UK Coal wins breathing space

MANAGEMENT at embattled miner UK Coal are breathing a bit easier after shareholders supported a restructuring plan aimed at stopping the company closing for good.
UK Coal wins breathing space UK Coal wins breathing space UK Coal wins breathing space UK Coal wins breathing space UK Coal wins breathing space

UK Coal's Kellingley mine.

Noel Dyson

Shareholders supported the plant to transfer the company’s listing category from premium to standard and to change its name to Coalfield Resources.

In a statement to the market the company said this was a key step to implementing the restructuring, although considerable work remained to complete it on schedule by December.

That restructuring plan has been described as a debt-for-equity swap with its pension fund that would bring about £80 million ($US128 million) in financial support to the end of 2015.

One important milestone has been the receipt of a clearance statement from the Pensions Regulator in relation to the restructuring.

If the restructuring is not completed, warns UK Coal management, it is likely the group’s banking facility covenants will be breached at the December 2012 test date.

That will cause the group’s bank facilities to be breached. If a waiver for these covenants cannot be obtain, it will result in the bank facilities becoming repayable in the first quarter of 2013.

The company reported that its lost time accident rate for the third quarter was 20.44 per 100,000 man shifts. This is a 23% improvement on the 26.67 per 100,000 man shifts for the same period last year.

Total production for the third quarter was 1.6 million tonnes, down slightly on the 1.8Mt it turned out in Q3 2011. That took the year to date production to 4.9Mt, down 1Mt on the 2011 YTD of 5.9Mt.

While Kellingley and Thoresby had some difficulties, the main issues encountered in the quarter were at Daw Mill.

At Daw Mill the decision has been taken to put 32s into salvage due to safety concerns and move the equipment to 33s.

This panel remains on plan for a Q2 2013 start.

Operational difficulties arising from the layout of the panel in 2009 and poor geological conditions continue on 303s face.

These difficulties are cutting output rates although it is still anticipated the last coal will be cut from this face before 33s is ready.

UK Coal completed the sale of Harworth Power on October 1 to Red Rose Infrastructure for a £20.3 million consideration. Of that, £20 million was paid on completion with the remaining £300,000 deferred.

Total net debt at September 29 was £134 million. Net bank debt was £70.8 million.