UK Coal, Britain's biggest producer of coal, yesterday said it would discuss a possible bid offer from a consortium led by private equity firm Alchemy Partners as it reported a £30.5 million pretax half-year loss in line with expectations.

The company said it had received clarification on a number of issues arising from an approach by Alchemy in April, which it rejected, and was now ready to discuss the offer.

"Clarification has now been received on some of the issues raised and, whilst in the view of the company the proposal remains highly preliminary and tentative, UK Coal has now agreed to meet the consortium of Alchemy Partners, Morston Assets and the Buccleuch Group," UK Coal said in a statement. It said there was no certainty that an offer would be made or what the terms of any offer might be.

UK Coal chief executive Gerry Spindler declined to comment on what " clarification" it had received to convince it to begin discussions with the Alchemy-led consortium, over an offer or on its criteria for an acceptable offer. He also declined to reveal when the discussions will take place.

Despite the sharp widening in its pre-tax loss, from £9.9 million a year earlier, Mr Spindler said the half-year results showed a "turnaround story". So far this year UK Coal, formerly RJB mining, has closed three of its worst performing mines, leaving five.

Meanwhile, the output of mines, in terms of coal tonnage, has improved by 30-35 per cent in the first half of the year, said Mr Spindler. "We finished the first half of the year in a lot better shape than when we started," he said.

The trading outlook has also brightened, after UK coal renegotiated contacts with its main customers. Mr Spindler estimated that the new contracts would raise revenues by ten per cent per tonne of coal produced by next year.

Total contracted sales between June 2005 to the end of 2010 was 38.4 million tonnes, with averaged proceeds in 2005 prices ranging between £1.31 and £1.40 per gigajoule.

Revenue from continuing operations in the six months to June 30 fell to £164.1 million from £222.4 million a year earlier, while net debt rose to £29.9 million from £6.8 million net cash.

Operating losses before exceptional items came in at £14.7 million against £15.8 million in 2004.

Deep mines made a loss of £44.4 million, and an unexpected face gap at Daw Mill, near Cannock, was partly to blame. UK Coal said this was "mainly due to the time needed to resolve the problem of floor heave, a complication not anticipated when the developments were designed some two years ago".

As a result Daw Mill produced just 0.7 million tonnes in the first half of 2005 against

1.4 million in the equivalent period last year. Deep mine production at ongoing mines was 3.9 million tonnes, up on 2004's 3.6 million.