A rock fall at Pike River Coal's West Coast mine last month - estimated to cost $7 million to remedy - has prompted placement of a $45 million ordinary share issue with bonus options, which will also be used to purchase hydro mining equipment.
The rock fall occurred down the ventilation shaft of the hard coking coal mine in the rugged Paparoa Ranges, 45km northeast of Reefton, on the West Coast. It has set back delivery and sale of Pike River's first coal by two to three months, prompting the need to fund the final capital expenditure requirements through the share issue, chief executive Gordon Ward said in a statement yesterday.
Pike River has completed the 2.3km tunnel late last year and were scheduled to deliver 160,000 tonnes of specialist hard coking coal for export by the end of June, which are now expected in August or September.
"The decision to raise cash at this time follows a rock fall from the lower section of the new 108m ventilation shaft, temporarily halting mining operations until remedied," Mr Ward said.
Shares in Pike River were down 5c yesterday, trading around 75c following the announcement. However, that was on light trading.
ABN Amro Craigs broker Chris Timms said when contacted yesterday the rock fall was "ultimately bad timing" for Pike River, but the offer was a "reasonable proposal", with two main issues to consider.
One was whether shareholders were able to find the cash to to take up the offer, and whether the $45 million offer would be underwritten, he said.
The offer for the 70c ordinary shares opens on March 25 and closes on April 14. The proposed bonus options have a two-year term, expiring April 2011, and an exercise price of $1.25 per option.
Mr Timms said listed New Zealand Oil and Gas spun off Pike River in May 2007, raising $85 million and retaining a 30% cornerstone stake. It moved quickly yesterday to announce it would take up its share of the offer, equating to a $12.3 million injection.
"They [Pike River] have lost the ability to get [the first] coal out, at the contracted $US300 per tonne, which would have assisted with the planned capital expenditure," Mr Timms said.
ABN still valued Pike River at $1.55, with a recommendation of "hold" on the stock, based on ABN's forecast that it was still able to deliver 500,000 tonnes of coal in 2010, and 800,000 per year thereafter. However, Mr Timms did not rule out a review of the share value soon.
• Mr Timm's financial disclosure document is available on request.
