Twenty-seven miners are unaccounted for after an explosion in a coal mine on the west coast of New Zealand's South Island.

The explosion occurred at Pike River Coal's underground mine about 50 kilometres north-east of the town of Greymouth about 4:30pm (local time).

Two miners have emerged from the processing plant in Atarau and have been taken to hospital where they are being treated for non-life-threatening injuries.

They told rescuers that three of their colleagues were also making their way to the surface.

The fate of the others, however, remains unknown and the company denies reports that a body has been retrieved.

There are concerns that ventilation inside the mine shaft may be affected by a power outage.

Pike River Coal's chief executive, Peter Whittall, says the two men are being interviewed to try and determine the extent of the incident.

"One of the employees has said they felt an explosion underground, and since then he's walked from the mine with another employee," Mr Whittall said.

Police say an electrician who went in to investigate the explosion found a loader driver blown off his machine about 1,500 metres into the mine shaft.

"At this stage there is some communication because the employee who did walk out first rang the surface and said, 'I believe there's been an explosion underground and I'm walking out of the mine'," Mr Whittall said.

"So there is some communications, but we haven't had any further communications with those that are underground."

Mr Whittall says the mine's experienced emergency services are working with the human resources department to figure out which workers are still in the mine.

He says 35 people were rostered on for the afternoon shift, minus the two that have since walked to the surface.

"We're just going through a process of correlating that against their cap lamps and rescuer devices they would have taken with them underground, against their tags that are on the board to ensure we've got exactly the right number of people and understand who is there."

A number of ambulances and rescue helicopters have arrived at the scene.

"It's not good news," district mayor Tony Kokshoorn told Radio New Zealand.

"We're just keeping our fingers crossed, but it's not good.

"It's just a matter of praying and hoping everyone's OK.

"There's a big crowd arriving here now. Some of the families are very concerned their loved ones are on the wrong side of things.

"I don't want to speculate at the moment, the rescue crews are doing everything they can."

An official in Pike River Coal's Wellington office said the company was still working out what had happened.

"We are still trying to determine what has actually happened down there," a company official said.

"All our senior management are involved in trying to find out what's happened and when we know what's happened we'll be able to release a statement and update."

The Pike River mine has been beset by delay, most particularly the collapse of an air ventilation shaft when it was close to opening for production.

Pike River Coal's Australian-listed shares dropped sharply when news of the explosion broke, losing as much as 15 per cent of their value.

They were placed in a trading halt at 3:52pm (AEDT), with the share price down 10 cents to 61 cents.

Shares in New Zealand Oil and Gas, a major shareholder in Pike River Coal, were also placed in a trading halt at 92 cents, down three cents.

The Pike River mine is the source of high-grade coal used in steel production, most particularly for the Indian market.

The company's website says the mine began production last year and has a 2.4-kilometre access tunnel running beneath the Paparoa mountain range to reach the coal seam which took 10 years to build.

Fairfax Media said the mine was on the opposite side of the range to the scene of the 1968 Strongman mine disaster in which 19 miners died in an explosion.

The Department of Foreign Affairs (DFAT) says the Australian High Commission in Wellington has contacted local authorities and the mining company to confirm whether any Australians have been affected by the explosion.

People with concerns about the welfare of family and friends should contact them directly.

If they cannot get through DFAT's 24-hour consular emergency centre can be contacted on (02) 6261 3305.

- ABC/wires