Harworth Gp Regulatory News (HWG)

26 Oct 2009 07:00



UK Coal PLC

26 October 2009

 26 October 2009

UK COAL PLC

("UK COAL" or "the Group")

Interim Management Statement

UK COAL today issues its Interim Management Statement for the period from 27 June 2009 to the date of this announcement, incorporating a trading update for the third quarter ended September 2009, together with an outlook statement for the full year. Other than the information contained in this Interim Management Statement there have been no material events or transactions in the period from 27 June 2009 to 25 October 2009 which have affected UK COAL and its financial position.

Production from all mining operations, for the third quarter and year-to-date, is broadly in line with the same periods last year. Third quarter production was 1.8 million tonnes (Q3 2008: 1.8 million tonnes) and September year-to-date output is 5.4 million tonnes (2008 YTD: 5.5 million tonnes).

The lower market demand for electricity in 2009 and an imbalance in the coal market have consequently reduced international coal prices. Despite this, the average sales price we have achieved for the year-to-date at £1.89/GJ remains at an historically high level, albeit lower than last year which benefited from very high market prices (2008 YTD: £1.97/GJ). The average sales price we achieved in the third quarter was £2.06/GJ (Q3 2008: £2.31/GJ). Group revenues were approximately £95 million for the third quarter, and approximately £255 million for the year-to-date (Q3 2008: £119 million ; 2008 YTD: £292 million).

Whilst we believe that we continue to make improvements in our safety culture, as part of our drive for Zero Incidents, it is with deep regret that we must report the recent loss of the life of a colleague at Kellingley. Both Company and Health and Safety Executive ("HSE") investigations are continuing into the accident. Our condolences go to relatives and friends of our colleague.

Deep mine operations 

Deep mines output in the third quarter was the same as the prior year at 1.5 million tonnes (Q3 2008: 1.5 million tonnes) and 4.4 million tonnes in the September year to date (2008 YTD: 4.3 million tonnes).

The development programmes at our three ongoing mines remain on track, with new faces set to start at Daw Mill, Kellingley and Thoresby in Q1 2010. In line with our strategy to increase the productivity and reduce the uncertainty of output, these programmes will enable the mines to access their further substantial reserves at much improved and more predictable production resulting in better economics. Production on the final panel to be worked at Welbeck started in September 2009 and will be completed in Q1 2010 when the mine is expected to close.

Immense focus remains on emphasising and maintaining safety in all aspects of our operations. The HSE recently gave notice of its intention to prosecute the Group for alleged Health and Safety breaches following four fatalities in separate incidents at Daw Mill in 2006 and 2007, and at Welbeck in 2007. Summonses have now been received. 

Surface mine operations

Surface mine operations output in the third quarter was in line with the same quarter last year at 0.3 million tonnes (Q3 2008: 0.3m tonnes). September year to date production was 1.0 million tonnes (2008 YTD: 1.2 million tonnes).

Planning consent has recently been received from the Secretary of State for a further site at Huntington Lane near Telford to mine 0.9 million tonnes of coal, and 0.25 million tonnes of fireclay. This site is expected to commence mining operations in 2010. We are now waiting determination in respect of applications for three further sites with 2.8 million tonnes of coal.

Property

Since the half year, we have submitted planning applications for approximately 400 houses at North Gawber, Barnsley, and around 1,000 homes and over 3,200m2 of retail space on part of the Harworth, North Nottinghamshire, deep mine site. The latter application also allows for approximately 76,500m2 of space for employment uses should the decision be taken in future not to reopen the colliery.

We have received planning approval (subject to Section 106 agreement) for approximately 300 homes at Bolsover, Derbyshire and Blyth, Northumberland.

We continue making progress on representations bringing forward sites through local and regional planning frameworks to secure our medium and long term project pipeline. The property market remains in its early stages of recovery and we are well placed to capitalise on opportunities arising as market activity returns.

Net borrowings and completed equity raising

Overall net bank debt (excluding restricted cash balances) at the end of September 2009 was approximately £168 million, excluding prepayments and loans from generators of £57 million (27 June 2008: £151m, with no prepayments and loans from generators). 

During October, we successfully completed the issue of 142,045,413 new ordinary shares raising approximately £100 million, net of expenses. This exercise has put in place a more appropriate capital structure for the Group, reducing the Group's net bank debt (to approximately £84 million, excluding generator loans/prepayments, as of 23 October) and providing more headroom within our debt facilities for the period of the Group's current deep mine investment programme. These debt facilities have been restructured as part of the equity raising exercise to extend maturity dates and vary terms.

Expectations for the remainder of 2009

We have remained on track to achieve our previously announced deep mines output for the full year of 6.4 - 6.6 million tonnes, although anticipating output to be at the lower end of this range. The recent tragedy at Kellingley has, however, introduced an increased degree of uncertainty regarding the output from Kellingley for the year. We received, on the 23 October, a notice from the HSE requiring the production face to stand pending completion of certain technical alterations to the equipment. This is likely to mean that the face will stand for a further 7-14 days, following which it is expected that the face will commence ramp-up of production. On this assumption, overall deep mines out-turn for the full year is anticipated to be around 6.2 million tonnes. Output at our surface mines for the full year remains on track to deliver production in line with expectations of 1.4 million tonnes.

The market price for coal has improved since the prospectus that we issued on the 16 September 2009. Our average realised sales price for the whole of 2009 is expected to remain within the previously announced range of £1.85 to £1.90/GJ.

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