Pike's funding relief

NEW Zealand Oil and Gas has given Pike River Coal more time to pay off significant debt, allowing the coal company to keep operating and continue its recovery efforts.
Pike's funding relief Pike's funding relief Pike's funding relief Pike's funding relief Pike's funding relief

The Pike River mine a few weeks before the tragic explosions.

Blair Price

Pike has drawn down $NZ13 million ($A10.12 million) of a working capital loan facility provided by its 29% stakeholder, NZOG, since September.

Repaying this facility by mid-December was a looming problem for Pike before the two explosions that rocked its mine over the past week.

“We estimate that PRC will have a $NZ13-16 million shortfall at this time which will need to be funded by either a rollover of the existing NZOG facility, a new debt facility or equity,” Goldman Sachs said in a report in the last week of October.

“PRC’s poor history on execution will likely mean that accessing traditional debt channels is challenging.

“We believe the risk of a fifth equity raising is not immaterial and is principally dependent on NZOG’s willingness to roll its debt facility.”

But the mine disaster has eliminated these concerns.

This morning NZOG wired over the remaining $12 million to Pike and extended the repayment date to the end of February 2011.

Interest payments which would have otherwise been due have also been deferred until that time.

“This decision was taken because there are sound business reasons for honouring our earlier funding commitment,” NZOG chief executive David Salisbury said.

“It is also the right moral decision. During this difficult time, the mine company’s workforce needs to know it can still be paid.”

The oil company also committed $500,000 to Pike’s relief fund to support the families and communities of the 29 men lost at its namesake mine.

Grey district mayor Tony Kokshoorn has already received $2 million of donations to the council-run Pike relief fund, according to the TVNZ station.

Meanwhile, gas levels at the mine remain high enough to fuel another explosion.

With the Queensland Mines Rescue’s GAG inertisation unit on its way to the mine, significant progress could be made on a recovery effort next week.

The jet engine technology makes an underground mine atmosphere inert by eliminating oxygen through a release of carbon dioxide and water vapour into the mine.

This approach could not be used when there were still hopes of more survivors from the first explosion on Friday.

Once the mine is inert, rescuers can enter the mine using breathing apparatus without the risk of being subject to another explosion.

While the focus is on retrieving the bodies of the lost miners, Pike CEO Peter Whittall is not ruling out a possible reopening of the mine, with the Pike board scheduled to meet today to discuss asset impairments.

But even if the damage to the mine can be overcome, there is a looming threat of legal damages, with New Zealand Prime Minister John Key promising an inquiry.

“This is an inquiry that will leave no stone unturned to ensure they get their answers as to why their men are not coming home," he told reporters yesterday.