Denham Takes Stake In NZ Iron Ore Operation

Stake Will Enable TTR To Advance Offshore Mining Plan

US-based private equity firm Denham Capital Management has taken a stake in company Trans-Tasman Resources (TTR), which is mining offshore for iron ore from the west coast of New Zealand’s North Island.

TTR holds a prospecting permit covering 6319km of seabed in two offshore areas off the New Zealand coast. Initital prospecting work has found what the company describes as a “very large and low costs” iron ore resource.

Funds from the sale of shares to Denham will enable TTR to advance its plan to set up an offshore dredge mining operation combined with an offshore beneficiation plant located on a fixed rig. Ironsand would be dredged from the seabed, processed in the beneficiation plant, then slurried either to a vessel for shipment to Asia, or to a dedicated local onshore steel mill.

Denham director and head of metals and mining Bert Koth said TTR was in an outstanding position to help meet an expected global shortage of iron ore.

"Its operating and capital costs will be a fraction of those for land-based mining and its transport logistics suffer none of the constraints and costs faced by many, if not most, other iron ore projects."

TTR managing director Paul Berend said the partnership with Denham would enable TTR to fast track the development of its project without the costs and distractions associated with an early initial public offering (IPO).

Pike River Unable To Explain Share Price Hike

NZ Stock Exchange asks for reason behind 15% rise

The New Zealand Stock Exchange has written to hard coking coal miner, Pike River Coal, asking it to explain at 15% rise in its share price.

The exchange wrote to Pike River after shares rose 14.74% to $1.09 on Wednesday; however, managing director Gordon Ward has said that there was no material information that could be released to explain the rise. The shares rose again on Friday, up 4.5% to $1.14. Analysts suggested that bids for Australia’s Macarthur Coal, a rise in coking coal prices and a shift to quarterly rather than annual contracts were possible reasons behind any increase in the share price.

In March Pike River exported its first shipment of coking coal to India and aims to produce 1 million tonnes of coal per year.

Bathurst To Complete L&M Coal Purchase By 30 April

Australian Coal Miner Eyes New Zealand Coal Resource

Australian coal miner, Bathurst Resources, has said that it wants to complete its 100% share purchase of privately-owned New Zealand coal miner, L&M Coal Holdings, by 30 April. The company’s MD, Hamish Bohannon, made the announcement to the Australian Stock Exchange on Wednesday. Bathurst also announced that it is to dual-list on the New Zealand Stock Exchange.

L&M Coal has permits covering more than 10,000ha at Buller, in the western part of New Zealand’s South Island. The areas contain 50 million tonnes of premium hard-coking coal and 90 million tonnes of thermal coal.

"Studies show it should be developed as an open cut operation that could be in production within 18 to 24 months," said Mr Bohannan, adding that due diligence of the Buller coal field was currently in progress.

The neighbouring coal field owned by Solid Energy produces about 2 million tonnes of hard-coking coal per year.

No indication was given of the price Bathurst is paying for L&M Coal.

Pike River Reports $14 million H1 Loss

Pike River Coal, New Zealand’s only listed coal miner, posted a $14.1 million first-half loss on Wednesday which, the company said, reflects the mine’s development phase.

The loss to 31 December 2009 compared to a $9.55 million loss for the same period last year and includes a $4.3 million unrealised exchange gain (relating to currency movements on the USD convertible bond), a $3.8 million depreciation and amortisation charge and $2.6 million of interest expenses.
Total investment in mine assets was $279.3 million including a $14.6 million investment was made in mine assets during the period.

Chief executive Gordon Ward commented: “Once hydro-mining is underway in the July-September 2010 quarter, the typical export shipment size of premium hard coking coal will be approximately 60,000 tonnes. Once full production rates from hydro-mining are achieved, the mine is expected to produce an average of approximately 1 million tonnes of premium hard coking coal a year.”

The company is also to raise $50 million in an equity issue. The company had suggested in its quarterly report last October that it needed $20 million in working capital. Biggest shareholder New Zealand Oil and Gas will refinance its existing $US28.9 million ($42m) bond facility, if shareholders approve. NZOG is to subscribe to its 29.5% interest in the rights issue and will also have a two-year option to buy Pike River coking coal at annually-negotiated market prices up to the existing un-contracted amount of coal to March 2013 and up to 30% of annual production for the rest of the mine’s life. Pike River said this would not affect contracts with Asian customers and it would still be able to sell on the spot market.

