New Zealand Plans Pike River Inquiry, Checks at Other Mines After Disaster

New Zealand Prime Minister John Key said a Royal Commission will probe the causes of deadly explosions at the Pike River Coal Co. mine, while the government is planning a safety audit of other underground pits.

“We owe it to the families of the men who perished to find out what happened,” Key told reporters today in Wellington. “It is important that we take every step we can to get the answers that these people, and all New Zealanders, need about what happened at Pike River.”

The first blast at Wellington-based Pike River’s mine on the West Coast of the South Island occurred on Nov. 19, followed by a larger explosion on Nov. 24 that prompted police to say none of the 29 workers trapped would have survived. A fourth blast yesterday has ignited a coal fire, further hindering the recovery of bodies.

Key said the provisional terms of reference for the inquiry, to be headed by High Court judge Justice Graham Panckhurst, include the causes of the explosions, the handling of the search operations, the availability of rescue resources, systems in place at the mine and mine safety legislation.

The three person commission will hold open hearings, mostly in Greymouth, Key said. It could take a year to complete its findings, or longer if separate police or Labor Department inquiries identify wrongdoing and charges are laid, he said.

Separately, the Labor Department is seeking an overseas expert to undertake a safety audit of New Zealand’s underground coal mines as a matter of urgency, Key said.

Safety Audit

The mines will stay open during the audit, according to the prime minister, who yesterday said the future of underground mining rests with the outcome of the probe. Pike River is likely to stay closed for some time, he said today.

“Men will not be going back into the Pike River mine until everyone is satisfied the environment is safe,” he said.

New Zealand’s West Coast has 13 coal mines, including four underground operations, according to the Ministry of Economic Development’s website. Mining employs about 6,000 people, according to the government’s http://www.beehive.govt.nz website. The industry earned about NZ$1.1 billion ($820 million) in export receipts in 2009.

A fourth explosion occurred at the mine just before 2 p.m. local time yesterday, New Zealand police said in a statement. The third explosion was on Nov. 26.

The fourth blast has resulted in a fire involving coal and gas, the company said in a statement sent to the stock exchange. Preparations are underway to inject inert gas to extinguish the fire and enable access to recover the bodies, it said.

Insurance Claim

The fatalities this month were the country’s worst mining disaster in 96 years.

Pike River will also conduct an internal inquiry, Chairman John Dow said in today’s statement. The company has issued force majeure notices to parties involved in its coal transport arrangements and will be discussing commercial relationships with other contractors, he said.

The company has material damage and business-interruption insurance cover of NZ$100 million ($75 million) and has begun preparing a claim, Dow said, without saying who provided the insurance.

Much of the claim work will require damage assessment that isn’t possible until the mine can be entered.

The company has agreed a stand-still arrangement with Bank of New Zealand Ltd. and has received funds from 30 percent shareholder New Zealand Oil & Gas Ltd. which, with coal stockpiled and available for sale, allows it to pay workers and plan the next steps, Dow said.

Drilling Delays

Pike River had agreed to sales contracts with international customers for as much as 90 percent of output for the life of the mine, Chief Executive Officer Peter Whittall said in a presentation this month. The company is part-owned by India’s Gujarat NRE Coke Ltd. and Saurashtra Fuels Pvt. New Zealand Oil & Gas Ltd. is the biggest investor with a 30 percent stake.

The mine was forecast to produce 320,000 tons to 360,000 tons of coal in the year through June, the company said Oct. 19. That almost halved an April forecast because of delays with drilling equipment and road construction.

Key yesterday said mines such as the Solid Energy New Zealand Ltd. Spring Creek project had a very good safety record and he wasn’t considering closing other sites while inquiries were underway into the fatalities.

“I haven’t had any advice to do that and I would be reluctant to do that,” he said. “That’s one of the reasons why we need to understand very quickly, if we can, what happened at Pike River.”

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

To contact the editor responsible for this story: Iain Wilson iwilson2@bloomberg.net

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