Trading Statement

UK Coal PLC
19 July 2006

                             


                                  UK Coal PLC

19 July 2006

                                 Trading Update


In line with best practice, UK COAL PLC is issuing the following update which
covers the half year to 30th June 2006. It is anticipated that the interim
results for the six months ended 30th June 2006 will be announced on Wednesday
6th September 2006.


Trading Update

The Group currently anticipates reporting a first half year profit before
taxation of £7m (H1 2005: £31m loss), including a revaluation gain on investment
properties of £5m (H1 2005: £5m). Sales for the six-month period were £193m (H1
2005: £164m).


Deep Mines operating loss before exceptional items was £2m (H1 2005: £30m). The
second quarter was affected by difficult ground conditions at Maltby and costs
incurred of approximately £4m in accessing new reserves at Welbeck and
Kellingley. Total Deep Mine unit costs were £1.37 per gigajoule (H1 2005: £1.50
per gigajoule). Surface Mining achieved a profit of £1m (H1 2005: £1m), which
includes a release of £3m of restoration provisions as a result of gaining
planning permission for a surface mine site at Stobswood North, Northumberland.


The Property and Power businesses performed in line with expectations,
generating a trading profit of £1m for Property (H1 2005: £1m) and £2m for Power
(H1 2005: £4m). Property disposal profits were £4m (H1 2005: £4m), and £5m (H1
2005: £5m) was realised from increases in the value of the Group's investment
properties as a result of increased occupancy rates.


Financing costs were £5m (H1 2005: £4m) including a charge of £2m for unwinding
of discounts (2005 £2m).


Exceptional gains were £1m (H1 2005: £12m expense). Coal Investment Aid income
was £5m (H1 2005: £8m). Rossington closure costs were £2m, and Harworth
development costs of £2m invested in the first half year to support future
mining were written off.


As previously reported, UK COAL has retained £12m of assets relating to Harworth
colliery. UK COAL is currently trying to secure a market for the coal at prices
which will allow the mine to continue in production. In the event that this is
not successful, a full review of the asset values will be conducted and may
result in an additional non-cash charge.


Total borrowings at 30th June 2006 were £104m (December 2005: £96m), including
leasing and hire purchase agreements but excluding cash balances held in respect
of insurance requirements and subsidence security funds. Payments have been made
in the half year in respect of surface mine restoration and land rehabilitation
of £7m, additional contributions to the companies defined benefit pension
schemes of £5m, and payments in respect of redundancy provided in 2005 of £4m.


The deficit on the Group's defined benefit pension schemes reduced to £92m
(December 2005: £117m). The reduction is a result of net actuarial gains, mainly
arising from higher bond yields.



Sales and Contracts


Sales volumes for the first six months of 2006 were 5.7 million tonnes (H1 2005:
4.8 million tonnes) against production of 5.5m tonnes (H1 2005: 4.6m tonnes).
Unit income rose to £1.39 per gigajoule (H1 2005: £1.32 per gigajoule).


Coal under contract at the end of June, including an estimate of sales to
non-Electricity Supply Industry markets, was 27.4m tonnes. Average proceeds
across all years (in 2006 prices) are projected at between £1.39 and £1.51 per
gigajoule. These prices are subject to full RPI and are partly dependent on the
outturn of international coal prices.


The Joint venture company formed in the second quarter for marketing domestic
and industrial coal is performing in line with expectations.


Energy Review


UK COAL welcomes the DTI's Energy Review report, which underscores the important
long-term contribution of coal-fired generation and aims to optimise the use of
economical domestic coal reserves. In particular, we are pleased with the
Government's decision to convene a Coal Forum, which will bring together
electricity generators and coal producers to help find solutions to secure the
long-term future of domestic coal production.

UK COAL is now going to work hard to secure contract terms which will allow the
company to invest in new mining operations, and help deliver the Government's
energy policy goals



Outlook


Deep Mines continue to develop as expected. Output for the second half of the
year is expected to be 5.0 million tonnes, resulting in overall profitability
for Deep Mines.


Surface Mining output is expected to increase in the second half of the year as
new mines come into production and output for the full year is expected to be
around 0.8 million tonnes.


Surface Mining progress in planning is very encouraging and three new
applications covering 1.9 million tonnes were granted in 2006. Production at
these sites is expected to commence in the fourth quarter of 2006.



The current status of surface mine permits are summarised in the table below.

Site                                             Tonnes       Remaining Tonnes
Maidens Hall                                  1,700,000                678,000
Cutacre                                       1,500,000              1,500,000
Stony Heap                                      257,000                257,000
Stobswood North                                 920,000                920,000
Long Moor                                       725,000                725,000
Sites with Planning                           5,102,000              4,080,000

Potland Burn                                  2,000,000              2,000,000
Sharlston                                       360,000                360,000
Lodge House (Public Inquiry)                  1,000,000              1,000,000
Steadsburn                                    1,000,000              1,000,000
Oxcroft                                          15,000                 15,000
Site in Planning / Public Inquiry             4,375,000              4,375,000


The Property business progressed further with the arrival of Jon Lloyd, Property
Director on the 3rd July 2006. This appointment to the Board will increase the
focus on the strategic development of the Group's property assets.


Good progress is being made on a number of fronts and the group is well placed
to benefit from a better environment for indigenous coal in the future.



Production-6mths to June (m t)            H1 2006            H1 2005
--------------------------------------------------------------------
Daw Mill                                      1.6                0.7
Kellingley                                    1.2                1.0
Thoresby                                      0.9                0.8
Welbeck                                       0.6                0.5
Maltby                                        0.4                0.4
Harworth                                      0.4                0.3
Rossington                                    0.2                0.2
Other Closed mines                            0.0                0.1
--------------------------------------------------------------------
Total Deep Mines                              5.3                4.0
--------------------------------------------------------------------
Surface Mines                                 0.2                0.6
--------------------------------------------------------------------
Total Production                              5.5                4.6
====================================================================



Note 1: Mining Production Output for the Half Year to June 2006 (2005)



Enquiries:

Financial, Gavin Anderson & Company                         020 7554 1400
Ken Cronin
Michael Turner


Operational
Stuart Oliver                                               07774 231 178



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