UK Coal confirms Daw Mill on course for closure

MASSIVE losses, poor production and a recalcitrant workforce may have sounded the death knell for the Midlands’ last deep mine, Daw Mill.

Owner UK Coal said today that the pit would close in 2014 or sooner if its poor record could not be turned around.

Announcing a 23% fall in interim group revenue and a loss of £20.6m, UK Coal chairman Jonson Cox said: “Principal operational issues continue to be the level of production risk in the deep mines, at Daw Mill in particular, the price of coal and the reduction of operating costs at the mines.

“Daw Mill remains on a course to close in early 2014, or before, unless it can achieve key targets.   The mine is expected to endure another face gap in 2013, reflecting the results of past poor performance and the failure last year fully to mitigate a 2012 face gap.  

“We have set out clearly the terms under which the company would seek to extend the life of Daw Mill to realise its full potential.  One of these conditions was the adoption of new shift patterns.  We regret that a recent ballot of the workforce rejected the proposals of our new Mine Director at Daw Mill, rendering it unlikely that the mine will be able to continue to operate under the required lower risk operating model.”

UK Coal said group revenues fell 23% in the first half to £198.3m (H1 2011: £256.1m, FY 2011: £488.2m) following significantly lower sales volumes at slightly higher average realised sales prices (H1 2012 £2.43/GJ: H1 2011 £2.36/GJ, FY 2011: £2.48/GJ). 

This led to an operating loss of £6m before non-trading exceptional items in the first half of 2012, some £41.2m worse than the operating profit before non-trading exceptional items of £35.2m booked in H1 2011.

Daw Mill finally reached anticipated levels of production in March, and has continued to mine in line with expectations.  Engineering work to salvage one of the faces progressed during the period but the firm said more work was required before normal production could resume.

Nevertheless, lost production means the costs of keeping the mine going are likely to increase.

“Daw Mill remains in consultation around whether it will close after the conclusion of 33s face by 2014. This is only avoidable if a lower risk operating model can be agreed.  The recent rejection of revised shift patterns by sections of the workforce makes this less likely to be agreed,” said the firm.