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Solid Energy bounces back in second half

Friday 27th August 2010

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State-owned coal miner Solid Energy bounced back strongly in the second half of the year to June 30, recording a tax-paid profit for the year of $67.8 million.

The full-year profit was down 39% on the previous year owing largely to weak international prices and prolonged industrial action, which pushed Solid Energy to a $6.5 million loss in the first six months of the trading period under review.

The result was achieved on revenues of $689.8 million, a 29.6% fall from almost $1 billion of sales the previous year. No announcement on a final dividend has been made.

Particularly assisting the result was the recovery in hard coking coal prices from under US$100 per tonne early in the year to more than US$200 per tonne in the fourth quarter, while some export orders carried over from 2009 also achieved higher prices, and there were unbudgeted sales to the New Zealand Steel mill.

The strength of the New Zealand dollar depressed returns in the local currency, but foreign exchange hedge gains of $30 million partially offset this.

The company made capital expenditure commitments totally $325 million during the year, most notably at the Stockton open-cast mine, where a total of $249 million was spent on coal processing plant, mobile plant and equipment, and safety and environmental projects.

A further $19 million was spent at the joint venture Spring Creek mine, which contributed an increasing proportion to total coal sales of 3.8 million tonnes for the year, down from 4 million tonnes a year earlier.

The company also continued to invest in coal-seam gas, a coal gasification pilot project in the Waikato, completed a $34 million wood pellet plant in Taupo, and showed strong growth in both wood pellets and bio-diesel.

Looking to the future, Solid Energy indicated it was now able to target increased coal extraction which could push total annual production from a base case of around 6 million tonnes annually by 2020, to closer to 8 million tonnes.

Presentation slides show Solid Energy is also targeting a major ramping up of its lignite coal developments in Southland mid-decade. The slide shows coal to fertiliser production of 1.2 million tonnes a year from 2016, and coal to liquid fuels producing between 2,000 and 35,000 barrels of oil equivalent a day from 2017.

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