Dairy juggernaut Fonterra is planning a major new coal mine in north Waikato, saying that will be cheaper than buying coal from Solid Energy, the state-owned enterprise axing 120 jobs at Huntly, blaming falling prices.
Fonterra's coal mining company Glencoal is about to apply for resource consents to develop an open cast coalmine on 30ha of farmland it has owned for 10 years between Mangatawhiri Rd and the new State Highway 2 at Maramarua.
The proposed mine would replace Glencoal's 18-year-old Kopako 3 (K3) mine 8km south of Maramarua, which is nearing the end of its working life.
Glencoal has Government permits to mine the new property which, like K3, is expected to yield around 120,000 tonnes of coal a year.
Fonterra plans public consultation meetings on the site and at Mangatawhiri Hall on Tuesday, where it will show technical and rehabilitation plans for the land.
Fonterra national consents manager David Wright said in planning for a replacement coal supply the company had talked to other coal companies, including Solid Energy.
The SOE announced last month it was shedding hundreds of jobs from its Huntly East and South Island Spring Creek mines, claiming the cost of producing coal was "substantially more" than current international coal prices.
Mr Wright understood Fonterra's decision to develop another mine itself had been because of cost and security of supply.
New Zealand's biggest company uses coal to power its Hautapu, Te Awamutu and Waitoa plants in Waikato.
Solid Energy spokeswoman Vicki Blyth said any discussions "which may or may not" be going on between Fonterra and Solid Energy were private.
Solid Energy is earmarked for partial sale by the Government under its delayed SOE sales programme.
The Waikato Times sought a Government response to Fonterra's claim it was cheaper to develop its own new mine than buy coal from Solid Energy, but received no response.
Mr Wright could not say whether any more jobs would be created by a new mine. Glencoal currently employs six fulltime staff, and up to 19 extra contractors when necessary.
It was planned to transfer this workforce to the new mine, which could start development mid-next year if regulatory approvals were given.
He said it was intended to mine sub-bituminous coal which is a high moisture, low carbon and low sulphur coal with high energy value, typically used for thermal energy generation. Asked if Glencoal could have sourced the same sort of coal from Solid Energy, a Fonterra spokesman said all coal in the north Waikato region was similar.
Fonterra would not discuss the price of coal from other suppliers or say how much it was investing in the new mine development.
As is the case with K3, coal extracted from the new mine will be trucked to a nearby processing plant and then trucked to Fonterra's sites because no rail facility is available, a spokesman said.
Mr Wright said the new mine would take up to two years to start producing and have a six to seven year life.
DO-IT-YOURSELF MINING CUTS OUT THE MIDDLEMEN
Fonterra digging up its own coal avoids the highs and lows of the open market, an industry expert says.
Big coal consumers like New Zealand's biggest company can afford to ditch the intermediaries and the volatile coal market by extracting their own and that's what Fonterra's doing, Grant Williamson, director of Christchurch-based financial analysts Hamilton Hindin Greene told the Waikato Times yesterday.
"Fonterra is what you'd consider to be a smart operator so I'm sure they've done a lot of number crunching and come up with the verdict that it's cheaper to produce your own coal than to actually buy it off someone else."
The last few months have shown the volatility in price can be "huge".
"Therefore what they're going to do is guarantee their own supply and they'll know exactly what the cost will be going forward.
"I suppose it creates some certainty for Fonterra and doesn't add a volatile costing to their business."
Waikato District Mayor Alan Sanson learnt of Fonterra's mine plan a month ago but won't get to hear residents' views until a public meeting next Tuesday.
He said the area is "no stranger" to coal mines.
"The difference here is that it's a green fields site on the other side of State Highway 2 when normally it's been around Kopuku and not closer to Maramarua or Mangatangi like this one is."
Mr Sanson said residents who live nearby could have concerns about noise levels, dust and visual effects but they would be teased out through the resource consent process.
He was 99 per cent sure it would be publicly notified.
- © Fairfax NZ News
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