RJB Mining seeks to calm fears of further pit closures
Tuesday 19 August 1997
Gordon McPhie, RJB finance director, said each of the remaining 15 pits had a separate business plan which could guarantee their future, at least until reserves were exhausted.
The company is currently negotiating new coal contracts with the three big coal-burning electricity generators, National Power, PowerGen and Eastern Group. The existing contracts, which guarantee RJB 30 million tonnes of coal for the generators, expire next April. So far contacts for just 3 million tonnes have been agreed, involving the Selby coalfield and the adjacent Drax power station complex.
Mr McPhie said the generating companies were unlikely to switch to buying much of their coal on the world spot markets, despite lower prices for imports. "It isn't going to happen. The generators burnt a total of 50 million tonnes of coal last year. How are they going to get all that from the spot market?" said Mr McPhie.
RJB is thought to be pressing for an average price of pounds 1.28 per gigajoule for its supplies, against around pounds 1.20 suggested by the generators, a difference of about pounds 4 a tonne. The talks are not likely to conclude until the end of this year.
David Price, from the industry journal Coal UK, said the position had worsened in recent months, with electricity burnt from coal down by some 25 per cent this year. "The market is declining rapidly and Budge, as the swing supplier, is taking all the hits."
Shares in RJB fell 5p yesterday to 312.5p, compared with a 12 month peak of 565p, on the news that Asfordby was to close after suffering years of geological problems. The share price compares with the 320p offer price for shares in the 1994 rights issue, when RJB raised pounds 385m to help fund the pounds 815.3m purchase of British Coal's English pits.
Malcolm Edwards, the former British Coal commercial director whose company, Coal Investments, went into administration last year, claimed it was too late for the industry to secure the bulk of the remaining pits. "You've got to look to something cataclysmic to get a major sea change in public opinion. The time to act was in 1992 when 31 pits were closed."
RJB anticipated the trouble with Asfordby early last year, when it wrote off pounds 78m from the asset value of the pit. At the time Richard Budge, RJB chief executive, said he was giving the site "one last go" to try to extract coal profitably.
British Coal originally envisaged production of 4.5 million tons a year from Asfordby, which would have a 25 year life and gradually replace the previous "super-pits" in the Selby complex. But the forecasts were lowered as the geological difficulties arose.
At the time of RJB's rights issue in 1994 the company showed the latest British Coal predictions of 2.7 million tons by 1999, an estimate later halved by RJB.
The pit made an operating loss of pounds 16.3m in 1995, followed by further losses of pounds 19.9m last year. However this year it had broken even, though only by mining a much smaller face after work on the 250 metre long main face had been abandoned.
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