firstname.lastname@example.org (Steve Leary) | 07.12.2010 10:27
MOPG's latest press release, PR 86 'Safeguarding the Community Benefits of the proposed Minorca Surface Mine' explaines why MOPG are asking all those local bodies with an interest in the Minorca Surface Mine Application, whether for the application (Ashby Canal Trust, Ashby Canal Association and Measham and Ashby Canal Trust Enthusiasts) or against the application (Measham, Swepstone and Snarestone Parish Councils) to join with MOPG in asking Leicestershire County Council to ask UK Coal to provide a Bankers Guarantee as a condition to be met if the company gain approval to work the Minorca site in light of the Company;'s "fragile financial circumstances".
MOPG PR 86, 6/12/10
SAFEGUARDING THE COMMUNITY BENEFITS OF THE PROPOSED MINORCA SURFACE MINE
UK Coal has recently had to close one of its three deep mines, Kellingley Colliery in Yorkshire after a Methane Gas scare
Steve Leary for the Minorca Opencast Protest Group said
“We were very pleased that when Kellingley Colliery in Yorkshire had to be evacuated recently because of a Methane Gas incident, that no one was hurt or killed.
However this new incident highlights our concern as to whether UK Coal will always be able to honour the commitments it agrees to should it gain permission to mine on the Minorca site near Measham”
As a consequence of this recent incidence the Minorca Opencast Protest Group (MOPG) has written to the local Parish Councils of Measham, Swepstone and Snarestone inviting them to take action to safeguard the community benefits that would arise from UK Coal gaining approval to opencast on the Minorca site. To help gain approval, the Company has offered an unprecedented amount of money, £1.25m plus machinery and materials, to help to restore a section of the Ashby Canal. In addition the three parishes are being offered a Community Fund worth £150,000. This offer however, has not overcome the objections voiced by these Councils and MOPG to the scheme.
Leicestershire County Council may still approve the scheme in the New Year so the letter suggests why each of the Parish Councils may wish to ask the County Council that UK Coal plc should provide a Bankers Guarantee to underwrite the Company’s offer to restore part of the Ashby Canal and the proposed Community Fund.
In the letter, part of which is reproduced below, MOPG argue the following:
“In the past MOPG has highlighted the financial plight of UK Coal plc. In August the Company announced that its debt position was so serious that it was beginning to sell off part of its land estate in order to reduce its debt level, then standing at over £250m. The Company, at that stage, expressed optimism that now all its deep mines had overcome geological problems, it could look forward to producing 7m tonnes of coal in 2010 and reduce the level of debt bearing down on the Company. This was still the position when the Company made its Interim Management Statement on 28/10/10, even though the level of debt had risen to £265m.
However we have to advise your organisation that an event has occurred which reduces the prospect that this Company will be able to reduce its level of debt in the short term. Since 23/11/10 Kellingley Colliery has not been able to produce any coal and the last news story on the incident reported that part of the Colliery was on fire. This deep mine produces approximately 25% of UK Coal’s annual coal production, producing approximately 1.6m tonnes per annum, so each week Kellingley stands idle, UK Coal not only loses over 30,000 tonnes of coal but reduces its ability to pay off its debts, thus increasing the likelihood that the business cannot continue as a ‘going concern’, an issue which its own Auditors drew attention to in the Company’s last Annual Report.
We have to advise you that such risks of production being interrupted by unpredictable changes in geological circumstances are an inherent risk when mining coal. UK Coal now only has three deep working mines, each with a single face producing coal so it is very difficult for the shortfall in coal production to be made up. The risks of the Company defaulting on obligations it enters into if the production of coal is interrupted is, we would argue, now a significant risk which your organisation can help to abate if your organisation joins with the Minorca Opencast Protest Group in asking Leicestershire County Council for a Bankers Guarantee along the lines already indicated to you...............
The first obligation of a Company is to its shareholders. If it faces financial problems then the duty of the Directors is to so structure the Company that part of it can remain as a ‘going concern’. UK Coal has already announced that it is to restructure the Company so that the mining activity area responsible for most of the debt is separately managed from the property activity area.
MOPG believe that the current coal production problems, if prolonged at Kellingley, will significantly speed up this restructuring process. If the two divisions can be organised as separate companies then the property company would have no obligation to honour agreements the mining company has entered into, with the risk that should geological problems continue, or arise at any time in the three deep mines during the four years when coal is to be extracted from the Minorca site, the mining company could fail as a going concern and nobody would then be in a position to honour the Section 106 Agreements attached to working the Minorca site. We could be left with a big pit and a muddy ditch if no Banker’s Guarantee underwrites the granting of Planning Permission under such circumstances.”
A similar letter has been sent to those organisations which have supported this application specifically because it will help to bring forward the restoration of part of the Ashby Canal. These are The Ashby Canal Trust, the Ashby Canal Association and the Measham and Ashby Canal Trust Enthusiasts.
Steve Leary for MOPG went on to say,
“Given what we know about UK Coal’s current fragile financial circumstances, any interruption in the production of coal from any of its deep mines directly affects its cash flow. The letter indicates that when all of UK Coal’s mines were not producing coal earlier this year, that Northumberland County Council began formal proceedings in order to get UK Coal to comply with its obligations to restore the Stobswood Opencast site in that county.
At Daw Mill in Warwickshire, UK Coal’s biggest mine for example, coal production had been interrupted when the miners had to remove 150,000 tonnes of rock before they could restart coal production. Such unpredictable interruptions to coal production could occur at any time and put at risk UK Coal honouring its obligations to provide the community benefits that have been promised. The other possible effect would be to delay the provision of the benefits to the community.
MOPG hope that in light of this evidence all organisations, whether they oppose or support the Minorca Surface Mine Application can agree on the issue of guaranteeing that local communities get the benefits promised if approval is given for the Mine. All groups concerned should bury their differences and recognise that if we all take the action of asking Leicestershire County Council for the Bankers Guarantees that will safeguard both restoring the Ashby Canal and providing the Community Fund should UK Coal’s Minorca Application be approved. In this way we can ensure that the area will benefit if UK Coal gain planning permission, whatever happens to UK Coal as a ‘going concern’.
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STEVE LEARY, SPOKESPERSON, MOPG
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firstname.lastname@example.org (Steve Leary)