Pike River posts loss, seeks bond extension

Tuesday 25th August 2009

Pike River Coal, which is developing a coal mine in the South Island, posted a full-year loss as expected and said first shipments would be delayed until the first quarter of calendar 2010 because of slower-than-anticipated progress at the site.

The delay requires an extension of the terms of its convertible bond.

The net loss was $13 million in the 12 months ended June 30, from a loss of $1.1 million a year earlier, the Wellington-based company said in a statement. The loss was expected because Pike isn’t yet producing revenue from coal while its mine is in development.

The result includes a $6.23 million unrealized loss on currency movements on its U.S. dollar convertible bond, $2.1 million depreciation and $3.5 million of interest.

Pike, which is part-owned by New Zealand Oil & Gas and has contracts to sell some of its coking coal to an Indian shareholder, has made a total investment in the mine of $271 million.

The project has struck some delays, pushing out production of its first export coal, including repairs to a ventilation shaft.The shares fell one cent to $1.14 yesterday and have gained about 20% this year.

The miner today said production of premium hard coking coal “has been running at lower rates than envisaged” in the schedule it released on July 21, “due mainly to early geological complexity and machinery difficulties resulting in slower roadway development driveage."

The first 60,000 tonne export shipment scheduled for mid-November, with the first hydro coal expected in the three months after that, it said today.

“In light of the mine performance since 21 July, Pike River has advised Liberty Harbor that an extension to the convertible bond production condition of 30 November 2009 will be sought from them,” Pike said.

“This condition currently requires the mine to be capable of producing 800,000 tonnes (66,700 per month) in the 12 months ended 30 November 2010.”

The miner said Liberty Harbor’s initial response has been favourable and a formal request for an extension for up to 6 months will be made once Pike River has finalised an updated mine plan and production schedule.

Pike is satisfied it can meet the cost of the delays, it said.Pike had expected to have all three coal cutting machines operating during August but due to “intermittent commissioning problems with the machines this has not occurred.”

Repairs have included track work for two 60 tonne continuous mining machines, at the manufacturer’s cost, which has resulted in “considerable production down-time during the past month."

A breakdown of underground coal/rock haulage machines, more-than-expected roof support work due to the proximity of the Hawera fault and the need to familiarize staff with the machines and mining practices also contributed to the delays, it said.

“The mine is working two shifts 24 hours per day, 7 days a week in order to meet our production targets, and all Pike River’s management and staff are focussed and committed to this outcome,” chief executive Gordon Ward said.

“Most of the hard work has been done and investors’ patience is set to be repaid, with Pike River producing low ash coal at a time of rising global demand.”

Businesswire.co.nz

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