Mining sector confident of growth despite Pike River gloom

By Simon Hartley

Photo / Thinkstock
Photo / Thinkstock

Businesses believe there is still strong potential for growth in New Zealand's mining sector despite a cloud of gloom over the Pike River Coal tragedy.

Bathurst Resources - a more than A$300 million ($386 million) coal mining company - listed on the New Zealand stock exchange on Friday, uplifting New Zealand's annual mining conference, held in Auckland last week.

New company news was sparse at the New Zealand branch conference of the Australasian Institute of Mining and Metallurgy (AusIMM), but relatively new entrant Bathurst and the on-going commitment to work by Glass Earth Gold in Otago and L&M Energy reveal plenty is under way for next year.

Several of the almost 300 delegates, who asked not be named, reeled off the names of three private Australian companies "looking very seriously" at coming to the South Island next year for gold, and also talk of a large Chinese company preparing to announce a southern foray in coming weeks.

Some gold seekers are expected to raise equity, with one considering a listing.

A foray by Australians is not inconceivable as their resource sector is well into recovery mode and New Zealand offers a tighter range of prospects, with many areas offering well documented historical data through Crown Minerals.

While the future of Pike River is unknown because of the extent of damage to its tunnel and coal asset, Bathurst is preparing to pump about A$57 million into its open pit hard coking coal tenement, the Denniston plateau north of Westport, next year.

On Friday Bathurst managing director Hamish Bohannan said a total A$110 million capital raising was being done for the West Coast venture, with A$18 million for working capital, the acquisition of the field from L&M Group of A$35 million and A$57 million to be used on capital expenditure.

Bohannan said contracts for the premium quality hard coking coal were expected to be announced shortly, possibly for 50 per cent of overall production and 50 per cent later for sale on the global spot market.

Development should be under way in about 15 months, with production due to begin in mid to late-2012.

The Escarpment area will be targeted first, where there is an estimated 7.3 million tonnes of coal, with the Deep Creek prospect potentially holding almost 11 million tonnes.

Overall, the Buller project was targeting total exploration of 60 to 90 million tonnes of coal, Bohannan said. Pike was targeting 18 million tonnes over 18 years.

Glass Earth and L&M and their subsidiaries have spent more than $55 million, mainly on southern prospects, during the past decade or more.

Glass Earth chief executive Simon Henderson, who has spent 60 weeks travelling overseas raising capital for the project during the past five years, painted a bleak survival story of "doing the hard yards during the global financial crisis".

Glass Earth's cash-burn during exploration has been more than $25 million so far, with no cashflow.

Then during the financial crisis, with a share price slumping from 20c to 1.5c, cash was dwindling and the company had to be restructured, Henderson told delegates.

Glass Earth had to move from explorer to gold producer, with almost 1000oz coming out of its McAdies prospect in the Ida Valley for the year.

He said he expected a total 7500oz from McAdies during the coming year - which at US$1300 would equate to more than US$9 million.


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