Mines group wants threatened pits

A LARGE private mining group wants to buy up to 10 of the British Coal pits under threat of closure, and is planning at least a pounds 100m flotation on the Stock Exchange to give it an appropriate financial base.

RJB Mining, formerly Budge Mining, has appointed Barclays de Zoete Wedd as its financial adviser, and says it wants its shares to be offered some time next year.

The company runs 11 opencast pits as well as a small deep mine at Blenkinsopp, near Carlisle. It made pounds 15m profit on a turnover of pounds 76m last year, and employs 800 people.

RJB has been independent only since February when it was bought out from A F Budge, the road-building contractor now in receivership, for pounds 106.5m.

The MBO team was led by Richard Budge, whose brother Tony ran the contracting company. AF Budge went into receivership earlier this month when banks called in loans estimated at pounds 20m. Tony Budge, who was recently listed as being worth pounds 50m, was a well-known racehorse owner and collector of military hardware.

Richard Budge said yesterday that he had been looking at about 10 of the 31 mines the Government said it wanted to close in October. Most of the pits in which he is interested have been reprieved pending the Government's review, although one - Markham Main - is on the immediate closure list.

Mr Budge's request in October to examine 22 of the 31 mines in detail was turned down, so he has been carrying out his own 'semi-superficial' analysis on 10 of them.

Although RJB operates only one small deep mine - Blenkinsopp produces 150,000 tons a year and employs 90 - it provides auxiliary services for many of British Coal's deep pits.

Mr Budge said that this, along with experience he had had in the US, had enabled him to identify areas of inefficiency.

The workforce would have to be cut substantially, but would be given a shareholding in the mines; the equipment would also be de-standarised to allow each mine to choose the most appropriate machinery.

Mr Budge said that a market for an extra 11m to 15m tons could be created by undercutting imports for the power generation, industrial and domestic markets.

RJB's opencast mines can produce coal at pounds 1 a gigajoule, below the cheapest imports, and he believes the cost of deep-mined coal from the pits he wants to buy can be cut to pounds 1.30 a gigajoule. This compares with the pounds 1.50 that the generators are likely to pay British Coal as a result of current negotiations. He said he would also like to buy the opencast mines that RJB currently operates under contract to British Coal.

His plan's success will depend on the results of the DTI's energy review and the House of Commons Select Committee examination of the coal industry. The select committee is due to report at the end of January, and the Government should announce its plans for the coal industry shortly after that.

If it decides that pits can be sold off, there could be competition for at least some of them. Malcolm Edwards, British Coal's former commercial director, has said that he wants to lead a consortium to buy four mines: Markham Main, Bentley, Hatfield and Rossington. Ryan International, another big private company, is reported to be in talks with British Coal over Betws colliery in South Wales. Other companies, notably Hanson, have been mentioned as possible bidders for the whole of British Coal.

Mr Budge said that his main fear was that the Government would decide to increase the tonnage the generators have to buy from UK mines, but would give the extra business to British Coal.