Pike River Coal Limited (NZE:PRC) Supports Government Review Of Mineral Potential

Wellington, May 19, 2010 AEST (ABN Newswire) - Pike River Coal Limited (NZE:PRC) (PINK:PKRRF) has encouraged its investors to participate in the debate around the New Zealand Government's proposal to look at the mineral potential in some of its conservation land by lodging submissions in support of the Government's initiatives before the deadline of 26 May 2010.

Mining - The Truth is Out There

As an investor in Pike River Coal you have a real interest in the current debate around the New Zealand Government's proposal to look at the mineral potential in some of its conservation land. Unfortunately, the debate to date, has been far from rational and sensible, due in large part to some seriously misleading and untruthful information being promoted by the objectors. These tactics are unhelpful and prevent a very important issue from being given the proper hearing it deserves. In this letter, we try to help rebalance the debate.

Mining minerals and petroleum in New Zealand presently generates NZ$6.9 billion* of revenues a year from less than 40 square kilometres of land. The net surplus from mining before tax was NZ$2.05* billion. There is no other major industry in this country that comes anywhere close to that wealth generation from such a small area. Doesn't it makes sense to find out whether small but highly valuable deposits lie beneath other parts of our country in areas not considered an iconic part of our landscape? (* Source - Statistics NZ, Annual Enterprise Survey, 2008)

The last government transferred 7,500 square kilometres into the Schedule 4 conservation land estate in November 2008 without the mineral potential being assessed. That is more than 180 times the total land currently mined in New Zealand.

New Zealand is currently borrowing NZ$250 million per week as we cannot pay our bills. We cannot continue like that if we want to avoid being the Greece of the South Pacific. We are leaving a massive debt for our next generation to pay back. That does not seem fair to our kids and grandkids.

What Can You Do?

We need to do something as a nation - our collective futures and that of future generations are dependent upon the country improving its performance in a range of areas. You can do something about this issue.

By lodging a submission on the Government's proposal by 26 May 2010, the voice of reason can be heard. Without it, there is a danger that once again the silent majority will not be heard. This is a rare opportunity where the country can make substantial economic gains without any significant adverse impact on our environment. Attached for your assistance is an example submission for your consideration. Let the government know what you think.

Fact or Myth

So who to believe? The reasoned voice of Government and industry, or the earnest entreaties of objectors most recently fronted by a well known TV actor.

Let's look at some of the claims made by both sides during the debate with some facts to help you form your own view.

Our National Parks are going to be Mined - A Myth

We have 14 national parks. The facts are: (a) the Government has proposed to explore the mineral potential of some land in one national park (Paparoa) which was transferred there in 2008 by the last government apparently without fully evaluating the mineral potential and against the recommendation of the Department of Conservation; and (b) it wants to look at mineral potential in some parts of the Rakiura National Park on Stewart Island. The Government has stated categorically that the other 12 national parks will not be touched.

Prospecting and Exploring has Significant Impacts on the Environment - A Myth

The type of prospecting techniques that will be typically used will be airborne surveys, ground mapping and sampling by hand. This means flying over the prospective areas with geophysical equipment and geologists walking across the ground with a rock hammer to chip some samples and map interesting surface features. Even if surface drilling is conducted like at Pike River, a drilling rig lifted in by helicopter is typically used. The drilling platform is suspended 1 to 1.5 metres above the low vegetation and the total area required is not more than 10 metres by 20 metres. Vehicle access tracks are not necessary for these prospecting activities. They have a minimal impact. This is because at this stage the explorers are simply having a look at what's there to evaluate whether or not mining is feasible.

New Mines on Schedule 4 land will be Big Stripping Operations - A Myth

It is likely that new mines developed on Schedule 4 land are likely to be underground mines like the Pike River coal mine or the Favona gold mine at Waihi. In such case, the surface impact is small, the infrastructure is removed at the end of mining and the small areas affected are restored. On the small areas affected - trees grow back.

Significant cash bonds and insurances are lodged by mining companies before mining starts, to ensure the Department of Conservation (and the public) are protected from any environmental issues during the mine operation and subsequent restoration activities.

Mining will kill the Tourism Industry and Wreck the "Pure" New Zealand brand - A Myth

Mining revenues on the West Coast have increased by more than 300% from 2001 to today. Tourism on the West Coast has increased by 31% in the same period. The claim that the two industries can't and don't co-exist is untruthful and this claim has the potential to cause damage to our tourism industry.

During the period since 2001 two major new mines have opened on Department of Conservation land on the West Coast, being the Pike River coal mine at Greymouth and the Oceana gold mine at Reefton. Tourist numbers on the West Coast have soared, independent of increased mining.

