UK Coal, formerly British Coal, is to announce this week that its property portfolio is worth over £300m more than previously estimated.
The company, led by chief executive Garold Spindler, will tell analysts on Tuesday that its 50,000 acres of land, which have a book value of £274m, should be worth well in excess of £500m.
News of the revaluation of UK Coal's land bank is certain to send its shares soaring when the market opens tomorrow.
The company only has a market capitalisation of £362m and is largely ignored by analysts, who choose to focus on international mining giants such as Anglo American.
Previously called RJB Mining, UK Coal inherited a huge portfolio of land when the British coal industry was placed into private ownership in 1994. But the current value of its property empire does not take into account the potential for the land to be developed for new homes and offices. UK Coal has spent the past six months revaluing its land and will now announce its findings to the City.
Nearly all of the undeveloped land surrounds either active or dormant coal mines. Most of the sites are on the outskirts of major urban areas and are close to road and rail links. The company also owns 150 rental properties.
It is believed that UK Coal will set up a partnership agreement with a property developer to seek planning permission for a large portion of its 50,000 acres.
Property groups will be keen to exploit UK Coal's brownfield sites if they become available. Strict planning laws and a shortfall of new housing have increased the value of new residential developments.
At the moment, UK Coal does not have the capacity to mine enough coal to meet demand from power generators. Many British electricity producers have long-term contracts with the company dating back to when coal was much cheaper than it is today. That has prevented UK Coal from maximising the potential profits from renewed demand for the solid fuel. Part of any profit from the development of its land bank will be used to increase production at its mines.
In the six months to the end of June 2006, UK Coal made a pre-tax profit of £7.05m, against a loss in the year before of £30.4m.
But last month it said it expected to make a loss for the full year after problems at some of its deep mines, which are expected to cut output for the year by over 400,000 tons to between 3.9 million and 4.1 million tons.Reuse content