April 10, 2014 / 9:52 AM / 5 years ago

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

* Loan will prevent company insolvency

* Deep mines to close by Autumn 2015

* Surface mines to be sold

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 Autumn 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.

A source told Reuters last week rival coal producer Hargreaves Services and regeneration company Harworth Estates have also promised a combined 10 million loan to UK Coal (Reporting by Susanna Twidale; editing by Keiron Henderson)

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