At least £75 million will be spent this year and next on new equipment, according to company newsletter NewScene. This will be mainly channelled to its deep mines, which lost £38 million last year.
British energy minister Mike O’Brien welcomed the plan and said the Government intended continuing with its coal investment aid. Already, £57.5 million had been allocated.
O’Brien said the industry had begun to address management-workforce-union issues, in particular related to the future of the Harworth and Welbeck collieries, but that investment aid was an important contribution to keeping the pits viable long-term.
“We are committed to investing in the long term through developing research into carbon sequestration and clean coal technology. We are already putting substantial funding into that. If we can continue to develop such technologies, we believe that they will provide the sort of carbon-free, long-term future the coal industry wants,” he said.
Under the existing scheme, UK Coal has to find at least 70p for every pound of investment aid, which has included purchasing new equipment for Daw Mill and Kellingley mines. Aid of £15.2 million has been paid to date, with a further £14 million awarded to seven collieries.
“We are committed to investing in our mines, but it’s the mining operations themselves which have to generate the cash to invest,” said UK Coal chief executive Gerry Spindler.
“We will look at and listen to any proposal, from whatever source, that will improve performance, cash flow and profitability in a safe way. Ninety-nine percent of our income is from the sale of coal; that’s our core business and where our investment will be focused.”
Meanwhile, the cost of production has outstripped what the company gets for its coal, with the total average unit cost of production increasing from £1.16 a gigajoule in 2003 to £1.30 a gigajoule in 2004. The average selling price increased from £1.12 a gigajoule to £1.18 a gigajoule. The loss equates to about £3 a tonne, or over £41 million on UK Coal’s 2004 sales of 14.3 million tonnes.
Britain imported a record 36 million tonnes of coal in 2004 from Russia, South Africa, Australia, Columbia and other countries.
The company’s Kellingley mine is pricing plans to increase annual output from a target 1.65Mt this year to over 2 million tonnes per annum by 2008. The plans emerged from a review process involving close to 100 employees who looked at long-term planning, developments, production, infrastructure, surface, safety, manpower and incentives. Kellingley has been named as a potential site for a clean coal demonstration plant.
