Paparoa Mine losses outlined

Press, Volume CXII, Issue 33063, 2 November 1972, Page 5

Paparoa Mine losses outlined

The Paparoa coal mine was never really profitable under private management, even at the best of times, says the Under-Secretary to the Minister of Mines (Mr I. D. Dick) in a statement replying to a correspondent, Mark D. Sadler.

In a letter to the editor of “The Press” on October 23, Mr Sadler said that the Paparoa thine made a profit before the State took it over. He said that the right course for the Government would be “to help New Zealand foundry owners buy the smokeless fuel factory back from the Australians who took it over to shut it down.” Paparoa should be re-opened as a co-operative, said Mr Sadler.

Mr Sadler also said that figures quoted by the Minister of Mines (Mr Gandar) for “losses” on Paparoa coal would have meant more if given with figures for losses on other mines. NORTH ISLAND PROFITS

Mr Dick replies: “Last year our Waikato and Maramarua mines in the North Island made a profit (after interest on capital) of $107,970; the rest made a loss; Buller, $815,927, and Ohai, $603,326. In the Grey district, Paparoa lost $65,048; Liverpool, $327,250 and Strongman, $456,473. “The Mines Statement also reports the number of men employed in the mines and the output produced for sale. From these figures it can be readily calculated (but not actually printed in the Mines Statement) that the losses at Paparoa amounted to $10.70 a ton or $3252 a man employed; Strongman lost $5.93 a ton and $2282 a man employed; at Liverpool, the corresponding figures are $6.37 and $2871 respectively. “LOSS LEADERS” “On either a per-ton or per-man basis the losses in the Grey Valley mines were much the highest for any of the State coal mines. Last year was in no way exceptional; the Grey Valley mines have, regrettably always been our loss leaders. As the figures show quite clearly, Paparoa, in its turn, was last year ahead of the field. “The 1971 Mines Statement (page 58) gives a summary of our total losses (excluding interest on capital) for the 10 years, 1962 to 1971 inclusive. This table is very revealing. Our total losses in that period were, to nearest thousand dollars, $18,091,000. In the Buller they totalled $6,598,000, and in the Grey (including Reefton) $11,277,000, making a total for the West 'Coast of $17,875,000. In other words, almost the whole of our accumulated losses (98.8 per cent to be precise) were incurred in our operations on the West Coast. NORTH ISLAND SALES “On the other hand, our North Island operations are both expanding and profitable. Our sales have risen from 468,000 tons in 1968 to 582,000 tons last year. “The profitability is shown by the fact that our accumulated profits (before capital charges) in the North Island amount to $3,159,000 or a little more than $2 million after interest.

“Many people believe that our North Island operations are profitable because we produce only open cast coal. It is not widely known that our three North Island underground mines produced 238,000 tons, only 50,000 tons less than that produced from our nine underground mines on the West Coast.

“It should, though, be pointed out that our losses in the Buller of more than $6 million in the last 10 years need never had arisen had the department worked the extensive open cast reserves available in that district. The situation was clearly portrayed in the 1960 Mines Statement (page 88), when discussing the uneconomic mines in that district The department reported that: • SOCIAL CONSEQUENCES “About 30,000 tons of lowsulphur, gas-making coal from Denniston can come only from underground mines, but the remainder could be won much more cheaply than at present. Such a move, coming on top of the recession that has already taken place, would have disastrous social consequences. The

Mines Department could not recommend such a course. “Fall in demand has resulted in all mines in the district being worked at a level below that for which they were laid out. This has been an important factor in raising costs and causing losses. Some thoughts will have to be given to concentration of the effort on these fields. “Had successive Ministers of Mines and the department been less concerned about the social problems of the Buller, our losses there of $6,600,000 in the last 10 years would have been converted to a profit of much more than $1 million. “The Paparoa mine was never really profitable under private management, even at the best of times. Peak coal production in the Grey Valley occurred in the late 19205. Production rose from 450,000 tons in 1927, to 500,000 tons in 1928, 576,000 tons in 1929, and a peak of 609,000 tons in 1930.

“And yet in June, 1928, right in the middle of the rising tide of production, the Paparoa Coal Company was forced, for financial reasons, to lay off 85 men and close the mine. “Their offer to allow the mine to be worked under tribute (which it was for several years) was bitterly opposed by the unions which claimed that the co-operative system meant the speeding of production at the expense of conditions, and that the people working in co-opera-tive systems were little concerned about the conditions that had been built up through industrial organisation and effort over a long time. “It is also, perhaps, worth recording that in August, 1928, two months after the closing of the Paparoa mine, the nearby Blackball mine laid off 175 men. So in two months, 260 men were laid off at Paparoa and Blackball, this being 20 per cent of the total population of the Blackball and Roa communities. “It is not so very surprising that unemployed miners were demonstrating in Greymouth towards the end of September 1928. BEFORE TAKE-OVER “All this took place before the mines were taken over by the State and at a time when the market for Grey Valley coal had never been so buoyant, nor since. The Paparoa Coal Company had to struggle to survive and was only too pleased to see the mine taken over by the State in April, 1947. “I fully agree with Mr Sadler’s comment that we sold Paparoa coal at an unusually low price. Since I joined the Mines Department just more than five years ago, I thought it somewhat paradoxical that this unique coal, proclaimed by many to be the best coking coal in the world, was worth only $6.66 to the producer.

COMPANY’S REQUEST “About two years ago, in a discussion in my office, the Smokeless Fuel Company asked that the special discount we gave it on the price of coal used to make coke

for export be continued. “This discount on the price of coal used to make coke for export (not on the price of coal to make coke for the New Zealand market) was appreciable. The company said that this discount was essential to enable it to retain its export markets. Failure to retain these markets would mean that its works would have to close, irrespective of the availability of Paparoa coal.

“When I mentioned our ■losses at the Paparoa mine '(which was kept open only to meet its demand), I was told that the mine could be run much more economically on a co-operative basis; but my offer to let the company have the mine on a nominal rent and let it show me how such a happy state of affairs could be realised, met with a somewhat negative response,” says Mr Dick. MINER’S APPROACH Mr Sadler also said in his letter to “The Press” that a Mr Hibbs, one of . the younger miners, unsuccessfully approached the Mines Department before the Paparoa Mine closed last year, with the idea of taking it over as a co-operative. “Until I read Mr Sadler’s letter yesterday, I was unaware that Mr Hibbs had approached the department to obtain permission to work the mine on a co-operative basis,” said Mr Dick. “This approach must have been made at district level. I can only conclude that he was not sufficiently satisfied about the economic soundness of his proposal to have it drawn to the attention of the head office or the Minister of Mines, a course he had every right to pursue should he have so desired. UNION REACTION

“It could be (I have no knowledge one way or the other) that he had second thoughts, these being occasioned by events nine years ago.

“The Paparoa mine was closed for about 18 months

iin 1962 and 1963. In 1963, the Minister of Mines, Mr T. P. Shand, wanted the mine to be reopened on a co-operative basis, not as a State mine.

“This met with strong opposition from the United Mine workers who warned the Government that such an arrangement would compel them to ask the trade union movement, through the Federation of Labour, to take steps to support them against such competition. The statement was made to discourage trade unionists from flouting the policy of United Mine workers. “It is not for me to comment on the wisdom or otherwise of the Government helping foundry owners to purchase the smokeless fuel factory,” said Mr Dick.