Pike River Coal Announces $45 Million Rights Issue

news release

3 March 2009

Pike River Coal Announces NZ$45 Million Rights Issue and Placement

Pike River Coal Limited today announced it will raise NZ$45 million through an issue of ordinary shares, with accompanying bonus options, to provide funds until steady state production from hydro monitor mining is achieved.

The $45 million raising includes a $41 million renounceable pro rata rights issue to shareholders and a $4 million placement to a major institutional shareholder. The rights issue offer and placement will be one new share and one bonus option for consideration of NZ$0.70, for every 5 Pike River shares (note1). The company is currently completing negotiations for the underwriting of the issue.

The decision to raise cash at this time follows a rock fall from the lower section of the new 108-metre ventilation shaft temporarily halting mining operations until remedied. The rock fall has delayed the production ramp-up period by two to three months and delayed first coal sales proceeds to the third quarter of 2009 (ended 30 September). First hydro monitor production (the high pressure water cutting system) is now scheduled for the fourth quarter of 2009 (ended 31 December).

As a consequence Pike River Coal has been required to fund the final capital expenditure payments, largely for hydro-mining equipment, from a new equity issue instead of first coal sales proceeds. The issue will also provide some working capital and cover the estimated $7million cost to remedy the shaft, a portion of which may yet be covered by insurance.

“Demand for the ultra low ash premium hard coking coal from Pike River Coal’s estimated 58 million tonne resource remains strong notwithstanding the difficult world economic conditions“ Mr Ward says. “We are seeking to mitigate the effects of the delay and will be meeting with our steel mill and coking plant customers shortly to appraise them of the status at the mine and to discuss the shipment schedules”.

Mr Ward said “The rights issue is being attractively priced for our shareholders who have shown strong support as the mine progressed through the development phase”. The company’s principal shareholder, New Zealand Oil & Gas Limited (NZOG), has committed to take up its 30 per cent pro rata share of the new shares issued.

Lead Manager for the issue is McDouall Stuart Securities Limited. Final confirmation of the underwriting commitments is subject to completion of negotiations with selected subunderwriters. The terms of the placement (which are the same as the terms of the rights issue) are subject to approval of NZX. Subject to receipt of those commitments and approvals, it is intended that the offer will be fully committed/underwritten.

A Prospectus for the rights issue and an accompanying entitlement and acceptance form is expected to be mailed to shareholders on or about 25 March 2009* and will be available to view online at www.pike.co.nz. The Offer is expected to open on 25 March 2009 and close on 14 April 2009.

Australian coal producers have commenced negotiations for the benchmark price for hard coking coal supplied to Japanese steel mills from 1 April 2009. Market observers are tipping hard coking coal prices in the range of US$130 to $140 per tonne, well above the US$95 per tonne estimated at the time of the Company’s Initial Public Offering (IPO) in mid 007. The fall in the value of the New Zealand dollar exchange rate relative to the United States dollar by approximately 30 per cent since the IPO will boost New Zealand dollar revenues.

ends

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