Falling property prices and production shortfalls hurt UK Coal

UK COAL warned today that it expects to announce pre-tax losses of £115m after a difficult year.

The Doncaster-based group blamed poor performances at some of its mines, delayed planning permission and lower valuation of its properties for the anticipated loss.

In 2008, the group announced a pre-tax loss of £15m.

It said that its deep mining operations had experienced a difficult final quarter with production expected to be around 1.2m tonnes.

Production at its surface mines fell slightly from the same quarter the year before to 350,000 tonnes.

Revenue for the group for the full year ended December 2009 is expected to be around £317m compared to £393m in 2008.

However, the group has experiences significant planning progress across its development portfolio including planning applications for around 2,000 new homes and 114,000sq metres of employment space.

The majority of this is still being progressed in negotiation, with planning committee resolutions approving 332 new homes and 4,645 sqmt of employment space received as at the year end.

In addition, planning consent was received during the final quarter of the year for an 18 hole golf course, clubhouse and 50 bedroom hotel at Tetron Point, Swadlincote, Derbyshire.

Representations to local authorities promoting residential and commercial development under the various local development plans were made in respect of a further 5,250 new homes and more than 200,000sq metres of employment space.

Last week, UK Coal announced that Rotherham Council had agreed to grant planning consent for a new residential community at Waverley of around 3,900 homes and 15,300sq metres of commercial space.

In addition, a similar resolution was given to approve the group’s government campus project in association with Helical Governetz.

Both applications will now be referred to the Government Office for confirmation that the local authority may issue the consents without further inquiry.

As a result, UK Coal said it was expecting to report an income increase of around £11m in the valuation of its property portfolio in the second half of 2009.

Despite this, total valuation of its properties at the end of December 2009 stood at £394m compared to £422m at the end of 2008.

In its mining business, new faces at Kellingley and Thoresby will start in February.

Preparation for further production at Daw Mill remains hindered by difficult geological conditions.

UK Coal said it also has the potential to open up five new surface mines during the year with planning permissions being sought to extend our future surface mines programme.

“In order to reduce pre-coaling expenditure and expand our longer-term surface mining production capability, we are considering outsourcing some aspects of these operations,” it said.

 UK Coal will announce its results for the year ended December 2009 in April.