STATE MINES.

Dominion, Volume 6, Issue 1584, 30 October 1912, Page 10

STATE MINES.

REPORT ON OPERATIONS TO DATE,

THE FINANCIAL POSITION. A report by the Under-Secretary for Mines (Mr. H. J. 11. Blow) upon State Coal Mine?, was presented to Parliament 'yesterday. It deals with the history of the mines acquired under the State Coal-mines Act of 1901, the present financial position of the iiiines, details of operations and management, and competition with other coal. Tho report concludes with ;i series of recommendations regarding the future working of the mines. Under the Act of 1901 two mines were acquired, the Point Elizabeth mine, situated five miles from Greymouth, and the Seddonville mine, 29 miles from Westport. A* a State colliery the. Point Elizabeth No. 1 mine had produced at tho end of March, 1912, 1,513,427 tons of coal. It is anticipated that the profitable life of the mine will not exceed four years, unless which the demand is irregular. The manager of tho Sddonville mine estimates that mine .has-been found extremely variable, and unsatisfactory, owing to the large proportion of crushed and soft coal, for which the demand is irregular. The averago of the Seddonville mine estimates that all suitable or hard coal will have been won from it by the end of March, 1914. As a State colliery - the Seddonville mine had produced at tho end of March, 1912, 419,530 tons of coal.

, The manufacture of briquettes was commenced at Westport in 1907, with a plant which cost The total quantity of briquettes and eggettes manufactured was 32,714 tons. In 1911 the works were closed down owing to the high cost of production.

The New Mine. "In addition to the mines mentioned," the report continues', "as the result of a favourable report by the Government milling exports (Messrs. H. A. Gordon, Consulting Engineer, and James Bishop, Sfanager of State Collieries), dated 1907, a new colliery, known as the Point Elizabeth State Colliery No. 2, is now being laid down towards the head of Seven-mile Creek, to tho north-east of the No. 1 Stato Colliery, and connected therewith by an extension of the Government railway about three miles in length, which is nearing completion. This line has been carried through extremely rough nnd broken country, and the expenditure thereon to March 31, 1912, amounted to .£159,177; and it willprobably cost another ■£10,000 to to complete it. Messrs.' Gordon and Bishop reported that six seams of high-class bituminous coal exist upon this properly; and Mr. Bishop, reporting as recently as August 1, stated that there was in situ 132,435,800 tons of coal, of which he estimates that 49,663,425 tons may be won, being 'sufficient to provide an annual output of 500,000 tons for a period of ninety-nine years.' It should be stated that this estimate was arrived at by Mr. Bishop after a considerable amount of exploration had been carried out under his directions. This' colliery should reach the output stage about'the end of 1912.

"A small sample shipment "of coal from this new mine has recently reached Wellington, and about two tons have been sent to the Parliament Buildings, and are now being used there, so that members may have an opportunity of forming their own opinions as to its quality.

"The equipment at the new mine is on a scale to deal with an output of 2000 tons per day. • In addition to the expenditure

on the railway-extension above stated, capital amounting to .£90,145 "had been expended upon, this new mine on March 31, 1912, and a further expenditure of ,£IO,OOO or .£15,000 will be needed before it is opened. "For the sale of the coal produced from the State collieries depots were established in AVcllington in April, 190G, ChristcJiurcli in July, 1906, Wanganui in May, 1907, and Dunedin in July, 1908. Upon these, depots, with their furniture and appliances, capital amounting to £1G,7158 had. on March 31 last, been exDencleu.

Present Financial Position. "The total capital expenditure upon the, State colliery business to March 31, 1912, amounted to of which .£150,000 was obtained in tho form of loan debentures, as provided for by'the Stato Coal Mines Act of 1901; the balance from profits and flora sums annually set aside for depreciation and sinking fund. Included in the capital expenditure is the sum of .£90,145, recently expended in laying down the Point Elizabeth No. 2 State colliery, Hvhieh has not vet reached , tho output stage. i. "The assets as shown in the last, published balance-sheet and in the specially-pre-pared table attached hereto, total to .£244,014; but several of the items are not really worth the book value. All the assets have now been reappraised."

The report here contains a table showing State mine assets totalling .£188,312, valued as a /goiug concern, and ,£170,687 at auction values. "From this statement it will appear," the report continues, "that, taking the fair trading values of the assets, we not only hnvo our original debenture capital intact, but can show a surplus of .£38,342, after having paid all interest charges and working expenses, and providing for all depreciation; and even if we appraise our assets at their auction values only, wo can still show a surplus of over J20.000.

