Pike River Coal shares in free-fall

Chop chop.

Pike River Coal shares slid 8.5% in early trading this morning after the West Coast miner slashed its production forecast for the 2011 financial year in half following an operational review.

The company’s listed options were also caned, dropping 11.6% to 15.2c by 10.30am. The shares opened at $1.08, down 10c on yesterday's closing price. 

The company said this morning that its new production forecast falls in the range of between 320,000 – 360,000 tonnes of saleable coal to June 2011, with the most likely expectation “somewhere in the middle of this range.”

Pike had forecast production of approximately 620,000 tonnes, according to its latest prospectus released in April this year.

The mine had been hoping to hit its steady average rate of approximately 1 million tones per annum in the first half of 2011.

Chief executive Peter Whittall said the revision was primarily the result of slower than expected progress in developing underground roadways, which had impacted forecast production.

“Slower roadway development to date and lower forecast development in the next few months ahead of the introduction of the second ABM20 continuous mining machine and an upgrade to one of the current machines, will result in some interruptions to hydro production in the new year. 



“This will result in a couple of months of previously scheduled high production in May and June slipping into the following financial year.



“In addition, the revision takes into account the expected ramp-up of the hydro-mining system which, after several weeks of experience, we are now more familiar with. The mine plan has also been revised to fall within the parameters of the surface environmental consents. This has resulted in re-orienting one of the extraction areas to increase coal recovery, but adds some delay in reaching it.”



Exploring funding options

Pike River is also evaluating revised funding requirements, including repayment of the New Zealand Oil & Gas short-term facility due in December.

“Discussions are underway with various parties, with further announcements expected during November 2010, which will include details of the financial impact of these developments.



“This remains a great project, the scale of which is as we have always planned,” said Mr Whittall.



“But it hasn’t been without its problems, most recently machinery related. We remain confident, however, about our eventual annual production rates.”