KEY POINTS:
New Zealand Oil & Gas will find it harder to float its Pike River Coal project following the shock resignation of the miner's three independent directors, observers say.
The oil and gas explorer yesterday confirmed chairman Dennis Wood, and independent directors Graeme Duncan and James Ogden had resigned
for "personal reasons".
It also said it had taken control of the planned float away from Pike's board to help it achieve its objective of floating Pike early next year.
It declined to comment further. That surprised potential investors who say the departure of all the independent directors just three months before the planned float needed further explanation.
This is especially the case in the wake of talk that Pike shareholders, including 61 per cent shareholder NZOG, were extending the fledgling company sufficient funds to develop the mine.
"The investment community cannot help but ask questions about why the independent directors resigned and it is not obvious to me why they have resigned," said AMP head of New Zealand equities Guy Eliffe.
They were also surprised NZOG was not more forthcoming on the project since it represents more than half NZOG's assets.
The company is also in the middle of a 40.5 million capital raising to fund its oil and gas developments and give it working capital.
NZOG's shares - which have been under pressure since yesterday when the Business Herald revealed the boardroom ructions - yesterday closed down 1 cent to $1.05.
NZOG's Ray Meyer, who has assumed the chair of Pike said the independent directors would not be replaced although the company may search for another director in the New Year.
"I think four directors is sufficient at this stage," Meyer said.
Pike is developing a mine, which is in the Paparoa Range, northeast of Greymouth, and is capable of producing high-quality coking coal.
The development cost of $174 million is to be covered by the $60 million raised from the existing shareholders, the float, due to raise $60-65 million, and a $65 million loan from Westpac. NZOG will not be able to use this loan until the mine development is 80 per cent complete.
Meyer said the mine development was proceeding very well. Miners building the 2km tunnel from the outside to the coal face had advanced 138 metres into the bedrock.
"The rate of advance has been increasing as the tunnel drives into the mountain. Other major contracts are well under way with coal mining equipment ordered and pipeline and electrical infrastructure construction well advanced," Meyer said.
"It is an exciting project, which promises to be a long-life and profitable enterprise once into production"
NZOG shareholders will receive a firm entitlement in the Pike River float of one Pike security for every eight NZOG shares then held.
The departures are the latest setback to the mine. Last month, NZOG put the float on hold for the fourth time this year. It said it hoped to register a prospectus in February. It originally planned to float at the start of this year.
NZOG has previously blamed delays in securing bank financing as well as negotiating a deal with India's Gujarat NRE Coke, which became the project's third cornerstone investor in June.
Gujarat injected $20 million into the company and has agreed to buy 40 per cent of Pike's production for the life of the mine. Its stake in Pike is linked to the price achieved during the flotation. The other cornerstone investor is Indian coking coal company Saurashtra Fuels, which paid $17 million for a 10.6 per cent stake.
Pike River
* Developing $174 millon mine in the Paparoa Range, northeast of Greymouth.
* Due to float on the stock exchange in February after four delays this year.
* Existing major shareholders New Zealand Oil and Gas (61 per cent), Gujarat NRE Coke (stake dependent of float price) and Saurashtra Fuels (10.6 per cent).