"In the reappraisement of the assots the expenditure at the new No. 2 colliery, and in connection with tho proving of the coal area at Charming CreekvJins been taken as of- the full value ofi the cost. This is in necordnjico lritli the usual commcrrjil practice, as it is not customary to writo off for depreciation until the producing stage i>{ a mint lins been reached. "Hitherto the amounts written off for depreciation and allocated to sinking and reserve funds respectively, have not actually been withdrawn from (lie aecoiiiir, as tho amounts have been expended on the development of the No. 2 mine, and on other work fairly debitablo to capital account. It is now proposed to withdraw these amounts from the State coal mines account, and to invest them, probably through (hn agency of (he Public Trustee. It v'ill therefore be necessarv lo raise fresh capital to pay for the work nlreadv done at the new mine, nnd any further work that may be necessary to complete it, and provision for raising an additional .£IOO,OOO has accordingly been

innde in tho Coal Mines Amendment Bill, which is now being prepared. Output and Cost. "Previous to 1904 only a. few tons of coal had been produced by the State collieries, and it was during that year that actual trading business commenced;since then the State-owned mines have produced 1,9G0,05l tons of coal, being about 12 per cent, of the total output of all the collieries of the Dominion, which amounted to 14,719,790 tons during the same period." Tho following table shows tho cost per ton of coal produced at each of the State collieries from 1805 to 1912:-

Financialyear Point ending Elizabeth. Seddonville. March 31. ». d. p. d. 1005 "> 1.42 « 10.51 1908 5 9.50 G 8.18 1907 5 9.25 5 11.12 190S C e.60 fi 3.26. 1909 G C.87 . 5 5.87 1910 6 9.36 5 7.09 .1911 7 7.17 5 11.10 1912 -8 5.5.") 5 3.60 The earnings per shift of coal hewers averaged in 1905 12s. 7.50 d. at Point Elizabeth, and 13s. at Seddouville. In 1912 the average earnings per man per shift were 10s. 8.15 dl at Point Elizabeth, and 17s. Bd. Nt Seddouville. From these earnings is to bo deducted tho cost of oxplosives and other stores, equal to about Is. per man per shift. >

Sale and Distribution. Mr. Blow states that the sale price of coal, produced at tho mines, both to Government Departments and tho public, was fixed, and has always been maintained, at bedrock, the policy of the Government being to sell at practically cost price. During the six years in. which coal has been sold at the depots, the total quantity disposed of has totalled 330,908 tons, following are tho total quantities sold at the depots indicated:—

Tons. Wellington (six years) 114,390 Christchurch (six years) 132,132 Wangantii (fivo years) 30,181 Dune-din (four years) 24,265 It has sometimes bocn stated, Mr. Blow remarks, that tho Railway and other Government Departments have bean charged a higher prieo than the public for Stato coal supplied to them for the purpose of inflating the profit, but this is absolutely erroneous. He supplies a table which shows that during the last thrte years identical rates have bo?n charged tho Railway Department, other Government Departments, and the public. The rates for unscreened coal have been uniform throughout, but in 190G-7 tho Railway Department was supplied with screened coal at Is. Gd. per ton less than was .charged to other Government Departments and the public; in 1908-9 the Railway Department got screened coal at' Is. per ton less than other Government Departments and the public, nnd jn 1909 it got screened coal at 6d. per ton less. Mr. Blow adds that when, coal is charged •to tho Railway Department at higher rates it is on account of the State mines bearing the cost of eea freight and including tho same in the total charge for the coal.

Recommendations. The report concludes with a series of recommendations of which tho first is that the following additional sums be written off for depreciation:—Port Elizabeth No. 1 Colliery, ,£25,000; Seddonvillo Colliery, .£10,000; Briquette-works, ,£6,000; Wellington depot, £600; Dunedin depot, JMOO; Charming Creek, <£2,9G0. Total. ,£44,906. This, the report states, will bring the

total of the Depreciation Account up .to .£99,990, and will mean the practical Tepayment of nearly two-thirds of our original capital. "I further recommend that 10 per; cent.,instead of 5 per cent., bo annually written oft* for depreciation in future in respect of both the old collieries and the briquette works, nml that such amounts be computed on the gross total capital expenditure- in each case, and not; merely on tho balance not Written off as hitherto; the present.rate for depreciation (5 per cent, per annum) to be maintained as regards the depots, anil to l>o put in forco as regards tho new colliery as soon' as it reaches the output stage, . - "If these recommendations are given effect to, the different mines, works, and depots would appear in the books as assets of tho following values] and such .assets would (apart from interest earned on the accumulated Depreciation Funds) bo entirely written off within tho periods mentioned :—

£ Yrs. PointElizabelhNo. 1 Colliery n>1.771 + •SeiWonvillo Colliery 11,075 I! Briquello-works 7,110 -1} Wellington .'epot 2,015 12 Christchurch depot 5,282 15J Wanganui depot 1,477 101 Dmiedin depot 1,400 . H Hulks 1.385 11 Office furniture 77 9 Point Elizabeth No. 2 Colliery 90,145 20 "I also recommend tnat. the amount written off for depreciations, together with the amounts set aside as sinking nnd reserve funds, bo paid over to the Public Trustee for investment, in instalments, as the same can conveniently be spared from Hie Stato Coal Mines .Account, and as the Public Trustee can advantageously invest it,"