Mine had plan for ventilation

ROB STOCK
Last updated 07:13 11/11/2012

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Pike River directors are staying silent about their directors' liability insurance.

The insurance could mean that if the directors, or Pike River officers like chief executive Peter Whittall, are prosecuted or fined, their insurer will pick up the bill.

Though they are well-paid, directors are often provided with liability insurance by companies significantly limiting the risks they are personally responsible for. The Pike River financial statements for 2010 shows the men in charge of the mine at the time of the fatal explosion in November 2010, were covered by insurance bought by the company.

The financial statements describe the cover, saying: "The company has arranged policies of directors' and officers' liability insurance, which, together with a deed of indemnity, seek to ensure to the extent permitted by law that directors and officers will incur no monetary loss as a result of actions legitimately taken by them as directors and officers of Pike River."

But whether or not fines would be paid by the insurer, and Whittall is facing 12 charges under the Health and Safety in Employment Act with a maximum fine of $250,000 for each charge, is unknown.

A spokesman for some of the directors including chairman John Dow, director, Stuart Nattrass and chief executive Whittall, would provide no details of what the insurance covered, though typically it includes the costs of defending charges and may also cover fines handed out for regulatory breaches.

But the spokesman said the insurance terms were confidential.

That is common as insurers do not want any encouragement to disgruntled parties to seek damages against their policyholders, and revealing the terms of cover can be used by the insurer to invalidate the policy and avoid claims.

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PIKE RIVER investors were told in black and white in the company's 2007 prospectus that the mine would need a ventilation plan which was regularly reviewed to keep the miners and investors' capital safe.

Despite being on notice from an Australian mining consultancy, whose report was reproduced in Pike Rivers' prospectus, Pike River management failed to adequately update the ventilation plan in the years before the explosion at the mine in November 2010, caused by methane igniting.

And, the Royal Commission report into the Pike River mine disaster revealed, the board did not make inquiries to check the continued adequacy of the ventilation plan, which Australian mining consultancy Behre Dolbear said was key to managing the methane risk to protect lives and investors' cash, or whether it was being complied with.

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The board denies it failed in its duties and said it relied on management to report on ventilation.

Prospectuses are there to tell investors everything they need to know before investing, and the Pike River Coal prospectus was issued in May 2007 in the run-up to shares being listed on the NZX stock exchange. The shares floundered as the company missed forecast after forecast.

Because of the risk of investing in a single asset mining company, reports on the viability of the mine were included to show would-be investors the money-making prospects for the mine, but also to demonstrate that risks such as mine safety would be well managed.

Australian mining consultancy's Behre Dolbear's report was printed in full in the prospectus, and one passage read: "BDA considers the ventilation provisions appear appropriate at this stage, although the system will require periodic review, refinement and upgrade as the workings become more extensive. Pike River proposes to have a ventilation plan in place before mining production begins".

A ventilation plan was prepared in line with Behre Dolbear's prospectus expectation, but the Royal Commission report, which does not mention Behre Dolbear's guidance, shows that, despite warnings, Pike Rivers' ventilation plans were allowed to become outdated and criticisms of the ventilation were not effectively acted on.

The Royal Commission report, which the Pike River directors do not believe is fair to them, shows that on November 18, 2008, Pike River's 78-page ventilation plan was signed off.

In February 2009, however, Pike River's Pieter van Rooyen "realised the ventilation management plan would need to be reviewed because it contained information he considered irrelevant and was sometimes 'too detailed and impracticable', and in the same month ventilation consultant John Rowland carried out that review, and found the plan inadequate.

"To be honest, I don't like it either!!" Rowland wrote, but he received no further instructions on the matter.

The Royal Commission report indicates the ventilation plan was looked at by engineer Andrew Sanders in March 2010 following criticism from staff and contractors. He concluded the plan was "out of date and contained numerous references to standard operating procedures that did not exist or had not been approved".

There were 54 items Sanders identified for follow-up. Pike had no process to work through the 54 items. Many were not addressed.

The problems with the ventilation were being noted throughout 2010 in incident and production reports.

In October, 2010, the same miner wrote on a "specific production issues" form: "Get the dam ventilation sorted out so we can cut coal. This ventilation issue has dragged on for 2.5 years!!!".

John Draper, spokesman for some of the directors, including Pike chairman John Dow, issued a statement saying there was a significant improvement in ventilation with the commissioning of the mine's new main fan in September-October 2010.

"Our clients were aware of the need for ventilation planning and they understood that the ventilation plan was administered and updated as necessary by competent senior mining staff and consultants who reported to operational management. In 2010, ventilation at the mine was managed by the mine manager, Doug White, who confirmed in evidence at the commission that he was responsible for ventilation. Detailed, technical reports relating to operational matters such as these were seen by the mine managers with the technical expertise to implement them, not by the board."

He went on to say reports about ventilation were not seen by the board or senior management unless White brought them to their attention. White, he said, "had not expressed any misgivings about ventilation to the board or senior management".

Four days before the explosion White told a board meeting that "the new underground main ventilation fan reduces gas considerably, delivering 138 cubic metres of air per second" and that methane was therefore "more a nuisance and daily operational consideration than a significant problem".

Dow told the inquiry that the health and safety committee did not consider asking to see evidence of compliance with the ventilation management plan.

- Sunday Star Times

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