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September 07, 2008


Pike River Coal announces new coal transport route

Pike River Coal Limited has announced that it will transport its premium hard coking coal by rail to Lyttelton at Christchurch for export under a new agreement signed with Solid Energy NZ Limited.

The 18 year agreement to use rail, supersedes previous transport arrangements with West Coast Coal Company Limited which were based on coastal shipping of Pike River coal from the port at Greymouth to Port Taranaki for export. Pike River has agreed with Solid Energy that it will have capacity reserved of up to 1.3 million tonnes per year on the rail network and has priority access to rail and port facilities to transport that tonnage.

Mr Gordon Ward CEO of Pike River said that “The main factors leading to the change in transport mode were a significant recent increase in rail capacity that has allowed Solid Energy and Toll Rail to transport all of Pike River’s coal by rail and the fact that the financing conditions in the transport agreement were not met.”

Mr Ward said “One benefit of this decision will be the shorter distance Pike River coal travels by road and the consequent reduction in emissions and on traffic through the Greymouth Township. Delivery by Solid Energy and Toll Rail of a proven annual capacity of more than 4 million tonnes has given us the confidence to move forward with Solid Energy’s transport supply proposal.”

The total cost to transport Pike River coal from the coal preparation plant to the point loaded on Panamax vessels at Port Lyttelton under the new agreement with Solid Energy is approximately NZD 39 per tonne. Mr Ward said “This cost is at a level at least 10% less than WCCC were able to offer and slightly below the level forecast in the IPO prospectus.”

Following ONTRACK’s upgrade of the rail route and implementation of improved traction control on trains, Solid Energy and Toll Rail are able to introduce 45 wagon trains boosting the capacity and efficiency of the Midland line. Since the Government took back ownership of the rail network in July 2004, investing USD 25 million in the Midland line through ONTRACK, Solid Energy has committed more than USD 100 million to the line through its long term contract with Toll Rail and then spent a further USD 15 million on the new Cobden rail bridge over the Grey River.