State Coal Mines plans for profit

Press, 15 January 1986, Page 22

State Coal Mines plans for profit

PA Wellington State Coal Mines, which forecasts it will suffer a loss of $44 million in the 1985-86 financial year, will ask the Government to pay an explicit subsidy for loss-mak-ng mines or else approve their closing. Dr Roger Blakeley, general manager of State Coal Mines which produces twothirds of New Zealand’s coal, said the closing of unprofitable mines was one way of improving its financial position.

A review of uneconomic mines, including the Strongman mine on the West Coast and the Morley, mine in the Ohai field, Southland, has been done. If the Government did not approve mine closing it should pay a subsidy to keep the mines open for its Government objectives of jobs or fostering regional

development. State Coal Mines, as one of the trading divisions of the Ministry of Energy, was directed by the incoming Labour Government in 1984 to run in a more commercial manner.

State planned to introduce a fully commercial financial structure by April 1 next year or sooner if necessary approvals were obtained. Dr Blakeley said State Coal could make a profit in its first year under a new structure. This would involve a write-off of $94 million in accumulated losses.

The changes would involve a more appropriate equity capital to loan capital ratio. This would mean cutting the large interest costs of loans. “Without that restructuring State Coal operating surpluses will continue to be

totally absorbed by increased debt cost.”

Strategies to cut costs and set commercial coal pricing were under way also to ensure an international level of efficiency. The strategies included introducing improved mining methods, and better plant maintenance management and financial control.

State would put a focus on quality as a direction during 1986. . ; . The management had established a small think tank to plan strategies for organ-isation-wide quality improvement. Greater involvement of the workforce in planning the workload and sharing rewards had been discussed with the mineworkers’ and engine drivers’ unions. New bonus incentive schemes had been introduced.