UPDATE 1-Britain to give UK Coal 10 mln stg loan to fund mine closures

Thu Apr 10, 2014 9:11am EDT

Related Topics

* Loan will prevent company insolvency

* Deep mines to close by autumn 2015

* Surface mines to be sold

* Hargreaves Services to loan UK coal 5 mln stg (Updates with details on Hargreaves Services loan)

By Susanna Twidale

LONDON, April 10 (Reuters) - Britain will give UK Coal a 10 million pound loan to help fund the closure over the next 18 months of its two deep mines which employ around 1,300 people, the government said on Thursday.

The loan is needed to prevent UK Coal from slipping into insolvency which would lead to "significant losses and liabilities" for British taxpayers, Minister of State for Energy Michael Fallon said in a statement.

The coal miner was placed in administration last year after struggling with rising costs, hefty pension liabilities and strong competition from cheaper imports.

Its business has deteriorated since due to a flood of U.S. coal onto the market because of the development of shale gas there, and the strength of sterling.

The government backing means the company will be able to carry out a managed closure of its deep operational mines by the autumn of 2015 and look for a buyer for its surface mine business, the statement said.

The government also said the loan is conditional on the negotiation of final terms including assurances that all parties including the trade unions back the plan to close the mines.

Last week, UK Coal started redundancy consultations with staff at collieries in Thoresby in Nottinghamshire, which employs 600, and Kellingley in Yorkshire with 700 employees.

UK Coal also owns six operational, smaller surface mines in the North East, Derbyshire, Leicestershire and Shropshire which will be sold.

The government said its investment in UK Coal would be alongside private sector organisations, including an experienced coal operator.

Rival coal producer Hargreaves Services said on Thursday it would also provide UK coal with a 5 million pound secured loan.

"The planned closure of UK Coal marks a sombre day for the UK's coal industry. We ... feel a responsibility to support a well-managed and respectful wind-down of UK Coal's operations," Hargreaves CEO Gordon Banham said in a statement.

A source told Reuters last week regeneration company Harworth Estates has also promised to loan money to UK Coal

No one from Harworth was immediately available for comment.

(Reporting by Susanna Twidale; editing by Keiron Henderson and David Evans)

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