Hargreaves Services lost around a third of its value after it issued a profit warning as a result of ongoing problems at one of its Maltby wells in South Yorkshire.
The UK supplier of coal said further development on well T125 has had to be abandoned on health and safety grounds, and this will ultimately result in an adverse affect on profits for the year ending May 31st 2013 of between £12m and £16m.
Prior to the announcement, brokers were forecasting a profit before tax for the year to the end of May 2013 of £62.5m.
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Current trading is unaffected and the group's performance for the current year will be in line with management's expectations. The market is expecting profit before tax for the current fiscal year of £47.6m.
The firm was keen to emphasise that production will not be affected and no adverse affects should be seen in the results for May 31st 2012, but warned it was clear that the incident will result in a delay in the commencement of production on the T125 face. Current expectations are that the face gap between completing production on T15 and starting production on T125 could be between 12 and 16 weeks.
Gerry Huitson, Production Division Director, said: "This is a very unusual situation and to our knowledge this has never happened before in Maltby's long 100 year history. No one on the mining team, including our independent expert geologist with 32 years experience at many different UK mines, has come across these conditions before. We will revise the mining plans to avoid this locality and it is highly unlikely that these conditions will be found again in any subsequent panels."
Gordon Banham, Chief Executive, said he was confident that abandoning the mine was the right decision, adding that "there was nothing that could have been done by the mining team to foresee or avoid this situation."
"With the support and help of the staff and unions, the face gap should not reflect on the longer term viability or profitability of the mine and we will work hard to mitigate the resulting impacts. The group has the depth, breadth and financial strength to work through this and we do not see this event having any material adverse impact on the medium or long term prospects for the group," Banham said.
The share price plummeted 31.07% to 730p by 08:42.
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