The company, which announced earlier that it was considering re-opening Harworth Colliery, says it has launched a geological study to determine the viability of accessing its substantial reserves, as coal prices continue to rise.

In a trading update, ahead of the publication of its interim results next month, the firm says it is expecting to achieve a price of £1.79 a gigajoule of coal, compared with £1.52 for the first half of last year.

Production fell for the first six months from 3.8 million tonnes to 3.7 million tonners, due to face changes at Kellingley Colliery, but rising prices will offset the fall in production, says the company.

UK Coal expects production to increase to five million tonnes in the second half of the year. Energy price rises are not all good news for the firm, however.

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Increases in the price of diesel, which accounts for around 40 per cent of surface mine costs, have led the company to review the sums it has set aside to cover the cost of restoring surface mine sites over the next three to five years.

UK Coal expects the value of the property it owns to have risen by £20 million during the first half of its financial year.

The company says the outlook for its mining business in the second half remains positive, with the full year expected to be in line with expectations.

Although the company says it is cautious about the property market, it expects the value of its holdings to rise modestly and adds that the current turmoil in the house building sector is not having an immediate affect, since most of its regeneration projects are long term and the structural shortage of housing land in the UK underpins long term demand.


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