Coal chief calls for return to deep mining to fuel power-station pledge

THE head of the UK's largest coal producer has said that a return to deep mining north of the Border is essential if the Scottish Government is to follow through on its commitment to coal-fired power stations.

Don Nicolson, the new chief executive of the Scottish Resources Group, which owns several firms, including Scottish Coal, told The Scotsman that there are "perhaps billions of tonnes" of coal in Scotland that could not be accessed by surface mining.

He said: "There are millions of tonnes, perhaps billions of tonnes of coal in Scotland. A small fraction you can get at through surface mining. If coal was to become part of our long-term future, which we think it will, then you need to go deep. That is where the bulk of the coal reserves are."

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UK Coal has five deep mining sites – all in England. Scotland's last remaining deep mine, at Longannet, Fife, was closed in 2002. The Scottish Government plans to base the future of electricity supply on "clean" fossil-fuel power stations and renewables – and has said it will not build any more nuclear power stations north of the Border.

But it has come under fire from energy experts who have claimed that new coal-fired plants should not be built until a new technology – which does not yet exist – to capture and store carbon dioxide emissions is available.

Carbon dioxide from coal-fired power stations accounts for almost 20 per cent of Scotland's emissions. Scotland has a target of reducing greenhouse gas emissions by 80 per cent by 2050 to help prevent catastrophic climate change.

Nicolson admitted that a new deep mine could be some time off, refusing to comment on expectations that any new plant would open in Canonbie, Dumfriesshire, but added that coal mining could prove lucrative in the future, when commodity prices rebound.

Coal has dramatically dropped in price over the past six months, but Nicolson said he expects it to return to the $60 to $80 levels previously enjoyed by the industry. In August, the price was as high as $190 a tonne.

He said: "There are very high costs to set up, sinking shafts and all you have got to do. You need two things for this to happen. One, you need government's long-term commitment to coal because it will take a long time to get the coal out to get your money back. The second thing is commodity prices need to be high for a long period."

He added: "Coal prices today are pretty close to the bottom of the cycle. My view is once the world economy picks up, whether that takes one or two or three years, commodity prices will follow."

• Rio Tinto is in talks to raise up to $9 billion (6.2bn) from Chinalco, the state-owned Chinese aluminium firm which already holds an 11 per cent stake in the miner, reports claimed yesterday.

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The capital injection was intended to address growing concerns about the company's debt, it was reported, adding that the Chinese company was planning to buy minority stakes in Rio's mining assets.

It is understood that Chinalco was also considering increasing its stake in Rio to at least 15 per cent, which could be done through a placing to raise about $1bn.