BRITAIN’S biggest coal producer has said it has moved a step closer to securing its future but warned one of its largest mines remains under threat.
UK Coal slumped to a loss of £20.6m in the six months to June 30, as a poor performance at its Daw Mill mine near Coventry contributed to a 20% fall in production to 3.3 million tonnes.
The group, which employs 2,500 staff, has reached an initial agreement with pension trustees and power generation customers that will see them extend a support package worth £90m up to the end of 2015. However, the South Yorkshire-based group warned it was unlikely that Daw Mill, which employs 800 staff, would continue to operate beyond early 2014, when current coal panels will have been exhausted.
This was after workers rejected new shift patterns in a ballot, although chairman Jonson Cox remains hopeful that an agreement can be reached.
More than 90% of the total annual output is sold to generate about 5% of Britain’s electricity requirements. Its other deep mines are at Thoresby in Nottinghamshire and Kellingley in North Yorkshire.
The company owes its customers and banks £138.3m and has a funding deficit to its pension funds of approximately £430m. Under a highly- complex plan, its mining business would be left free of bank debt and with an affordable pension deficit reduction scheme.
Each mine will be restructured into separate legal entities to reduce the risk of any one mine’s failure bringing down all mines, a move which is expected to create a more stable platform for the mining business.
As part of this arrangement, from 2014 its pension funds will receive £30m a year plus any money in the mining business.
Trustees of the pension fund will also invest £30m in UK Coal’s property business in return for a stake of 75.1% in that business. The division, Harworth Estates, has 30,000 acres of land and other property.
Cox said: “While the ballot at Daw Mill has been rejected I don’t think that’s the end of the matter. I think there’s probably a will at the mine to reconsider.
“The bigger story is that we are really at the point where a restructuring of the balance sheet is now agreed by a heads of terms agreement and that moves us a step towards being able to ensure the survival of UK Coal.”
Shares fell 20% yesterday as shareholders reacted to the news that the value of their holdings is likely to be eroded by the rescue deal.
Numis analyst Howard Seymour said: “These proposals look sensible but will require shareholder approval and ultimately shareholder value is likely to be limited and linked to the future success of the property portfolio.”