RNS Number : 3153Z
UK Coal PLC
14 March 2012
UK COAL PLC
DAW MILL UPDATE AND BUSINESS RESTRUCTURING
UK Coal plc today announces plans to restructure the business and to start consultation over the future of its Daw Mill mine. The Board believes that this restructuring will provide a stable platform in the medium term for the group's mining and property businesses and will achieve the best value in the group for its stakeholders.
The principal objectives of the restructuring plan are to ensure a financial framework that is capable of supporting ongoing investment in each deep mine over its remaining economic life and to address the risks and volatility inherent in the mining industry. The plan is intended to isolate the operating risk of each deep mine from the group as a whole and mitigate future financial uncertainty arising from operations at Daw Mill.
The Company has today commenced consultation on the potential closure of Daw Mill by early 2014 at the point when current and largely-developed coal panels will have been mined. The Company has suspended developments for exploitation beyond the end of 2013 but retains the option to resume developments, re-open the mine or extend its life, to exploit the mines considerable long-term resources. This would only happen under a lower risk operating model.
Although UK Coal's other mines are performing broadly in line with expectations, production at Daw Mill is around 175,000 tonnes behind budget. To achieve UK Coal's plans for 2012, Daw Mill needs safely to increase production to target levels on its 303s coalface by May and to recover and resume production on the 32s coalface. Intrusive intervention since January 2012 has continued to identify material opportunities for improvement. New managers and leaders for each coal face have been appointed under the personal leadership of Managing Director of Mining, Gareth Williams.
UK Coal has initiated preliminary consultation with key stakeholders to test support for these structural changes. These stakeholders include the pension trustees, our bankers, the Department of Energy and Climate Change, the Coal Authority and our power generator customers. All stakeholders have approached the discussions constructively and the Board believes these parties will support the Company's restructuring initiative. The Company has also been in helpful discussions with the Pensions Regulator.
If the restructuring plan is successfully implemented in the interest of securing a more stable platform for the Company, shareholders may face dilution of their holdings.
The Company has entered into a collaborative and constructive process with its principal banking partner, Lloyds Banking Group, and is exploring the options available to address the funding requirements of the Group in light of the possible structural changes. The Company is confident that renewed facilities to 31 December 2013 will be agreed with Lloyds Banking Group, who remain supportive of the current process.
The Board expects to publish its 2011 audited accounts towards the end of April 2012.
The Board will make a further announcement when appropriate.
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Analysts and investors
Jonson Cox Chairman Tel: 01302 755 002
David Brocksom Group Finance Director Tel: 01302 755 002
Rob Ballantyne Cardew Group Tel: 020 7930 0777 / 07899 878 210
Emma Crawshaw Cardew Group Tel: 020 7930 0777 / 07971 468 308
Anthony Cardew Cardew Group Tel: 020 7930 0777 / 07770 720 389
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