King coal is on the rise once again

Published on Sunday 18 January 2009 22:27

SCOTTISH Coal, the UK's largest open-cast coal mining group, is back in the black and has revealed plans to reopen old sites and bring new sites into production to meet increased demand.

In new accounts filed at Companies House, the Scottish mining firm disclosed it made a 2.2 million profit on sales of 111.5m in the year to 29 March, 2008.

During the same period in 2007, the group made a 900,000 loss on sales of 110.1m.

The profits boost came on the back of slightly lower coal sales for the year – down to 2.9 million tonnes, compared to 3.1 million tonnes in 2007. Bad weather conditions, staff shortages and production from one site in Ayrshire – Spireslack – which was "lower than our expectation", were the main reasons cited.

However, the company is enjoying a renaissance as demand for coal increases across the UK.

In July 2008, it signed a long-term contract to supply ten million tonnes of coal over a five-year period to Scottish Power's power stations at Longannet in Fife and Cockenzie in East Lothian. Scottish Power invested 200m in "clean coal" de-sulpherisation technology and as can now burn Scottish-produced fuel.

And as a result of the new deal, Scottish Coal now plans to increase production to up to four million tonnes a year.

Sean Mahon, chairman of Scottish Coal's parent company, Scottish Resources Group (SRG): "The increase in production will come from the re-opening of previously mothballed sites and the opening of new reserves."

The group now plans to expand operations in Scotland. During the last year it invested 2.2m in future coal operations including 1.6m in land acquisitions.

The group's property division owns 22,000 acres of land, some of which will be sold to developers. Last year the group sold 107 acres to John Dewar and Sons for a new bonded warehouse in Poniel, outside Lesmahagow, Lanarkshire.

The group said that, although property activity "has slowed substantially" due to the downturn in the housing market, they "remained confident of the long-term value of our portfolio".

Scottish Coal has produced only open cast coal since Scotland's last deep mine at Longannet, which it owned, was closed in 2002 following flooding.

As coal becomes more widely used again thanks to the clean coal technology, it is understood Scottish Coal and the government have been in discussions to open a new deep mine at Canonbie, Dumfriesshire, which is said to have 400 million tonnes of coal waiting to be extracted.

There has also been speculation that deep mining at the Longannet site might be resurrected.

Yesterday a spokesman for the company acknowledged that these plans were under scrutiny but admitted they were a "long way" from getting sufficient commitment from the government for that to be feasible.

He added: "Any new opportunity to take coal out of the ground would be great but it would require a long-term commitment from government that, once the two or three years investment required was in, they wouldn't change their minds. It is difficult for any government to do that. It is a tough one.

"Scottish Coal would love to talk to government about it or explore any new reserves. But there is a long way to go before they get to the point of starting to do that"