New Zealand scratching coal surface

Brisbane (Barlow Jonker) - New Zealand, the renowned and only alpine tourism destination in the South Pacific, may be as interested as every other nation in the realization – sometime – of the vision of effective clean coal technology (CCT).

The country’s major landmass is made up of two islands – North and South – and both contain substantial quantities of coals that range from very high-moisture lignite to very low-moisture bituminous product.

The national coal resources are estimated at 15Bt, with some 8.6Bt considered to be economically recoverable.

That represents a strong potential income stream for NZ, for many years, from an industry that, on latest official figures, is producing less than 6Mt of coal a year.

The country’s coal industry is, effectively, state-owned and while the national government has keenly and successfully promoted fossil fuel alternatives, such as wind and thermal power, it has a valuable resource in coal that on latest estimates, contributes only some 5% of the country’s energy needs.

Notwithstanding the issue of longer sea transport, analysts believe that NZ could find a place as a coal exporter of substance – building on its 2006 exports of prized, sub-1% ash content bituminous coal totaling 2.61Mt, primarily to India and Japan.

The country is keen to protect its clean and green reputation – important for its economic pillars of dairy products and meat, as well as for its tourism – which helps to explain why NZ has not pushed for coal development at home.

But when it arrives, CCT may be the key to unlocking the country’s coal vault.

New Zealand coal ranges from very high-moisture lignite to very low-moisture bituminous coal, covering almost the full range of coal rank.

The principal areas of coal production (2006 official figures) are the Waikato region (2.29Mt) on the North Island and the West Coast (2.99Mt) and Otago/Southland (0.47Mt) regions of the South Island.

Government-owned Solid Energy produces most of the coal, with more than 60% of production coming from its two, large, open-cut operations - at Rotowaro in the Waikato and Stockton on the West Coast.

A further 16% of production comes from NZ’s two largest underground mines, Huntly East in the Waikato and Spring Creek near Greymouth on the West Coast, both operated by Solid Energy.

The main domestic users of coal are the 1,000MW Huntly power station and the Glenbrook steel mill in the Waikato region - Huntly consuming 2.5Mtpa and the Glenbrook steel mill 0.8Mtpa – while other large domestic consumers include the dairy industry (300ktpa), the cement industry (170ktpa) and the meat processing industry (120ktpa).

All of NZ’s export bituminous coal is produced on the West Coast. It is highly valued internationally for low ash (0.5% or less) and characteristics such as high swelling, fluidity and reactivity, making it ideal for fuel blending in the steelmaking industry.

In-ground resources for the West coast region are claimed at about 1Bt, with the main coalfields being Buller, Greymouth, Pike River and Reefton.

Solid Energy

Solid Energy produced 4.65Mt of coal in NZ FY2006/07 from seven underground and open-cut mines around Huntly in the Waikato, Greymouth, Westport and Reefton on the West Coast and at Ohai in Southland.

Solid Energy has access to coal resources estimated at 4.8Bt, although 3Bt are in the Southland lignite fields.

About half of Solid Energy’s annual output is exported, while at home, Solid supplies coal to the Glenbrook steel mill and is a major supplier to the Huntly power station.

These two companies accounted for 95% of the 2.01Mt of North Island coal Solid Energy sold in FY2006/07.

Solid’s Rotowara open cut mine in Waikato produced 1.58Mt in FY2006/07 and Solid is looking to extend the mine’s reserves beyond 2014 by expanding the mine’s Awaroa 4 pit in 2011.

The Huntley East underground mine produced 406.7kt and there are plans to develop the mine’s north blocks.

The Stockton open cut mine on the West Coast’s Stockton Plateau produced 1.94Mt during FY2006/07, a slight reduction on the previous year’s production due to delays in accessing the high-value coking coal on the Mt Augustus ridgeline area of the mine.

That’s been a snail-pace development as Solid has had to satisfy conservation requirements to relocate more than 6,000 native land snails before it could start mining.

In March this year, Solid Energy sold 49% of the Spring Creek underground mine near Greymouth to international trading company Cargill.

The joint venture company, Spring Creek Mining Company, owns the mine while Solid Energy continues to be the operator. In FY2006/07, Spring Creek produced 293.6kt of bituminous coal for export.

A five-year plan for the Stockton mine targets to open up 3.1Mt of coal, while a 15-year plan is being developed to access a further 15Mt reserve in the Rapahoe section of the mine.

