Coal Investments crisis deepens on planning setback

DAVID HELLIER

Coal Investments, the troubled mining company headed by former British Coal director Malcolm Edwards, sank into a deeper crisis yesterday as a further setback threatened to de-rail its talks with its bankers.

Just after midday the company requested the suspension of its shares following the refusal of planning permission for a planned coal face at Hem Heath Colliery, Stoke-on-Trent.

Although Coal is considering an appeal against the decision, the verdict could have a "substantial" effect on profits, said analysts, perhaps as much as 10 per cent. The company's advisers called for a suspension of the shares because they felt unable to give the market a hasty analysis of the decision and how it might affect the group's negotiations with its bankers.

"The revenues expected from this coal face were fairly fundamental to the financial projections on which the banks were working," Andy Quinn, from James Capel, one of the group's advisers, said last night.

"It's not the case of there being a lack of confidence. It's just that we were not in a position to inform the market properly."

The group was in discussions with its bankers at a pre-arranged meeting yesterday afternoon at the offices of UBS, which along with National Westminster Bank and Banque Indosuez, is one of the group's three lead banks.

The banks have appointed Arthur Andersen, the accountants, to give them an independent assessment of the company's prospects and they have also appointed a further specialised mining analyst. Some sources said that Mr Edwards would have difficulty surviving at the company.

The Hem Heath setback is the latest in a series of upsets to hit the company and is bound to adversely affect City sentiment as the group struggles to get a "rescue" rights issue off the ground. The shares were suspended at 25p. "This is not yet critical, but clearly it is not good news," a source close to the company said.

Since 1 December, the company has been reviewing its financial position. That day the group's shares fell 26p to 30p, at their low point, as investors worried about the company's ability to continue paying its suppliers.

The group disclosed then that it planned a further injection of capital to achieve its planned level of production. It has been to the market three times already in the two years since it took over parts of British Coal. Yesterday the company said its interim results would be delayed pending clarification of its financial position.

Sources said the company, which was reported to be raising pounds 15m-pounds 25m, may now have to try for even more money if it can persaude investors to put up more cash.

Coal Investments has already said it is trying to strengthen its top management team. The company has paid dearly for being beaten by RJB Mining to the best of the British Coal fields. When the industry was sold off last year, industry observers questioned whether RJB, which bid pounds 810m for most of the fields, had paid too much.

But RJB has managed to pay off a large chunk of its debt to its bankers while Coal Investments has struggled to match production targets.