Wellington, Jan 29 NZPA - State-owned energy company Solid Energy has confirmed it will spend $100 million in a new coal processing plant at its Stockton mine but says it will also cut coal production at the mine by 20 percent from July this year.

Workers at the mine, north of Westport, may lose their jobs as a result.

Uncertainty about the extent and duration of the international economic downturn has resulted in steelmakers, worldwide, cutting production by up to 30 percent, said chief executive Don Elder.

Stockton produces hard coking coal to steelmakers in Asia and elsewhere.

It produced 1.825 million metric tonnes in the 2008 financial year.

Solid Energy was forecasting a 10 percent production drop to 1.65m tonnes this year and based on current international demand, 1.35m tonnes in the 2010 year. Reduced production, and the freeing up of some resources that have been overstretched for several years, also created an opportunity for the company, Dr Elder said.

A number of major long-term capital projects, infrastructure improvements, and health and safety upgrades were planned over the next year to 18 months.

That would enable a return to full, and safer, production when market demand increased, he said.

Lower production would likely impact on contractors' workforces, said chief operating officer Barry Bragg.

"We'll know more around the end of March," he said.

"However, from June it is likely there will be either job cuts or fewer hours available to contractors' workers. A small number of jobs may also be lost from our own workforce in Buller."

Solid Energy, along with its contractors, was reviewing rosters, the non-essential work programme and investigating opportunities to second people to other contractors, he said.

Nelson engineering firm Brightwater has won the contract to design and construct the $100 million coal handling and processing plant at the mine.

It will begin operation in early 2010, separating high-value coal from rock and other waste material, and washing and grading it.

The plant has been designed to produce between 600,000 tonnes and 1m tonnes of coal a year. About 80 people will be involved in its construction.

Stockton has generated large stockpiles of coal mixed with rock and other material such as propping timbers from historic underground mining over the years.

Plans to opencast the former Millerton Mine in the north of the coal mining licence will generate even more of this material.

It is estimated that over the 20-year remaining life of mining on the Stockton plateau the processing plant will enable up to 10 million tonnes of coal to be recovered.

NZPA WGT dw nb