Merger talks go on, says UK Coal

In a trading update yesterday Doncaster-based UK Coal said talks were still at an early stage and there is no certainty that a transaction will result.

The company said production in the first quarter of 2010 was 1.0 million tonnes, down from 1.7 million tonnes in the first quarter of 2009.

Of this 0.8 million tonnes was from deep mines and 0.2 million tonnes was from surface mines.

The first quarter has been hit by the delayed start to the new face at Daw Mill, along with lower performance from Kellingley and Thoresby, as they mined the last of the coal through poor geology in their old seams.

A new seam at Kellingley in Yorkshire was brought into production in March while the new seam at Thoresby in Nottinghamshire commenced in the first week of April. Both mines are producing in line with expectations.

Daw Mill, near Coventry, started work on its new face on April 25, and is continuing to ramp up production.

Welbeck in Nottinghamshire mined the last of its coal on May 11 and is now starting the closure process.

Surface mine production at the start of the year was affected by the weather, although production is now recovering with the improvement in conditions.

At the end of the first quarter net debt was 236m of which generator balances were 77.4m.

Last month UK Coal announced plans to sell a third of its agricultural land including sizeable parcels of land in Yorkshire in order to pay down debts.

The group is in talks with all the major housebuilders about setting up joint ventures to develop its brownfield sites.

It has 28,000 acres of agricultural land, principally arable and pasture, and intends to sell around 9,000 acres.

UK Coal announced a 129.1m pre-tax loss in 2009, following problems at all four of its underground mines.

The loss compares with a pre-tax loss of 15.6m in 2008.