Specialist hard coking coal supplier Pike River Coal is expected to post a $14 million loss next week for full-year results, but retains plenty of cash in hand as it strives to meet its inaugural delivery deadline of the end of November.
A ventilation shaft rock slide in February, which cost about $7 million to repair, also delayed production which would have provided cash flow to complete development of the 2.3km tunnel into the Paparoa Ranges, about 50km northeast of Greymouth.
In late July, Pike announced it had put back its inaugural coal shipment by six weeks, until mid-November, but said it would meet the deadline of convertible bond holder Liberty Harbor LLC to have steady production by the end of November.
Pike raised $41 million in a rights issue in April, and could reap a further $73 million from future bonus share options, and at present has about $21 million cash in hand, ABN Amro Craigs broker Peter McIntyre said yesterday.
"Pike are running a fine line on the Liberty deadline, and penalty, but we're expecting them to get there in time," he said.
In late July, Pike chief executive Gordon Ward said the company had sufficient funding in place to accommodate the six-week delay and was on track to meet the Liberty Harbor convertible bond condition that first steady-state production would be demonstrated by November 30, 2009.
The Liberty bond condition requires Pike River to be capable of producing 800,000 tonnes in the following year to November 30, 2010, or face penalties.
Liberty Harbor LLC has $US27.5 million ($NZ40.8 million) in convertible bonds and could call on Pike to hand over 2.3 million ordinary shares, or the cash equivalent, if the November 30 deadline is missed, which could cost Pike about $2.5 million.
Mr McIntyre said the rock slide and subsequent work to construct a replacement shaft meant any coal sales, under an earlier contract price of $US300 per tonne, were voided.
"That [$US300] contract was to be a key funding source for final development," he said.
About 15 months ago, Pike was contracted to deliver its first coal at $US300 per tonne and its management and analysts were confident at the time the 2009-10 prices would be in the range of $US270-$US300.
However, in late July, it announced a deal with Japanese steel producers to deliver coal at $US128 per tonne, matching benchmark prices achieved by major Australian coal producers.
