The company began the year by scaling back expansion plans for its Kellington Colliery in West Yorkshire, a move that eliminated as many as 180 jobs. It cited “geological problems” as the reason for the decision.
Also in January, the company closed its Ellington Colliery after water flooded the face, rendering the mine unsafe to extract from. Despite almost two weeks of constant attempts to pump the water from the site and supply roads, the 12,000t/week operation was forced to close.
Approximately 340 jobs were lost in the Ellington closing, a fact that didn’t escape UK Coal executives. “The loss of any mine in these circumstances is a bitter blow, particularly for our employees and the local communities in which they live. However, the safety of our employees is paramount,” said chief Gerry Spindler.
Just one month later, the company opted to close its Welbeck Colliery because it was too costly to operate. The company reversed its decision just weeks later, opting to institute new shift patterns for its 520 workers and subsequently increase machine utilisation by 40%.
September brought good news for the mine when a positive trend of efficiency and improved profitability at the operation bought it a ₤4.32 million investment boost.
The company reported on its 2004 performance in March, with not much good news to share. An array of items including poor operational performance, industrial action and geological problems led to an operating loss of ₤28.7 million for the year. Even more disappointing was a drop in production from the company’s deep mines, which mustered only 12Mt of output versus 14.8Mt in 2003.
Financial results didn’t improve much for the first half of 2005. In July, UK Coal posted a ₤30 million loss before tax for the first six months of the year, causing the company to examine the future of three of its deep mines including Harworth, Rossington and Welbeck. Harworth was then mothballed amid problems with methane gas and difficult ground conditions.
Takeovers were on the tongues of those with a stake in UK Coal mid-year, when venture group Alchemy’s name re-emerged despite the company’s claim that it had broken off talks shortly before. UK’s statement that talks had ended with a potential bidder days before created a backlash that shaved down its share value by almost 7%.
Takeover talks took over again in August with UK Coal and Scottish entrepreneur Sir Tom Farmer. Farmer said he was joining forces with the Duke of Buccleuch and Alchemy Partners to attempt to win control of the company.
Adding to the situation was New York billionaire Wilbur Ross’s announcement that he owned a 3.74% stake in the company, higher than the 1.18% he previously disclosed owning.
The second coal mine closing announcement in UK Coals’ tumultuous year came during September, when the company reported it would close its Rossington mine in South Yorkshire after difficult geological conditions and high methane levels had slowed its progress. When the current panel is completed early next year, the seam will be abandoned, sending its more than 300 workers looking for new jobs.
The talk of 2005 wasn’t entirely about takeovers, closings and losses, however. The company announced in April that it would invest 100 million (BP) over two years to purchase new equipment and access new reserves, with at least 75 million (BP) of that being spent in 2005 and 2006 on equipment acquisition.
“We are committed to investing in our mines, but it’s the mining operations themselves which have to generate the cash to invest,” said Spindler. By year’s end and despite a trying, troublesome year, UK Coal might finally be generating the capital to make Spindler’s words come true.
The company’s five deep mines returned to profitability in the three months up to November, a trend it expected its remaining operations to continue into 2006. If so, it would be a first for the company in nearly a decade.
