Overhaul reaps the rewards at Maltby for miner

The group, which bought Maltby in South Yorkshire from UK Coal in 2007, yesterday added it expects to report results for the year to the end of May in line with its expectations.

Hargreaves recently overhauled working practices at Maltby, introducing a fifth shift. Its cutting equipment now operates for 165 hours a week – with just three hours’ maintenance downtime a week – unprecedented in the UK mining industry.

Hargreaves said this has improved production consistency, and thanked staff for driving through the changes.

“There’s always incremental scope for improvement but we’re very pleased with where we’ve got to at the moment,” said finance director Iain Cockburn.

“We worked hard with the unions, management and staff and got support and agreed these very far-reaching changes. Hopefully that will lead to improved production.

“We’re committed to making Maltby as successful and profitable a business for as long as possible.”

Maltby was beset by mining problems last year when the group battled geological and equipment problems. But Hargreaves said the harvesting and delivery of pond fines – very fine coal particles – has helped make up for its previously inconsistent production.

The group has also been called in to manage Hatfield Colliery near Doncaster, after it was taken over by ING Bank. The Dutch lender acquired the deep mine in May after Richard Budge’s energy firm Powerfuel fell into administration. The rescue saved more than 400 jobs.

Hargreaves said under an incentive scheme with ING, it may be granted an equity stake in the pit on condition of meeting performance targets.

Mr Cockburn insisted the group is not considering buying the mine outright, and will likely end up owning a “small equity stake”.

“That’s a share that we would earn through delivering the necessary results,” he said. “We’re engaged in a management capacity and not as a potential investor.

“It’s an attractive asset but deep mines are very capital intensive and have a fairly high risk profile. (We are taking it) one at a time.”

Hargreaves played down the earnings from its first 800,000-tonne coal contract from Hatfield, which will be sold to a number of power generators.

“Although the average margin achieved on this contract will be small, we believe it will position us well to assist Hatfield Colliery maximise their sales proceeds in future,” it said.

In time, Hargreaves will sell Hatfield’s coal to 2Co Energy, which bought the rights to Powerfuel’s clean coal power station. The planned plant could feature pioneering carbon capture and storage (CCS) technology.

“Hopefully as a result of ING stepping in and saving the mine, ING has given the opportunity to 2Co to take the CCS project forward,” said Mr Cockburn.

Hargreaves also owns Monckton Coke & Chemical Company in Barnsley, where production has been consistent and sales boosted by strong coke markets.

“We’re never complacent; we’re always paranoid,” said Mr Cockburn. “But we’re quite excited by the opportunities we’ve got; the continued growth and the opportunities in Europe. We’re very pleased with the development of the group.”

The update was met with widespread approval from analysts. Shares in Hargreaves lifted 20p to 1,040p, a two per cent gain.

Analysts at Charles Stanley forecast pre-tax profits of £40.6m for the year. They said the group’s year end net debt of £66m was below their expectations of £75.8m and “demonstrates the cash generative ability of the group and is a strong performance given the increased working capital requirements driven by the increase in the underlying coal price”.

Adrian Kearsey at Evolution Securities added the prospect of upgrades to 2012 and 2013 forecasts is growing.

“All four divisions are performing to plan and we expect 17 per cent growth to 2011 pre-tax profits,” he said. “(The) announcement accelerates the prospects for earnings upgrades.”

Opencast mine decision delayed

Hargreaves Services said it is “disappointed” that a decision on its planning application to reopen Tower Colliery in South Wales has been delayed.

The group aims to mine about a million tonnes a year for seven years at Tower, and has a joint agreement with former miners and families who own the site, where it will earn 35 per cent of any profits generated. It plans to access remaining reserves through opencast mining.

It had hoped for a decision this month, but a meeting of Rhondda Cynon Taf council has been rescheduled for July 4 to consider its planning application. “Although delays in the approval process have been disappointing, management is pleased with the progress being made,” said Hargreaves.