Pike River receivership 'cruel blow'

Fire coming from the vent shaft of the Pike River mine, before yesterday's successful capping operation. Photo / NZ Police

Pike River Coal has gone into receivership, with the company's board calling in receivers this morning.

"The company finds itself in a precarious position financially as a result of the events of the last three weeks," said an announcement.

The mine has not been operating since the first of a series of explosions ripped through it last month. The bodies of 29 miners remain in the mine.

EPMU, the union representing coal miners at the company, described the news as a 'cruel blow'.

EPMU national secretary Andrew Little said last week that most of the 80 to 90 workers at the mine were likely to lose their jobs in mid-January, with workers likely to be given the four-week notice period for redundancy on Wednesday, he said.

However it was now doubtful whether the men would get one month of notice paid out, redundancy payments or any other entitlements such as holiday pay, he said.

Little said the union would seek to clarify the situation with the receivers.

A cap was successfully put on the mine's ventilation shaft over the weekend as part of the operation to extinguish the fire, but there is still no immediate prospect of anyone entering the mine.

Shares in NZ Oil and Gas, which owns 29.4 per cent of Pike River, have been in a trading halt today, pending this announcement. Since trading resumed, they have fallen 4c, and are now changing hands at 85c each.

"The only prudent action we could take was to approach our major creditors and advise them we were unlikely to be able to repay our loans at the end of the standstill period that NZOG and BNZ offered us after the 19th of November," said the Pike River announcement.

"The Pike River Coal Board had a clear business plan for the next few months but unfortunately this has proved to be unachievable because of the explosions and subsequent coal fire.

Pike River has a market value of $357 million and as at June 30 had $21 million in cash and near-cash items and $43 million debt.

The company already has a $3 million insurance claim for last February's collapse of a ventilation shaft which dealt the project a major blow, contributing to it running around two years behind schedule.

The company has a financial buffer until the end of February, when NZOG and another secured creditor, the BNZ, agreed to a stand-still period of 90 days on convertible bonds and bank loans worth about $58 million.

Two weeks ago NZOG said that arrangements were being made for Pike River to draw down the $12 million balance of a $25 million short-term funding facility on the understanding it would not have to be repaid until the end of February as well.

Pike River managers met with workers on Friday to announce they were going to proceed with redundancies three weeks after the first explosion.

John Fisk, Malcolm Hollis and David Bridgman of PricewaterhouseCoopers have been appointed receivers to the company.

In a statement released this morning, Fisk said he acknowledged the receivership would be disappointing for the Greymouth community which was "already suffering from the recent tragic events".

"Yet, the receivership will enable a full consideration of the options available to the company in regards to the recovery effort and to preserve the value of the assets," he said.

Fisk further noted the receivers would be co-operating with the various inquiries being conducted.

The receivers will be meeting with Pike River employees tomorrow to brief them on their position and will "be focused on making a payment to employees prior to Christmas."

Today's receivership announcement says Pike River advised NZOG "of our priorities for action going forward and these have been conveyed to the Receiver." These are:

• options for the recovery effort and making the mine safe

• co-operating with the inquiries

• employees entitlements

• preserving the value of the asset, while recognising that there is considerable uncertainty about the future of the mine."

"Both Pike River Coal Ltd and NZOG are supportive of any intentions to eventually reopen the mine. It is to be hoped that the inquiries now under way will result in findings which allow this to happen in a safe manner."

"There remains a continuing effort to support the families."

"The arrival of the Receiver later today will expedite the orderly transition of the company's governance and management into its new form. The directors and management of Pike River Coal will do everything they can to assist the Receiver in the performance of his statutory duties."