HARGREAVES Services has warned that it may have to make job cuts but that it is working to maintain its Scottish coal mining presence even as prices continue to fall.

The group said it has seen a £14 per tonne reduction in coal prices since it acquired assets from ATH Resources and Scottish Coal almost two years ago.

The plunge in oil prices along with a relatively mild winter has also reduced the need for power stations to burn coal.

Hargreaves said at current prices of £39 per tonne, a nine-year low, it thermal coal production operations are loss making.

As a result it plans to focus on mining projects which produce higher value speciality coals for the domestic heating and industrial markets.

The company also cut its production forecast from Scotland from two million to one million tonnes for its next financial year. It expects to produce about 1.3 million tonnes in the current trading year which runs until the end of May.

In Scotland Hargreaves employs around 500 people at locations including Broken Cross in Lanarkshire, Duncanziemere and Netherton in Ayrshire, Glenmuckloch in Dumfries and Galloway and Muir Dean in Fife.

Finance director Iain Cockburn said: "We will be looking at job losses across the business, including Scotland, but will be doing our best to minimise these.

"We are very committed to keeping a viable mining operation in Scotland.

"We haven't started any formal processes yet but with the outlook [job losses are] obviously a risk."

The company is looking to reduce its fixed overheads by £3m before the end of the current financial year in May.

In the past year it has sold its Imperial Tankers business along with closing the Monckton coke works and other small non-core units.

Mr Cockburn suggested offering tax exemptions on the restoration of opencast coal mining sites would be one way to ensure continued employment.

The coal industry has been lobbying for this to be brought in and is hopeful something may be announced in next month's UK Budget.

Mr Cockburn said: "We are also working very hard with government to try and get tax changes in place to get restoration projects in place.

"That will have the double advantage of giving the industry an opportunity to create jobs and capacity to get men and machines into restoration projects. That will help [the industry] to get through these difficult times of low coal prices and deal with the outstanding legacy across Scotland.

"If we can get this exemption across the line and if the industry can get sight of it [in The Budget] that will mitigate the need for any job losses and will provide job creation opportunities."

Mr Cockburn confirmed it is looking for cost savings across its whole business which employs 2,200 and includes large divisions in industrial services and logistics which are not affected by commodity prices.

Hargreaves reported revenue from continuing operations slipped 23.7 per cent from £460.5m to £351.2m in the six months to November 30. Underlying pre-tax profit was down almost 29 per cent from £28.5m to £20.3m although net debt was trimmed from £95.2m to £40.4m. Hargreaves also upped its interim dividend from 8.8p to 10p.

Mr Cocckburn believes the long-term outlook for coal was still solid and said: "We are being prudent and assuming the recovery [in price] is not going to happen in the short term so we are working to size our overheads at the lowest possible level so we can weather through this difficult period and maintain a strong and stable group.

"The last thing anybody wants in the coal industry is any further failures of mining companies. We are making sure first and foremost that we are running the business in financially prudent and sensible fashion."

Hargreaves added that it was hoping to move forward with renewable projects in Scotland citing the recent granting of planning consent of 43.5 megawatts of wind projects in South Lanarkshire as a "first step".