Historic and modern mining sites are an important part of tourism. The Martha Hill gold mine at Waihi attracted 40,000 visitors last year. The Department of Conservation actively manages 70 historic gold mining sites nationally. The colourful coal mining history on the Denniston plateau has been made nationally famous by the book, the "Denniston Rose" and attracts many tourists. Old gold mining sites around Queenstown and Arrowtown draw many visitors keen to pan for gold and look at old Chinese mine workings. Shantytown at Greymouth is recognised as one of the country's leading cultural and heritage attractions.

Mining is a rich part of New Zealand's history with coal, gold and other mining having been part of our communities and our economy for more than 150 years. Mining and historic mining is in fact, a drawcard for many tourists.

The Government only Gets NZ$6 million a year of Royalties - A Myth

The annual royalty payments from minerals in 2007/08 were NZ$13 million but this is a small fraction of the total tax take from mining.

Royalties, levies and taxes paid by all minerals and petroleum companies in New Zealand are estimated by economists at NZ$813 million* for 2008. (* Source - Calculated by NZIER from Statistics NZ, Annual Enterprise Survey, 2008)

The total royalty, levy and tax payments by the mining sector including PAYE on staff salary and wages, is estimated at NZ$961 million* for 2008. (* Source - Calculated by NZIER from Statistics NZ, Annual Enterprise Survey, 2008)

Taxes paid by the mineral resources sector in 2008 were NZ$181,000 for each person employed, seven times the average across all industries and twenty five times the average in the tourism related trade and accommodation sector.

Mining Generates More than NZ$1 million of Total Revenues for each Employee - A Fact

The mining industry generates NZ$1.3 million of total revenues annually for each person employed. This is 6.6 times the contribution of people employed in the tourism related trade and accommodation sector.

Mining is a high productivity sector. The annual surplus per employee (revenues less costs) in the mining sector is NZ$387,000 compared to NZ$7,000 for the tourism trade and accommodation sector.

Mining Employees are High Income Earners - A Fact

The average income earned by a miner in 2008 was NZ$93,000. That is 3.7 times higher than the average of NZ$25,000 in the tourism related trade and accommodation sector. We re-emphasise that the two industries can happily co-exist and in fact have been prospering together.

All Schedule 4 Land is the same as National Parks - A Myth

New Zealand has more than 34,000 square kilometres of land in Schedule 4. National Parks are a part of the Schedule 4 category, but the reality is there is a range of conservation values in Schedule 4 land and any review of the mineral potential will take that into account. Land with lower conservation values in schedule 4 with mineral potential, could be swapped for land with higher conservation value not currently in schedule 4.

There are no Benefits from Looking to Open up New Mining Areas - A Myth

If the economic contribution from the mining sector could be doubled, that would be a massive win-win for the country. This is a realistic possibility. For example, the value of minerals produced from the West Coast has more than trebled in the past 7 years to NZ$900 million.

For every NZ$100 million earned by the Government from taxes and royalties another 2,100 teachers or nurses could be employed. Out of additional taxes, new hospitals could be funded, roads built, hip operations funded, breast and prostrate cancer operations funded, day care centres built.

What would happen on lands transferred out of Schedule 4?

The objectors have assumed that mines are guaranteed as soon as the land in the current stocktake is transferred out of Schedule 4 conservation land. That is certainly not the case. First a commercially attractive resource must be identified, then an access arrangement negotiated with the Department of Conservation. Resource consents will then be sought usually involving extensive consultation and finally the process of funding and developing a mine can get underway.

Pike River believes that a pragmatic solution to the whole vexed issue may be to look at the mineral potential in the areas of interest in Schedule 4. Only when a commercially attractive mineral deposit is identified, would the relevant area be transferred out of Schedule 4. This area would be very small and comprise just a fraction of the current proposal. Then a much stronger economic argument could be made to support any proposal to lift Schedule 4 protection.

Modern exploration techniques have a minimal impact (see above). But current Schedule 4 regulations allow only an area of 4 metres x 4 metres to be disturbed. To properly evaluate the mineral potential this minimum area would need to be increased to 10 metres x 20 metres.

The Future

Importantly, and critical to the success of proposed changes to Schedule 4, is the Government's commitment to unlocking the nation's resources for economic benefit while respecting and maintaining our environmental and conservation objectives.

Pike River wholeheartedly supports and concurs with the Government that the successful marrying of economic and environmental imperatives is achievable. In fact, New Zealand has an opportunity to be a world leader in developing 'green mines". Our mine at Pike River proves that it can be done.

