15 Mar 2013

Solid Energy downfall result of 'perfect storm' - former CEO

2:44 pm on 15 March 2013

Solid Energy's former chief executive says the state owned company hasn't been the only miner caught short by the sharp falls in coal prices.

Don Elder and former Solid Energy chairman John Palmer were forced to appear in front of Parliament's commerce select committee to explain the state owned coal company's $389 million debt.

Dr Elder says the company's downfall, when it posted a loss of $40.2 million and then axed hundreds of jobs and closed unprofitable businesses, was the result of a perfect storm.

He says the Australian and New Zealand dollars stayed very high, unlike in the two previous downturns in 1999 and 2008.

Dr Elder says Solid Energy's export prices in New Zealand dollars dropped back to 2004 levels.

He says the company was also mining coal in 2012 that was at least three times deeper than that which was available to mine in 2004.

"What that means in mining terms is that the cost of mining three times deeper is likely to be six or nine times higher and in fact the achievements we've made on productivity meant the cost was only four times higher."

But Dr Elder says the price was back at 2004 levels.

He says the global industry, which had been very strong, went from strong to struggling in less than three months.

"Every company everywhere is closing high cost mines, Solid Energy was, and still is, no different."

Dr Elder says the business now concentrates on open cast mining, underground gasification and monetisation of lignite coal.

He says much of the debt relates to investing in Stockton mine, along with Spring Creek, which is now mothballed.