Market hammers Pike River for further delay

The portal, or mine entrance, of the Pike River Coal mine. Photo / Greg Bowker

Shares of miner Pike River Coal tumbled by 11 per cent after the company cut its production forecast yesterday.

The cut is the latest in a series of delays which have plagued the project.

Details of the financial impact of the revision were expected to be announced next month, with the company saying it was evaluating revised funding requirements, including repayment of a NZ Oil & Gas short term facility due in December. Discussions were under way with various parties.

Pike River shares closed down 13c to $1.05.

"This company has had a lot of production delays and cost blowouts previously. It has been hammered pretty hard today on the back of that because the market's probably run out of patience a little bit with it," Forsyth Barr sales trader Jared Butters said.

However, the stock still had solid support, and a positive outlook for coal prices meant the company should be in a good position once it started meeting production forecasts, Butters said.

Pike River chief executive Peter Whittall said the new production forecast fell in a range between 320,000 and 360,000 tonnes of saleable coal for the financial year to June 2011, most likely somewhere in the middle of that range. In April the company had forecast production of about 620,000 tonnes for the year to the end of June, itself down from a previous forecast of 700,000 to 800,000 tonnes.

The revision was mainly the result of slower than expected progress in developing underground roadways at the company's hard coking coal mine, 50km northeast of Greymouth, Whittall said.

Slower roadway development and lower forecast development in the next few months ahead of the introduction of a second ABM20 continuous mining machine and an upgrade to a current machine, would result in some interruptions to hydro production in the New Year. Previously scheduled high production in May and June would slip into the next financial year.

The revision also took account of an expected ramp-up of the hydro-mining system which the company was more familiar with, Whittall said.

Pike River expected to achieve full hydro system capacity in the June 2011 quarter at a production rate of 60,000 tonnes of saleable coal per month. From that point, the company expected to continue to ramp up the rate of hydro production to a steady state of 80,000 tonnes a month by the December 2011 quarter.

- NZPA