Pike River Coal - Modern Mining

Pike River is an underground coal mine, operating at depths of 100 to 200 metres below the surface. The mine lies under Department of Conservation administered land on the eastern slopes of the Paparoa Ranges, 50 kilometres north-east of Greymouth. Pike River has striven to minimise the effects of developing the mine on the land, native vegetation, fauna and waterways, and to blend its surface operations in with the natural environment. There was extensive consultation with Department of Conservation (DOC) through this design and consenting process.

Pike River was granted an access agreement by the Labour Government in 2004 and mine development commenced in 2005. The mine is now producing from New Zealand's largest known deposit of low-ash, premium hard coking coal. Hard coking coal and iron ore are the main ingredients used to make steel.

Substantial financial commitments were made by Pike River before development started to ensure funds were in place to meet all environmental conditions during the mine operating life and subsequent restoration activities. This included cash bonds of NZ$2.3 million lodged with DOC and local councils and environmental insurances of NZ$10 million.

The mine has a relatively small surface footprint on DOC land of only thirteen hectares (compared to the large area - 22,000 hectares - of conservation estate surrounding it). Eight hectares had previously been logged so only five hectares of unlogged vegetation had to be cleared, primarily for the access road and the mine administration buildings.

This extremely small footprint was achieved by slurrying coal from the mine in a pipeline reducing road width and locating infrastructure outside of the DOC estate on land owned by Pike River.

To preserve 800 year native old rimu and miro trees in the unlogged area, we zig zagged the mine access road around the trees instead of felling them. To reduce vegetation clearance in this area, an expensive insulated power line (called Hendrix cabling) was used instead of cheaper standard power lines.

Pike River spent two years tunnelling laterally 2.3 kilometres under the Paparoa Ranges to reach the coal resulting in a low impact mine development.

Pike River is making a significant contribution to the local environment. Pest and predator control programmes, environmental health monitoring, ecological and biodiversity studies have been implemented at an estimated cost of NZ$200,000 per year and a further NZ$80,000 per year is contributed to a DOC administered Blue Duck (whio) enhancement programme. These measures can be expected to have a substantial positive impact on the environment, particularly pest and predator control in the Pike Stream catchment area which has been heavily infested by pests including rats, stoats and possums. The removal of these pests will allow the populations of native birds including Blue Duck and Great Spotted Kiwi (roroa)to expand in the area.

Pike River has minimised water take from the nearby Pike stream by recycling the majority of the water from the coal preparation plant located outside DOC land, back up to the mine for reuse. All water use and discharge is required to meet detailed resource consent conditions. Solids are removed from the water prior to discharge and after treatment and the water is tested for compliance with stringent resource consent conditions before discharge.

One of the significant protections is a conservative approach on the amount of coal mined to protect the surface effects related to subsidence. Pike River is mining just over 30% of the coal deposit to ensure subsidence does not have an adverse effect on the surface.

This means that the majority of the coal is actually left in the ground to protect the surface. Maximum subsidence levels have been set at the low end of a conservative range recommended by independent experts during the resource consents process.

Modern mining techniques are employed throughout the Pike River mine. Long range inseam drilling (horizontal directional drilling conducted underground) is used to maximise data recovery and reduce the impact on the surface through eliminating vegetation clearance for drill sites. Laser surveys are conducted to map the surface and determine what subsidence, if any, is occurring, again without having to clear access tracks on the surface for ground surveys. Where limited surface drilling is conducted, it is by helicopter mounted drill rigs which impact a tiny area of land, no greater than 10 metres by 20 metres and usually smaller.

The Pike River mine now employs more than 150 staff. More than NZ$20 million per year is spent locally on the West Coast. The annual corporate tax payment by Pike River for 2012 is forecast at more than NZ$50 million, based on an assumed conservative production rate of 850,000 tonnes*. In addition NZ$5 million of royalties to the government are forecast in that year. (*Source - McDouall Stuart Securities research report, 5 May 2010)

Pike River has undertaken to restore the site to its natural state after mine closure. The mine has a closure plan that is updated annually and restoration of the mine site will involve the removal of all structures, bridges and buildings. All entrances to the mine site will be sealed and the water draining from the tunnel entrance will be treated if required. Disturbed areas will be re-contoured where possible and the retaining walls and road will be broken up. Topsoil and logs will then be spread over any disturbed areas and seeded with native seeds.

For the complete Pike River announcement including figures, please refer to the following link:

http://www.abnnewswire.net/media/en/docs/62902-Schedule-4-letter---complete.pdf

Contact

Brian Roulston Company Secretary TEL: +64-9-377-3517 www.pike.co.nz