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Caution the new watchword for Pike River

Monday 15th November 2010

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Pike River Coal will abandon its practice of giving best case scenario forecasts for coal production, opting instead for a "range of achievable possibilities," newly appointed chief executive Peter Whittall told shareholders at the coal miner's annual meeting.

The announcement follows a string of disappointments caused by problems with mining equipment that delayed first coal shipments and the ensuing cash flow. Whittall replaced Gordon Ward, a 14-year company veteran and CEO since 2007, in mid-September.

"The previous forecasts were the best we could put out with the information available but they consistently proved to be at the upper end of the range while our operations performed at the lower end," Whittall said in his first address to shareholders.

He stopped short of criticising Ward's willingness to run with more bullish forecasts than were achieved, but acknowledged there was "speculation that I have made a conscious decision to develop a more conservative style in heading the company than has been evident in the past"

"Well, it is more case of the change in leadership providing an opportune time to present a different set of parameters in terms of what I believe we can achieve," he said. "These new figures represent a range of achievable possibilities rather than a best case scenario and I am personally a lot more comfortable with providing you, our investors, with a more realistic timeframe and production schedule as possible while preserving a measure of upside capacity."

A special meeting held in conjunction with the annual meeting passed a resolution extending by a year its 29% shareholder New Zealand Oil & Gas' ability to exercise options relating to US$28.9 million of bonds it issued to help PRC replace funding previously provided by an American investor, Liberty Harbor.

However, announcements were still required to outline the company's financial requirements now that it is forecasting production of 320,000 tonnes of coking coal in the current financial year, instead of the previously expected 600,000 tonnes.

"An announcement detailing those plans will be made shortly," said Whittall, who heavily criticised the Waratah underground mining machines that were a large part of the delay in ramping up production.Replacement ABM20 machines were working far better, and none of the current forecasts anticipated any production from either of the two Waratah machines on-site.

Mine layout is also being reviewed to try to improve production rates as the mine develops "away from the congestion of the pit bottom."

PRC expects to achieve full hydro system capacity by June 2011, producing 60,000 tonnes a month, ramping up to 80,000 tonnes a month by the December quarter next year.

Hydro-mining was progressing well, and a combination of ventilation and clean and dirty water systems will be completed in the next couple of months to allow full production to commence.

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