Specialist hard-coking coal company Pike River Coal could reap a further $73 million with its bonus share options during the next two years, on top of the $45 million it will raise in the present, fully underwritten, new share issue.
The new issue of 58.5 million shares was prompted by last month's rockfall at Pike River's West Coast mine, estimated to cost $7 million to remedy, and also to purchase hydro mining equipment. The ill-timed rockfall set back delivery and sale of Pike River's first export coal by two to three months.
During the past three trading days, Pike River shares have see-sawed from 80c-89c and were in the lower range yesterday, with expectations investors would see good value in the 70c per share offer, ABN Amro Craigs broker Peter McIntyre said.
For every shareholder buying five of the 70c shares, they will, in the next two years, have an option to buy a further one share at $1.25, which if, fully taken up, would reap a further $73 million.
"It's a wise decision: providing some security of funding for the next two years. It is a very good use of financial derivatives," Mr McIntyre said, highlighting that Infratil had similarly used a bonus option to secure future funding.
The offer is fully underwritten, with McDouall Stuart putting in between $26.5 million and $27.3 million and cornerstone shareholder New Zealand Oil and Gas $13.7-$14.5 million of the total $41 million, while AMP Capital Investors has taken a total $4 million in shares on the same conditions. Mr McIntyre said small investors were likely to be positive about the underwriting of the issue.
"We would expect a good uptake on this issue, because small investors will have confidence in the [underwriting of this] offer," Mr McIntyre said.
In early March, Pike River booked a $9.6 million loss for the half-year to December, because of an unrealised foreign exchange loss of $10.8 million.
Pike River completed a 2.3km tunnel late last year in the rugged Paparoa Ranges, 45km northeast of Reefton. It was scheduled to deliver 160,000 tonnes of specialist hard-coking coal for export by the end of June, now expected to be in August or September.
New Zealand Oil and Gas spun off Pike River in May 2007, raising $85 million and retaining the 30% cornerstone stake.
