The entire company returned to profitability for the six months ending June 30, with an operating profit after exceptional items of £12 million.

 

Its deep mines made an operating loss of £900,000, compared to a loss of £44.4 million in 2005. Costs of £4 million were incurred in accessing new reserves at Welbeck and Kellingley.

 

The group entered the year with seven deep mines, two of which were moving towards "care and maintenance" following the operational reviews of 2005.

 

Deep mines produced 5.3 million tonnes in the first six months compared to 4Mt in 2005, with all the mines either sustaining or improving output levels.

 

Output more than doubled at Daw Mill to 1.6Mt, and Kellingley produced 1.2Mt.

 

“The overall improvement can be attributed to a period of sustained production and fewer costly face gaps of 15 weeks [2005: 26 weeks]. This improvement was gained despite encountering adverse geological conditions at Kellingley, Maltby and Thoresby collieries,” the company said.

 

Production ceased at Rossington in April, followed by a period of equipment recovery. Exceptional post-coaling costs of £2 million have been incurred to date.

 

Production ceased at Harworth Colliery in August, together with development activities, following the discovery of faulting.

 

Harworth Colliery will be mothballed following salvage of equipment on the current coalface, pending evaluation of reserves in an alternate coal seam.

 

UK Coal’s outlook for the next six months was mainly positive.

 

“Results volatility will remain a feature, and output is estimated to be lower than expected in the second half, at 4.5Mt due to longer face gaps at Welbeck and Thoresby, difficult mining at Maltby, and disruption at Daw Mill following the accidents,” Jones said.

 

“The group's deep mines business has demonstrated it was able to operate at only a small loss in the first half – even at current low contract prices – and it is expected that deep mines will return to profitability for the last four months of the year following under performance in July and August.”

 

The group said although the deep mines were not expected to return a profit for the second half as a whole, the medium-term outlook was attractive, as coal contracts expire mainly in the next 18 months and underlying demand remains strong, which is expected to enable a renewal of coal supply contracts based on the much higher current open market prices.

 

The group’s board also expressed its deep regrets over the loss of two employees at Daw Mill in July and August 2006 following accidents at the mine and extended condolences to the families of those involved.