Pike River Coal has revised down its production targets as it outlines details of a $50 million equity raising.

The miner now expects to produce around 620,000 tonnes of hard coking coal in the year to June 2011, down from 800,000 tonnes it forecast in January.

The company also said its second 20,000 tonne shipment of coal had been delayed until July.

However chief executive Gordon Ward said the mine was still expected to reach its one million tonnes a year target in the 2011-12 year.

The company last week moved a step closer to the start-up of hydro-mining by breaking through a rock barrier to coal after months of tunnelling at a little over a metre a day.

Pike River intends to raise $50 million with a $10 million placement of shares and an underwritten $40 million renounceable rights issue to shareholders and option holders.

The rights issue offer would be two new shares for every 19 Pike River shares, and two new shares for every 19 listed options at a subscription price of 88c per new share.

The placement would be made to institutional investors and to two of Pike River's major shareholders at 88c.

Cornerstone shareholder New Zealand Oil & Gas, and Indian shareholder Gujarat NRE would participate in the placement proportionate to their current shareholding level.

Money raised would provide funding through the ramp-up into hydro-mining operations and would also provide a cash buffer of $18 million. The rights issue will be fully underwritten by UBS, McDouall Stuart Group, NZOG and Gujarat.

Pike River also confirmed a binding agreement with NZOG to subscribe to a new convertible bond to refinance the existing US$28.6 million ($40.3 million) Liberty Harbor bond facility, and the granting of a two-year option to NZOG to purchase Pike River coal, over the life of mine, at market prices.

The underwriting of the rights issue and NZOG's subscription to the new convertible bond was conditional upon shareholder approval of the funding arrangements with NZOG which would be voted on at a shareholders' meeting on May 7.

Market commentator Arthur Lim said Liberty Harbor's decision to walk away was symptomatic of ongoing concerns about the project which had been plagued by delays.

The issue was not going to dilute shareholders much as it was fairly small, said Hamilton Hindin Greene director Grant Williamson.

"I think it's been set at the right price - it's well underneath the current market price which I think is good." But further production delays meant the company could not take advantage of high coal prices, he said.

Before a trading halt yesterday, Pike River shares were up 2c to $1.10.

- additional reporting NZPA