SHARES in coal producer Hargreaves Services, which operates seven surface mines around Scotland, have plunged by six per cent after bad weather hit production at the start of the year.

The company, which moved into Scotland when it picked up sites from Scottish Coal and Aardvark (TMC), the trading arm of ATH Resources, last year, warned the conditions would reduce the contribution of its production division by between £3million and £5m in its current financial year.

Delays in commencing operations have also led to a production shortfall over the period.

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The firm said the performance of its surface sites, which include Broken Cross in South Lanarkshire, Duncanziemere in East Ayrshire and Glenmuckloch in Dumfries and Galloway, had improved since the end of February, telling investors that current production rates are encouraging.

However, in a trading update for the year ending May 31, the company said "it has not been possible recover all of the shortfall in production in the current period."

Hargreaves Services, which employs more than 450 staff in Scotland, said coke markets had also presented challenging trading conditions for it site in Monckton, South Yorkshire.

The site, near Barnsley, has been producing metallurgical coke for more than 130 years.

It added that contract renewals have seen its production division face continued pricing pressures during the second half of the year.

Away from production, Hargreaves reported that profits in energy and commodities, transport and industrial services "remained resilient."

It told the City that the full-year performance of each of the divisions is "anticipated to be in line with management's expectations."

Meanwhile, the company said it remains in discussions with the UK government over its potential involvement in a private sector-led consortium to fund the managed closure of UK Coal by late 2015.

The proposal would see Hargreaves and Harworth Estates each invest £5m, alongside a £10m interest bearing commercial loan from the UK government, to allow UK Coal to avoid immediate insolvency.

It would also allow the solvent closure of its deep mines and the repayment of loans.

Hargreaves Services is due to announce its preliminary results on September 9. The company's move into Scotland last year was backed by £40m of new funding from shareholders.

Hargreaves has three operational sites in East Ayrshire, two in Fife, one in South Lanarkshire and one in Dumfries and Galloway. These include the former Scottish Coal site at Broken Cross in South Lanarkshire, where production recommenced early this year.

Hargreaves has a joint venture with Buccleuch Estates, the family interests of the Duke of Buccleuch, to retrieve coal from the Glenmuckloch mine in Dumfries and Galloway, and to restore it.

It is operating the bulk of the seven mines in Scotland as the main contractor for the "hivecos" of Scottish Coal and ATH Resources. The hivecos are in the process of settling the liabilities of those companies, which went into liquidation.

Shares in Hargreaves Services closed the day down 50.5p or 6.09 per cent at 778.50p.