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Monday, 26 November, 2001, 16:57 GMT
UK coal sector poised for further cuts
Coal mine
UK Coal: Hit by a strike, and delays in tapping new reserves
The UK coal industry, which employs 5% of the miners it did in 1975, is poised for further contraction.

The country's biggest coal mining company, UK Coal, has warned that it is continuing to probe the "viability of the deep mine business".

The firm, which employs more than three-quarters of UK miners, said it had identified mines with potential for "significant improvements in productivity to be achieved".

Mines where factors such as rock faults increase the changes of "uneconomic production" are also being reviewed, the firm said in a statement.

A spokesman for UK Coal, formerly RJB Mining, declined to rule out mine closures.

"When you are making 100m profit, you can afford to do things you can't when you are making a 10m loss, as we did in the first half of the year," the spokesman told BBC News Online.

"The deep mine business alone lost 35m."

Seam problems

But he urged a more "charitable" view of the outlook for the firm's mining operations, spread over 40 sites.

Whereas in the past UK Coal would have been prepared to swallow costs needed, for example, to overcome an unexpected geological fault, such investment would now be less likely.

"What we are saying is that there are areas of mines that will not be working that might in the past have been working," the spokesman said.

Setbacks

Although, thanks largely to rising gas prices, demand for British coal has soared over the past year, prices are, in effect, capped at levels at which power stations can buy imported supplies.

The firm's ability to cash in on the market rebound has also been hindered by a five-month delay to production at a new operation at Daw Mill Colliery, Warwickshire.

"When you are talking about 1 million tonnes of coal over that time, at 30 a tonne, it give you an idea of the implications of this," the UK Coal spokesman told BBC News Online.

Three month's production at Rossington Colliery in Yorkshire have been lost to a strike over bonus pay.

The firm now expects to produce about 8 million tonnes of coal, "lower than expectations".

Shrinking sector

A decline in the size of UK Coal operations would hit a sector which employs about 10,000 people today, compared with more than 200,000 in 1975.

The firm, as RJB Mining, in 1994 took over the core operations of British Coal as the then Conservative government progressed its privatisation programme.

In 1995, the company reported a pre-tax profit of 173m, rising to 189m the next year.

But, hit by the strength of sterling and a switch by electricity generators to gas, profits had fallen to 11m, before exceptional items, by 1999.

The firm in May changed its name to UK Coal, following the resignation as chief executive of Richard Budge, after whose initials RJB Mining was named.

Shares in UK Coal fell 16% in early trade on Monday before recovering to close at 89p, down 8.75p, or 8.9%, on the day.

See also:

12 Sep 01 | Business
Buyer named for struggling colliery
14 Mar 01 | Business
The changing face of UK jobs
06 Mar 01 | Business
Coal firm unveils land sales
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