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Solid Energy could pay up to $32.5 million for Pike River

Friday 11th May 2012

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Solid Energy, the state-owned coal miner, has agreed to buy the Pike River Coal mine for $7.5 million but could pay a further $25 million if the mine is commercially reopened.

Solid Energy completed due diligence, signing the full but conditional sale and purchase agreement with receivers to buy Pike River Coal. The company will pay an initial payment of $2.5 million today, followed by $1.25 million on Sept. 30, it said in a statement.

The balance of the $7.5 million will be paid on completion. The future payment of $25 million will be based on the level of coal extraction and rate at which the mine becomes fully operational.

If production at the mine exceeds 250,000 tonnes over the next 12-months or total aggregate extraction over any period reaches 1.25 million tonnes, whichever happens first, Solid Energy will make payments based on the relevant level of coal extraction.

The Christchurch-based company has entered into an agreement with the government outlining the role each will play in recovering the bodies of the 29 miners who still remain trapped in the mine, following a series of explosions in 2009.

The explosions forced the closure of the operation, leading to a Royal Commission of Inquiry and NZX-listed Pike River Coal was pushed into receivership. “After extensive work by our own technical team, including advice and review by international experts, Solid Energy has concluded that the only safe, feasible and credible option for recovering the men’s bodies will be as part of a future commercial mining operation," said Don Elder, chief executive.

"This agreement commits Solid Energy to pursuing all reasonable steps to recover the men’s bodies as part of any commercial mining operations at Pike River, provided the company and the Government consider this can be achieved safely, is technically feasible and financially credible," he said.

Minister of Energy and Resources Phil Heatley said the government welcomes the sale. "The sale, conditional on a number of mostly procedural matters including transfer of the mining permit, is a positive step towards determining the future of resource development at the mine," Heatley said.

Solid Energy has been flagged for a partial sell-down in the government’s mixed ownership model, which is expected to kick off in the third quarter this year with MightyRiverPower.

BusinessDesk.co.nz

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