Pike River plans to raise $45 million through an issue of shares and accompanying bonus options to provide funds until a steady state of output from hydro monitor mining is achieved at the New Zealand mine.

Of the raising, $41 million will be a renounceable pro rata rights issue to shareholders and a $4 million placement to a major institutional shareholder.

The rights issue offer and placement will be one new share and one bonus option for consideration of $0.70, for every 5 Pike River shares.

Bonus options will expire in 2011 with an exercise price of $1.25 per option.

Principal shareholder New Zealand Oil & Gas has committed to taking 30% of its pro rata share of the new share issued.

The decision to go to the market follows a rock fall last month from the lower section of the new 108m ventilation shaft. Mining operations have been temporarily halted until the problem is remedied.

The rock fall has delayed the production ramp-up period by 2-3 months and delayed first coal sales proceeds to the September quarter.

First hydro monitor production, using a high-pressure water cutting system, is now scheduled for the December quarter 2009.

Pike River will use the funds to make final capital expenditure payments, largely for hydro-mining equipment.

The cash will also be used for some working capital and to cover the estimated $7 million cost to remedy the shaft, a portion of which may yet be covered by insurance.

The offer is expected to open March 25 and close April 14.

Pike was trading unchanged on the Australian Securities Exchange mid-morning today at A60c.