The new convertible bond will allow Pike River to repay its Liberty Harbor bond facility of $US27.5 million.

Last week Pike River despatched its first shipment of coal to India.

L&M Energy Approves Acquisition

New Zealand’s L&M Energy said its shareholders have approved the acquisition of L&M Coal Seam Gas at a special general meeting in Wellington today.

The merged company owns six coal seam gas permits, two in the Waikato Basin on New Zealand’s North Island and four in basins on the South Island.

Pike River Sends First Coal Shipment To India

New Zealand hard-coking coal miner, Pike River Coal, sent its first shipment of coal to India on Friday, a 20,000 tonne consignment worth $3.4 million shipped to Indian customer Gujarat NRE Ltd, which owns a 7.6% stake in Pike. GNRE is one of two Indian customers contracted to 55% of Pike's coal over its mine life.

CEO Gordon Ward said "It's a milestone day for us after some pretty intensive efforts." Pike has spent $270 million getting to this stage, $50 million of which were unexpected costs, forcing the miner to twice go back to its backers for more funds.

"It's a milestone day for us after some pretty intensive efforts," Mr Ward said, "we're very appreciative investors have kept their eye on the prize.”

Solid Energy Estimates Up To 20 Years Mining Left At Stockton

The chief executive of New Zealand’s state-owned coal miner Solid Energy says the company’s Stockton mine on New Zealand’s South Island near Westport is expected to produce coal for as long as 20 years rather than the three to five years it previously thought.

"There is a lot of coal left at Stockton, more than 20 years worth in the future,” Don Elder told a meeting in Westport on Monday, “but [some of] it is in new pits or blocks that are either lower quality or much deeper or much more difficult to mine, and under historical prices wouldn't have been economic.” Mr Elder added that with rising energy and commodity prices even some of the more difficult blocks are economic if mined efficiently.

The company is basing its economic judgment on an annual benchmark price for 2010-11 of US$180-200 per tonne. At those prices Stockton has at least 15 years worth of coal and possibly even 20 years.

In October Solid Energy began a five-year alliance with Downer EDi Mining at Stockton, which remains a focus of investment. The alliance has awarded a $63 million equipment supply package to the Gough Group.

Elder said it would take until the middle of this year 2010 before the company would reveal its plans for one of its bigger projects – a potential $1.5 billion coal to fertiliser or urea production plant.

"The only thing I would comment is that none of the work we've done to date has identified the major red flags that say we should be giving guidance that this thing is dying."

Pike River Looks To Customers For $20million Funding

Pike River Coal may turn to its Asia-Pacific customers with a share offering to raise $20 million needed for operational outgoings in the first half of 2010.

In a quarterly report to shareholders, the NZX-listed company said despite operational improvements over the last two months, pushed-out dates for the first coal deliveries and sale proceeds had increased working capital costs.

Pike River is waiting for primary funder Liberty Harbor to extend the $US27.5 million convertible bond from November to June 2010, as it requires the company to be capable of producing 800,000 tonnes in the six months from condition date – unlikely to be met.

But it was confident of funding the cost of delays and any bond redemption obligations, the report said.

However, about $20 million is needed to bolster existing funds and loan facilities for working capital, which may come from increased debt or equity, the company said.

Chief executive Gordon Ward said an Australian-based specialist coal industry commercial adviser had canvassed its Asia-Pacific customers and believed there was strong interest in securing a long term coal off-take agreement at competitive market prices, possibly including a share placement at a premium to Pike River’s share price.

Mr Ward would not say what the premium price might be. "The board is yet to decide which way it will go [through equity or debt options]," he said.

The company contracted coal sales for hard coking coal to March at $US128 a tonne. By October, international spot prices reached $US160 a tonne, with some speculation it will go higher, up to $US200 a tonne next year.

Considerable demand was coming from China, which was estimated to have imported 15.7 million tonnes of hard coking coal in the eight months to August – offsetting reduced demand in Europe and the US.

Last month, Mr Ward said the company was continuing talks with China and Korea, despite most of its production already committed for at least the next three years.

