Gordon McPhie, chief executive of UK COAL, said that market conditions for coal have been adversely affected by several factors, including low gas prices, increased stocks at power stations and a recent drop in international coal prices.
The result was largely attributed to exceptional redundancy costs of £13 million related to the closure of the Prince of Wales colliery. UK Coal said the viability of its deep mines has been strengthened through the closure of Prince of Wales, the announced closure of the uneconomic Selby complex by the first quarter 2004 and cessation of mining at Clipstone.
Within the next two years, the Selby mine complex – which made operating losses of £14.3 million for the first six months - would be phased out.
“We are continuing to look at the economic viability of all the mines, particularly in the light of current market conditions and the international market prices for coal,” the company said in a statement.
The company is beginning to see the results of a two-year project called Project 105, aimed at reducing mining costs to a target of 105 pence per gigajoule (gj). The company said the primary focus of the project has been improving performance in the deep mines focusing on productivity improvement; cost cutting; risk management; and a focus on mines that are economically viable in the long term.
“We are encouraged by the progress made by Project 105 in terms of increased efficiencies and reduced costs and will continue to focus on costs and the review of high cost operations in order to create a profitable business embracing coal production and property interests,” McPhie said.
During the first six months of 2002, overall production unit costs have been reduced from £1.33 per gj to £1.21 per gj.
Deep mine production in the period increased to 8.3 million tones, compared with 7.6Mt for the previous period.
The company has not been able to get the new Daw Mill mine longwall face up to full production. A section of the face is experiencing unforeseen geological features, creating difficult operating conditions, which has resulted in production being reduced to an average of 5,000 tonnes per week. The company said this could remain the case through the year-end.
“Although Daw Mill will incur losses in the second half of the year, we are confident that it will emerge as one of the Group’s lowest cost producers,” the company said.
“The focus remains on driving down unit costs and continuing to review high cost operations to create a profitable business embracing coal production and property interests.”