Solid Energy’s smallest mine, the Terrace underground mine near Reefton, produced 56.2kt in 2006/07 and may be closed next year.

In Southland, Solid’s Ohai open cut mine operations are being scaled back following the loss of a coal supply contract to Frontera’s Clandeboye dairy factory near Timaru.

The contract represented about half of the mine’s annual production of 175kt of coal and Ohai is likely to close between late 2009 and the end of 2012.

Pike River Coal When the Pike River coal mine on the West Coast reaches full production – mining is due to start next april - it will be the second-largest coal export mine in New Zealand, with expected annual saleable production of premium hard coking coal of more than 1Mt by 2009.

The Pike River coalfield is high on the Paparoa mountain range. It’s New Zealand’s largest known deposit of hard coking and high fluidity coals, with an in-ground resource of 58.5Mt.

Recoverable coal is estimated at 17.6Mt from the Brunner seam, which can be up to 20m thick.

The coal’s low ash (about 1%), high fluidity and very low phosphorous levels make it attractive in coking coal blends for steel mills and coke plants.

At the mine site, a 2.3km tunnel is being created to reach the coal seam. A 10.6km slurry pipeline will carry raw coal from the mine to the NZ$20M coal preparation plant currently being constructed, which will be able to process 1.5Mtpa of ROM coal.

Pike River has signed an 18-year agreement with Solid Energy to transport up to 1,3Mtpa of saleable coal by rail to the east coast port of Lyttelton for export to India, Japan, China, Brazil and Europe. The total cost to transport Pike River coal from the mine’s coal preparation plant to Port of Lyttelton for loading onto Panamax vessels is about NZ$39/t.

Eastern Corporation Australia’s Queensland-based Eastern Corporation has plans to become one of New Zealand’s leading coal producers.

In 2005, it purchased the Cascade open cut mine in the Buller coalfields near Westport,on the West Coast.

The mine produces low ash, low sulphur coal with a high calorific value, targeted at the domestic industrial market.

Production at the mine – rated with a gross resource of just 1.5Mt - is targeted at 50-55ktpa for the next four years, with work underway to extend the mine life through maximum coal recovery.

Eastern Corporation has an exploration tenement, Whareatea West EP40-591, 5km north west of the Cascade mine, which offers an estimated coal resource of 25.7Mt.

Whareatea hosts 18Mt of measured resource and 7.7Mt of indicated resource and Eastern says early signs are that coal quality ranges from coking to a high-ash thermal product.

A year ago, Eastern bought its second NZ mine, the Nightcaps, north of Invercargill in Southland, and renamed it Takitimu, which has a coal resource of 2.82Mt of sub-bituminous coal, 2.6Mt measured and 0.22Mt indicated.

In March this year, Takitimu won a contract to supply 130ktpa coal to the Fonterra Clandeboye dairy plant near Timaru, beginning in September 2008.

Eastern also holds prospecting permits for sub-bituminous coals at Orepuki 39-319, west of Invercargill, on the southwest coast of Southland and at Ohai 39-321, which covers a large area surrounding the existing Ohai and Takitimu mines.

Roa Mining The Roa coal mine is in the Greymouth coalfield, 30km north east of the town of Greymouth.

The underground mine produces a low ash, low sulphur, hard coking coal. Processed coal is stockpiled at the mine before transport by road’ either to the port of Greymouth, which can accept ships and barges up to 8,000t capacity, or to the rail loading facility at Stillwater, about 20km from Greymouth.

From Stillwater, the coal is transported by rail 190km to the east coast port of Lyttelton, near Christchurch, which is able to accommodate vessels with a 65,000t carrying capacity.

Roa Mining has a contract with Solid Energy for the transport of up to 150ktpa of coal from Stillwater to the Port of Lyttelton for shipment to international markets.

Other large mines include the wholly-owned Fonterra Co-operative Group Glencoal Energy, which operates the Kopako open cut mine in the Waikato and MacDougall Mining, which operates the Boundary open cut mine, also in the Waikato.

NZ has a number of smaller mines, such as the privately-owned Birchfield open cut operation that supplies coal to the domestic market from the Rotokohu coal measures in the Giles Creek Basin near Reefton, on the West Coast, with mine infrastructure capacity for up to 500ktpa.

The low sulphur,sub-bituminous coal is supplied to the domestic industrial market on the West Coast, and to the Canterbury and Nelson regions. Birchfield’s permit area contains an estimated 16Mt of recoverable coal.– John O’Neil/Peter MacDonald.