Its first shipment will be a 20,000 to 30,000 tonne cargo to India in the January to March quarter.

The company has a 14,000 tonne stockpile at its coal preparation plant and production levels are expected to ramp-up to more than 15,000 tonnes a month as roadways and other infrastructure is completed.

In the next few months, Pike River will install ventilation structures, extend coal slurry flumes and main underground fans.

The first hydro-mining is scheduled for the April to June 2010 quarter.

Source: National Business Review

Pike River Coal In Talks With Asian Customers

Pike River Coal is in "ongoing discussions" with groups in China and Korea, despite most of its production already committed for at least the next three years.

The country's only listed coal mining company, Pike River is mining the Brunner seam on Department of Conservation land on the Paparoa Ranges, 50 miles north-east of Greymouth in the South Island's West Coast.

The underground mine holds 58.6 million tonnes of hard coking coal, with a further potential of 8 million tonnes from the three Paparoa seams below the Brunner seam. Pike River expects to recover at least 18 million tonnes over the mine's 18-year life-span.

Plagued by delays to its planned production, the company is now preparing for its first shipment from Lyttelton to India in the first quarter of 2010.

Chief executive Gordon Ward said Pike River was entering the export market at a good time, as demand for hard coking coal recovered, due mainly to record imports by China this calendar year and international spot prices trading above the contract price.

Pike River has already sold three-quarters of its output over the next three years to Japan and India, with two Indian cornerstone shareholders committed to 55% for the life of the mine.

Mr Ward said there was also strong interest from other countries, including China and Korea. "In the last three to four months there's been increasing interest, which is reflective of increasing spot prices."

The company contracted coal sales to March 2010 at $US128 per tonne, but prices increased after that up to the $US170 mark, he said.

While Mr Ward said discussions were ongoing, it depended on how much tonnage the company "locked down."

"Ideally we'd have 10% to 20% available for the spot market," he said. "Then we might only have 5% to 10% available...it may just be purchased on a short-term contract."

At full production, Pike River expected to mine at the rate of one million tonnes a year, operating the second largest export coal mine in New Zealand (to Solid Energy).

Source: National Business Review

Pike River Delays Exports From NZ Coal Mine

The first 60 000-t export shipment from ASX-listed Pike River Coal’s new mine has been delayed until the January-March quarter in 2010.

The miner initially planned to export its first coal from the Pike River mine, in New Zealand in mid-November.

Pike River Coal stated on Monday that production of premium hard coking coal from its new mine has been running at lower-than-expected rates, owing mainly to early geological complexity and machinery difficulties, resulting in slower roadway development driveage.

“The first 60 000-t export shipment, scheduled for mid-November 2009, will unfortunately be further delayed while the pit-bottom development roadways are extended to the area where first coal will be mined by hydro-monitors,” the company said in a statement.

The first hydro coal was expected in the April-June 2010 quarter.

“The Pike River mine has overcome many challenges to get into operation, and while the current delay is frustrating for investors, customers and staff, it is an issue that many new mines have to face and work through. Most of the hard work has been done and investor patience is set to be repaid, with Pike River producing low-ash coal at a time of rising global demand,” said Pike River Coal CEO Gordon Ward.

The underground coal handling facilities at Pike River have been commissioned and pit-bottom is continuing to be developed with a combination of coal and stone drives. The three new coal cutting machines have been largely repaired and modified, with the remaining outstanding modifications being replacement of tracks on the two continuous miners by the German manufacturer.

Both 60-t machines were currently operational, but repairs, including track work, has resulted in considerable production downtime, during the past month.

Other main factors limiting production over the past month, have included the unavailability of some underground coal and rock haulage machines, owing to breakdowns, a greater level of roof support being required owing to the proximity of the Hawera fault, and the need to familiarise new staff with machinery and mining practices.

Pike River Coal stated that the countermeasures taken by the company included more intensive maintenance, intensified operator training, and changes to underground work practices following internal and third-party review.

“The mine is working two shifts, 24 hours a day, seven days a week in order to meet our production targets, and all Pike River’s management and staff are focussed and committed to this outcome,” Ward noted.

Source: Mining Weekly

NZ Silicon Producer Facing Dissolution

A prominent company exploring for silicon in Southland is facing dissolution if it does not get an injection of capital in the next year.

