Mastermyne has decided to impair the continuous miner as at December 31, 2010, after giving up hope of recovering the Sandvik ABM20.

“The underground division of the group entered into a contract to dry hire one of its underground continuous miners (ABM20) to Pike River Coal in New Zealand,” the company said in a statement today.

“On the 19 November 2010 there was an explosion underground, ceasing mining operations and subsequently commencing a recovery effort at the mine. By 31 December 2010 the mine experienced three more explosions, increasing gas levels and temperatures and significantly hampering efforts to re-enter the mine.”

Initially, Mastermyne’s directors thought it was likely the asset could be recovered but after a thorough investigation conducted since early January, they found there has been insufficient physical evidence as to the condition of the machine and no indication that the likelihood of re-entry to the mine has substantially improved.

The company has therefore started the correspondence to lodge an insurance claim for this loss event.

“Insurers have acknowledged that Mastermyne is insured under the Industrial Special Risks (ISR) insurance policy issued by the insurers in favour of Pike River Coal Ltd,” the company said.

“Mastermyne has been advised that it is entitled to make a claim under the policies in respect of the continuous miner.”