Defence minister Judith Collins described the incident as “a really sad day for the Navy” during a news conference.
She added: “But everyone came through, and that, I have to say, is down to the professionalism [of the crew], the training and their own courage.”
Dave Poole, who witnessed the ship ablaze, told the Reuters news agency: “As we came into the bay we saw the ship and no smoke. Within 15 minutes fire and smoke were visible. It sank shortly after.”
The HMNZS Manawanui is the first of New Zealand’s naval vessels to be unintentionally sunk since the nation participated in naval battles during World War Two.
Several other ships have been intentionally sunk in the intervening period for various reasons, including to serve as a diving wreck or an artificial reef.
Military officials said their efforts are now turning towards attempting to salvage the vessel and minimising the environmental impacts of the sinking.
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