UK Coal shares up on merger proposal news

Updated: 09:33 EST, 9 March 2010

The UK's biggest coal mining firm today said it was assessing a merger proposal involving its production-hit deep mines division.

UK Coal, which has surface mining operations as well as the four deep mines in northern and central England, described the approach as highly conditional and at a very preliminary stage.

While it did not name the party involved, UK Coal said the interest could address its exposure to the volatile performance of its deep mines.

UK Coal shares rose 10 per cent today as investors also digested speculation that Peel Holdings, which owns 28 per cent of the firm, has received an approach for its stake

Production last year was at the lower end of the group's forecasts, while preparation for a new coal face at its Daw Mill deep mine in the West Midlands has been hindered by difficult geological conditions.

It expects the start of production at the site to commence during April, rather than this month as previously envisaged.

UK Coal said: "The exposure of the group to the volatile performance in its deep mines is a significant concern to the directors and mitigating the effects of this exposure, by operating improvements or structural means, is a priority."

The company also has deep mines at Kellingley in Yorkshire and Thoresby and Welbeck in Nottinghamshire, although the Welbeck mine is earmarked for closure.

As well as the deep mines, the firm has active surface mines at Steadsburn in Northumberland, Cutacre in Bolton, Lodge House in Derbyshire and Long Moor in Leicestershire.

The Doncaster-based firm bought the English coalfield assets of British Coal for £815 million in December 1994 when the state-owned business was privatised.

UK Coal shares rose 10 per cent today as investors also digested speculation that Peel Holdings, which owns 28 per cent of the firm, has received an approach for its stake.

The company said it was not aware of any proposals involving an outright offer for the group, which has substantial property interests comprising around 43,500 acres and including agricultural land.