai from August 2007 and review the long-term future of its Ohai opencast mine following the loss of the key contract.
Solid Energy chief operating officer, Barry Bragg, says:
“Obviously we're disappointed. The viability of Ohai is underwritten by that contract and while we had only expected to mine Ohai until around 2012, we had proposed to Fonterra that we transition to supplying coal from our recently-acquired New Vale Mine.”
New Vale is an Eastern Southland lignite mine which supplies Fonterra's Edendale dairy plant.
Mr Bragg says that Solid Energy has confirmed to its contractor Ohai Mining Ltd that bulk stripping of the ground above the coal will finish in August this year. Solid Energy currently employs 23 staff at Ohai in technical, coal processing and administration roles. OML employs 35 people stripping overburden and extracting coal. Solid Energy and OML are discussing with staff the impact of this decision on jobs.
Mr Bragg says the company will be assessing how best to optimise the remaining coal reserves at Ohai to meet demand from new and existing customers.
This will determine how long the mine will continue to operate - at this stage based on access to current reserves this will be between late 2009 and the end of 2012.
As part of the review process, Solid Energy will be assessing its ability to continue to supply Ohai bagged coal in Southland and Otago until the end of 2012. Solid Energy decided in 2004 that it would progressively withdraw from supplying the household coal market by the end of 2012, when local authorities must comply with the National Environmental Standards for Air Quality.
Sources: Eastern Corporation and Solid Energy.
