Business reporter Simon Hartley updates the latest efforts of Solid Energy, Bathurst Resources and Pike River Coal - looking at collectively shifting several million of tonnes of coal and lignite annually for domestic and export use.
Exploration into new lignite and coal deposits in Southland and the West Coast continues unabated with three companies ramping up investments of tens of millions of dollars to get their prospects into production.
In the wake of oil giant Exxon Mobil pulling out of offshore exploration in the Great South Basin this week, the quest for large quantities of other southern mineral resources continues.
In Southland, test drilling and getting access to new land to explore has been resumed by state-owned enterprise Solid Energy as it investigates ways of commercialising the low-grade coal into briquettes, fertiliser or fuel.
In the West Coast's Buller district, Australian-listed Bathurst Resources Ltd, which plans to develop a large open cast coal mine in the Buller coal field, has received government approval from the Office for Overseas Investment for acquisition of the project from L&M Coal Ltd, a subsidiary of listed methane gas explorer L&M Energy Ltd.
Pike River Coal, which is more than 20 months behind schedule and and carrying large cost overruns of more than $50 million, has recently exported two coking coal shipments from the rugged Paparoa Ranges, also in Buller about 50km northeast from Greymouth, as it continues to ramp up toward full production; targeting a million tonnes per year during each of the next 18 years.
Solid Energy chief executive Don Elder said when contacted the New Zealand testing of the briquettes had been "positive" so far and he hoped a decision would be made within the next three to six months on building the trial briquette-making plant.
It would initially process 100,000 tonnes of lignite annually, primarily for industrial use, but a larger plant of one million tonnes per year would supply commercial, residential and industrial customers.
In ascending order of costs to establish, briquetting would be followed by research into lignite-to-fertiliser production, then petro-chemicals, he said He cited a Parliamentary Library research paper released earlier this week, The Next Oil Shock, which forecast a "supply crunch" possibly beginning in 2012 as known oil supplies became depleted during the next 25 to 32 years, as evidence of the importance of lignite in the energy chain.
"These projects are well suited for New Zealand, particularly because we are importing most products now and exporting coal," he said.
While there are billions of tonnes of southern lignite, to develop the three briquette, fertiliser and diesel plants would cost billions of dollars.
Mr Elder, as head of a state-owned enterprise, has side-stepped questions on the possibility of a partial float of Solid Energy to raise funds by referring comment to "the stakeholder", but otherwise said "all options" of public and private capitalisation would be considered in time.
Craigs Investment Partners broker Peter McIntyre said the efforts of producing premium quality hard coking coal by Pike River, and belated entry of Bathurst, had huge economic potential for the West Coast in investment and jobs; alongside the two million tonnes of coking coal Solid Energy exports annually from Stockton to Japan, Brazil and South Africa.
"We expect to see a 'sweet spot' hit in hard coking coal prices over the next two years," Mr McIntyre said.
High-grade coking coal is a key ingredient in steel manufacturing, with Craigs' forecast of prices per tonne rising from about $US200 ($NZ263) at present to $US237 by the end of next year and $US280 by the end of 2012.
Both coal and lignite offered huge economic potential to the West Coast and Southland when applied alongside emerging new technologies for conversion to briquettes, diesel fuel or fertiliser, he said.
In Southland, after a 2007 drilling programme in coalfields near Croydon and Mataura, Solid Energy is restarting its exploration drilling again near Croyden in eastern Southland to improve its knowledge of the quality and quantity of lignite for the plant-feed requirements of its different lignite conversion projects, Solid Energy's lignite conversion manager Greg Visser said.
"We are trying to get a better understanding of the quality of the lignites, and the available lignite resource in the coalfield and possible technical issues related to mining it," he said in a statement.
Solid Energy, through its Dakota-based partner GTL Energy, last year successfully converted 420 tonnes of lignite into high-energy briquettes.
After boiler-fuel testing in the South Island, Solid Energy could build an up to $15 million briquette plant somewhere in Southland.
The company was still considering where to locate its new pilot briquetting plant for lignite upgrading; either at the former Mataura mine site, New Vale mine west of Gore or the former Mataura paper mill.
"To aid this work, more geotechnical drilling is being carried out at the Mataura mine site," Mr Visser said.
"Solid Energy has a great deal of experience and expertise in exploration, and environmental effects management skills that will be applied to the mine plan for lignite conversion projects to meet our own stringent internal standards, and any likely resource consent conditions that apply to future lignite mining activities."
He said most of the test drilling would take place on Solid Energy-owned land and its lignite resources, but a "small number of private landowners" in Croydon, around New Vale and south Mataura, would be approached to grant land access for drilling.
This week, Bathurst said it had Overseas Investment Office approval to acquire the shares of L&M Coal Ltd and consent from permitting agency Crown Minerals for the transfer of the coal exploration and coal mining permits of the Buller coal project, NZPA reported.
Bathurst has said it is planning a capital raising of up to $A110 million ($NZ143 million) to develop the project.
Mr McIntyre said since the announcement, ASX-listed Bathurst shares had almost doubled in value, from A22c to A43c.
The company had identified an estimated resource of more than 10 million tonnes of coking coal, adjacent to Solid Energy's Stockton holdings.
It would not be known until November how successful the capital raising would be, but Mr McIntyre said it was unlikely Bathurst would get to production without another capital raising.
The Bathurst equity raising is a placement of up to 253.4 million shares at A30c a share to raise about $A76 million and a one-for-two non-renounceable rights issue at A30c a share to raise about $A34 million, managing director Hamish Bohannan said in a statement.
