second research note gives dcf nzd1.45

Forsyth Barr Research - 17 April 2008

See www.pike.co.nz for full details.

Pike River is developing an underground coal mining operation near Greymouth to extract 17.6mt of premium hard coking coal, used in steel production. First coal is now expected around July 2008; once the mine reaches full production in 2009 it will produce around 1m tonnes p.a. for around 18 years, and potentially more if additional resources prove viable.

Key Points

�� A combination of extraordinary factors means prices for premium hard coking coal now look set to triple in the year to March 2009 to around US$300/tonne, even higher than our last update, although we expect them to fall back substantially over the next few years.

�� Pike River remains on track for first coal around mid-2008.While costs are rising (most recently an additional $5m for the ventilation shaft) total capital cost is still expected to remain within PRC’s revised cost estimates.

�� Factoring in much higher short-term coal prices has increased our DCF valuation again to $1.45.