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Tunnelling delays and extra costs have sent Pike River Coal back to investors for more money to finish building its West Coast coal mine.
The NZX-listed company said yesterday it planned to raise $100 million of new equity and debt to complete the mine.
An underwritten renounceable rights issue to existing shareholders and noteholders would raise $60 million and shareholders would be asked to approve a debt issue of US$30 million ($40 million) of convertible bonds to investment fund Liberty Harbor. The funding package would replace a mandate held by Westpac to provide $65 million.
Managing director Gordon Ward said the Liberty Harbor bond facility would have an interest rate of 6.75 per cent and would provide certainty of funding and greater flexibility.
"It removes both the need for bridge finance until the proposed Westpac facility could be drawn and the requirement for a guarantee from NZOG [New Zealand Oil & Gas] which was not deemed appropriate or necessary given Pike River's status as a separately listed standalone entity," Ward said.
The Westpac facility could not be drawn down until the mine tunnel - now 1.96km long - had intersected with the coal seam.
The expected coal intersection date had been moved back from late April to early July after the company decided to stop near the Hawera fault and construct pit bottom facilities with conventional drill and blast equipment. "This is a risk mitigation step which should result in more cost-efficient construction of the pit bottom area," the company said.
Additional costs totalling $13 million related to a new long-term transport arrangement with Solid Energy, capital expenditure of $11 million related to tunnelling costs notified to the market in September and a refreshed contingency fund of $11 million.
The total cost of the mine was expected to be about $240 million - about $35 million above that budgeted at the time of an initial public offer last year. "Nearly all capital costs other than the tunnels has been in accordance with budget," Ward said.
Pike River Coal did not expect to need to raise any further funds to complete the mine.
The pro rata renounceable rights issue will be for one new share at $1 for every 3.56 shares held and fully underwritten by McDouall Stuart Group and shareholders New Zealand Oil & Gas, Gujarat NRE and Saurashtra World Holdings Private.
Coal exports were expected to start this year with the first production coming out of the mine in the third quarter. Pike River shares closed down 3c yesterday at $1.
PIKE RIVER COAL
* Floated in July 2007 raising $85 million.
* Wants to raise a further $100 million to finish mine development.
* New package replaces $65 million Westpac facility.
