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After four delays and three directors' resignations, New Zealand Oil & Gas has finally revealed the details of its plan to float subsidiary the Pike River Coal mine.
NZOG, a 54 per cent shareholder in PRC, said yesterday it was seeking $65 million to fund further development of the mine in an initial public offering (IPO) targeted mainly at Australian and New Zealand investors. The company will have an market capitalisation of $180 million.
The float was originally intended for 2005 but has been put off four times. The date of the mine's coal production has been pushed back three times, from the original June 2006 to March next year.
In December three independent directors quit the board after NZOG's decision to take control of the previously independent float plan. And the mine's tunnel is three months behind schedule because of unexpected "variable rock conditions".
Pike River Coal managing director Gordon Ward admitted the delays had "cost" the company, but some were "positive".
Ward said NZOG had spent three months finalising a $20 million investment by India's Gujarat NRE Coke, a deal finalised in August.
Another delay was in November when NZOG had to raise $25 million to fund its Kupe prospect, the country's largest undeveloped gasfield.
"Essentially we had to refresh the prospectus over the last few months. While one development was going on we were busy signing up contracts [and this was happening] all the way through."
He added: "Good things come to those who wait."
NZOG will remain a cornerstone investor but will chop its 54 per cent stake to 34 per cent. The other two major stakeholders are Gujarat, which owns 11.1 per cent, and Indian coking coal company Saurashtra Fuels, which owns 9.5 per cent.
The mine, touted as the country's second largest export coal mine, will produce on average 1 million tonnes a year from 2009 on, and 17.6 million tonnes during its 19-year life.
NZOG's prospectus estimated that the gross sales value of the coal would be $2.3 billion at today's prices and exchange rates.
The prospectus shows that based on global researcher AME's forecast prices, Pike River Coal's average sales price is US$99 ($136) a tonne in 2008, US$95 a tonne in 2009 and US$91 a tonne in 2010. Those prices are based on an average NZ-US exchange rate of 0.63 in 2008, and 0.7 for the next two years. NZOG has already sold 70 per cent of the coal which will be produced in the mine's first three years.
Gujarat has agreed to buy 40 per cent of the mine's production for its estimated 19-year life, while Saurashtra Fuels will buy 15 per cent of the coal for the life of the mine.
Japan's Nippon Steel will buy 100,000 tonnes in the first year, and 150,000 tonnes in the second and third years of its three-year contract, with an option to renew the contract for another four years. The IPO will be underwritten by up to $22 million by Wellington-based broker McDouall Stuart, while Gujarat will subunderwrite the offer for $5 million. Four New Zealand institutions will underwrite the rest.
Broker Andrew McDouall said the company would be doing a significant marketing programme targeting investors in Australia, and had already been there and to the UK.
NZOG has already raised $60 million to fund development of the mine and in April-May issued a further $11 million of convertible notes.
McDouall said he expected oversubscriptions. Pike River expects to pay six-monthly dividends on shares once the mine is cashflow positive.
Shares will be issued at $1 each. NZOG shareholders can subscribe for one Pike River share for every eight NZOG shares held on June 6. Shares closed up 6c yesterday at $1.02.
