HARGREAVES Services has reaffirmed its commitment to coal mining in Scotland even as its chief executive admitted trading conditions are the "most challenging" he has ever seen.

Gordon Banham has already overseen a major restructuring of operations at the company designed to save about £3 million.

The firm said it will be booking £4.5m of one-off charges, including £1.4m for redundancies in the first half of its financial year.

Along with mining it also has large divisions in industrial services and logistics that are not affected by commodity prices.

Hargreaves, which employs about 500 in Scotland out of a total workforce of more than 2,000, said in recent months it has seen conditions in the coal market continue to deteriorate, with the price it gets per tonne having fallen to £38.

That is about £17 lower than when the business bought its Scottish opencast mines two years ago from the administrators of Scottish Coal and ATH Resources.

Alongside that a number of coal-fired power stations, including Longannet in the Firth of Forth, have announced plans to close.

Shares in Hargreaves closed down 24.5p, or seven per cent, at 323.25p.

Its Scottish mines include Broken Cross in Lanarkshire, Duncanziemere and Netherton in Ayrshire, Glenmuckloch in Dumfries and Galloway and Muir Dean and St Ninian's in Fife.

Hargreaves had warned in February it would trim production and may have to review job numbers.

Now it has confirmed it may need to cut production further and said: "There remains very limited revenue visibility from UK power generators. In addition, the coal price, a key driver of the profit in our coal production and distribution division, has continued to fall and is currently £3 lower at approximately £38 per tonne.

"Whilst this will impact short term profits, the group continues to take the view that it is right to continue to protect the viability of its current Scottish operations, subject to reviewing mining plans and reducing forecast production volumes where necessary."

It added the longer term opportunity "continues to outweigh the negative impact on short term profits".

Mr Banham said: "Market conditions in the coal sector are the most challenging that I have ever seen."

Nicky Wilson, national president of the National Union of Mineworkers, said the industry was being hampered by cheap foreign imports and high levies at home such as the Carbon Floor Tax.

On the clear-up and remediation work around its mining sites Hargreaves said: "The group also continues to work hard with government and other stakeholders on a solution that will allow the commencement of major restoration projects."

It has been estimated the cost of landscaping Scotland's opencast mines could cost as much as £200m.

At Glenmuckloch, where the land is owned by the Duke of Buccleuch, restoration work has been ongoing for about two years with a view to establishing green energy projects.