Daily Share Chat: Pike River Coal

By Jenny Ruth

Thursday 28th January 2010

Pike River Coal's December quarter operations report highlighted the need for the company to raise more capital than the originally planned and he expects it will be closer to $40 million, says Forsyth Barr analyst Andrew Harvey-Green.

"The rock graben facing Pike is taking twice as long as expected to get through."

While Pike said in early December it might be as little as three weeks away from reaching coal, more than six weeks on it appears the company is still two weeks away, Harvey-Green says.

"This is frustrating for Pike and investors alike."

The setback means hydro-mining has been delaying, hitting Pike's production forecasts for the year ending June by between 120,000 and 150,000 tonnes.

Fixed mine operating costs and less revenue is driving the amount of capital needing to be raised, he says.

"On the positive side, spot coal sales have continued to rise and the latest reports we have seen suggest a spot price of around $US190 a tonne."

Much of the price rise is due to a weak US dollar but strong demand for coking coal from China has been just as important, Harvey-Green says.

The price rise has almost offset the impact of the delay on his $1.19 a share valuation, he says.

Recommendation: hold.

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