Pike River coal delayed again

The entrance to Pike River Coal's mine on the West Coast of the South Island. Photo / Greg Bowker

The first 60,000 tonne export shipment scheduled for mid-November from Pike River Coal's new mine has been delayed and rescheduled for the January to March quarter.

Production of premium hard coking coal from the mine 50km northeast of Greymouth had been running at lower rates than envisaged, due mainly to early geological complexity and machinery difficulties, the company said today.

Pike River said its board was satisfied the company would be able to fund the costs of the delays given the operating status of the mine, the state of international coking coal markets and its ability to raise further funding if and to the extent that may become necessary.

The company had advised convertible bondholder Liberty Harbor that an extension to a convertible bond production condition would be sought from it.

Now that condition required the mine to be capable of producing 800,000 tonnes - 66,700 per month - in the 12 months ended 30 November 2010.

Liberty Harbor's initial response was favourable and a formal request for an extension for up to six months would be made once Pike River had finalised an updated mine plan and production schedule, Pike River said.

The company also said that when it updated the market in July it had expected to have all three coal cutting machines operating during August.

Due to intermittent commissioning problems with the machines that had not happened, Pike River said.

The three new machines had now largely been repaired and modified, with the remaining outstanding modification being replacement of tracks on the two continuous miners by the German manufacturer at its cost.

Both 60-tonne machines were now operational, but repairs including track work, had resulted in considerable production down-time during the past month.

Other main factors limiting production in the past month were unavailability of some underground coal/rock haulage machines due to breakdowns, a greater level of roof support being needed due to proximity to the Hawera fault 180m to the east, and the need to familiarise new staff with machinery and mining practices.

Measures taken by the company included more intensive maintenance, intensified operator training, and changes to underground work practices following internal and third party review.

Chief executive Gordon Ward said the mine was working two shifts 24 hours per day, seven days a week in order to meet production targets.

The geological faulting complexity encountered so far was expected to reduce as mining moved to the west away from the Hawera fault, and in-seam drilling was in progress to help with mine planning.

With all three coal cutting machines expected to be operating in September, and having made a number of modifications to mining practices, improvements in advance rates would be achieved.

"The Pike River mine has overcome many challenges to get into operation and whilst the current delay is frustrating for investors, customers and staff, it is an issue that many new mines have to face and work through," said Ward.

"Most of the hard work has been done and investors' patience is set to be repaid, with Pike River producing low ash coal at a time of rising global demand."

The outlook for the metallurgical coking coal industry generally had improved substantially in recent months, particularly in China and India, with spot prices for coking coal above US$160, compared to this year's contract price of US$128 per tonne.

The company today also reported a loss for the year to the end of June of $13 million.

Pike River said the result reflected the pre-production status of the mine until early June 2009. Included was a $6.2m unrealised exchange loss relating to currency movements on a US dollar-denominated convertible bond, a $2.1m depreciation charge and $3.5m of interest paid.

At June 30, Pike River held cash of $21.7m and had $26m of available undrawn debt facilities.

Pike River Coal's share price was down 10c to $1.04 after about 50 minutes trading.

- NZPA