Wellington, Feb 19 NZPA - State-owned coal miner Solid Energy is closing its Ohai mine in Southland at the end of June, with the loss of 13 jobs.

"I am devastated for the community," said Southland District Council mayor Frana Cardno.

The closure had been signalled when Solid Energy lost a contract to supply dairy giant Fonterra.

Mrs Cardno said there was about 1.5 million tonnes of coal still in the mine but the cost of getting it out was huge.

"The news couldn't have come at a worse time and our hearts go out to those affected," she said.

Solid Energy said it has been re-working old underground mines at Ohai, 76km northwest of Invercargill.

It had been thought the last pit would provide enough coal to supply the household market through the 2010 winter.

But chief operating officer Barry Bragg said diminishing reserves altered this outlook.

"The last remaining pit currently contains 45,000 tonnes of coal but most of that is needed to honour commercial supply contracts, leaving us with only 5000 tonnes of household coal that we hope will last most of this winter."

Household customers will be able buy coal from Solid Energy's other Southland mine, New Vale, west of Mataura, 52km northeast of Invercargill.

Mr Bragg said the company was looking to see if it could offer alternative employment to the 13 affected staff at other sites, such as New Vale.

There will be five pits to rehabilitate at the mine. They will be reshaped and partially filled and seeded with pasture for grazing.

Three hollows will be formed into lakes of 29ha, 12ha and 7ha, with wetland vegetation sown along the banks.

Mr Bragg said the rehabilitation has been designed to allow for the resumption of mining if a substantial long-term supply contract could provide the economies of scale needed to open a new pit. NZPA WGT pjg kn