HARGREAVES Services said it is confident of hitting targets despite encountering geological problems at Maltby Colliery in Yorkshire.
The energy services group, which owns and operates mines, trades coal and transports commodities, yesterday said production from a new panel at the South Yorkshire mine had been “disappointing”.
However, “the board remains very confident about the prospects for the group and of achieving management’s targets for the full year”, added the company.
“We’re working in an area of the mine that has a very thin coal seam, less than 1.5m thick,” said finance director Iain Cockburn. “Once we get through that we will be into thicker coal. You get more coal out for the same amount of effort (with a thicker seam).”
The group, which typically mines 850,000 tonnes annually from Maltby, did not quantify the production shortfall, but said it was working with staff and unions to “attempt to recover some of this shortfall” later this financial year.
Hargreaves bought the pit from Doncaster-based UK Coal in 2007, and earlier this year struck a deal with staff which allows it to cut coal around the clock by adding a fifth shift.
“We operate Maltby virtually 24/7,” said Mr Cockburn. “We’ve got a very good relationship with our management and unions.”
By contrast, Britain’s biggest coal miner, UK Coal, recently warned staff it may have to close its Daw Mill deep mine in the West Midlands because it could not strike a pay deal with a union. The possible closure of the UK’s most productive mine threatens about 800 jobs.
Hargreaves said it was already making progress developing Maltby’s next panel, T125, where the coal seam is 25 per cent thicker.
“We are confident that this will benefit performance significantly from the end of the first quarter of the next financial year,” it said.
The group said it was hopeful of securing a two-year extension to its project to manage production at Hatfield colliery near Doncaster, where it works on behalf of ING Bank.
Production at its Monckton coke works near Barnsley remained consistent, it added.
“Coke markets remain strong and the group’s price and forward contract positions are in line with management’s expectations,” said the group.
Hargreaves revealed it had finally won planning permission for its project to re-open Tower Colliery in South Wales.
Its plans to mine about seven million tonnes of coal from an opencast pit at Tower Colliery were granted conditional permission by Rhondda Cynon Taf Borough Council in July, but Hargreaves has only just had final planning approval signed off.
It will receive a 35 per cent share of any profits from the mine, and plans to begin production by the end of May.
“It produces a very high grade of coal,” said Mr Cockburn, adding the coal was valuable in steel production.
“It’s an interesting extra flow of specialist product to add into our marketing.”
Hargreaves also revealed it is working to develop other surface coal mines, with a further one million tonnes of reserves on track for planning applications next year. Mr Cockburn declined to pinpoint opportunities, but said the group was focused on developing its own assets.
Hargreaves has been linked with possible approaches for both UK Coal and Doncaster-based surface miner ATH Resources during the past two years.
“There are advantages and disadvantages to buying assets,” he said. “At the moment we’re working on the basis that we’re doing it organically with a clean sheet. We do not buy into history; we’re not taking on any restoration.”
The business ended November with net debt of £102m, lower than expected. Its energy and commodities arm also performed better than hoped.
Shares in the group gained 15p to 1,107p.
Charles Stanley analysts said: “With... further growth offered by the Tower Colliery joint venture, European expansion, improved margins from speciality coal sales and Asian industrial service, we continue to believe that the shares are undervalued.”
Division ahead of expectations
HARGREAVES Services’ industrial services division performed “slightly ahead” of management expectations during the six months to the end of November.
The business specialises in engineering design, fabrication and project management, plant operation and maintenance, facilities management and ash and residual product recovery. It serves companies including E.ON UK, Scottish Power, Scottish & Southern Energy, International Power, ConocoPhillips and Eggborough Power.
Hargreaves said it has won contracts worth £5m in recent months from the steel, power and renewable sectors, and tender opportunities are healthy.