OPEN-cast miner Scottish Coal's financial results have been hit by wet winter weather, with production and sales below target in the current financial year to end- March.
This update on the performance of Scottish Coal, the largest open-cast coal miner in the UK, came in the interim results of investment company Palmaris Capital. Palmaris has a 16.1% stake in Scottish Coal parent company Scottish Resources Group, which was close to floating on the stock market in 2010 but pulled these plans at the eleventh hour.
Palmaris said the "management team of SRG recognises that SRG's performance is capable of improvement".
No-one from SRG was available for comment.
Palmaris signalled potential for a significant cut in its valuation of its SRG holding. It values this stake, its sole remaining investment, at £15.45 million.
Palmaris said: "SRG's results so far for the current year to March 2012 are behind budget in a number of areas and are likely to end up below the previous year's figures rather than significantly above them as had been hoped six months ago.
"In the previous year, four million tonnes of coal were sold for a total turnover of £209m, which produced operating profits of £13m. The operational performance of SRG has been affected by the fact the west of Scotland has endured above-average rainfall during the winter resulting in coal production and coal sales being below target."
Shares in Palmaris fell by 0.25p or 4.8% to 5p yesterday.
Palmaris said: "We have not undertaken a full review of the value of SRG at this time, as the results to March 2012 are not available, and have therefore retained our previous valuation at 96p per share. This maintains the value of SRG at £96m and of our investment at £15.45m, and our net assets at £15.5m, equivalent to 9.9p per Palmaris share.
"Were we to have had sufficient financial information to have undertaken a full review of the SRG valuation, we believe this would have resulted in a substantial reduction in the value of our SRG holding."
Palmaris cited a 20% fall in the spot coal price in the last five months as an "issue of concern". While noting most sales were on fixed-price contracts and this should not affect SRG results this or next financial year significantly, it added: "It is important for SRG that spot prices increase before contracts for subsequent years are negotiated."
It said SRG management was exploring ideas including opening "new, lower-cost mines".
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