Planning problems incur big costs for UK Coal

Shares for UK Coal dropped considerably this week after the company announced that planning permission hitches this year could have cost it up to £16 million.

Moreover, restoration work to rejuvenate landscape around a mine at Stobswood in the North East of England is likely to cost the company far more than originally envisaged after the plans to extend the mine were rejected.

The extra costs will be incurred over a five-year period, and UK Coal has announced in its trading update that it will set aside around £11 million to cover them.

As surface mine planning becomes increasingly difficult in Britain, the company has also identified plants that are likely to be underused in 2005.

"An additional write down will be made at the end of the year with a charge to the profit and loss account of around £5 million," the company said in a statement. "The planning environment for surface mines is expected to remain difficult."

UK Coal added that it would keep trying to develop the business, particularly regenerating severely blighted Brownfield sites into viable mining propositions with land development opportunities.

On the up side, recently appointed chief executive Gerry Spindler has had a positive impact on the business, according to the report. Operating performance has been better under his management, and is expected to continue to improve.

But UK Coal has also announced that it will be putting under performing collieries under review, and will be engaged in action to raise standards of operational effectiveness.

"Overall, we are disappointed with the mining performance of the company in 2004," the firm concluded. "We will take action to address the underlying problems in 2005 by resolving long standing issues and by appropriate investment in collieries. This will allow the company to realise its full potential by returning it to profitability in 2006 and beyond."

By Jane Kettle



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