Wellington, Sept 30 NZPA - Pike River Coal Ltd has negotiated an unsecured loan facility of up to $25 million with its largest shareholder New Zealand Oil & Gas Ltd (NZOG) to provide short-term working capital while its mine on the West Coast ramps up.
The facility has establishment and other fees of $600,000, its interest rate is 13 percent, and it is repayable in full by December 15.
The company had earlier said that discussions were at an advanced stage with potential funders and an outcome was expected by the end of September. NZOG owns 29.4 percent of Pike River Coal.
Bank of New Zealand and NZOG have agreed to waivers of a potential covenant non-compliance on September 30.
NZOG has, as part of its waiver, requested a one-year extension to a coal option agreement, which shareholders have to approve.
This option was put in place in April when NZOG provided a replacement convertible bond facility and gives NZOG the right to at any time until March 2013 enter into an offtake agreement to purchase Pike coking coal at market prices to be negotiated annually.
The maximum volume under the agreement is the currently uncontracted coal quantities for the first three years and up to 30 percent of annual coal production for the remaining life of mine.
"Pike River is now producing its highly valued coking coal and the first two shipments have been exported. But with the underground mine roadways still being developed and hydro-mining equipment in the commissioning phase, Pike River currently requires further working capital," said NZOG chief executive David Salisbury.
"Pike River has in NZOG a supportive investor providing the short-term funding it needs, allowing Pike River to focus on ramping up to full production. The new facility is value creating for NZOG and is a continuation of our strategy of managing this investment in the interests of our shareholders."
General manager mines at Pike River Coal, Peter Whittall, said the money would be used to buy additional mining equipment which was critical to providing access for hydro-mining operations at a time while coal is being produced and stockpiled for shipment.
Commissioning of the hydro-mining equipment commenced on September 20.
In its annual report the company said two continuous miners purchased from mining equipment supplier Waratah Engineering had not operated to expectations and had required ongoing modifications.
Because of these problems Pike River leased one reconditioned ABM20 continuous mining machine for 12 months at a cost of $NZ4 million ($A3.06 million), which began operating in August, and purchased a second ABM20 at the cost of $5 million, which will arrive in January.
Pike River shares were unchanged at $1.14 today.
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