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UK Coal’s profit sinks

Reeling from a £20m half-year loss, the UK's largest coal producer confirms plans to close one of the country’s deepest pits.

UK Coal has reported a pre-tax loss of £20.56m for the first six months ended 30 June 2012, compared to a profit of £22.22bn for the same period last year. The firm, which employs 2,500 staff, was rocked by problems at the Daw Mill mine near Coventry, which contributed to a 20 per cent fall in production. According to UK Coal, Daw Mill will close in early 2014 or earlier.

The company produced 3.3 million tonnes during the half-year period (2011: 4.1 million tonnes). The group’s three deep mines produced 2.4 million tonnes (2011: 3.1 million tonnes).

Meanwhile, total group revenue declined by 23 per cent to £198.3m (2011: £256.1m), as a result of significantly lower sales volumes.

Surface mining had a good first half from the four producing sites when compared to the six sites in operation in the same period last year. First-half production was 0.9 million tonnes (2011: 1 million tonnes) and production has begun at two further sites, with an additional site expected to begin production in the last quarter of 2012.

Jonson Cox, chairman of UK Coal, said: 

Our first half year results for 2012 show a disappointing performance, caused by the poor Daw Mill performance in Q1 and the weakening coal price seen in Q2. These factors were mitigated by an improved consistency of production in Q2. We have continued to progress with the recovery of Daw Mill’s 32s face, and are in the process of re-commissioning the face.

The production problems and the risks of operating Daw Mill in its current structure, when combined with the pension deficit and the level of bank and generator debt, led the board to conclude that a restructuring of the business was necessary to secure a stable platform for UK Coal and its stakeholders. We are pleased to report today that we have reached an agreement in principle with key economic stakeholders on the restructuring.

The company operates three deep mines in the Midlands and Yorkshire and surface mines in the north-east, the north-west and the Midlands. Over 90 per cent of the total annual output is sold to generate around 5 per cent of Britain’s electricity requirements.