The High Court has reversed a deal that gave Solid Energy leases on coal-handling facilities vital to the Pike River mine's viability, just as receivers were preparing the damaged but potentially valuable mine for sale.
The Pike River receivers accused the state-owned coal miner of anti-competitive behaviour that tried to undermine the price for the whole development by making it attractive only to Solid Energy as a buyer, and sought relief in the High Court.
They said Solid Energy did this by securing the reassignment of the 25-year leases held by Pike River on farmland at Ikamatua, near Greymouth, where $10.5 million had been spent on the only ``long train'' coal-loading facility on the West Coast.
Two farming families were to be paid a total of $78,000 a year in lease fees for the big side-loop at Ikamatua.
In a series of transactions in March, both family farming businesses received non-refundable ``incentive payments'' of $15,000 each from Solid Energy for agreeing to cancel with Pike and reassign to Solid Energy.
This, in effect, broke Pike River's route for coal for export.
Each family farm business would have earned a further $65,000, for a total of $80,000 each, if the receivers had lost the High Court case and there was ``no longer any realistic chance of relief against cancellation''.
Judge Joe Williams found in the receivers' favour, allowing them to attempt to extract the best price from an unknown range of bidders, of whom Solid Energy is the only one identified, and is likely to include potential foreign owners.
``I am well satisfied that Ikamatua is a core strategic asset to Pike River and that its loss ... would materially devalue Pike River as an integrated operation,'' he said.
John Fisk of accounting firm PwC, one of the Pike River receivers told BusinessDesk: ``The application has been granted, largely on terms we proposed, so we are very pleased with the decision.''
O'Malley Farming Ltd and H&M Trustee Five Ltd cancelled their leases with Pike River, citing the receivership as grounds. But Williams found there was ample precedent for granting relief where receivers were making a credible effort to prepare a package of assets for the best possible sale, to assist creditors and insurers.
Williams strikes a compromise by allowing the Pike receivers a two-year lease, to give time for an orderly sales process, after which the landowners may again apply to cancel their leases with Pike.
Solid Energy's interest in Ikamatua stems from an explosion in the volume of high value coking coal, used in steel-making, being sold into export markets where the price for the high temperature, relatively low emissions coal has jumped in response to Asian economies' urban and industrial construction booms.
It has extensive coal mining operations to the north, in the same coal seam as Pike River was mining underground in the Paparoa Ranges and is planning to double production.
It also has a monopoly over KiwiRail's coal-carrying capacity on the Midland Line from Westport to the Port of Lyttelton, for export shipment.
Pike had one million tonnes a year capacity under a contract with Solid Energy, which it cancelled by invoking force majeure clauses after the catastrophic explosions and subsequent receivership, while promising to keep paying the rent in advance, unless three months' notice was given.
It has since leased capacity to Bathurst Resources, an Australian developer of a series of mines on the Denniston plateau above Westport, in a transport-sharing arrangement involving shipment from Westport to New Plymouth for export as capacity on the Midland Line becomes constrained.