Pike River Coal has released details of plans to raise around $90 million to refinance an existing bond facility and continue developing its underground premium coking coal mine on the West Coast, where production has fallen behind schedule.
Pike River Coal has released details of plans to raise around $90 million to refinance an existing bond facility and continue developing its underground premium coking coal mine on the West Coast, where production has fallen behind schedule.
The company is raising $50m through a $10m share placement and an underwritten $40m renounceable rights issue to shareholders and optionholders.
Pike River will also issue a new convertible bond to cornerstone shareholder New Zealand Oil&Gas to refinance an existing $US28.9m ($NZ40.3m) bond facility with Liberty Harbor, and grant a two-year option to NZOG to purchase Pike River coal, over the life of mine, at market prices negotiated annually.
The capital raising would provide a cash buffer of $18m, equivalent to about three-and-a-half months of operating costs, and $21m in working capital.
The cash buffer was based on a coal sales price of $US160 per tonne, which was conservative compared with current prices of around $US240 per tonne.
The issue was not going to dilute shareholders much as it was fairly small, which was positive, said Hamilton Hindin Greene director Grant Williamson.
"I think it's been set at the right price -- it's well underneath the current market price which I think is good."
However, further production delays meant the company could not take advantage of current high coal prices, he said.
Pike River was on track to begin hydro-mining -- using high pressure water to cut coal -- in the July to September quarter, but slow progress developing the pit bottom and cutting access roadways through an underground rock formation meant the company's second coal export shipment had been pushed out to July.
Production for the year ended June 2011 was forecast to be about 620,000 tonnes, down from an initial forecast of up to 800,000 tonnes, before reaching 1 million tonnes.
"The hydro-monitor itself is more than capable of doing a significantly larger amount of production than what we've got scheduled, but because of the nature of the geology around our immediate pit bottom area, we've actually scheduled a very slow advance rate," Pike River mines general manager Peter Whittall told a briefing.
"I'm very confident within our operational team that we'll exceed that, and if we do, that will allow the hydro-monitor to go quicker."
The rights offer would be two new shares for every 19 Pike River shares, and two new shares for every 19 Pike River listed options, at a subscription price of 88c per new share.
That compared with Pike River shares at $1.10 before they were placed in a trading halt this morning.
The placement would be made to institutional investors and to two of Pike River's major shareholders at 88c. NZOG, with a 29.5 percent stake, and Indian customer and shareholder Gujarat NRE, with a 7.4 percent stake, would participate in the placement at their current shareholding level.
UBS and McDouall Stuart Securities were joint lead managers, with the rights issue to be fully underwritten by UBS, McDouall Stuart Group, NZOG and Gujarat.
The underwriting of the rights issue and NZOG's subscription to the new convertible bond was conditional upon shareholder approval of the funding arrangements with NZOG, which would be voted on at a shareholders' meeting in Wellington on May 7.
The record date is April 29, and rights trading begins on the NZX on April 30. The offer closes on May 19.
