Corus scopes out plans to build coal mine in south Wales

Corus is set to decide on a proposal to build a coal mine at its steelworks in Port Talbot in Wales within a year.

The company is this month pressing ahead with £6m-worth of geoseismic studies to scope out the scheme, which could cost hundreds of millions of pounds and create 500 mining jobs. If the plan goes ahead the Port Talbot plant will be the only steel factory in Europe to source coal on-site.

Kirby Adams, the out-going chief executive of Corus, said: "If the exploration is a success and the investment can be funded, then that would underpin forever the economics of steel- making at Port Talbot because it would remove all the transportation costs of moving one of our raw materials halfway around the world to get here."

"We will make a decision on this within a year," said Uday Chaturvedi, the managing director of Corus Strip Products UK, which is headquartered at Port Talbot.

Although several Australian steelworks have coal mines on-site, there is nothing of the kind in Europe. Corus has been considering the Margam mine venture at Port Talbot since the company first applied for a mining licence for the site in 2005. Initial estimates have suggested that as much as 35m tonnes of coal could be deep under the hills surrounding Port Talbot, enough to supply the plant at full capacity for 15 years.

But it has never been extracted because it is buried at technically tricky depths of up to 1,000 metres. Thanks to improvements in mining technology and the ever rising cost of coking coal and transportation, the economics may have changed. And the deposit has larger, as-yet-unexplored areas which could increase the size of the project even further.

Corus, acquired by India's Tata Steel in 2007, was hit hard by the global downturn, which decimated the construction and automotive markets, the main consumers of steel. In total, some 7,000 jobs were axed and, at the worst point, the group was losing £100m every month. Because of the collapse of an off-take agreement, the Teesside Cast Products (TCP) facility was mothballed earlier this year and Corus is still desperately trying to find a buyer.

But a massive cost-cutting programme at Port Talbot helped the plant to meet its £220m cost-saving target. And over the last two years the company has invested £100m to improve the efficiency of the facility and reduce its environmental footprint. Some £60m was spent on a "basic oxygen steelmaking" facility to recycle the waste gases produced in the main plant, helping cut a whopping 240,000 tonnes from the site's annual carbon emissions.

Last week Corus announced plans for a £31.5m offshore wind-farm business on the TCP site. The factory, producing the steel monopiles which fix turbines to the sea floor, will create up to 220 jobs.

The company estimates as much as 6m tonnes of steel will be needed to fulfil the government's offshore wind expansion targets. The news followed first-quarter financial results that showed a 12.5 per cent drop in pre-tax profits, to $601m (£386m) compared with the previous three months – although the performance was still a major improvement on the $434m loss that it had reported for the same period of the previous year.