Chairman David Jones said: “2005 proved to be a transitional year for UK COAL, especially in the deep mine business, where the mining conditions required the Group to announce the closure or mothballing of three collieries.”

The group operates five ongoing deep mines. During the year, one mine was closed and the decision to mothball two others was announced.

Jones said geological problems elsewhere, especially at Daw Mill, caused lower-than-expected production.

“The Group is now well placed for the coming year, having returned to profitability in the final quarter of 2005. The outcome of the energy review, which we expect will recognise the importance of indigenous coal supply in a balanced energy portfolio, will be important for UK COAL.”

Jones said the 2005 final quarter demonstrated that the deep mines could produce coal economically over an extended period.

Total deep mine production was 9 million tones, reflecting the closure of the Selby complex in 2004.

Changes made include new wage structures at four of the ongoing collieries, eliminating daily bonuses; the launch of a structured daily maintenance program to predict component failure; the introduction of better budgetary techniques improving project management; and utilisation of new techniques in ground control, including polyurethane injection, which help to control adverse face conditions and accommodate faster face advance.

UK COAL made £15 million from the sale of land, generating profit of £9.6 million.

The company currently provides around 7% of the UK’s energy needs for electricity generation and will be actively engaging with the energy review process, Jones said.

Debts at the end of December 2005 totalled £95.5 million.