Bathurst Resources is putting its Escarpment Mine into care and maintenance and reviewing 25 jobs in Buller, more than half of which look likely to go.
The company yesterday announced it would suspend operations at the mine, on the Denniston Plateau north of Westport, in early May.
Bathurst said it had to pull the pin because Escarpment's main customer, Holcim's Cape Foulwind cement works, was closing in June.
"The truth of it is, we've really got nothing to replace Holcim," said Bathurst chief executive Richard Tacon.
"We've put in for other markets elsewhere and we haven't been successful so far."
The announcement comes two days after Solid Energy said it planned to cut another 41 jobs at nearby Stockton Mine.
Mr Tacon said that Bathurst had to react quickly to the loss of Holcim or its viability could be compromised.
Bathurst's other Buller mine, Cascade, used to supply most of the cement works' coal. It closed before Christmas with the loss of seven jobs.
Mr Tacon said it was too early to say how many employees Bathurst would need in Buller once Escarpment stopped production. Bathurst operates the mine, a nursery and a Westport office.
Mr Tacon confirmed all 12 mine jobs would go along with some support office staff. He said some of Bathurst's Buller staff, such as geologists, worked across the whole company and would stay on.
"There is no need to move them. If we can keep the office for the right cost we will."
There would be opportunities for some employees to relocate to Canterbury.
Mr Tacon said the entire Escarpment operation was up for review.
The original plan was to produce up to three million tonnes of coal a year. The mine has produced just 50,000 tonnes since production started 18 months ago.
"The whole world has changed," Mr Tacon said. "The coal market has changed. Our company has changed. We're really going back to basics on the whole thing.
"At the moment our domestic business is still strong."
Bathurst needed markets of about 100,000 tonnes a year, whether domestic or export, he said.
Existing domestic markets amounted to only about 35,000 tonnes a year.
"Given the cost of operating on the plateau and everything else we just can't come up with a scale that allows us to do that and make money."
At the current exchange rate the export coking coal price would have to rise to about US$100/tonne for export markets to be viable.
The price is less than US$80/tonne at present.
Ramping up the mine for domestic production would cost about $20 million, said Mr Tacon.
However, Escarpment would "definitely" become operational over the next five years.
Bathurst would now be talking to various regulators about care and maintenance of the mine site.
"We've got a lot of conditions that apply to Escarpment and it's our intent to meet all our conditions and our access arrangements.
"We've got a period of negotiation with those bodies then out of that will flow how many people we need to maintain it."
Bathurst's other mines, Takitimu and Canterbury Coal, would help supply the 17,000 tonnes a year Escarpment had been providing to east coast customers. Bathurst might also have to buy in some coal, Mr Tacon said.
Two Westport trucking firms, TNL Freighting and Johnson Bros Transport, truck Escarpment coal.
TNL manager Mark Diskin said the company carted two truckloads a week to Holcim. TNL would not replace one driver who was retiring when the Escarpment trucking stopped.
The Westport branch would make up for the loss of income by doing more work for TNL branches elsewhere, Mr Diskin said.
Johnson Bros owner Mark McIntyre could not be reached for comment. It's understood his company takes about eight truckloads of Escarpment coal to Timaru a week.
Buller Mayor Garry Howard said Bathurst couldn't keep operating the mine without sales or orders.
"It's just really hard for the community to take this particular situation where everything seems to be bad news, and trying to get on with it and get through it.
"It certainly has an affect on the mood of the community."
- Westport News