Pike River Coal Announces New Coal Transport Route

27 November 2007

Pike River Coal Announces New Coal Transport Route

Pike River Coal Limited has today announced it will transport its premium hard coking coal by rail to Lyttelton, Christchurch for export under a new agreement signed with Solid Energy NZ Limited (Solid Energy).

The 18 year agreement to use rail, supersedes previous transport arrangements with West Coast Coal Company Limited (WCCC) which were based on coastal shipping of Pike River coal from the port at Greymouth to Port Taranaki for export.

Pike River Chief Executive Gordon Ward says “The main factors leading to the change in transport mode were a significant recent increase in rail capacity that has allowed Solid Energy and Toll Rail to transport all of Pike River’s coal by rail and the fact that the financing conditions in the transport agreement were not met.”

Following ONTRACK’s upgrade of the rail route and implementation of improved traction control on trains, Solid Energy and Toll Rail are able to introduce 45 wagon trains boosting the capacity and efficiency of the Midland line. Since the Government took back ownership of the rail network in July 2004, investing $25 million in the Midland line through ONTRACK, Solid Energy has committed more than $100 million to the line through its long term contract with Toll Rail and then spent a further $15 million on the new Cobden rail bridge over the Grey River.

The total cost to transport Pike River coal from the coal preparation plant to the point loaded on panamax vessels at Port Lyttelton under the new agreement with Solid Energy is approximately NZ$39 per tonne. Mr Ward said “This cost is at a level at least 10% less than WCCC were able to offer and slightly below the level forecast in the IPO prospectus.”

Port Taranaki Chief Executive Roy Weaver says “We worked extremely hard at WCCC to establish an innovative coastal shipping alternative transport solution for West Coast exporters with Pike River Coal providing the base load. We are very disappointed in not being able to build the transport chain for this project, but were unable to constrain construction cost increases since 2005 to match the rates offered on the newly renovated Midland Line. WCCC wishes Toll Rail, Solid Energy, Port of Lyttelton and Pike River Coal Limited all the best for a successful venture.”

Pike River has agreed with Solid Energy that it will have capacity reserved of up to 1.3 million tonnes per year on the rail network and has priority access to rail and port facilities to transport that tonnage.

Mr Ward said “One benefit of this decision will be the shorter distance Pike River coal travels by road and the consequent reduction in emissions and on traffic through the Greymouth township. Delivery by Solid Energy and Toll Rail of a proven annual capacity of more than 4 million tonnes has given us the confidence to move forward with Solid Energy’s transport supply proposal”.

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