Mining firm sinking millions into massive expansion plans

MINING firm Scottish Resources Group is to embark on an expansion drive that could see it become "one of the country's largest companies", after securing nearly £50 million in fresh funding.

• Scottish Resources Group chief executive Don Nicolson at one of the company's mines in Fife. Picture: Ian Rutherford

Alloa-based SRG, which owns Scottish Coal, has increased its workforce by 50 per cent over the past two years to 1,000 staff. That headcount is set to grow as the UK's biggest surface miner expands its core mining, renewables and land divisions.

Chief executive Don Nicolson told The Scotsman that the company had already invested 75m in new equipment over the past two years and increased coal production by 12 per cent year-on-year.

He said SRG was already seeking planning permission for wind turbines on its land that could produce 200 megawatts (MW) of power at peak capacity.

Plans for 2,500 homes and two million square feet of business space were also working their way through the planning system, he added.

SRG yesterday unveiled a 47.5m debt facility with Lloyds Banking Group. About 23m will be used to refinance previous bank facilities, with the remainder going towards the expansion plans.

Mark Prentice, head of Lloyds Corporate Markets' operations in Edinburgh and the east of Scotland, said: "If SRG can capitalise on all of the opportunities before it, then it could become one of the biggest companies in Scotland.

"This is one of the biggest deals we've done this year, and it's symptomatic of the size of deal we're seeing. Over the past few months, we've signed deals with Baxters, BeCogent and C&C, the cider group that owns Tennent's, all of which were worth millions of pounds."

The flurry of activity will go some way to easing concerns over a lack of bank funding for Scottish firms. Nicolson said: "We have a continuous programme of mining on sites, and then when we're finished the other parts of the group work together to use land for building residential, commercial or recreational developments."

The most recent accounts filed at Companies House showed that SRG grew its turnover from 111.8m to 143.5m in the year to 28 March, 2009. But the group sank back into the red, booking a 12.2m pre-tax loss on the back of rising production costs, compared with a pre-tax profit of 2.1m in 2008.

Nicolson said the results for the financial year that ended on Sunday would be "an improvement" on the previous year.

Currently, 95 per cent of Scottish Coal's output goes to power stations and other industrial users in the UK, but Nicolson said about 75 per cent of the coal burned in the UK was imported.

Nicolson joined SRG in 2008, having spent 26 years at BP, latterly as a director of the BP Exploration, the company that ran its North Sea arm.

SRG's Scottish Coal subsidiary operates nine open cast mines in Ayrshire, Fife and Lanarkshire, which together produce about four million tonnes of coal each year.

The group's land bank stretches to about 25,000 acres across the Central Belt and the company said its land has the potential to support about 15 wind farms.