Pike River Coal project makes rapid strides

Pike River shares have begun trading on the New Zealand and Australian stock exchanges after successfully raising $85 million in the initial public offer.

Strong interest from investors for Pike River shares completed the largest public equity float in New Zealand so far this year. The issue was 20 million shares oversubscribed above the initial 65 million shares allocated thus raising an extra $20 million in capital.

The company said the funds will be used for the ongoing development of the Pike River hard coking coal resource near Greymouth on the West Coast of the South Island, and for reducing debt.

Pike River CEO, Gordon Ward, said that at today’s prices, the Pike River coal mine is expected to generate $2.3 billion in export receipts over its lifetime.

He said Pike River coal is understood to have the lowest ash and highest fluidity of any hard coking coal in the seaborne trade. These attributes are valuable in the production of steel, having high energy content and allowing other lower grade coals to be blended with the Pike coal.

“Hard coking coal prices have firmed on the spot market this year and the trend is likely to continue into 2008 when the Pike River mine begins production,” Mr Ward said.

Full production, averaging 1 million tonnes a year, is scheduled to begin in 2009.

At present a 2.3 kilometre access tunnel to the coal in the Paparoa Ranges is closing in on the halfway mark and is currently at 1,038 metres. A conveyor inside the tunnel to move out blasted rock has meant faster daily and weekly tunnel advances.

Meanwhile, work is proceeding on the necessary infrastructure to support the mine including a coal preparation plant, offices, workshops, and staff facilities. The mine will employ 150 people directly.

The mine’s administrative and engineering buildings are close to completion. Work has commenced on the stores and workshop buildings at a small amenities area about 1.2 kilometres from the tunnel entrance.

Electricity has now been connected to the mine facilities and when water and telecommunications are completed in August, the Pike River project team will move from their current offices in Greymouth to the new mine site buildings.

Pike River also signed a $19 million contract with Brightwater-PEAT Ltd for the construction of the coal preparation plant to be located at the entrance to the Pike valley. This plant will receive the raw coal from the mine via the 10.6 kilometre slurry pipeline and “wash” the coal to remove diluting rocks. Clean, dewatered coal will be stockpiled for haulage by road to the port at Greymouth.

Coal will be shipped from the river port on two purpose-built self propelled vessels to Port Taranaki for export to India, Japan, and other markets.

A new $20 million terminal at the Greymouth port will be developed with financing underwritten by Port Taranaki Ltd.

More than 70% of Pike River’s first three year’s production has already been sold.