Trading Statement

UK Coal PLC
16 July 2002

                                  16 July 2002



                                  UK COAL PLC

                     SELBY MINE CLOSURE AND TRADING UPDATE




UK COAL announces today that production at its Selby mine complex will be phased
out over the next 20 months, due to deteriorating geological conditions and
continuing financial losses. The mines made operating losses of £35m last year
and £107m in the last three and a half years.



A four-month review of the operational options conducted by the Company has
concluded that mining should cease in the Spring of 2004 when coal faces at all
three collieries - Wistow, Stillingfleet and Riccall - simultaneously become
exhausted.  The complex currently employs 2,100 people.



The decision is supported by the conclusions of an independent study conducted
on behalf of the Department of Trade and Industry by IMC Group Consulting Ltd.



Gordon McPhie, Chief Executive, UK COAL PLC, commented:



'It has been apparent for some time that our Selby mines have not been able to
produce coal at an economic cost.  Measures designed to return the complex to
viability, including a rationalisation programme and focusing on the lower risk
reserves can reduce losses but cannot make the operations viable.



'We have decided to introduce a closure plan which will minimise financial
losses, fulfil our commitments to customers, and takes account of the interests
and welfare of our employees.'



Added Mr. McPhie: 'We welcome the package of measures announced by Government to
cushion the impact of the colliery closures on the communities it affects, and
to help equip employees with new skills needed to enable them to continue to
play a positive role in their communities.'



In order to maintain mining operations at Selby until the Spring of 2004, over
20 miles of tunnels need to be driven to access and prepare replacement faces
for production.  The company has set targets to achieve this objective and past
performance has shown that this is realistic.  However, the closure date may be
brought forward if targets are not met.

There will be no financial effect of the closure on the interim results to 30
June 2002, which will be announced on 9 September.  During this period, the
Selby group of collieries made operating losses of £14m (200l: £19m).  The shaft
treatment and pit top restoration costs for these sites are already provided for
in the group balance sheet. Redundancy costs totalling around £40m, £10m of
which will be government funded,  will be treated as an exceptional cost in the
full year profit and loss account for 2002.  Due to the earlier incurrence and
expensing of development costs, the cash flow during the closure period should
be neutral, provided that performance targets are met.



Trading Update



UK COAL's drive to improve productivity and reduce costs continues to make good
progress and is offsetting the delay to achieving full production at Daw Mill
Colliery, Warwickshire.  At Daw Mill, the face equipment and conveyor systems
are now operating well, having overcome initial commissioning problems.
However, a section of the face is experiencing some unforeseen geological
features, which are creating difficult operating conditions and delaying
progress towards full production.  Production on the face is currently averaging
5,000 tonnes per week.



Market conditions remain competitive and coal usage has fallen back from the
high levels of 2001.  Sales volumes in the first half of the year were 9.6
million tonnes (2001: 10.4 million tonnes), producing an increase in stocks of
1.0 million tonnes (2001: reduction of 0.6 million tonnes).



Production in the underground mines in the period was 8.3 million tonnes (2001:
7.6 million tonnes). Surface Mines produced 2.2 million tonnes (2001: 2.1
million tonnes) with planning approvals for 2.6 million tonnes being gained
(2001: 1.9 million tonnes).



The focus of management attention is on the continued improvements in unit costs
to create a long-term business that is competitive with imports in our home
market.



Enquiries:


Gordon McPhie, Chief Executive
UK COAL PLC                                                Tel: [phone]

Liz Morley/Fiona Grant Duff
Gavin Anderson & Co                                        Tel: [phone]






                      This information is provided by RNS
            The company news service from the London Stock Exchange