Pike River Coal seeks more money for its mine

A contractor walks past a generator at the Pike River coal mine in Westland. File photo / Greg Bowker

Pike River Coal shares dropped 3.6 per cent after the coal mine developer said it requires more short-term funding to sustain its rate of underground mine development.

Pike, whose mine location includes part of the Paparoa National Park, expects to announce by late September the results of its advanced discussions with potential funders. The company reported a $39 million loss for the year ended June, following a $13m loss in the 2009 year. Its shares traded at $2.50 in mid-2008.

The shares fell 4 cents to $1.07.

Chairman John Dow said good progress has been made this quarter in installation of hydro-mining equipment, though capital costs have been higher than expected and installation has taken longer than forecast.

The company has also committed to the purchase of a second, and unbudgeted, "ABM20 continuous miner" machine ready for operation in early 2011, following the success the first machine gave in improved development rates.

"The increases in costs and the delay in the receipt of revenues from the second coal shipment have impacted short-term cash flow and led to the need for additional working capital," Dow said.

The first hydro-mining equipment is now fully installed with commissioning and first extraction planned this week, and will incorporate its progress to provide an updated forecast of annual production expectations he said. The company exported 20,000 tonnes of the coal, which obtains a premium for its specialist steel-making attributes, out of an earthquake-damaged Port Lyttelton last week.

"While we now have to deal with the short-term impact of the additional capex we have committed to, it has been pleasing to see the results of introducing the new continuous miner and, with hydro mining imminent, we are moving into a phase where our future production rates will be able to be forecast with more confidence," Dow said.

Earlier this month, managing director Gordon Ward, who has been instrumental in PRC's development over its 14 year history, announced his resignation effective Oct.1. He is to be replaced by the company's general manager of mines, Peter Whittall.

The company invested over $25 million in Pike River mine assets in 2010, while the total investment in mine assets at the end of June balance date was $288m. Much of its coal production is destined for Indian customer and shareholder Gujarat NRE.