Pike River Coal said today it has struck coal at its West Coast mine after two years of tunnelling to reach one of the most valuable coal deposits in the country.

Tunnellers cut through the last few metres of an access tunnel stretching nearly 2.3km under the Paparoa Range to intersect with the Brunner seam of premium-grade hard coking coal, essential for steel-making.

This was the largest and longest tunnel in New Zealand since the second Manapouri tunnel was completed in 2001.

Pike River Coal chief executive Gordon Ward said everything was now in place to start mining New Zealand’s largest-known hard coking coal deposit.

“Whilst tunnelling has taken longer to break through because of poor rock conditions in much of the last 300 metres, we have now very much de-risked the development and can begin operating as a coal mine.”

As it ramps up production, Pike River is scheduled to produce its first 100,000 tonnes by March 2009 and another 100,000 tonnes by June 2009.

From mid 2009 onwards the mine is scheduled to achieve its “steady state” production rates of about one million tonnes a year.

“We’re taking all necessary safety precautions every step of the way and it’s a credit to our staff and our contractors that no serious accidents or environmental incidents have occurred through the two years of tunnelling to reach the coal.”

The breakthrough comes after international annual benchmark contract prices for premium hard coking coal rose 200 percent six months ago, enabling Pike River to settle first coal sales to March 2009 at $US300 ($NZ494) a tonne. This price compares with the original price forecast in the company’s prospectus 18 months ago of $US98 a tonne.

Mr Ward said while global financial difficulties were likely to have some negative impact on next year’s steel production in some regions and therefore potentially on coal prices, it would take time for that impact to be determined.

An offsetting factor was the recent fall in the New Zealand dollar against the US dollar, which helped export prices.

Pike River was establishing a new and valuable source of high quality coking coal for the world’s steel market, with fixed supply contracts already in place for Japan and India and strong interest from other coke and steel-producing nations.

Pike River Coal had reported a $1.14 million loss for the year to the end of June, which it said reflected the development phase of its new mining operation and related one-off costs.

Pike River, the country’s only listed coal stock, had raised $182m from debt and equity markets to finance the mine. Its shares were up 7c to $1.36 shortly after today’s announcement.

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