$70m Pike boost 'torpedoed' by disaster

Pike River Coal chairman John Dow. Photo / Greg Bowker.

Pike River Coal says it was days away from securing a $70 million capital injection before the initial blast that ripped through its mine.

Chairman John Dow told a media briefing in Greymouth yesterday the company had been about to announce a fully underwritten $70 million capital raising that would have got the mine into full production and provided financial security. "We had an explosion on November 19 that pretty well torpedoed Pike's business plan. Recovering from that is the challenge now," he said.

The company had been forced to raise additional capital several times in the past three years, Mr Dow said, and the blast "left us in a much more precarious position than you could possibly imagine".

Soon after the first blast the company was given breathing space of three months on $45 million in loans and it was hoped then to recover the business. However, after the fourth explosion and signs the coal seam was on fire, prospects of a quick recovery disappeared, he said.

The company was committed to supporting recovering the bodies of 29 men killed in the disaster and that would involve re-entering the mine, allowing an assessment of the coal, which Mr Dow said was the second priority.

A PricewaterhouseCoopers receiver, John Fisk, said receivership was inevitable as the company relied on a single asset - coal - that could not be reached after the fatal blasts. "When that happens there's a limit to the amount of time you have to see if the business can be restructured."

Dozens of suppliers and contractors are owed millions of dollars and Mr Fisk said they became unsecured creditors and their debt was frozen at the day of receivership - on Monday. There remained doubt about whether they would be paid at all.

He said the company's main asset now was a business interruption insurance policy, which could pay up to $100 million but receivers had only just started assessing prospects of a payout. "It depends on the approach of the insurance company and whether there's argument about payment."