UK Coal delivers return to profit

UK CoalBritain's biggest coal producer said talks about closing one of the country's largest mines were ongoing despite its first annual profit in four years.

UK Coal, which employs 2,500 staff, hailed its recovery plan as it reported pre-tax profits of £58 million for 2011, compared to a £124.6 million loss the previous year.
The South Yorkshire-based group, which operates three deep mines and six surface mines, said it benefited from a 25% rise in coal prices and a 4% increase in production.

But UK Coal is still considering closing its Daw Mill mine near Coventry, which employs 800 staff, by early 2014 when current coal panels will have been exhausted.

Shares in UK Coal jumped 13% as the market opened. However Louise Collinge, analyst at Investec, said the uncertainty around UK Coal's restructuring plans overshadowed the good set of full-year results.

She said: "We advised that we were withdrawing our recommendation and target price for UK Coal, due to the uncertain outlook for the company. This remains the case."

The group, which bought the English assets of British Coal in 1994 when the state-owned business was privatised, reported a 40% surge in revenues to £488.2 million as it produced 7.5 million tonnes of coal, up from 7.2 million in 2010.

The performance was also helped by the increase in the average sales price per gigajoule of coal, which increased to £2.48 from £1.97. Its net debt was cut by 40% to £139 million.

Chairman Jonson Cox said: "This improved performance is in line with our recovery plan, with an increase in revenue from improved production, stock reductions and realised sales price, and from our initial steps in addressing our cost base."

He added: "However, recent operational performance at Daw Mill, the near-doubling of our pension deficit and the level of debt in the mining business have continued to highlight how much remains to be done to put the UK Coal mining business on a stable footing."

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