* CEO says Daw Mill unlikely to re-open
* Mine was already under threat of closure
* UK Coal to meet energy ministry this week
By Brenton Cordeiro and John McGarrity
LONDON, Feb 25 A major fire at its Daw Mill
Colliery could threaten the viability of operator UK Coal, its
chief executive warned on Monday, hitting shares in listed
shareholder Coalfield Resources.
The fire on Friday forced UK Coal to evacuate more than 100
underground workers from Daw Mill, one of three deep coal mines
Shares in Coalfield Resources, which shares ownership of UK
Coal with the UK Coal Employee Benefit Trust, were down more
than 11 percent at 5.55 pounds as of 1415 GMT.
UK Coal said on Monday it was unlikely to re-open the mine,
a site which had already been facing an uncertain future.
"This fire is on a scale not seen for decades," Chief
Executive Kevin McCullough said.
"There's a very, very slim chance that this mine will
re-open. We don't want to give miners at the mine false hope.
Similar fires in Britain's mines have led to permanent
He said the fire could pose a threat to UK Coal as a
"Our other mines are economically viable but the company as
a whole won't be viable if the cost burden from a fire at Daw
Mill has to be shouldered by the company alone," he said.
UK Coal will meet with Britain's energy ministry this week
to discuss the future of the company's operations, McCullough
Its mines employ almost half of Britain's 6,000 coalminers
and are among the remnants of the country's once-mighty coal
industry which was privatised in 1994.
Daw Mill has a capacity of 1.6 million tonnes a year but was
producing below that.
"Daw Mill was UK Coal's mainstay asset, but also its most
troublesome asset, both operationally and in terms of labour
relations. The fire may, unfortunately, be the death knell for
it, at least in its current structure," Investec Securities said
in a note.
Dogged by debt and losses, UK Coal has been vigorously
cutting costs at Daw Mill and had already reduced headcount
The company avoided a debt default and closure of its
operations after completing a major debt restructuring with
shareholders in December.
Despite a surge in domestic coal use, British coal miners
have been hit hard by slumping international coal prices and
high diesel costs.
Most deep mines closed in Britain after a 1984 miners
strike, shrinking what had been an industry employing several
hundred thousand workers to a headcount of fewer than 6,000
workers by 2011.
UK Coal said that the main utility affected by the fire was
German utility E.ON, whose 2,000 MW Ratcliffe plant
burns coal from Daw Mill.
"Our supply chain is very varied and operations at Ratcliffe
are continuing to run as normal and in line with market
conditions," said a spokesman for E.ON.
An analyst at a utility who requested anonymity said: "It's
fair to say that E.ON will need to increase imports, but it's
difficult to say by how much."
Physical European coal prices gained around 1 percent on
Monday, buoyed by the fire and attacks on supplies at a major
mine in Colombia.