Pike River ponders road ahead

Pike River pays wages of more than $1 million a month. Photo / Simon Baker

Pike River Coal's board will meet today to talk about the company's options following the tragedy at its West Coast mine.

Although its biggest single shareholder and a bank have granted the company an $80 million lifeline until the end of February, one Australian analyst says Pike's financial future looks bleak.

Chairman John Dow said top of the agenda would be to discuss support for the families of the 29 dead workers and other staff at the site.

Directors would then take stock of the books "to see what we've got and see what committed expenditure [there is]".

Pike River has a market value of $357 million and as at June 30 had $21 million in cash and near-cash items and $43 million debt.

Dow said workers were told yesterday their wages were guaranteed until early in January. The company - whose only asset is the Pike River mine - pays wages of more than $1 million a month.

Dow said the company had business interruption and major event insurance. He could not give details of what this covered but it would now be looking at policy fine print.

"It comes with all kinds of caveats but our business has been interrupted. There are all sorts of valuations to be done.

"Businesses generally had to be shut for more than a month to qualify."

Dow was not sure whether this would be for historic or project revenue.

The company already has a $3 million insurance claim for last February's collapse of a ventilation shaft which dealt the project a major blow, contributing to it running around two years behind schedule.

The company has a financial buffer until the end of February.

NZ Oil & Gas, a 29.4 per cent shareholder, says it and another secured creditor, the BNZ, have agreed to a stand-still period of 90 days on convertible bonds and bank loans worth about $58 million.

On Tuesday, NZOG said that arrangements were being made for Pike River to draw down the $12 million balance of a $25 million short-term funding facility on the understanding it would not have to be repaid until the end of February as well.

An analyst at IG Markets in Melbourne, Cameron Peacock, said it appeared the mine was going to be shut for the foreseeable future.

"You can't see it opening any time probably within the next six to 12 months. The near-term future is going to be pretty bleak.'

Pike River chief executive Peter Whittall told a briefing in Greymouth yesterday that it was difficult to talk about the future at this stage.

He did say he had worked in mines where there had been explosions 10 to 15 years before he started at the sites.

"But if the roadways [in the Pike River mine] are open there's still 50-odd million tonnes of coal there," Whittall said. "The roadways are probably in good condition. No doubt there's been a lot of damage to a lot of equipment but at this stage that's just not what we're focusing on."

Pike River shares remain on a trading halt. NZOG shares were up 5c at 94c.

- Additional reporting: NZPA