Maltby Colliery in South Yorkshire is likely to be closed with the loss of about 550 jobs
“Geological reports have been received which indicate that the risks associated with mining… have not significantly reduced,” Hargreaves said. Maltby is a deep mine operating about three-quarters of a mile underground.
The company, which also operates the Hatfield Colliery and has a joint venture running the Tower Colliery in South Wales, first revealed that it had encountered “unusual geological conditions” in May. Water and toxic gases were leaking from a new coal face, putting miners’ safety at risk.
Hargreaves said it would continue to consult with Maltby employees and trade union representatives and remained “committed to exploring alternative employment opportunities for staff.”
Unions have until November (Xetra: A0Z24E - news) 30 to table any proposals that could see the mine continuing as part of the formal consultation process, however, analysts believe it is probable that the mine will be closed and its equipment sold.
“We view it as increasingly likely that the Maltby mine will be mothballed,” Justin Jordan, an analyst at City broker Jefferies, said. Mr Jordon thinks the closure of Maltby could hit profits by between 15pc and 20pc in the year to May 2014.
The Maltby mine supplies the giant Drax power station in North Yorkshire, the largest coal-fired power plant in Europe (Chicago Options: ^REURUSD - news) . About 60pc of the mine’s output was used by Drax. Hargreaves is sourcing coal from alternative suppliers and no disruption to supply at the power station is expected.
Hargreves has sourced alternative supplies for its Monckton coke works near Barnsley. Monckton produces about 200,000 tonnes of coke per year, used in glass, detergents and steel manufacturing, as well for heating homes.
The shares rose 2.5p to 730.5p on the news, but remain significantly below their high of £12.64 seen in April.