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
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