UK Coal 'looks at' merger proposal

Mar 10 2010 by Iain Laing, The Journal

THE UK's biggest coal mining firm today said it was assessing a merger proposal involving its production-hit deep mines division.

UK Coal, which has surface mining operations in the North East as well as the four deep mines in Northern and Central England, described the approach as highly conditional and at a very preliminary stage.

While it did not name the party involved, UK Coal said the interest could address its exposure to the volatile performance of its deep mines.

Production last year was at the lower end of the group’s forecasts, while preparation for a new coalface at its Daw Mill deep mine in the West Midlands has been hindered by difficult geological conditions.

It expects the start of production at the site to commence during April, rather than this month as previously envisaged.

UK Coal said: “The exposure of the group to the volatile performance in its deep mines is a significant concern to the directors and mitigating the effects of this exposure, by operating improvements or structural means, is a priority.”

The company also has deep mines at Kellingley in Yorkshire and Thoresby and Welbeck in Nottinghamshire, although the Welbeck mine is earmarked for closure.

The firm also has active surface mines at Steadsburn, Northumberland, Cutacre, Bolton, Lodge House, Derbyshire and Long Moor in Leicestershire.

The Doncaster-based firm bought the English coalfield assets of British Coal for £815m in December 1994 when the State-owned business was privatised.

UK Coal shares rose 10% today as investors also digested speculation that Peel Holdings, which owns 28% of the firm, has received an approach for its stake.

The company said it was not aware of any proposals involving an outright offer for the group, which has substantial property interests comprising around 43,500 acres and including agricultural land.

The company is currently examining the possibility of opening two new opencast sites in Northumberland in a bid to continue coal production well into the future.

UK Coal says it is “assessing the potential” of working the Hathery Lane site at Bebside near Blyth, and land at Highthorn near Ellington – where it closed the region’s last deep pit five years ago.

A previous bid to work Hathery Lane was thrown out by the Government 12 years ago following local protests about the likely impact on the environment and views of the area.

Now the site is being re-assessed, along with 1,000 acres of land at Highthorn, which has previously been said to contain up to seven million tonnes of coal reserves.

UK Coal says it has no immediate plans to submit formal planning applications for either of the sites, which between them would secure continuity of supply and extend coal production in Northumberland well into the future.