Solid Energy’s warnings about Pike River bid

Solid Energy’s bid for the devastated Pike River Coal mine has come with a warning from the company that it is prepared to spend up to $100 million drawing up plans for the project and it could cost hundreds of millions more to mine.

The warning is intended for other potential bidders for the mine, and comes after Solid Energy said it was the only company with the enough West Coast mining experience to be able to effectively mine Pike River and make it financially viable again.

The company’s chief executive, Don Elder said public declaration of the bid for the mine served two purposes; to highlight the difficulties the project involves and to set more realistic expectations of how quickly the project could be restarted.

He said it the unusual move was not an attempt to drive down the price sought from receivers, and that if other companies from New Zealand or anywhere else thought it would be easy to go in through the existing mine infrastructure or bring equipment to start open-cut mining within a year they were mistaken.

“Both of those are remotely possible, but unlikely,” he told the NZ Herald.

The mine had just started producing coal when the explosions that killed 29 men ripped through the mine on November 19.

The mine’s receivers PricewaterhouseCoopers said it has up to 12 companies who have expressed interest in buying the mine.

Some of the companies believed to have offered bids are rumoured to be foreign mining companies and steelmakers.

Elder said Solid Energy is prepared to spend $30 million to $100 million on a conceptual mine plan that could result in findings that the coal can not be recovered safely or economically.

The Royal Commission of Inquiry into the tragedy, which is due to conclude at the end of this month will have a bearing on the future of the mine and the techniques used.

Pike River Coal mine had long experienced problems of dangerous gas levels inside the underground mine and experts say the 2km tunnel into the Paparoa Range was inherently dangerous as it was difficult to ventilate.

Previously Greymouth Mayor Tony Kokshoorn said turning the mine into an open cut mine would be “win-win” but yesterday ACT Leader Rodney Hide said the consideration to begin open cut mining there was too late and the deaths of the 29 men in the underground coal mine was a waste.

Elder has confirmed a combination of tunnelling and open cut mining would be an option of Solid Energy is the successful bidder and that it is impossible to estimate the cost of resuming operations in the environmentally sensitive area.

"This is not a tens-of-millions operation, it’s a hundreds-of-millions in exploration, planning and development work – that’s assuming you can get permission to do it in this Schedule Four environment."

He said the company expects a debate between the buyer and environmental groups about the decision to use open cut mining at the site.

"Open-casting is economically, and from the point of view of scarce commodities, a better answer for a resource if you can do it but that’s got to be balanced against the environmental consequences.

"That will not be an easy discussion and it’s hard to see which way that will go."

The sale will include some above-ground infrastructure, a damaged tunnel which has had $200 million spent on it and the licence to mine the hard coking coal there for 20 years.

Elder said Pike River’s liabilities and the uncertainty about the viability of mining meant he was not prepared to name an offer price.

“We’re chucking our hat into the ring – where we get to is up to the receiver,” he said.

Solid Energy remains committed to recovering the bodies of the workers trapped inside the mine, which would include redrilling existing tunnels to reach them.

He said this option was unlikely, and another possibility is incorporating an area where the men were last known to be in the future mine plan and reaching them at a later stage.

Hamilton Hindin Greene analyst James Smalley said Solid Energy’s public declaration of interest would put it in front in future negotiations on the mine.

"They do make some valid points. If anyone’s got some expertise they have."
 

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