County Durham-based coal mining and transport company, Hargreaves Services PLC, has confirmed it is to close its Monckton site as part of an ongoing group simplification plan.
On October 27, following a period of what it calls “unprecedented turmoil” in European coke markets, the Hargreaves board announced the start of a 45-day consultation process at the Monckton Coke and Chemical Company Ltd.
Since there, although discussions with key export customers have continued, there has been no significant improvement in the market or in customer demand. Production at the site will therefore cease this month, with the group now exploring alternative employment options for staff, both within the business and externally.
Hargreaves says the decision represents a major element in its group simplification plan, which continues to progress well and looks set to deliver strong cash generation from a more streamlined business. The approximate cash impact of the closure in the current financial year is expected to be an inflow of £8m.
In a trading update for the six months ended November 30, 2014, Hargreaves said that, overall, trading had been in line with management’s expectations.
Surface mining operations were performing well, with strong production rates being achieved across the portfolio of operating sites.
In the E&C division, meanwhile, ongoing uncertainty around Government policy on energy, coal generation and carbon taxes continues to reduce medium-term visibility.
Sales of thermal coal have likewise been slow, reflecting the impact of low gas prices on coal burn. Volumes are expected to recover to normal levels through the winter.
Hargreaves also noted that, while contract visibility provided the group with confidence in terms of meeting full-year expectations, ongoing production and financial problems at Hatifeld could impact on the second half.
In the trading update, the group said: “In summary, the group is satisfied with the progress and trading in this financial year.
“The decision to close Monckton, whilst regrettable for the staff and stakeholders, will reduce the level of risk and volatility currently created by the challenge of fluctuating demand and low commodity prices.
“We are pleased to note that the group faces these challenges with a very strong balance sheet and profitable and cash generative trading, services and transport operations.”
Hargreaves says its board remains committed to developing the group’s surface mining operation and regards these assets as a source of significant long-term value.
The statement continued: “The actions taken to maintain the maximum amount of operational flexibility around the mining business will ensure that the group is well placed to ride out the current challenges presented by low international coal prices and quickly benefit from any improvement.”