Synergy told: pay more for coal

The State Government should intervene and help Premier Coal get a better price for its coal from Synergy, according to Collie-Preston MLA Mick Murray.

Premier Coal, which is paid an estimated $40 a tonne for its coal, is seeking a $10/t increase to remain viable, but Synergy is only willing to offer an extra $7/t despite Premier Coal being the power company’s sole coal supplier.

Mr Murray said Premier Coal could not continue to produce coal at a cost which was lower than its production cost.

“Both South West coal companies are under stress due to the low coal prices, ” he said.

“The State Government needs to sit down with the coal companies and help them with the price negotiations.

“If we lose coal then we lose our dual fuel policy.”

The Synergy supply contract authorises the company to step in and manage the mining if Premier Coal is unable to, but it is understood neither Synergy nor the State Government want this.

A spokesman for Yancoal said the issue was part of an ongoing discussion and the company wished to make no further comment.

The West Australian reported last week that Energy Minister Mike Nahan believed a solution to Premier’s difficulties would need to be found soon.

Dr Nahan has acknowledged the severity of Premier’s plight, saying he was “acutely aware of the challenges” faced by it and fellow Collie coal miner Griffin.

Premier Coal has struggled since Yancoal bought the Collie-based mine from Wesfarmers in 2011 for nearly $300 million.

Late last year Premier Coal was facing a cash crisis and needed up to $300 million in fresh capital as it grappled with low prices and increasingly marginal coal reserves.

Premier Coal has produced an estimated 90 million tonnes from five underground mines and six open cut operations in a 60-year period.

The coal company employs about 300 people.

Earlier this month Griffin Coal confirmed its plans to export coal out of the Bunbury Port were still on track.

Premier Coal is not the only Collie-based mine making headlines, with BHP Billiton’s Worsley Alumina revealing last week it would review its processes which would lead to an unknown number of job cuts.