The West Coast coal mine, which will be mothballed with the loss of more than 200 jobs, had lost $100 million in the past five years, its owners say.
Solid Energy yesterday said it would put the Spring Creek Underground Mine into a maintenance phase, with the workforce being slashed from 254 to about 20.
The state-owned coal miner will also cut 63 positions at its Huntly East mine as it reduces production and halts development while 163 roles, or 50 percent of the staff, will go from office-based roles, mainly at its head office in Christchurch.
The company signalled earlier in the year it was facing a revenue shortfall of $200m in the current financial year.
Its chairman Mark Ford said the mine had not been profitable for some time and had lost $100m since the Spring Creek Mining Company, a joint venture with international industrial giant Cargill, was set up in 2007.
It had been in a $50m development phase since the end of last year with a limited amount of coal being extracted.
He said the mine would not have been able to return to full production until early next year and between $40m-$70m was need to get it to that point.
"The mine has performed below expectations as a result of more complex geology being encountered, higher costs and slower development progress," Mr Ford said.
Solid Energy chief executive Don Elder also told Radio New Zealand an unforeseen, and dramatic, global price crash had rocked the industry.
"In the second week of July the markets tanked, demand fell through the floor," he said.
In up to six weeks the price plummeted 40 to 50 percent and did not show any sign of bouncing back anytime soon, he said.
Mr Ford says the price for semi-soft coking coal from the mine would need to rise by 50 percent for the mine to be profitable.