The future of Malcolm Edwards, the former British Coal commercial director, was in doubt yesterday as his coal-mining group said it planned to raise further capital in what is being seen as a "rescue rights" issue.
If the issue of new equity goes ahead - and market sources suggest that it will need to be priced at a heavy discount - it will be the fourth time the company has been to the market for new funds in the two years since taking over parts of British Coal.
Sources close to the company said its bankers and shareholders wanted Mr Edwards, who is currently executive chairman, to remain with the group. "He is very valuable to the business," one source said. But they added that they would try to strengthen senior management to bring in somebody to perform the chief executive's role.
Others in the City were less sure about Mr Edwards' ability to stay on. "He may be a good salesman but the City is definitely questioning Mr Edwards' ability to run a public company after this," one City coal analyst said yesterday.
In October Mr Edwards told an annual meeting of the company's shareholders that the group would be profitable by "well before the end of the financial year".
The group, which bought a number of pits from British Coal including Hem Heath, Silverdale and Markham, has been beset by production problems that have ratcheted up costs while adversely affecting revenues.
Yesterday's announcement came after a sharp fall in the share price of Coal Investments. The shares fell 26p to 30p at their low point as investors worried about the company's ability to continue paying its suppliers. The shares closed at 35p, down 21p.
The company said it "has agreed terms with its bankers for the removal by them of certain conditions attaching to the extension of existing credit facilities in order to enable the company to meet its currently anticipated cash requirements."
"However", it added, "an injection of further capital will be required in order to achieve the company's planned level of production."
The company is expected to raise between pounds 10m and pounds 20m but some coal industry experts doubted whether this would be anything like enough to adequately finance the full-scale development of the collieries.
"The company, together with its financial advisers and with the support of the banks, is working on proposals for an issue of further equity, the detailed terms of which are expected to be announced during the first quarter of next year", the company said.
Mr Edwards fought and lost a hard and bitter campaign last year against Richard Budge of RJB Mining to buy the bulk of the English assets of British Coal.