The Pike River Coal Ltd mine has great promise but has disappointed investors and only has funding until December.The underground mine developed on the edge of a national park on the west coast of New Zealand's South Island has been held up as an example
The Pike River Coal Ltd mine has great promise but has disappointed investors and only has funding until December.
The underground mine developed on the edge of a national park on the west coast of New Zealand's South Island has been held up as an example of a mine development in a sensitive environment that targets a proven coal seam of quality coal with upside potential from a second seam below.
Its developer is New Zealand's only listed coal mining company. The country's biggest coal miner by far is state-owned Solid Energy.
Pike River's development has been slow. The mine encountered a rockfall in its ventilation shaft in February 2009 which cost $7 million to fix and it faces a bill of between $700,000 and $1 million to overhaul continuous mining machines it has had trouble with.
The mine, which is near the historic mining settlements of Blackball and Dobson, has pushed back mine development timetables, cut production targets and has been back to shareholders several times for more money.
It raised an extra $50 million in May this year but by September had to get more working capital funding from 29.4 percent shareholder New Zealand Oil&Gas Ltd (NZOG).
Last month NZOG agreed to provide Pike with a short term working capital facility of up to $25m, which has an interest rate of 13 percent and is to be repaid in December.
NZOG chairman Tony Radford told his company's shareholders that the Pike River coal mine development had proved much more challenging than originally contemplated, "but that fact does not detract from the first class coking coal it produces and the value it will represent once it has reached steady state production".
The mine is in inaccessible hills 46km northeast of Greymouth, covered by 300-year-old rimu trees on land owned by the Department of Conservation, the northern part of which is in the Paparoa National Park.
The Pike River Coal project has taken decades to get off the ground but shares were offered for sale to the public in February 2007. By February this year the first shipment of premium hard coking coal was shipped from Port Lyttelton to a life-of-mine customers Gujarat NRE.
A second shipment was being loaded when the magnitude 7.1 earthquake struck Christchurch but left just one day later than planned.
A target 620,000 tonnes of saleable coal for this year to June 30, 2011 has been halved to 320,000 tonnes to 360,000 tonnes.
The company recently completed commissioning the first of two main underground fans that increased ventilation by around 30 percent.
This allowed the company to run its hydro system as well as three roadway development units which was not previously possible. Complete installation of the clean and dirty water systems to allow the hydro-mining system to increase output from its current 50 percent capacity to its full 9000 litres per minute design capacity was expected to take place in the next couple of months.
