Pike River Coal’s Future ‘Bleak’ After New Zealand Mine Blast

November 24, 2010

By Elisabeth Behrmann -Bloomberg News

Pike River Coal Co. faces an indefinite production shutdown at its New Zealand mine after two gas explosions that police say killed 29 workers.

“It’s their only operating asset, and it’s shut, and it’s going to be shut for the foreseeable future,” said Cameron Peacock, a market analyst at IG Markets Ltd. in Melbourne. “You can’t see it opening anytime probably within the next six to 12 months. The near-term future is going to be pretty bleak.”

New Zealand Oil & Gas Ltd., Pike River’s largest shareholder, this week had its biggest share drop on record after resuming trade following last week’s first explosion. Prime Minister John Key said yesterday he expects cabinet next week to approve a commission of inquiry into the blast.

Pike River, which expected to get NZ$4 billion ($3.1 billion) in export sales from the mine,slumped 14 percent to 61 Australian cents in Sydney on Nov. 19 before trading was halted. The company fell 4.4 percent to 88 New Zealand cents at the Wellington close on the same day. The stock was suspended on both exchanges Nov. 22.

“Given the high level of uncertainty regarding the nature of the incident, it is impractical to usefully discuss its potential value implications,” Macquarie Group Ltd. said in a note, cutting its recommendation to neutral from outperform. “However, it must be highlighted that a possible result is the current equity of Pike River Coal could become worthless.”

Production Cut

Chief Executive Officer Peter Whittall told reporters yesterday in Greymouth that there had been a second explosion at the South Island mine at about 2:40 p.m. local time. He wouldn’t comment on the mine’s future. There’s no time set for resumption of trading, Pike River relationships manager Helene Ambler said Nov. 23 in an interview. A call to the company yesterday wasn’t returned.

To read more, visit: http://www.bloomberg.com/news/2010-11-24/pike-river-coal-s-future-bleak-after-new-zealand-mine-blast.html

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