UK Coal digs £26.5m in the red

THE dire financial state of UK Coal was highlighted when the group revealed that it plunged £26.5m into the red last year - despite receiving a £21.7m Government handout. The loss, which compares with a £17.8m profit in 2000, includes a £15.8m write-off relating to the closure of the Prince of Wales Colliery in West Yorkshire.

The company, formerly the privatised British Coal, incurred a £7.7m loss from its core UK mining activities after booking a £25m deficit at its deep mines and a £17.3m profit from surface operations. UK Coal's figures provide more evidence of the urgent need to implement the substantial cost-saving measures proposed in its Project 105 strategy.

This is aimed at cutting costs by 20% to bring down average unit costs from £1.28 at the end of last year to £1.05. The project includes a series of productivity steps which the company believes will bring it into line with some of the most efficient mines in Australia and the US.

The latest results were also hit by an engineering disaster at the Daw Mill colliery in Warwickshire, where efforts to construct new tunnels were hamstrung by ground instability. UK Coal said this contributed to a production shortfall of 600,000 tonnes at Daw Mill. Output was also restricted at the Rossington colliery in South Yorkshire due to industrial action, while geological troubles at Thoresby colliery in Nottinghamshire led to lost production there of 330,000 tonnes.