This
paper reviews the annual status of the New Zealand
mining industry (metallic minerals and coal) including key aspects such as
mineral production, mineral exploration expenditure, commodity price trends, key
industry players, market activity and other significant commercial
factors.

Strong commodity prices
during 2006 have been underpinned by a number of key factors including US dollar
weakness and emerging market demand, particularly from countries such as
China and India. In real
terms commodity prices have recovered significantly since 2002 and are currently
at 20-year highs.

New Zealand
exploration spending on metallic minerals (predominantly gold) is at a 15 year
high driven by rising global commodity prices. New Zealand gold
production in 2006 was about 340,000 oz and is expected to grow in 2007 as new
mines at Frasers and Globe-Progress (Oceania Gold) and Favona (Newmont) come on
stream. Gold production broadly lags 10 years behind exploration spending and
exploration activity over the last five years remains well below that seen in
the early 1980's. Expenditure on coal exploration shows a similar trend with
strong growth from a low base over the last five years, reaching over $11 M in
2006. Total coal production in 2006 was 5.9 Mt, an increase of 10% on 2005 with
imports from Indonesia adding a further $1.1
Mt.

Newmont and Oceana Gold
are by far the largest public gold mining companies operating in
New
Zealand, although only Oceana Gold maintains a
presence on the local stock exchange. Other metals explorers with
New
Zealand projects include a range of
public-listed Juniors (market capitalisation less than NZ$50m) domiciled largely
in New Zealand,
Australia and/or
Canada. Capital-raising on public
markets directed towards New
Zealand exploration is estimated at around
NZ$12 M for 2006, the bulk of this coming via Glass Earth's NZ$10 M IPO on the
NZAX in October.

The
New Zealand Coal sector is dominated by the state-owned enterprise Solid Energy
with around 80% market share by production. Other domestic coal competition
remains limited, and includes the L&M Group, Pike River Coal, Eastern
Corporation, and New Vale (acquired by Solid Energy in 2007). Pricing parity
comes mainly from imported coal and global thermal coal prices have remained
strong during 2006 at around US$45-55/t, driven by continued expansion in
Chinese demand. Coking coal prices have eased 16% since 2005 to around US$98/t
in 2007.

Although recent
increases in exploration spending suggest a renaissance in the
New
Zealand minerals sector, long-run trends
indicate that we have simply rebounded from a low base over the last five years
and much work is still to be done to stimulate further growth in the mining
industry to maintain minerals production at current levels. Key industry
challenges include marketing exploration opportunities to local and overseas
investors, building a critical mass of NZX-listed explorers and providing an
internationally competitive environment to attract further capital and
expertise.