NZOG releases $12 million for Pike River

Friday 26th November 2010

New Zealand Oil & Gas has released the $12 million balance of a $25 million short term funding facility to Pike River Coal because it is "the right thing to do" and to ensure that the mine's remaining work force continues to be paid.

The $25million facility was agreed in September 2010, to support PRC as it commissioned hydro-mining equipment and prepared for regular coal shipments.

Prior to two deadly explosions in the last week, which claimed 29 miners lives, $13million of the facility had been drawn by PRC to meet operating costs.

"Following the first explosion at the Pike River Coal mine, the NZOG board was advised that the outstanding loan was repayable and that NZOG had no legal obligation to advance any further money," NZOG said in a statement to the NZX."However, the board resolved not to seek immediate repayment and that it would honour the spirit of the agreement and make the remaining $12million available to PRC."

NZOG is extending the repayment date from December 15 February 28, and to defer interest payments that would otherwise be due until that time.

"NZOG has always managed its investment in PRC with the best interests of NZOG shareholders in mind," said NZOG chief executive David Salisbury. "This decision was taken because there are sound business reasons for honouring our earlier funding commitment.

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

NZOG also holds US$28.9m in secured Convertible Bonds. NZOG has agreed to a 90 day standstill period for the Bonds, including deferred payment of interest.

NZOG has also effectively made a $1 million donation to the Pike River Miner’s Relief Fund, having contributed $500,000 on its own account, matched by PRC, which remains dependent for the time being on NZOG’s ongoing financial support.

The PRC board is to meet today, with a press conference scheduled for early afternoon.

NZOG shares were trading at 95 cents this morning, up 1%, having lost a third of their value when a trading halt was lifted earlier in the week after the first explosion at the mine. PRC's chief executive, Peter Whittall, said yesterday that if the mine's tunnels were clear, the mine could potentially be reopened in due course.

Whittall said he had been "mobbed" by PRC employees wanting to work the mine again, once it had been made safe. The mine was on the cusp of ramping up to full production, almost two years behind schedule, at the time of the explosion.

Pike River coal is high quality, low emission coking coal, highly sought after in the steel-making business and commanding premium prices on world markets.

BusinessDesk.co.nz

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