ATH Resources, which runs five surface mines in Scotland, said it will cut production after plunging into the red in the first half when coal prices tumbled on international markets.
The company made a £3.9 million loss before exceptionals in the six months to April 1 compared with a £1.7m profit in the same period of the preceding year as falling coal prices and a surge in the cost of gas oil weighed on the bottom line.
The company's performance would have been worse had it not sold some of its output under fixed price contracts, which means it has some protection from market developments.
ATH, which sells some of its coal to power stations in England, felt the benefit of the renegotiation of two older contracts in the first half.
However, the company is set to become more exposed to the effect of the drop in coal prices which has resulted from the combination of a mild winter and the global economic slowdown.
Noting that coal prices fell by 28% on international markets during the first half. ATH's chairman David Port cautioned: "The proportion of group sales exposed to movement in the international price of coal will increase significantly as existing contracts are fulfilled towards the end of this calendar year.
"In the absence of a recovery in the international price of coal, trading conditions are expected to remain challenging."
Against that backdrop, chief executive Alistair Black, said ATH resources will rein in activity to conserve cash.
He said: "The group has reviewed all of its existing and future operations with a view to concentrating investment on those sites which will continue to generate cash even in this depressed market.
"Consequently annual levels of production will be reduced for as long as low coal prices persist."
The cutbacks may result in job losses in Scotland, where ATH employs around 200 people.
The company will not decide whether to revive plans to extend the Glenmuckloch site in Dumfries and Galloway until the end of the calendar year. Production at the current site is in its final phase.
A spokeswoman for the company said ATH is in a statutory consultation period with the 60 employees at the site, which ends today.
"The group is working with the local authorities and other stakeholders on initiatives to minimise the number of redundancies as a result of this delay," said ATH.
Yesterday's announcement follows a series of gloomy updates from ATH in recent months.
Shares in the company plunged around 50% on June 14 when ATH said it was in talks with its bank "in order to secure adequate facilities for the group" after being hit by plunging prices and a multi-million- pound carbon credits bill.
The group's existing facilities with its lenders are scheduled to expire in May 2013.
Yesterday Mr Port said: "The discussions are continuing against a background where the group expects to continue to reduce debt even in these difficult trading conditions."
Shares in ATH Resources dropped 22%, or 1p, to 3.5p following the interim results announcement.
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