New Zealand Oil and Gas (NZOG) today named the private equity partner who will help fund the development of the Pike River coal mine.
Indian coking company Saurashtra Fuels Private Ltd and NZOG will make a combined contribution of $40 million to fund the project, which will create the country's
second-biggest coal exporter.
The remainder will be raised in a $30m initial public offering (IPO) of shares, now scheduled for March next year.
The mine is located between Greymouth and Westport.
NZOG currently owns 72 per cent of the Pike River Coal Company. Its stake will be reduced to 65 per cent under today's deal, in which Saurashtra will acquire a 10.6 per cent stake and invest $17m.
NZOG and existing minority shareholders in Pike River will contribute $23m -- with NZOG paying $6.9m of that up front.
The remaining mine development costs will be funded by debt and up to $30 million equity from the IPO.
"These arrangements for funding of the Pike River mine represent the optimal approach for NZOG and the other shareholders in Pike River," NZOG and Pike River chairman Tony Radford said.
After evaluating a number of alternatives, NZOG decided it was in shareholders' "best interests" to maintain a strong stake in Pike River and have control over the company, at least through the development phase, he said.
Saurashtra is India's largest privately owned coke manufacturer.
"As a substantial trade investor Saurashtra is a good strategic fit with Pike River," Pike River general manager Gordon Ward said.
Saurashtra has agreed to purchase at least 150,000 tonnes per annum of high quality Pike coking coal for the entire mine life, at market price.
It will appoint a director to the Pike River board, and will assist in marketing Pike coal in India.
NZOG has a target date for the sharemarket listing of March 2006, and possibly earlier. A significant portion of any shares offered to the public will be reserved for existing NZOG shareholders.
Pike River will be the only listed coal company in New Zealand.
Shares in NZOG rallied 6c, or 6 per cent, on the news to $1.05.
- NZPA
