Shareholder value ‘may be wiped out’ as ATH faces uncertain future

ATH are Scotland's second-largest open cast mining company.
ATH are Scotland's second-largest open cast mining company.
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THE future of ATH Resources, which employs more than 300 at its five Scottish open cast mines, was thrown into doubt yesterday after it called in Deloitte to look at options including restructuring or a sale of the business.

The company, which has blamed a slump in coal prices for its difficulties, warned that the level of its debts meant shareholders were likely to see the value of their stakes wiped out in any rescue move for the firm.

The news came just two weeks after Doncaster-headquartered company announced that it was in discussions with its key backers to secure support for a proposed refinancing plan.

Although it said yesterday that talks with parties – including its lenders – were continuing, it warned that “developments over the past week had led the directors to believe that the company is unlikely to attract the level of capital required to continue operating without a restructuring of the group”.

It Added: “Given the level of liabilities within the company, it is unlikely that shareholder value will be maintained following any possible restructuring.”

Major shareholders in the company, which employs 330 people at mines in Ayrshire, Dumfries and Galloway and Fife, and at its head office in Yorkshire, include Swedish value investor Peter Gyllenhammar. He is the largest investor in the company with a 20 per cent stake, while businessman William Paterson of Coatbridge-based group Patersons Quarries is also a major shareholder, with a stake of 8.52 per cent.

The company’s market value has plunged in recent years, from a high of more than £110 million in 2007 to just £550,000 yesterday. ATH, Scotland’s second-largest open cast miner, said Deloitte had been instructed to advise on “all restructuring options that may be available and to assist the board in considering the merit of any proposals from parties who may be interested in investing in or acquiring the business”. It will update the market on developments “in due course”.

Last year, the company entered takeover talks with an unnamed buyer that were eventually aborted. Energy and logistics group Hargreaves Services had been tipped as a likely suitor, although Scottish Resources Group, Scotland’s biggest open cast coal miner, was not understood to be interested.

Coal production of 1.6 million tonnes for the financial year to the end of September helped ATH cut its debts from £31m to £22m, but the company said it needed further improvements to fund the business beyond December.

The firm has also recently written off £2m due to issues at its Muir Dean site in Fife, where problems caused by old mine workings had reduced coal production and increased costs. It has also mothballed its Glenmuckloch site in Dumfries and Galloway after postponing a decision on whether to extend the site.

Earlier this month, ATH highlighted the impact of a slump in international coal prices which are some 30 per cent below that of the beginning of the financial year and said there was no “meaningful recovery” forecast in the medium term.

ATH reported an operating loss before exceptional items of £3.9m in the six months to 1 April against a profit of £1.7m in the same period last year. Shares closed down 52 per cent, or 1.5p, at 1.38p.