Situated in the Greymouth Coalfield, the Mt Davy Block
contains a significant resource of high quality bituminous coal suitable for use
in metallurgical coking coal blends. The coal, which is all low sulphur, is seen
as a complementary deposit to export coking coal at Stockton Mine.

Previous drilling by State Coal Mines (1948 - 1953) and
Japanese interests (1970's) have been supplemented by Coal New Zealand drilling
(1992 - 1993) and surface mapping. A mining feasibility study was completed in
late 1993 and approval gained for the driveage of an exploratory tunnel to the
target seam.

Following construction of surface facilities, tunnel
driveage on a 1:5 decline commenced from Rewanui in May 1995 and to date about
half the required length has been driven. When the seam is intersected a
comprehensive geotechnical testing programme will be undertaken to assess the
in-situ mining conditions. It is expected that the results will confirm the
assumptions made in the feasibility study.

The Mt Davy Mine, at depths of 500 - 700 metres, will be
the deepest underground coal mine ever inNew
Zealand and in-situ stresses (orientation and
magnitude) will be important considerations for mining engineering. The coal has
a high gas content and suitable techniques for gas control and
prevention/mitigation of coal outbursts will be necessary.

Mine development
is scheduled to commence in mid 1998 and an annual production level of
500 000 tonnes is forecast. The coal seams will be developed by continuous
miner and coal extraction will be by hydraulic monitor. Coal will be pumped to
the surface and from Rewanui transported five kilometres to Dunollie either by
truck or slurry pipeline. At Dunollie a coal dewatering plant, coal stockpile
and rail loadout will be constructed.