Bathurst Resources and Talley's buy three Solid Energy mines - Stuff.co.nz

HAMISH RUTHERFORD

Last updated 13:10, October 31 2016

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Bathurst Resources has bought two mines from state-owned Solid Energy

One of New Zealand's leading food companies has joined forces with a mining company to buy three mines from collapsed state mining company Solid Energy.

More than a year after the state-owned mining company was placed into voluntary administration to protect it from collapse, the sale of its assets was released on Monday.

The most notable purchase sees Talley's - a major Motueka-headquartered food producer, partner with Wellington-based Bathurst Resources in buying the Stockton mine on the West Coast, as well as the Rotowaro and Maramarua mines in the Waikato.

The purchase is in a joint venture, Phoenix Coal, with Talley's Group, which will own 35 per cent of the project.

READ MORE:
* Solid Energy announces voluntary administration ahead of sale
* Blame for Solid Energy's collapse should be spread far and wide
* Timeline: Solid Energy brought down by debt and ambition
* Bathurst Resources: Hauled over the coals of protest

Elsewhere, Greenbriar, owned by the Palmer MH Group, a private South Island resources company, has bought the New Vale and Ohai coal mines in Southland.

Birchfield Coal Mines, a West Coast mining company, has bought the Strongman and Liverpool mines on the West Coast.

In a statement, Solid Energy's incoming chief executive Tony King said staff had been briefed on the process, and that most would find jobs under the new owners.

"Our expectation is that a good majority of staff will be employed by the new owners, an outcome that Solid Energy has worked hard to achieve."

The deal is also expected to see the banks which lent hundreds of millions of dollars recover significantly more than expected a year ago.

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'A perfect storm'

Solid Energy embarked on a rapid expansion including into new forms of energy, but the company hit troubles in 2012, with a combination of hundreds of millions of dollars in debt and a collapsing coal prices.

Management and the Government blamed a "perfect storm" of a surging kiwi dollar and weak international coal prices.

However it later emerged that the Government encouraged the company to take on debt to allow it to continue to pay dividends as it expanded, leaving it prone to a downturn.

In the years since the problems emerged the Christchurch-headquartered company laid of hundreds of workers and restructured its debt, but this was not enough to turn around its performance.

Once touted for sale in the mixed ownership model process, the company was placed in voluntary administration in August 2015, to enable an orderly sale. The government warned the banks which were owed hundreds of millions by Solid that the alternative was liquidation.

'Primarily an investor'

The move into coal marks a change of course for Talley's, which has interests in seafood, frozen vegetables, dairy and meat.

Director Andrew Talley said the company would leave Bathurst to operate the mines.

"The opportunity just presented; the right partner in what's a solid and proven resources. It just gives us a bit more business diversity , which we've always sought. We're not there to operate the mines. We're there primarily as an investor."

While Bathurst is headquartered in Wellington, the deal will require the approach of the Overseas Investment Office because most of its shareholders are based offshore. The company's shares are traded on the Australian ASX.

"Combining the Solid Energy assets with our existing mines will create the country's largest specialist coal mining company, sharing knowledge and resources, and providing economies of scale to create a strong foundation for a long-term business," Bathurst chief executive Richard Tacon said.

"Our focus remains on being a responsible resource development company and we're confident that we can build a great business adding value to communities on the West Coast and the Waikato. We believe our strategy for the business will also contribute to the country through employment and maximising resource value."

Bathurst's shares have been placed in a trading halt. Back in July, shares were trading at as little as A1.2c, however on Friday they hit 6.8c, the highest level since February 2014.

The 'best outcome'

In a statement, the government claimed the sale was the best outcome for employees, creditors and communities.

"The sale of the mines as going concerns is a very positive development," Finance Minister Bill English said.

"It means they will continue to provide jobs and contribute to regional economies. That is not something we could be sure of 18 months ago."

Solid Energy said the sale of the assets were expected to be completed in the first half of 2017.

Chairman Andy Coupe said the bids the company had received were of a "high calibre".

"The successful bidders were those who offered the highest aggregate value realisation for the group of assets assessed as a whole, underpinned by a high degree of confidence in their capability to complete the transactions." 

The board of Solid Energy were pleased the assets were going to "capable hands for ongoing successful operation".

"Directors and management have worked hard to achieve this outcome and ensure continued prosperity in the local communities and regional economies in which we operate."

Under the terms of the deal, environmental indemnity funding which the Crown had extended to Solid Energy, would be extended to the new owners.

"This provides certainty for affected local authorities, who have also supported the sales process by agreeing to cap any environmental claims at the indemnity level," Solid Energy said.

KordaMentha, which has run the administration of Solid Energy alongside the company's board, said in a statement that the mining company's creditors were new expected to receive 45-55 cents for every dollar they were owed.

The deed of company arrangement, agreed by the lenders, predicted a recovered of 35c-40c in the dollar would be recovered, however this was significantly above the 15-20c they might recover through a liquidation.

 - Stuff