October 07, 2008

Pike River coal mine development update

Pike River mine is poised to benefit from an expected jump in hard coking coal prices. Market observers are currently expecting hard coking coal prices in the next Japanese fiscal year to settle at around USD 115 per tonne compared to the Pike River initial public offer prospectus forecast of USD 96 per tonne.

Pike River Board of directors had approved an USD 11 million increase in the mine development budget taking the approved budget from USD 174 million excluding the working capital budget of USD 33 million, which is unchanged. The budget increase relates mainly to tunneling costs with nearly all other development costs currently being on or under budget.

Overall, the benefit to Pike River of higher coal prices is expected to more than offset the increased mine development cost resulting in an increased project value since the initial public offer prospectus.

The status is as under
1. The Pike River tunnel has advanced to 1,391 meters, which represents more than 60% completion of the 2,300 metre total length. The tunnel is expected to intersect first coal by the end of April 2008, one month later than previously forecast.
2. The coal preparation plant contract signed with Brightwater PEAT Limited in June 2007 is progressing with detailed plant design and hazard reviews being undertaken. This plant will receive all of the raw coal from the mine through a 10.6 kilometre coal slurry pipeline and wash the coal to remove diluting rocks and deliver a clean, dewatered product into stockpiles for haulage to the port at Greymouth. Construction of the coal preparation plant will commence in the final quarter of 2007 to be completed in time for processing of coal production of the mine.
3. The mine's administrative and engineering buildings at the mine site have now been completed and occupied with the Pike River staff and project team moving from their previous offices in Greymouth
4. The first piece of coal mining equipment, a road header manufactured by Waratah Engineering in Australia, is set for delivery to the mine site in November 2007.
5. The two continuous miners, also being manufactured by Waratah, are currently en route from initial fabrication in Germany to Waratah's workshop in Newcastle, NSW with delivery to the mine site currently scheduled for February 2008.