According to its latest annual report, UK Coal had an operating profit of £1.8 million in 2008 compared to £72.1 million in 2007.

Matching its expected coal sales results announced back in January, the company’s group production for the year was 7.9 million tonnes, with 6.2Mt from underground operations.

The tonnage was less than that initially hoped for, with the company’s Kellingley and Thoresby deep mines set back by tough geological conditions, while its largest mine, Daw Mill near Coventry, produced 3.2Mt for 2008.

UK Coal said the production from Daw Mill was a European record for a single face mine.

Production from surface operations was 1.7Mt, 13% higher than in 2007, with the miner aiming for more than 2Mt per annum after 2010.

Overall, UK Coal had a loss before tax of £15.6 million, an improvement on £69 million in 2007.

Net debt for the company excluding restricted cash was £137.1 million.

Yesterday UK Coal announced it had won a five-year contract to supply Scottish and Southern Energy with 3.5Mt of coal between late 2009 and 2015.

The coal will be used in SSE’s Ferrybridge power station, which has recently installed flue gas desulfurisation equipment.

UK Coal said the price would be linked to global coal prices, “but with a ceiling and floor to reduce both parties’ respective price risk”

The utility company has agreed to provide UK Coal with a loan to assist in further investment, with the coal producer saying it was repayable over the period to 2014.