Britain’s biggest coal producer UK Coal has reached an initial agreement with pensions trustees and power generation customers to extend their support package worth £90 million to the end of 2015.

Trustees of the pension fund will also invest £30 million in UK Coal’s property division Harworth Estates in return for a stake of 75.1 per cent. The division has 30,000 acres of land and other property. As part of the arrangement, from 2014 the pension funds will receive £30 million annually plus any money in the mining business.

UK Coal owes its customers and banks £138.3 million and has a funding deficit to its pension funds of approximately £430 million.

Under a "highly complex" plan the mining business will be left free of bank debt and with an affordable pension deficit reduction scheme.

Each mine will be restructured into separate legal entities to prevent one mine’s failure affecting all the mines. The move is expected to create stability for the mining industry.

The company slumped to a £20.6 million loss in the six months to June, as poor performance from its largest mine Daw Mill in Coventry contributed to a 20 per cent fall in production.

Daw Mill, which employs 800 staff, is unlikely to continue operations beyond 2014 when coal panels will be exhausted, the group warned. This warning follows a recent ballot with workers rejecting new shift patterns but chairman Jonson Cox remains hopeful of reaching an agreement.

Mr Cox said: “The bigger story is that we are really at the point where a restructuring of the balance sheet is now agreed by a heads of terms agreement and that moves us a step towards being able to ensure the survival of UK Coal.”

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