Pike River Coal Limited Activities Report

Pike River Coal Limited Activities Report Quarter ended 31 March 2009*

OVERVIEW Pike River has made good progress with restoring ventilation to its hard coking coal mine following a rockfall in February 2009. Coal production with one of the continuous miner machines is to recommence at the start of May 2009, once reaming and lining of a 600mm diameter ‘slimline’ hole is completed.

Full ventilation will be restored by the end of May 2009 with completion of an angled shaft bypass around the main ventilation shaft where it was blocked by a rock fall. That will allow operation of all three roadway development machines and the in-seam drilling unit to start the ramping-up process, creating the access roadways for large-scale coal production.

This Activities Report covers activities for the quarter ended 31 March 2009 with some updates to 24 April 2009 where relevant.

Highlights • Successful $45 million equity raising • Benchmark prices for hard coking coal settled at US$128/tonne • Ventilation shaft restoration on track • Production ramp-up on track to start in June • Hydro mining equipment being delivered A continuous miner, used to grind out roadways through the coal seam to create working space 2 The first export shipment of 60,000 tonnes of Pike River coal to Japan is due in the July- September 2009 quarter.

Large-scale production will come with the arrival from Australia of the hydro monitor equipment (high pressure water cannon), which will cut coal at a rate averaging more than 2,000 tonnes a day.

Hydro mining is scheduled to start during the October-December 2009 quarter, boosting production to one million tonnes a year.

Successful $45 MILLION EQUITY RAISING Pike River successfully raised $45 million in March-April 2009 through a $41 million rights issue and a $4 million placement. The funds were raised to meet ventilation shaft restoration costs and to bridge the funding gap due to delayed production.

More than 1,100 shareholders attended a series of investor presentations held by Pike River around New Zealand from 31 March to 2 April demonstrating the strong interest and support for the company.

The rights issue closed fully subscribed on 17 April 2009 with more than two-thirds of shareholders taking up their rights and 2,900 of those applying for additional shares. AMP Capital Investors, New Zealand’s largest institutional investor, boosted their holding through a $4 million share (and attached option) placement on 31 March 2009.

PIKE RIVER COAL LIMITED Mine General Manager Peter Whittall at the Dunedin shareholder meeting – courtesy Otago Daily Times Extraction fan housing under construction in Greymouth 3 PIKE RIVER COAL LIMITED ACTIVITIES REPORT QUARTER ENDED 31 MARCH 2009

Benchmark COKING COAL PRICE SETTLED The economic downturn has reduced demand for steel and, as a result, premium hard coking coal prices have fallen from the record US$300 per tonne in the 2008 Japanese fiscal year (JFY).

The recent annual benchmark price-setting process for JFY 2009 (year ended 31 March 2010) saw premium hard coking coal struck at a healthy US$128 per tonne.

Pike River anticipates a price at or about this level when it completes its own negotiations. That would still be approximately US$30 per tonne higher than forecast for this period at the time of the company’s 2007 IPO.

Ventilation RESTORATION ON-TRACK

A specially-trained mining team from Australia, working around the clock, is on track to complete the angled bypass round the blocked main ventilation shaft by the end of May.

That will restore the fresh air required to run all the powerful mining machinery and vent gases.

In the interim, a new ‘slimline’ hole has been drilled and is being reamed out to 600mm diameter to provide enough fresh air to allow a continuous miner machine to operate at the start of May 2009. This hole, through extremely hard rock, will be steel lined and connected to an underground fan to provide air to the working faces, until the shaft is fully restored.

Drilling of the $800,000 slimline ventilation hole was an extra step undertaken by Pike River to accelerate recovery of ventilation.

Technical information has been provided to the insurance underwriters assessing Pike River’s insurance claim for partial recovery of ventilation shaft restoration costs.

Hydro Mining EQUIPMENT BEING DELIVERED

Once the ramp-up phase is completed during the July-September 2009 quarter, production will be significantly boosted by installation of the hydro monitor equipment (high pressure water cannons). When fully commissioned, the hydro monitors will cut coal at an average rate of more than 2,000 tonnes a day.

Shift crews will go through extensive training before the hydro monitors go into full service during the October-December 2009 quarter.

Diagram showing location of the Alimak raised shaft Good ground conditions – supported by bolts, mesh and geomesh Alimak raised shaft Completed Completed Raised bored shaft Concrete delivered to shaft by helicopter Void now filled by concrete 66 m 77 m 105 m 111 m Lower section of shaft filled with rock debris and left Not to scale NORTH SOUTH Tunnel Pike River’s new hydro monitor cannon which uses pressurised water to blast coal out of the seam 4 Arriving with the hydro monitors will be two “guzzlers” which guzzle up the coal cut by the hydro monitors, crush it to less than 200mm, and feed it into steel flumes. Water and gravity will carry the crushed coal to the pit bottom coal handling facilities where it will be further crushed to 35mm so it can be pumped via the water-fed slurry pipeline 10 kilometres to the coal preparation plant at the bottom of the Pike River valley.

Two hydro monitor cannons have arrived in Australia from Japan to be customised for Pike River and a spare has arrived at the mine for initial evaluation and familiarisation by the shift crews. The high pressure pipes used to move water to the cutting face and the steel pit-bottom flumes have commenced delivery to the mine site.

Recruitment Recruitment this year has concentrated on production staff so that the production rampup can commence as soon as ventilation is restored. Current staffing is tracking well with 110 employed out of the total workforce of 150 required for full production.

Safety Considerable effort has gone into operational and safety training. One recent initiative is the installation of transponders into the miners’ helmet lamps to provide instant information on their location if any difficulties were to arise.

Environmental In recognition of Pike River’s strong environmental sustainability focus, the company has been nominated by the Mayor of Grey District Council for a Ministry for the Environment “Green Ribbon” Award. The nomination, supported by the Mayor of Buller District Council, is for the “Businesses Making a Difference” category for companies which demonstrate an ongoing commitment to reducing environmental impacts.

In the meantime efforts to create a safe haven for native birds in the mine area continue with 99 rats and 27 stoats killed during the March 2009 quarter.

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