Solid Energy's suspension of operations at Spring Creek is a "devastating blow", a politician says.

The company said this afternoon that it would stop work at its Spring Creek oalmine on the West Coast as a result of tough market conditions.

West Coast-Tasman MP Damien O'Connor said the suspension would affect the whole West Coast community.

"There has been much hype and hope generated by the company, and many workers have invested in their future based on that hope,'' he said. 

''This is a sudden and sad turnaround and it will have a severe effect not only on the workers and their families but on a much wider community."

O'Connor said the Coast was "suffering" from a National Government "determined to sell our assets".

"The National Government wants to sell off Solid Energy, the board and management want to slash costs, and it's the West Coast workers, not those sitting in head office, and their families who suffer the consequences," he said.

"Any good company, mining or otherwise, would have a more measured and longer term view of both job and company prospects.''

The company said it would cease its investment in upgrading ventilation at the Huntly East mine in Waikato.

About 240 people work at the Spring Creek mine near Greymouth, with another 130 contractors working at the site.

The mine had struggled to be profitable for some time, and work would cease almost immediately, the company said.

Huntly East's staff would be reduced from 234 positions to 171, while about 60 mainly contracting roles would go at the mine's ventilation upgrade project.

The company said the cuts would "absorb the impact of the global coal market downturn by introducing operating efficiencies to preserve and generate cash while retaining core capability and future options for growth".

It would review Spring Creek's "complex issues and interaction with different stakeholders" and advise the outcome as soon as possible.

Solid Energy chief executive Don Elder said he was aware of the impact the decisions would have on affected staff and communities, but the company had made "difficult decisions to cushion the impact of the market and protect as much as we can of the long-term value of the business".

"Compared with the first half of the 2012 financial year, the deteriorating market will potentially reduce our revenue in the current financial year by more than $200 million," he said.

"The current weak market conditions have also exposed the huge challenges of underground mining in New Zealand's geologically complex coal resources, which, as a result, will always be near the top of the cost curve and therefore the first production to be susceptible to any market downturn.

"We believe Spring Creek still has potential if the international market turns around, as does Huntly East if we can secure satisfactory long-term contracts with our major North Island customers to support future investment."

Solid Energy chief operating officer Barry Bragg said this afternoon his job with the mining group had also been cut.

He would not be reapplying for any new roles with Solid Energy, and would be leaving the company in February.

Fears as Spring Creek calls meeting

Solid Energy had called a meeting with the Spring Creek coalmine's employees in a hall at the nearby West Coast township of Dunollie at 1.30pm today to discuss the mine's future.

Grey District Mayor Tony Kokshoorn said the community was nervous about possible job cuts at the underground mine in response to plummeting international coal prices and Solid Energy's poor financial performance.

''The town is awash with people who are very worried about the repercussions,'' he said.

''I suspect it's not going to be good news, but I don't think they will close the mine.''

The West Coast's economy relied heavily on mining, as well as farming and tourism, but all three had been badly affected by the high New Zealand dollar, the international recession and Canterbury's earthquakes.

''Mining was the jewel in the crown that was holding it all together,'' he said.

Kokshoorn said the Pike River coalmine disaster meant the district lost 150 jobs, so any redundancies from Spring Creek would hit hard.

''This is a kick in the guts we just don't need after Pike and other things,'' he said.

''We have to hang in there because we know coal will be in demand again and prices will rebound.''

Miners on the West Coast earned about $90,000 a year, double the district's average wage, so a single job loss effectively had double the impact, he said.

Kokshoorn said it had taken Solid Energy a long time to assemble such a skilled mining workforce for the West Coast.

"They don't want to lose them to Australia, and that will be what will happen. They need to hang on to their workforce,'' he said.

Elder phoned Kokshoorn on Sunday to warn him about today's announcement but had revealed little detail.

The company has two coalmines operating on the West Coast and employs about 1250 workers.

Its Stockton mine, New Zealand's largest opencast coalmine, employs about 1000 staff.

The state-owned enterprise bought the Pike River coalmine last month for $7.5 million and had been pushing to develop a new mine near Greymouth, the Liverpool mine.

Minerals West Coast manager Peter O'Sullivan said today that everyone in the industry was waiting anxiously to hear Solid Energy's announcement on possible redundancies.

''Any fluctuation in it is going to have a significant impact locally and nationally,'' he said.

O'Sullivan said West Coast's minerals industry generated about $940m and coal contributed about three-quarters of that, with about $650m spent locally.

About two-thirds or more of the region's coal production was from Solid Energy mines, he said.

''It starts to show how vulnerable we are with just one major coal provider.''

If mining jobs were cut, it would hit other industries hard, he said.

''It's not just mining. It hits engineers, transport, construction, commerce and others,'' he said.

State-owned Solid Energy will announce its full year result on Friday, and it has already warned its revenues were down $200m.

Solid Energy spokeswoman Vicki Blyth said staff would be told at meetings today, but she would not confirm or deny job losses.

However, she said rumours of 40 redundancies at the Stockton mine may have been sparked by a contractor completing a job early, which could lead to job losses.

Spring Creek is costing $5m a month and is still in the development phase with no mining, although it is ready to come on stream in six months.

Two months ago, Elder and Solid Energy chairman John Palmer gave West Coast leaders a positive view of coal's prospects.

West Coast Tasman MP Damien O'Connor said the news was "alarming and disturbing for the West Coast, given the amount of hype from Solid Energy and investment in the past year".

"This is a rapid about-turn," he said.

- © Fairfax NZ News

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