Tip hold-up hits coal mining group

The Doncaster-based group, one of the UK's biggest coal miners, said delays to its spoil tip washing project at Langton in Nottinghamshire will set back this year's production target from the site by around 50,000 tonnes.

Shares in the group closed the day down 6.5p at 77p, giving the group a market value of just 31m.

ATH has been dogged by planning delays in its bid to reclaim around 175,000 tonnes of coal annually over 2.5 years at Langton.

Last year, Derbyshire County Council refused planning permission for the scheme, despite approval being received from neighbouring Nottinghamshire County Council.

The decision was approved on appeal in November, but the delays meant the group's

tip washing arm ATH Regeneration delivered no revenues last year.

ATH then hoped detailed planning would take four weeks, allowing for production to begin by May.

Yesterday it said the project has been delayed by another three months as detailed planning took longer than expected, meaning full-year trading will be "slightly lower" than market expectations.

ATH said the issues have now been resolved and construction has started. The company added the project has not fallen in value and it is in talks with a major electricity generator over a long-term contract for Langton's coal.

Spoil tip reclamation typically extracts coal more cheaply than

surface mining as there is minimal stripping and waste removal.

Analysts at house broker

Seymour Pierce had been expecting pre-tax profits of 5.8m but yesterday downgraded their expectations by 17 per cent of 5m.

However, ATH said it is ahead of schedule on securing planning permission for a new mine at Netherton and an extension to Laigh Glenmuir, both in Scotland.

It expects decisions on the sites in the next few months. If positive, they are expected to boost ATH's proven reserves by three to four million tonnes.

It wants to mine 1.8 million tonnes of coal from a new surface mine at Netherton, and also believes the site has potential for another 1.5 million tonnes of coal reserves.

ATH also hopes to mine around 500,000 tonnes of fireclay, used for making bricks. The 127-hectare site would employ around 110 staff and be active for up to 10 years.

At Laigh Glenmuir, it wants to mine an extra 800,000 tonnes of high-grade coal, which would be extracted over a four-year period.

Another 18 months would be needed for site preparation and final restoration. The extension would employ 36 staff.

The group said it sold around 775,000 tonnes during the six months to the start of April. This was eight per cent lower than a year ago, due to wet weather and heavy snowfall.

However, it expects to make up this lost production in the second half, allowing it to mine about 1.8m tonnes, level with last year's production.

Improving international coal prices mean ATH is now

selling coal for around 43 per tonne and it expects a further increase in the second half of the year.

Chief executive Tom Allchurch is positive on pricing and said he thinks it will push up consistently over the next three to four years.

Analyst Asa Bridle Seymour Pierce said the delay is relatively short-term, but will impact earnings.

"It was a high-margin operation that's been delayed, which had suffered delays previously as well. I think it's a measure of the frustration in the market that there's a drag on that particular operation."

He maintained his "buy" rating but cut his price target to 122p from 130p.