Tough rock drives costs up
Tough rock drives costs up
By MARTA STEEMAN - The Press | Thursday, 25 October 2007
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Tunnelling the Pike River coalmine has proved more difficult than expected, Pike River Coal's shareholders were told yesterday at the firm's inaugural annual meeting.
"In fact, based on tunnelling experience to date we now expect nearly all the tunnel to be in the more expensive rock classes, rather than a maximum of 40 per cent," managing director Gordon Ward told about 70 shareholders at the meeting, which was held at the mine site.
The 2300-metre tunnel to the coal seam was 71% complete with 666m to go. Pike River Coal (PRC) expected to hit the coal seam next April 30.
That was about a month later than previously forecast although there was still potential for more slippage of one to three months, Ward said.
Last month, PRC said it had approved an $11 million increase for the extra tunnelling costs taking the approved budget to $185m, excluding a working capital budget of $33m.
Since July 2005, $105m had been spent on the underground mine development. The mine is in the Paparoa Range, 46km north of Greymouth with the access road cutting through Department of Conservation land. PRC raised $85m in an issue of shares to the public in July. Overall, the benefit of higher coal prices was expected to more than offset the increased mine development costs, Ward said yesterday.
Pike was poised to reap the benefit of an expected jump in hard coking coal prices next year. China and India were big influences on the price. For the first time China had become a net importer of thermal and coking coal.
Ward said market commentators were expecting premium hard coking coal – the type PRC would produce – to sell about $US120-125 a tonne from next April, compared to the current price of $US96.
Construction of the $19.2m coal preparation plant was expected to start at the end of the month and be completed in May next year in time for the first processing of coal.
Production in the first 12 months to April 2009 was forecast to be 240,000 tonnes building to 1m tonnes in the following year.
In the next six months the company would recruit 50 staff.
The company was looking at options to transport the first coal exports of about 60,000 tonnes next year. A possibility was by rail to Lyttelton Port.
Transport by two purpose-built vessels from Greymouth to Taranaki for export from there was being finalised by the West Coast Coal Consortium, Ward said.
Ward told shareholders coal exports were to be exempt from the Government's carbon emissions trading scheme.
Once the mine was running at full capacity, PRC's mine would be the fourth largest employer in the Grey District and would spend about $35m a year in the local economy on labour, services, power and transport.