ATH shares fall as bad winter pushes company into the red

The Doncaster-based group, one of the UK's biggest coal miners, also announced it has received an approach to buy its coal-recovery division ATH Regeneration.

ATH Resources, the third-biggest coal producer in the UK, lowered its full-year production volume outlook, but said it plans to reinstate the interim dividend with a payment of 1p.

ATH is forecasting that full-year production volumes will be 60,000 tonnes lower than it previously thought, at about 1.75 million tonnes.

The company said a delay in starting a new tip washing and reclamation plant at Langton, Nottinghamshire, would reduce full-year production from ATH Regeneration by nearly 50,000 tonnes and result in slightly lower-than-expected trading for the group.

The group said it had seen no contribution from the ATH Regeneration business, due to delays in obtaining planning permission for Langton.

For the six months to April 4, the group reported a pre-tax loss of 2.9m, compared with a profit of 90,000 last time.

Revenue fell 3.6 per cent to 34.4m, reflecting the abysmal weather which hit the group over the winter months.

ATH's chief executive, Tom Allchurch said a combination of the floods in Cumbria and the heavy snow and freezing temperatures in Scotland had hit the group hard. "We had the Cumbrian floods last November which impacted production. Then just before Christmas we had freezing weather with temperatures at –17 degrees which hit the conveyor. In addition our mining equipment couldn't operate as the diesel had frozen and we couldn't get it working," he said.

The group's shares closed down 6.6 per cent, a fall of 4.5p to 63.5p.

ATH said it expects to pull back a lot of business in the second half as it has agreed new long-term sales contracts which, with an improving coal market, increases expected average prices by six per cent to 36 per tonne from long-term contracts.

"The business has taken longer than expected to recover following the unprecedented adverse weather over the autumn and winter period," said Mr Allchurch. "However, the group is now operating at expected levels of production and efficiency."

He said that ATH has significantly advanced its reserve base to its highest levels with planning successes at Netherton, Duncanziemere and Langton.

"As the group works through the newly improved contract base we will be able to access a rapidly improving coal market leading to significant improvements in future profitability," said Mr Allchurch.

Analysts expressed concern that the company had been too hasty to pay a dividend.

"ATH has warned the market that it will fail to meet the production target for the full year that it lowered only a couple of months ago," said analyst Charles Kernot at Evolution Securities, adding that instead of reinstating dividend payments the company should have used the cash to reduce debt.

"Despite receiving planning permissions for new mines, shareholders need to be cautious about the level of capital expenditure to be incurred in putting them into production," he added.

Making money out of spoil heaps

ATH's regeneration business, the subject of a takeover approach, was formed when the group bought Doncaster-based A Ogden & Sons in 2006 for 25.4m, in a bid to reclaim coal from deep mines.

Ogden, a successful coal-recovery, land-remediation and regeneration business, focused on colliery spoil-heap reclamation projects.

The group, which was renamed ATH Regeneration, now works on reclamation projects using a large hybrid washing plant on site.

All excavated surface material from spoil heaps is washed to enable any residual coal to be recovered. Lumps of coal ranging in size from 0.5mm to 150mm can be separated from dirt using the technique.

Spoil heaps can contain about six to seven per cent coal by weight and spoil-heap washing is a higher margin way of obtaining coal.

The coal recovered is sold direct to the power generators. Sites are then cleaned and restored with projects ranging from residential developments to community woodland.

ATH said it is reviewing the approach and will make an announcement in due course.