“Based on current productivity rates, the costs of operating the mine and current 10-year thermal coal price predictions, there is no credible, economically viable plan for the new mining area,” Solid Energy chief operating officer Barry Bragg told mine staff on Friday.

“There is, however, an option which has been identified over the last few weeks that might secure higher prices and underwrite a continuation of mining.

“Over the next three months we will explore the feasibility of processing coal to produce a higher quality product for international thermal and steel making markets.”

Bragg said this work would involve finalising a mine plan to access thicker coal seams, along with tests to confirm the feasibility of an upgrade of the coal washery to produce an improved product.

“However, we would need to have a high level of confidence that the international market would pay a premium for this higher quality product,” he said.

At the same time, Solid Energy will complete a $NZ1 million mining feasibility study that will include some geological drilling to confirm the final mine design.

When current development work finishes at the end of May, crews will move into a new area to the northwest (panel 6). This will cost a further $3 million, but Bragg said there was no certainty that the company will be able to secure the revenues needed to begin extraction in the new area.

The Spring Creek mine, in New Zealand’s South Island north of Greymouth, opened in March 2000 but mining was suspended in February 2001 due to difficult geological conditions, before reopening again in October 2002.

Coal extraction at Spring Creek was again suspended in November 2004 due to concerns about slow development rates and coal quality issues. Solid Energy carried out a comprehensive review of development and mining systems and practices at the mine and implemented a number of initiatives to improve operational performance, restarting coal extraction in August 2005.

The current 12-month mine plan, through to February 2007, was approved in November 2005. At that time the company said it would make a decision about the future of the mine in April 2006.

Solid Energy will keep Spring Creek staff updated regularly and meet again in July to advise them on the outcome of this further work and before making a final decision about the future of the mine.