Soaring gas oil prices put pressure on ATH

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Coal miner ATH Resources warned that escalating gas oil prices and weakness in international coal prices could hit the group’s full-year trading performance.

The Doncaster-based surface miner told shareholders at its annual general meeting in Leeds yesterday that the two factors are continuing to exert pressure on its operating margins.

The company said that if the two price pressures persist, they will impact on the group’s trading performance for the full year.

ATH is seeing a growing “disconnect” between surging gas oil prices – used to fuel its diggers – and falling coal prices.

Chairman of ATH Resources David Port told shareholders that production in the four months to the end of January was 20 per cent ahead of the same period last year.

However, production for the full year is expected to be only slightly ahead of last year due to delays in obtaining insurance.

ATH is bound to provide local authorities with an insurance bond every time it opens a new site or extends an existing one. However, the number of bond insurance providers has reduced recently.

Mr Port said: “Despite the board having successfully renegotiated pricing on two of the group’s legacy contracts and with the remaining legacy contract finishing in the next few weeks, the escalating gas oil price and weakness in international coal prices are continuing to exert pressure on the group’s operating margins and, if this persists, will impact on the group’s trading performance for the full year.”

He added that the company is working to improve margins through a combination of cost efficiencies and improving its sales mix.

“However, given the uncertainties over commodity prices, the board remains cautious in its view of trading performance for the full year,” he said.

ATH is still waiting for a decision on its appeal against a requirement to register for the Government’s carbon reduction commitment scheme.

It said it will provide an update to the market as soon as the outcome is known.

Mr Port said development of the group’s project pipeline remains on track with planning applications for over two million tonnes expected to be submitted during 2012.

Last month, ATH slumped to a £5.8m pre-tax loss as tough geology and high prices eroded earnings.

It warned that tensions in the Gulf are making its mining increasingly costly.

Losses for the year to the start of October compared with profits of £4m in 2010. Revenues increased to £84.2m from £78.3m after it achieved better prices per tonne.

Its average selling price surged 15 per cent to £50.43 per tonne from £43.70 in 2010. But volumes were down to 1.67m tonnes from 1.79m tonnes in 2010.

Exceptional charges included £4.1m writedowns due to tough geology at its Glenmuckloch and Muir Dean mines.