UK Coal warns of more delays to production after tough quarter

Deep mine production for last year was at the lower end of the group's forecasts at 5.65 million tonnes, as a fatal accident at its Kellingley colliery in Yorkshire also brought mining to a halt.

The Doncaster-based company also has deep mines at Thoresby and Welbeck in Nottinghamshire, although the Welbeck mine is earmarked for closure.

The company will begin work on a new coal face at its Daw Mill deep mine in the West Midlands at the end of March, a month later than planned as a result of difficult geological conditions.

UK Coal hopes to open up to five new surface mines this year, but added that plans to outsource parts of its operations could set back the beginning of work.

Chief executive Jon Lloyds said: "We remain focused on getting the new Daw Mill face into production and maximising output from the other deep mines until their new faces are available."

Numis analyst Howard Seymour said the delays at Daw Mill could cost around half a million tonnes in lost coal production.

He said: "A further downgrade from UK Coal is clearly disappointing after a torrid period in deep mines since the second half of 2009."

The group expects to make an operating loss of 65m for 2009 although when writedowns on its property portfolio are included, the firm is set for a pre-tax loss of 115m.

Mr Seymour added: "We continue to argue that the assets are worth materially more than the current share price, but unlocking these will require some crystallisation of value plus signs that management have drawn a line under operational issues within the deep mines."

Alongside the deep mines, the firm has active surface mines at Steadsburn in Northumberland, Cutacre in Bolton, Lodge House in Derbyshire and Long Moor in Leicestershire.

The group bought the English coalfield assets of British Coal for 815m in December 1994 when the state-owned business was privatised.

Evolution Securities analyst Charles Kernot said: "UK Coal's trading update for 2009 and initial outlook for 2010 is a little behind market expectations."

He added that the company is still suffering problems at its Daw Mill colliery, although these are now being overcome.

Mr Kernot widened his 2010 loss forecasts to about 40m from 34m.

UK Coal expects production in 2009 to fall 11.4 per cent to seven million tonnes.

The company, which cut its production forecasts several times during 2009, said it expects full-year deep mine output to be 5.65 million tonnes down from a prior forecast of 5.7 million tonnes to 5.8 million tonnes.

Surface mines output is expected to be around 1.35 million tonnes.

However, the company expected available-for-start dates for production from its new Kellingley and Thoresby faces to remain unchanged at around late February and mid-March, respectively.

The group, which supplies around six per cent of the country's needs for electricity generation, has struggled to meet output forecasts over the past year because of geological problems and the death at Kellingley.

In October, the Health and Safety Executive (HSE) ordered the temporary suspension of mining at Kellingley deep mine following the death of mine worker Ian Cameron. UK Coal has also faced 10 charges over three deaths at two other deep mines in 2006 and 2007, in a prosecution brought by the HSE.

Production at Thoresby and Welbeck mines has been hampered by geological problems, which the group is tackling with investment.

Massive office park gets go-ahead

Plans for a large office park and almost 4,000 homes on the site of a former colliery on the border between Sheffield and Rotherham were given approval by planners this week.

The Waverley site, which is in Rotherham, is owned by Harworth Estates, the land-ownership arm of mining company UK Coal.

It is hoped that the office park, which will be developed by specialist firm Helical Governetz will attract Government departments and offices to relocate to the site, providing jobs.

Last week, members of Sheffield Council voted to support the scheme – despite being advised to oppose it by officers, who said the office park was against planning policy.

The meeting was held at Rotherham Town Hall, and the borough's planning board gave the scheme unqualified support, despite it being the biggest development the council has ever had to consider.