Jobs will be lost at Solid Energy's Ohai mine because of dairy co-operative Fonterra's decision not to renew its contract with the company to supply coal to the Clandeboye dairy factory.
The Ohai mine produces about 200,000 tonnes of coal a year for the South Island market, halfof it is railed to the Clandeboye plant, in South Canterbury.
Solid Energy chief operating officer Barry Bragg said the five-year contract, which expired in August next year, had not been renewed.
Engineering, Printing and Manufacturing Union national secretary Andrew Little said the contract had gone instead to the Australian-owned Eastern Corporation. It also mined in Ohai, but Solid Energy jobs would probably be lost and profits from the contract would go to Australia.
Mr Bragg said the decision was disappointing.
"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 nearby New Vale Mine," he said.
Instead, operations at Ohai - where 58 people work - would be downsized from August this year.
"We've been talking to Ohai staff today and outlining what we'll be doing over the next few months to assess how best to optimise the remaining coal reserves at Ohai to meet demand from new and existing customers," Mr Bragg said.
"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 - and the numbers of jobs that will be affected."
Mr Little said Fonterra's decision endangered decent Kiwi jobs.
"Eastern Corporation ... may well have come in with a lower price for Fonterra off the backs of its workers."
