NZOG comes to Pike River aid

Tuesday 3rd March 2009

New Zealand Oil & Gas agreed to help coalminer Pike River Coal through a funding squeeze by taking up its entitlement in a $45 million rights issue announced today.

Pike will issue ordinary shares and bonus options, raising funds to tide the miner over until coal production gets underway. The fundraising includes a $41 million renounceable pro rata rights issue to shareholders and a $4 million placement to a major institutional shareholder, Pike said in a statement. The offer is for one new share and one bonus options at 70 cents for every five Pike share held.

The sale of shares comes after a rock fall in a ventilation shaft last month that temporarily halted mine operations. The rock fall has delayed the ramp-up of production for two-to-three months and put back the first coal sales proceeds until the third quarter.

The issue will also provide some working capital and cover the estimated $7million cost to remedy the shaft, a portion of which may yet be covered by insurance, Pike said. New Zealand Oil & Gas will take up its 30% entitlement. NZOG's shares fell 1.6% to $1.20.

"We are seeking to mitigate the effects of the delay and will be meeting with our steel mill and coking plant customers shortly to appraise them of the status at the mine and to discuss the shipment schedules," chief executive Gordon Ward said.

McDouall Stuart Securities is lead manager for the sale while underwriting terms are still being negotiated, Pike said.

By Jonathan Underhill

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