Silicon Metal Industries is one of four firms believed to hold exploration permits to search for silica at Pebbly Hills.

In the firm's annual report, issued in March, chairman Michael Hawarden said SMI concluded the year with a $62,000 deficit and an injection of funds was vital to keep the company alive. Overtures had been made to local and overseas financial institutions to raise $500,000 initially, he said.

However, shareholders were also being asked to increase their holdings in the firm, being offered up to $5000 in shares at 2.5c each.

"Our hope is shareholders will avail themselves of this discounted offer, which will enable the company, firstly, to survive, and to pursue capital raising from other sources, leading ultimately to capturing the very considerable value which it is felt is inherent in this project." The year's activities would depend on the successes or otherwise of interim capital raising, he said.

It was a difficult time to be seeking capital, given the disarray in world financial markets, but he believed the future of the project was positive.

"The silicon market appears to be relatively buoyant, and a weaker New Zealand dollar enhances the viability significantly."

Previous geological investigations had also indicated the presence of economically significant gold grades in the area, he said. "This alluvial gold could be recovered as a byproduct of the gravel washing and screening stage. Further testing to confirm actual grades is warranted."

SMI has about 70 New Zealand shareholders, including the South Island's richest man Allan Hubbard, and some in South Africa.

Three of its South African directors were recently investigated for fraud by South Africa's Government, but no prosecution has been taken.

Source: stuff.co.nz

Pike River Coal Sells Coking Coal To Japan At $128 A Tonne

New Zealand miner Pike River Coal said on Tuesday it had sold its premium hard coking coal at $128 a tonne for the current Japanese fiscal year through to March 2010. The company said there had been some production issues at the mine and the first shipment would leave for Japan about mid-November 2009.

Pike River said that the price met its expectations, and prices should rise in the following year based on increased demand from China.

Source: Reuters

Pike River Progressing Mine Repairs

Pike River Coal Ltd has made good progress towards its goal of restoring ventilation to its coal mine on the West Coast of the South Island following a rockfall in February.

The mine is yet to export any coal and delays in its development has caused the company to raise $45 million this year. While production has been delayed the price of hard coking coal has been falling.

The company has employed 110 people out of the total workforce of 150 required for full production.

Pike River said today the first export shipment of 60,000 tonnes of coal to Japan was due in the July-September 2009 quarter.

Coal production with one of the continuous miner machines was to recommence at the start of May, once reaming and lining of a 600mm diameter "slimline" ventilation hole was completed.

Full ventilation would be restored by the end of May with completion of an angled shaft bypass around the main ventilation shaft where it was blocked by a rock fall.

Large-scale production would come with the arrival from Australia of a high pressure water cannon, which would cut coal at a rate averaging more than 2000 tonnes a day.

Hydro mining was scheduled to start during the October-December quarter, boosting production to one million tonnes a year.

The economic downturn has reduced demand for steel and, as a result, premium hard coking coal prices have fallen from the record $US300 ($NZ532.76) per tonne in the 2008 Japanese fiscal year.

Pike River said the recent annual benchmark price-setting process for the year ended March 31, 2010 saw premium hard coking coal priced a $US128 per tonne.

"Pike River anticipates a price at or about this level when it completes its own negotiations.

"That would still be approximately $US30 per tonne higher than forecast for this period at the time of the company's 2007 initial public offer."

Source: National Business Review, NZ

NZ Coal Mine To Close

Solid Energy will close its Terrace underground mine at Reefton in two months, its closure hastened by the world economic slowdown.

The mine, which employs 16 permanent and two fixed-term contract staff, had already lost about six staff over the last 18 months by natural attrition while its future was reviewed.

When the mine was last reviewed about 12 months ago, it was producing very good returns from the international market, said Solid Energy South Island operations manager Simon Doig.

"That underwrote continuing on with Terrace for another 12 months, but unfortunately the international market is in a different environment at the moment with the global credit crunch. That revenue is no longer there," Mr Doig said.

However, the closure was more to do with Terrace being a small, marginal, underground mine than the impact of the recession, he said.

Terrace produced 45,000 tonnes of thermal coal a year, mainly for the South Island industrial market.

