Pike River coal mine goes ahead on DOC land

By Pam Graham

There is coal in the hills past the turn-offs to the historic mining settlements of Dobson and Blackball. Lots of coal.

One "little feature", a seam visible with the naked eye on a 6.5km long escarpment, is being targeted by Pike River Coal.

On top of a hill is 58 million tonnes of premium hard coking coal in the Brunner seam and possibly another 29 million tonnes in the Paparoa seam 150m below it.

"There is no question that the resource is there," said Peter Whittall, general manager of mines for Pike River Coal.

The question is how to get it out of inaccessible hills 46kms northeast of Greymouth, covered by 300-year-old rimu trees on land owned by the Department of Conservation (DOC), the northern part of which is a national park.

The Pike River Coal project has taken decades to get off the ground -- the company took a call recently from a surveyor who did work on the resource in the 1940s -- but shares in the venture will be offered for sale to the public in February.

Pike River Coal has taken eight years to get all the necessary consents, including an access agreement with DOC.

The company meets fortnightly with DOC and has a fulltime liaison officer.

A visit to the site leaves little doubt that the second largest coal mine in the country and the largest underground mine is underway and it is a private sector effort. About $50 million has been spent to get this far.

A 11.5km private road with seven bridges and six culverts has been built to a mine entrance where McConnell Dowell has drilled 195m of a 2.3km tunnel.

The mine is different in that it is underground but the miners will drill upward toward the seam.

The access road curves around ancient rimu that DOC would not allow to be felled and a stream beside the entrance is partitioned off and will not be used as a water source after Ngai Tahu said fairly late in the piece that it was sacred.

There are rotting rimu logs at the side of the road that DOC can not sell but the company did not want to get into a public debate about that particular resource.

When the 18 plus years of mining are over the road will be covered over and the bush allowed to regenerate. The Pike River Coal mining project is being sold as an example of how business can work with DOC.

This is modern mining, we are told. It has a small footprint on the environment but will give the West Coast a new boost from its resource base. There will be 140 jobs at the mine and 40 jobs driving trucks.

Logistics arrangements to get the coal to Asian steelmakers are awaiting a green light, and face the usual problem that the ports on the West Coast are river mouths into wild seas and the alternative, Lyttelton Port, is over a mountain range.

Residents aren't happy that a truck will be going past every 4.6 minutes 16 hours a day six days a week.

There is still a slight questionmark over the transport arrangements because the word on the West Coast is that Toll NZ is testing coal trains to Lyttelton port with 45 wagons, up from 30, which increases the capacity of the so-called coal route used by Solid Energy.

Greymouth District Council Mayor Tony Kokshoorn said they are using seven locomotives and have problems with ventilation in the Otira tunnel.

Pike River Coal has decided on a "blue highway". Two self-propelled ships with 12000 tonnes capacity each, effectively motorised barges, will be built to ship the coal from Greymouth to New Plymouth where it will be loaded on larger ships. The vessels cost US$19 million ($28 million) each and will be built in China.

Solid Energy tendered for the logistics work from its competitor but the concern was that the state-owned miner, Toll NZ and Lyttelton Port have a cosy relationship and Pike River Coal might be better served by independent arrangements.

Mr Whittall said the West Coast Coal consortium has been chosen for logistics and there would have to be a significant difference in price for the company to consider other routes.

Mr Kokshoorn said Greymouth's port will close if this development does not go ahead. If it does go ahead it will be possible to handle containers on these vessels.

West Coast Coal, a consortium of Port Taranaki Ltd, TNL Group, Wendell Offshore Services Ltd and Jebsens GmbH will be responsible for transporting the coal. Everything has been planned and is waiting for the go button from Pike River Coal if the IPO is successful.

First production from the mine is scheduled for the December quarter of this year. Production is expected to increase to 1 million tonnes a year from 2009, with peaks of up 1.3 million tonnes a year during the mine's first 17 years.

The project is costing $173 million, $29 million of which is working capital. The company is refusing to disclose any details of the share offer before the prospectus is registered and it is not commenting further on the walkout of three independent directors late last year.

The speculation at the time was that the issue was governance and control by the major shareholder. Pike River Coal is 61 per cent owned by New Zealand Oil and Gas, which itself has large offshore oil and gas projects underway that transform it into a production company from an exploration company.

Mr Whittall is a miner from Australia who spent 24 years working for BHP Billiton. His knowledge is of coal and he says Pike River's coal is as good a quality as Queensland's hard coking coal, an industry benchmark product.

The coal from Pike River has a very low ash content, at 1 per cent compared to 8 per cent in premium Australian coking coals. It also has low phosphorous levels but moderate sulphur levels.

Premium coking coals sell for as much as US$96 per tonne, double the price for thermal coals produced from many other New Zealand mines. The coal is baked to produce coke used in steel production.

The company has contracts with Indian company Gujarat NRE Coke Ltd and Saurashtra Fuels Private Ltd who have become cornerstone shareholders and agreed to take 55 per cent of the mine's production.

The coal will mostly be extracted by water canon. There are no conveyers in the mine. The coal will travel down a flume to a crushing plant inside the mine. A slurry, 40 per cent of which is solid, will then be pumped down a 28cm pipe to a coal preparation plant down the road. Here the water and ash are extracted. It is then transported on trucks.

The large amounts of water the mine will use come from high local rainfall, ground water and some water will be taken from streams. It will be recycled and cleaned up.

A new power line has had to go in too because the mine will use 60 million kilowatt hours of power annually, stretching demand in a region with a fragile electricity network. The supply of power to the site will cost $12 million.

"There's been nothing bigger happening in this region for the last hundred years," Mr Kokshoorn said.

Local contracters have been used in many aspects of the project so far, mostly in the engineering and site building contracts. When the mine is in production it is expected to pump $30 million a year into the local economy.

Pike River aims to recover 17.5 million tonnes of coal from the Brunner seam and the mine's economics are based on that seam alone. Anything from Paparoa will be a bonus.

The West Coast has boomed before from gold and coal mining then experienced decades of decline.

It has been on the up in recent times on the back of dairying and tourism and looks set to get another boost from the resources industry with Solid Energy also developing the Spring Creek mine in the region.

- NZPA

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