The new Energy Minister Michael Fallon told parliament on Friday that the government was in daily contact with the company and union representatives to ensure that the viable parts of the business are maintained.

The future of UK Coal was jeopardized when a fire broke out at its largest underground mine, the Daw Mill colliery, on February 22.

The fire continues to burn and has resulted in 650 miners being put out of work and has cost UK Coal £160 million in lost coal and a £100 million in equipment losses.

The Sunday Times has reported that discussions at Whitehall seem to be leaning towards whether the Coal Authority, the publicly owned successor body to the National Coal Board, can relieve UK Coal of Daw Mill, saving it from financial crisis.

“We are looking at whether the ownership of Daw Mill can be transferred back to the Coal Authority,” Fallon told the Sunday Times.

A part-nationalisation could include some pension obligations, it was reported. The company already had a shortfall of more than £500 million in its pension schemes.

Dogged by loans and losses, the company avoided an imminent debt default and the closure of operations after completing a major debt restructuring with shareholders last December.

Before the fire at Daw Mill, UK Coal produced about 5% of British electricity and the colliery had a capacity of about 1.6 million tonnes a year. The company employs around 6,000 people across its two remaining underground mines and six surface mines.

Last month, UK Coal chief executive Kevin McCullough was forced to reject reports that the company was seeking involuntary liquidation.

McCullough rejected claims made in a Financial Times article that the firm was battling with cash flow problems after the fire.

"We remain positive that we have an underlying profitable business."

McCullough added: "I hope we are close to securing a way forward for our remaining mines. There will undoubtedly be some difficult decisions as we have had to look at all possible options."

Fallon on Friday reiterated these claims.

“The cross-government response, co-ordinated by my officials, has ensured that we have been able to respond to the company’s needs, and help facilitate its financial position,” Fallon said in his written statement to parliament.

“Our priority remains to assist the company's efforts to ensure that, as far as possible, the viable parts of the business are maintained and that those who are regrettably likely to be made redundant following the fire at Daw Mill receive appropriate support.”