Mining firm backs coal survival
A leading British coal mining group said it believes rising power prices will ensure the fuel plays a vital part in the UK's energy mix for at least a decade.
Announcing annual results, Durham-based mining-to-logistics group Hargreaves Services said pressure on power plants to cut emissions and the high cost of renewable energy are likely to push up prices for households and businesses.
The group, which recently closed Maltby deep mine in South Yorkshire, said price hikes and a power generation squeeze could force politicians to reconsider coal as an alternative fuel, with new nuclear, gas and renewable plant slow to replace ageing coal power stations.
Chief executive Gordon Banham said: "Our own view is that coal fired generation will remain an important element of the UK energy mix well into the second half of the 2020s and probably even beyond.
"Forecasts of the rapid demise of coal usage in the UK are not well founded."
The group, which also runs Monckton coking plant in Yorkshire, cited statistics from the Department of Energy and Climate Change showing the UK burned 61 million tonnes of coal in the year to the end of April, up from 44 million a year earlier.
It said while overall demand is likely to fall, the size of the UK coal market will be "more than adequate to sustain our business for many years to come".
The group plunged to £50 million annual losses after closing Maltby earlier this year, but has since been scooping up surface mines in Scotland.
It bought the rights to surface mines in Scotland from failed mining groups ATH and Scottish Coal to consolidate its position as a "key UK coal producer and distributor", leaving it with more than 24 million tonnes of provable reserves.
The group funded the acquisitions through a £42.3 million cash call in April, and said they provide a "springboard" to rapidly develop its surface mining business. It is talking to the Office of Fair Trading about any competition concerns from future deals.
Losses of £49.6 million in the year to the end of May compared with profits of £30.8 million a year earlier, as it was hit by the closure of Maltby, where it encountered dangerous geological conditions, and a fraud in Belgium.
But revenues surged by more than a third to £843.3 million as it supplied much more coal to power stations and steel producers.
Despite weaker coal prices, revenues in its coal mining arm increased by £173 million to £585 million during the year. It sold almost six million tonnes of the fuel, up from 3.8 million a year earlier.
The closure of Maltby forced it to buy overseas coal for Monckton, which produces coke used in steel production. Volumes sold by the plant fell by 25,000 tonnes to 236,000.
And it booked a £1.6 million hit on the failure of UK Coal, the country's biggest deep coal miner, which it had a supply deal with.
Stripping out the impact of Maltby's closure, which resulted in hundreds of redundancies, Hargreaves' pre-tax profits fell 4.2% to £43.1 million.