Detailed plans for a two-year investment programme are being finalised by UK COAL following the Government's announcement of the offer of £36.5 million in Investment Aid.

Projects at eight collieries would gain access to more than 70 million tonnes of reserves over the two-year period if all the schemes at the UK COAL mines in the Midlands, Yorkshire and the North East go ahead.

"We have responded to the Investment Aid offers positively in respect of five of the eight collieries, Daw Mill, Harworth, Kellingley, Maltby and Thoresby, amounting to £26.6 million. The aid, which amounts to a maximum of 30% of project costs, is subject to the details of the projects envisaged and proof of financing at some collieries being confirmed. We are continuing to review the offers in respect of Ellington, Rossington and Welbeck collieries where geological features have caused us to re-examine mining plans," said UK Coal CEO Gordon McPhie.

Daw Mill colliery has been offered aid of £9.6 million in line with the application for aid for projects costing £35.5 million in the first two-years, during which time, over 15 million tonnes of coal will be accessed. The projects include the development of over 3,200 metres of underground roadways, and the purchase of equipment for a new coal face.

Harworth Colliery have received aid of £4.6 million to aid projects costing £15.4 million in the first two-years. The projects include the development of a new 320-metre long retreat face and driving 6,000 metres of underground roadways. Around 8 million tonnes of coal is accessible in the area being developed.

Kellingley Colliery will receive £7.2 million in aid for schemes costing £25.6 million in the first two-years. The projects involve driving around 20,000 metres of new underground roadways to gain access to, and open up, 10 million tonnes of coal reserves.

The aid package was agreed taking into account the acceptance of flexible working arrangements to promote colliery viability; measures are in hand to extend shift working in developments from the start of April, enabling over 100 job offers being made to men at the Selby Complex who wish to remain in the industry, and on the coal face from July onwards, when around a further 100 job offers will be made to potential Selby transferees.

Maltby Colliery will receive £2.4 million for aid for projects costing £11.6 million in the first two-years. The projects include 5,000 metres of new underground roadways. Around 8 million tonnes of coal is available in the area being accessed at Maltby, where the introduction of new flexible working practices has enhanced the opportunity for viable longer-term operations.

Thoresby Colliery has been designated £2.8 million to aid projects costing £10.8 million in the first two-years. The projects include the refurbishment of equipment and repair of roadways into the Ollerton reserves; 2,000 metres of new underground roadways and the purchase of equipment. Over 9 million tonnes of coal is available in the area being accessed.

Ellington Colliery will receive a smaller sum of £1.1 million for the first two-years for a project, which will cost around £13 million to complete. The project involves developing and exploiting new reserves, the purchase of a new coal cutting machine and other mining equipment and an extension to the locomotive transport system. However, in view of recent results and performances, UK COAL has concluded that the aid offer is insufficient in itself to justify ongoing investment. In a bid to reduce losses, the bord and pillar system of mining at Ellington is to cease early in the new year and work on the development of a face due to be ready next autumn is to be suspended.

The colliery is seeking volunteers for around 70 redundancies, and will become the subject of a review process before a final decision on the offer of Investment Aid is made. Meanwhile, work will continue on equipping a replacement longwall face ready for production to commence in the next few weeks, and a successor face.

Rossington Colliery will collect £3.2 million in line with applications for aid for schemes costing £15.3 million in the first two-years. The projects involve driving 6,700 metres of underground roadways to access nearly 6 million tonnes of reserves. However, as geological faulting will result in a production gap, mining plans at Rossington have been revised to mitigate the effect. The revised plans will entail reduced output in 2004 and working a production face on advance before returning to the normal retreat system. As a consequence, operations at Rossington are to be the subject of a review process before a final decision on the offer of Investment Aid is made.

Welbeck Colliery has £17.9 million designated for projects in the first two-years to be supplemented by £5.2 million aid. The project involves driving nearly 13,000 metres of new underground roadways to access nearly 9 million tonnes of reserves. However, geological faulting has resulted in a change of mining plans, which will entail a short-term move to advance mining before returning to the normal retreat system, thus reducing output in 2004. As a consequence, operations at Welbeck are to be the subject of a review process before a final decision on the offer of Investment Aid is made.

Current Investment Aid offers remaining open until 29 February 2004 include the Selby Mining Complex, which was due to cease production in March 2004, has continued to incur losses, albeit at slightly reduced levels. The mining operations have been re-phased with Wistow Mine ceasing production in February. Riccall and Stillingfleet will now cease production in June 2004 when the mines become exhausted and the Selby Complex will then be closed.

Output at Daw Mill has continued to improve and in the last quarter average production will be circa 60,000 tonnes per week.

Progress has been made at reducing costs at the eight ongoing mines. However, geological and operating problems at Ellington, Rossington and Welbeck have reduced outputs resulting in unit operating costs of circa £1.09 per GJ at the ongoing collieries for the last quarter. Costs for 2004 will be influenced by increases in line with inflation and the effect of the revised mining plans at Rossington and Welbeck, which are expected to add around 3% to unit costs. Against this background UK Coal is continuing to work to reduce unit costs.