In recent years, mining had reached depths of 230m, creating considerable engineering challenges, Mr Doig said.

"Unfortunately, we've reached a point where the costs of going deeper safely cannot be met by the lower returns for thermal coal."

Six workers will transfer to Spring Creek underground mine, near Greymouth, next month.

Solid Energy hoped the remainder would also get jobs at nearby Spring Creek or other Solid Energy mines after Terrace closes on June 26.

However, some miners had indicated they did not want to leave Reefton, Mr Doig said.

Century-old Terrace is Solid Energy's smallest mine.

Solid Energy was looking at resuming production at Island Block opencast mine, which had been in care and maintenance since 2002 after mining became uneconomic. Island Block contained about 5 million tonnes of semi-soft coking coal considered suitable for export.

Source: Stuff.co.nz

Pike River To Raise NZ$45 Million

New Zealand's Pike River Coal Ltd plans to raise NZ$45 million ($22 million) through an issue of new shares and a placement to an investor, it said on Tuesday, after delays to production and sales.

It said the funds would be used to provide working capital after a rock fall disrupted mining, delaying progress to steady production at its mine in the South Island.

"The rights issue is being attractively priced for our shareholders who have shown strong support as the mine progressed through the development phase," said chief executive Gordon Ward.

Pike River will offer one new share for every five currently held at 70 NZ cents each with a bonus option, which would raise NZ$41 million. A placement of new shares to an investment institution would raise a further NZ$4 million.

Shares in Pike River Coal, which came off a trading halt, last traded down two cents or 2.5 percent at NZ$0.78. The stock has fallen 11 percent so far this year, compared with a 9.8 percent drop in the benchmark top 50 .NZ50 index.

New Zealand Oil & Gas Ltd, which owns around 30 percent of Pike River, said it would both partly underwrite the issue as well as take up its full entitlement of new shares, funded by its large cash reserves.

Two Indian companies Saurashtra Fuels Ltd and Gujarat NRE Coke Ltd also hold substantial minority stakes in Pike River.

Lead manager for the issue is McDouall Stuart Securities.

Pike River mines hard coking coal used in steel making and said last year it had signed contracts for $300 a tonne for the first production by the end of this month, with its Indian shareholders and two Japanese steel mills.

Source: Reuters

Pike River Success At Brunner Coal Seam

New Zealand coal miner, Pike River Coal, has confirmed the presence of three potentially mineable seams of low sulphur hard coking coal beneath the main Brunner seam it has opened up under the Paparoa Ranges near the west coast of New Zealand's South Island.

A new exploration hole drilled from the surface to more than 250 metres below the Brunner seam, has found three additional, separate, mineable seams of 2.2 metres, 3.4 metres, and 5.4 metres thickness respectively. The new corehole was located 600 metres north of the ventilation shaft and 1900 metres northeast from a previous hole drilled into these coal seams.
The new corehole intersected the first seam 140 metres below the Brunner seam and the third (and thickest) seam 240 metres below the Brunner seam.

Pike River Chief Executive Gordon Ward cautions that one drilling test – the first in nearly 20 years - does not prove the extent of the new resource “but it is a most positive and encouraging result”.

The only previous corehole, located close to the western outcrop along the Paparoa ranges and about 1.3 kilometres south-west of the ventilation shaft, intersected six thin seams with just one seam of about 2 metres thickness. The current hole appears to have all the seams represented, but all seams have thickened appreciably.

Based on sampling the Paparoa coal seams which are exposed along the western outcrop, it was expected that the coal resource would improve to the north. The latest corehole has confirmed this is the case.

Pike River Coal is now waiting for test results, due in a few weeks, on the quality of coal in each of the three potentially mineable seams.

Over the next 18 months, as mining of the Brunner seam advances, more test drilling will be undertaken from underground using an in-seam drilling rig, to establish the thickness and length of the Paparoa seams before any decisions are made.

Analysis from the original test drilling nearly 20 years ago and sampling along the western outcrop of the Paparoa Ranges showed the Paparoa seams vary in thickness with potential for up to 8 million tonnes of recoverable coal.

Mr Ward says if any of the new Paparoa seams prove economically viable, Pike River Coal would benefit from having a source of low sulphur coking coal on-site and since much of the infrastructure is already in place development costs would be significantly reduced.