Investment Aid

UK Coal PLC
18 December 2003





                                                                18 December 2003

                    UK COAL PLC RESPONSE TO INVESTMENT AID

Detailed plans for a two-year investment programme are being finalised by UK
COAL following the Government's announcement of the offer of £36.5 million in
Investment Aid to access coal reserves.

Projects at eight collieries would gain access to more than 70 million tonnes of
reserves over the two-year period if all the schemes at the UK COAL mines in the
Midlands, Yorkshire and the North East go ahead.

UK COAL Chief Executive Gordon McPhie said: 'We have responded to the Investment
Aid offers positively in respect of five of the eight collieries, Daw Mill,
Harworth, Kellingley, Maltby and Thoresby, amounting to £26.6 million. The aid,
which amounts to a maximum of 30 per cent of project costs, is subject to the
details of the projects envisaged and proof of financing at some collieries
being confirmed. We are continuing to review the offers in respect of Ellington,
Rossington and Welbeck collieries where geological features have caused us to
re-examine mining plans.'

The current position at the eight collieries for which the Department of Trade
and Industry has made Investment Aid offers, is as follows:

   • Daw Mill, near Coventry: Investment Aid of £9.6 million has been offered
    in line with the application for aid for projects costing £35.5 million in
    the first two-years, during which time, over 15 million tonnes of coal will
    be accessed. The projects include the development of over 3,200 metres of
    underground roadways, and the purchase of equipment for a new coal face.


   • Harworth Colliery, North Nottinghamshire: Investment Aid of £4.6 million
    has been offered in line with the application for aid for projects costing
    £15.4 million in the first two-years. The projects include the development
    of a new 320-metre long retreat face and driving 6,000 metres of underground
    roadways. Around 8 million tonnes of coal is accessible in the area being
    developed.


   • Kellingley Colliery, Knottingley, West Yorkshire: Investment Aid of £7.2
    million has been offered in line with applications for aid for schemes
    costing £25.6 million in the first two-years. The projects involve driving
    around 20,000 metres of new underground roadways to gain access to, and open
    up, 10 million tonnes of coal reserves.

The aid package was agreed taking into account the acceptance of flexible
working arrangements to promote colliery viability; measures are in hand to
extend shift working in developments from the start of April, enabling over 100
job offers being made to men at the Selby Complex who wish to remain in the
industry, and on the coal face from July onwards, when around a further 100 job
offers will be made to potential Selby transferees.

   • Maltby Colliery, near Rotherham, South Yorkshire: Investment Aid of £2.4
    million has been offered in line with the application for aid for projects
    costing £11.6 million in the first two-years. The projects include 5,000
    metres of new underground roadways. Around 8 million tonnes of coal is
    available in the area being accessed at Maltby, where the introduction of
    new flexible working practices has enhanced the opportunity for viable
    longer-term operations.


   • Thoresby Colliery, Edwinstowe, Notts: Investment Aid of £2.8 million has
    been offered in line with the application for aid for projects costing £10.8
    million in the first two-years. The projects include the refurbishment of
    equipment and repair of roadways into the Ollerton reserves; 2,000 metres of
    new underground roadways and the purchase of equipment. Over 9 million
    tonnes of coal is available in the area being accessed.


   • Ellington Colliery, near Morpeth, Northumberland: Investment Aid of £1.1
    million has been offered for the first two-years for a project, which will
    cost around £13 million to complete. The project involves developing and
    exploiting new reserves, the purchase of a new coal cutting machine and
    other mining equipment and an extension to the locomotive transport system.
    However, in view of recent results and performances, UK COAL has concluded
    that the aid offer is insufficient in itself to justify ongoing investment.
    In a bid to reduce losses, the bord and pillar system of mining at Ellington
    is to cease early in the new year and work on the development of a face due
    to be ready next autumn is to be suspended. The colliery is seeking
    volunteers for around 70 redundancies, and will become the subject of a
    review process before a final decision on the offer of Investment Aid is
    made. Meanwhile, work will continue on equipping a replacement longwall face
    ready for production to commence in the next few weeks, and a successor
    face.


   • Rossington Colliery, near Doncaster, South Yorkshire: Investment Aid of
    £3.2 million has been offered in line with applications for aid for schemes
    costing £15.3 million in the first two-years. The projects involve driving
    6,700 metres of underground roadways to access nearly 6 million tonnes of
    reserves. However, as geological faulting will result in a production gap,
    mining plans at Rossington have been revised to mitigate the effect. The
    revised plans will entail reduced output in 2004 and working a production
    face on advance before returning to the normal retreat system. As a
    consequence, operations at Rossington are to be the subject of a review
    process before a final decision on the offer of Investment Aid is made.


   • Welbeck Colliery, near Mansfield, Notts: Investment Aid of £5.2 million
    has been offered in line with applications for aid for schemes costing £17.9
    million in the first two-years. The project involves driving nearly 13,000
    metres of new underground roadways to access nearly 9 million tonnes of
    reserves. However, geological faulting has resulted in a change of mining
    plans, which will entail a short-term move to advance mining before
    returning to the normal retreat system, thus reducing output in 2004. As a
    consequence, operations at Welbeck are to be the subject of a review process
    before a final decision on the offer of Investment Aid is made.

Current Investment Aid offers remain open until 29 February 2004.

The Selby Mining Complex, which was due to cease production in March 2004, has
continued to incur losses, albeit at slightly reduced levels. The mining
operations have been re-phased with Wistow Mine ceasing production in February.
Riccall and Stillingfleet will now cease production in June 2004 when the mines
become exhausted and the Selby Complex will then be closed.

Output at Daw Mill has continued to improve and in the last quarter average
production will be circa 60,000 tonnes per week.

Progress has been made at reducing costs at the eight ongoing mines. However,
geological and operating problems at Ellington, Rossington and Welbeck have
reduced outputs resulting in unit operating costs of circa £1.09 per GJ at the
ongoing collieries for the last quarter. Costs for 2004 will be influenced by
increases in line with inflation and the effect of the revised mining plans at
Rossington and Welbeck, which are expected to add around 3% to unit costs.
Against this background UK COAL is continuing to work to reduce unit costs.

MEDIA CONTACTS:

UK COAL PLC
Gordon McPhie, Chief Executive         01302 751751

Financial
Gavin Anderson & Company               020 7554 1400
Liz Morley / Ken Cronin

Operational
Stuart Oliver                          01525 381759
                                       Mob: [phone]




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