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The Pike River mine is expected to reach its first seam of coal in April 2008.
Pike River Coal says higher tunnelling costs and slower-than-forecast mining progress will be offset by better prices for coking coals.
The company has had to budget a further $11 million to the original $173 million cost of developing the mine tunnel, just four months after it launched a prospectus to raise $85 million.
The budget increase relates mainly to tunnelling costs, with nearly all other development costs being on or under budget, the company said.
Pike said the 40 per cent of the tunnel to be completed would mostly encounter a more expensive fractured rock class than expected in the May prospectus.
The planned 2300m tunnel had advanced from 764m on May 20 to 1391m yesterday and was expected to hit the first coal at the end of April - one month later than forecast.
Pike noted Japanese prices for hard coking coal from April 1 were expected to be around US$115 ($165) per tonne; prospectus forecast was US$96.
"Indications are that longer-term coking coal prices from 2011 onwards will also lift due to ongoing strong international demand," Pike said.
"The benefit to Pike River of higher coal prices is expected to more than offset the increased mine development cost, resulting in an increased project value since the IPO."
A coal preparation plant contract signed with Brightwater-PEAT in June was progressing with detailed plant design and hazard reviews.
The plant will receive all the raw coal from the mine through a 10.6km coal slurry pipeline and "wash" it to remove diluting rocks.
Construction will start in the final quarter of 2007, to be completed in time for processing of coal production.
Administrative and engineering buildings had been completed.
The first piece of coal mining equipment, a roadheader manufactured by Waratah Engineering in Australia, was set for delivery to the mine site in November.
Two continuous miner machines, also being manufactured by Waratah, are en route from initial fabrication in Germany to Waratah's workshop in Newcastle, with delivery scheduled for February.
Pike shares, issued at $1 in July, were up 2c to 87.
- NZPA
