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PIKE RIVERCOAL www.pike.co.nz

C O R P O R AT E B R O C H U R E

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Mining is often about an underground world of tunnels towards the ce At Pike River Coal, however, the challenge of New Zealand’s geology h tunnelling uphill and a reliance on water. New CEO Peter Whittall expla

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Pike River Coal

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he recent earthquake in Christchurch, New Zealand reveals the geological complexity of the South Island. For Pike River Coal, however, while earth tremors are no major problem, geology has proved to be an uphill struggle.

For the past five years Pike River Coal has worked on methods to extract a large and rich seam of coal. Despite the attraction of coal prices, the challenges thrown at the company by nature would have been enough to make many people quit.

Not so Peter Whittall, who became the company’s first ever employee when he joined the start-up business in 2005. Now about to take over the mantle as CEO, Whittall remains hugely optimistic for the prospects of PRC, despite a number of initial setbacks.

“We are focused purely on coal here and are a single asset start-up company. We operate a premium hard coking underground mine which is located about 50 kilometres north east of Greymouth, on the west coast of New Zealand’s South Island.”

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When Whittall joined the business in 2005, it was a subsidiary of New Zealand Oil and Gas (who still retain shareholdings today). He worked as mine and general manager for the ensuing five and a half years, during which time all kinds of surveys and tests were undertaken to establish whether the area could be mined and how.

“The coal mine is located within the Paparoa Range, up the Grey Valley, which is renowned for coal and gold mining. The terrain is exceptionally challenging and the coal seam itself has been upthrust and sits some 600 metres above sea level and within 100 metres of the surface.

“The seam runs from a depth of 100 metres up to 700 metres below the mountain range with outcrops on the western escarpment which are impossible to mine; we have had to access the mine from the east, some 10 kilometres up a steep river valley and to do that we needed to build a winding road on the edge of a hillside which took a year to complete.”

To compound the technical challenges, the road could not be built the whole way to the seam and finishes some two kilometres away, while the seam sits to the west of a major 1,000 metre geological fault. Whittall and his team have had to tunnel uphill through rock on a one in eleven grade for the whole two kilometres.

“If that wasn’t enough, the whole site sits within an area of stunning natural beauty (including ancient forests), owned by the Department of Conservation (DOC) and every step of the way we have had to work very closely with them to ensure that we complied with all their requests,” he says.

“We operate with huge restrictions environmentally on issues like water discharges and construction and when we built the road we had to obtain a permit for every tree we removed above a certain size. New Zealand Oil and Gas first obtained their lease for the land in 1986 and for the first ten years very little got done as it was deemed too difficult.

The watershed came in 1996 when NZOG decided to take on the challenge and began consent procedures, taking them eight years to obtain all of the relevant consenting permits.”

At that point Whittall joined the company and worked closely with DOC to put the pre-planning work into action. Such were PRC’s efforts that in 2008 they received an award in recognition of their environmental consideration for the construction

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of the mine, the first time the DOC had ever extolled such a distinction on a mining company.

“The environment is something we will always give huge consideration to and whenever we run induction courses for new employees one of the first things we do is to inform them of their environmental responsibilities,” Whittall affirms.

Progress on the underground tunnelling to the coal seam has been slow and has met setbacks on more than one occasion. An initial outlay on German machinery proved a false dawn as the equipment, which had been modified in Australia, slowed down operations. That particular problem has now been largely resolved with the purchase of new machinery.

The project also saw a collapse of the lower portion of the ventilation shaft during construction and Whittall says that served to remind everyone that the area is comprised of very faulted ground.

“It has taken nearly two years to develop the

underground roadways but productivity is increasing and will make another step change with delivery of a second ABM20 continuous miner in January 2011. Establishing a good lead of development roadways over extraction is always a challenge during the early stages of a mine’s life.”

Financing to this point has been successful, and was given a large helping hand when the company went public both in Australia and New Zealand back in 2007, as Whittall explains. “Our initial flotation raised roughly $85 million and we have subsequently been back to the market in subsequent years and, through a number of rights issues and a bond placement, we have managed to raise a further $195 million. It is very fair to say that the equity market has been hugely supportive of Pike River Coal.”

Much of the support and optimism in the company stems from the price of coal and demand for this commodity as part of the steel-

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making process. Despite the project costing around NZ$300 million so far, Whittall says that the method of mining will be very cost effective given the rising price of coal. “We are using a hydro-mining technique to extract and transport the coal the two kilometres out of the mine and a further eight kilometres down the valley to the Coal Preparation Plant. While this method (that shoots jets of water at a rate of 9,000 litres per minute at the coal) is not as productive as long wall mining, it is in many ways more flexible and well suited to

West Coast conditions. It is also much safer as it reduces the risk of fire, for example.

“We expect to eventually produce a million tonnes a year which at forecast market prices will give us a cash positive balance sheet in the near future,” he continues. “We recently completed the first underground hydro-tunnels and expect to ramp up operations over the next few months, reaching full production rates in the next six months. The mine life at present is around 20 years but we know there is lots more coal beneath our feet, so we hope to begin drilling and exploring the potential in 2011.”

Having overcome so many obstacles already, Whittall is now looking at a bright future for Pike River Coal. “Our coal is only used for steel-making and we already have contracts in place with Indian customers and Japanese mills. Demand remains high and it really is a boom-time for the whole industry.” www.pike.co.nz

PIKE RIVERCOAL www.pike.co.nz