Maltby Colliery faces closure threat

Hargreaves Services, which owns the colliery, said it was carrying out further investigations into whether a new face, known as T125, could be mined safely.

In May, Hargreaves Services reported that it had encountered significant geological problems while preparing the next panel of coal at Maltby, in South Yorkshire, which employs 500 staff.

A statement from Gordon Banham, the chief executive, said: “Although this instance did not affect production on the current T15 panel and had only limited impact on the financial results in the year ended May 31 2012, we indicated that the delay in the commencement of production on T125 was estimated to be between 12 to 16 weeks with a consequential estimated impact on the group’s profit in the year ending May 31 2013 of between £12m and £16m.

“The current development plan shows that development and face set up will be completed by February 16 2013, some 15 weeks after the completion of the T15 panel.

“However, as the face line is being driven, gas issues, possibly emanating from the zone that caused the difficulties in May, are adding delays and risk to the completion of the face line. We envisage this may continue to add risk and further delay to both completion of the development and successful production of the panel once production commences.”

The company’s mining experts, together with external consultants, are reviewing the mining plans and performing additional investigative work to ensure that there is a plan that addresses both the health and safety risks and the financial risks this may cause. The outcome of this comprehensive review will be known by the end of October, when there will also have been time to review geological data from driving the face and carrying out exploratory boring.

Mr Banham added: “Along with the board, I am unequivocal in my view that, should the presence of gas, water and oil in the vicinity of the panel put our employees at risk, in the opinion of our own management or the external consultants, we will not attempt to mine the T125 panel.

“We anticipate that the abandonment of the T125 panel would lead to the mothballing or even closure of the mine as it would probably be uneconomic to switch production to a later panel due to the long face gap entailed. We believe that prevarication on these types of issues, especially in the context of deep mines, can bring unacceptable levels of risk to employees, avoidable financial losses and destruction of shareholder value, none of which we will countenance.

“While any decision to close or mothball the mine can only be taken after the outcome of the comprehensive review is known, given the current risk profile, the board wants to ensure that all stakeholders, internal and external, are kept fully informed and where necessary consulted with over the coming weeks.

“I personally hope that the review will provide unequivocal evidence that will leave the group in a position to carry on with development and production of the T125 panel. We were and we remain very optimistic about the potential yield from the T125 panel given the thickness of the coal seam.

“Should the level of risk ultimately prove to be unacceptable, the closure or mothballing of Maltby would obviously be a disappointing development for the management and employees.”

Mr Banham reassured investors that the board believes that the group is strong enough to absorb such actions.

He added: “Maltby has not been driving our recent profitable growth and it has undoubtedly been adding risk and volatility to the group’s earnings profile and rating. Although we would incur a substantial book impairment charge, the cash costs, including redundancy, of mothballing or closing the mine, would likely be less than the losses that are forecast to be made during the upcoming face gap.

“Based on the initial work we have done to date we are very confident that the cash that would be raised from selling the plant and machinery would be comfortably higher than the cash costs of redundancy..Setting financial matters aside, we can assure shareholders that the safety of our workforce is our primary consideration and, no matter which path is followed, that safety will not be compromised.”