Last month Pike cut its production forecast from 620,000 tonnes of saleable coking coal to 320,000-360,000t for this financial year, almost three weeks after long-time chief executive officer and managing director Gordon Ward left the company.
In his first AGM address as the new chief, Whittall explained why Pike was less upbeat.
“Ladies and gentlemen, there has been speculation that I have made a conscious decision to develop a more conservative style in heading the company than has been evident in the past,” he said.
“Well, it is more of a case of the change in leadership providing an opportune time to present a different set of parameters in terms of what I believe we can achieve.
“These new figures present a range of achievable possibilities rather than a best-case scenario and I am personally a lot more comfortable with providing you, our investors, with a more realistic timeframe and production schedule as possible while preserving a measure of upside capacity.
“The previous forecasts were the best we could put out with the information available but they consistently proved to be at the upper end of the range while our operations performed at the lower end.
“Now it’s time to be more realistic in our approach and forecast production at rates which we have a realistic chance of achieving.”
Whittall attributed the slow development progress at Pike’s namesake mine in New Zealand to its two “unreliable” Waratah Engineering continuous miners, while he said its Sandvik Alpine Bolter Miner 20 was a “superb” machine.
“The lack of reliability and performance from these Waratah machines has been a major factor in this recent reforecast,” he said.
“Despite having one of the Waratah machines still in service, our reforecast now does not assume any production from it, making any metres we achieve a bonus.”
While Pike has purchased a second ABM20, expected underground in early 2011, Whittall tried to reassure frustrated investors.
“We share your disappointment; we take it as hard as you do and I only wish that at times we had a magic wand to address the issues that hamper the development of the business,” he said.
“But we don’t. What we do have is a quite complex geological environment that will always throw up challenges that impact on different parts of our operation at different times – there will always be cause and effect to deal with as we develop the mine.
“But we continue to build knowledge and operating history, and we have a very dedicated, focused and enthusiastic management team and workforce who continue to drive this business forward to success.”
On a brighter note, the recent commissioning of two main underground fans has increased ventilation by about 30%.
“This allows us to run the hydro system as well as three roadway development units which was not previously possible,” Whittall said.
“Complete installation of the clean and dirty water systems to allow the hydro-mining system to increase output from its current 50 per cent capacity to its full 9000 litres per minute design capacity will take place over the next couple of months.”
Pike is targeting 60,000t of saleable coal production per month in the June quarter of 2011 and 80,000tpm by the December quarter of that year.
The magnitude of Pike’s production revisions “surprised” Goldman Sachs.
“Longer term, the investability of PRC is a challenging question. It is certainly not a stock for investors with a lower risk tolerance,” Goldman analysts said after the move.
But it still gave Pike a “buy” recommendation.
“We believe the stock is pricing in a low operating success scenario, the leverage to a positive outcome is substantial and, on balance, we maintain the view that the risk/reward equation appears positive.”
The market responded favourably to Whittall’s frank assessments with Pike shares closing up 2% to 75c yesterday.
