Pike River updates on hydro-mining, no decision by NZOG

Pike River Coal Ltd said it is on track to start hydro-mining at its West Coast coal mine by mid-September, while shareholder New Zealand Oil and Gas Ltd (NZOG) said separately it has not decided when it will sell out of the company.

Pike River Coal said in its quarterly operating report that roadways to access the first area of hydro-mining are currently being driven in excellent conditions and are expected to be completed in August.

Water storage areas are now in place, sumps are being installed for coal storage and hydro-pumps are now being installed underground ready for use in mining operations.

Two of the mine's three coal cutting machines are now being used at the coal face. The third machine was not used as expected because of insufficient faces to mine and some mechanical issues. Three machines are planned to be cutting coal from early August, increasing to four in early 2011.

The company will lease a large continuous mining machine at the cost of $4 million for a 12 month lease.

This machine cuts the full roadway width in a single pass, whereas existing machines require two passes to complete the 5.5 metre wide roadway. The leased machine also has simultaneous cutting and roof-bolting abilities. It is expected to achieve better roadway development advance rates. Hydro-mining is dependent upon roadway advance rates.

Pike River Coal is preparing for its second export shipment of 20,000 tonnes of hard coking coal in August, one month behind plan. Worth approximately $6 million, this shipment will again go to Gujarat NR, a life-of-mine customer. This shipment is of development coal and is discounted because of a high ash content.

Shareholder NZOG said separately today that its total equity investment in Pike River Coal has been $85 million. The market value of this investment is now $120m.

NZOG said that when it is in the best interests of NZOG shareholders it will sell out of Pike River Coal.

"But no decision has been made".

NZOG owns 29.4 percent of Pike River Coal and has 17.3 million options.

NZOG believes that future cash flows from the mine has not been fully priced in by the market.

It also noted that Pike River Coal was addressing operational challenges.

"Really what it is about is getting the coal out of the ground, which sounds very simple, but that is operational risk, and we're very pleased to see that Pike is making some progress in addressing its operational performance, and that should enhance the rate at which the coal is extracted from the mine, and so we watch with interest to see the rate at which the production is increased with the start of hydro mining," said NZOG chief executive David Salisbury.