The owner of Warwickshire’s Daw Mill pit has landed a deal to supply 3.5 million tonnes of coal to a giant power station.
UK Coal has secured a five-year contract to supply to Scottish & Southern Energy’s Ferrybridge power station in West Yorkshire.
The deal comes after UK Coal, which operates three other deep mines in Nottinghamshire and Yorkshire, made moves to renegotiate supply contracts with existing major customers such as EDF Energy, E.ON and Drax. Chairman David Jones said: “The new coal contracts, as well as the planned impact of our deep mines investment programmes and the growing strength of our surface mining, provide a more positive and more financially underpinned outlook.”
UK Coal made operating profits of £1.8 million in 2008, compared with £72.1 million the previous year, although 2007’s results were boosted by property gains and a one-off tax credit. Sales last year were up 19.5 per cent to £392.5 million, reflecting an 18.5 per cent rise in average prices to near £50 a tonne.
The group issued a profits warning last October after being hit by difficult geological conditions at pits in Yorkshire and fluctuating coal prices – halving from their peak by the year end as global demand waned. But shares gained more than seven per cent yesterday as analysts welcomed the contract. UK Coal also estimates its property portfolio should double to about £866 million by 2014. Numis Securities analyst Howard Seymour said: “While the group is not out of the woods due to continued weakness in end-user markets, the shares look very cheap relative to asset value for property and mining operation.”
The Birmingham Post revealed in March that workers at Daw Mill - the last remaining pit in the Midlands - are earning up to £70,000 a year.