Widening half-year losses - at £81million eight times worse than they were a year ago - are just the prelude to a profitable new era for UK Coal, chief executive Jon Lloyd promised today.

The quoted Midlands and South Yorkshire miner, one of the last vestiges of the old British Coal, said that from next year production and prices will improve and that things may begin to turn back round on its property arm building homes on the old coalfields of Britain.

Mine operating losses worsened to £38 million in the first half as top class production at Daw Mill near Coventry was offset by the last output from difficult-to-mine, inefficient seams at Kellingley in Yorkshire and Thoresby and Welbeck in Nottinghamshire. Welbeck is being closed next year while operations at Kellingley and Thoresby open up new - and what is hoped high-performing - seams.

That comes as UK Coal - Britain's biggest coal producer - shakes off the shackles of old long-term supply contracts with huge coal-fired power stations and move to new arrangements which will see prices paid rise by at least 25%.

Movements in the planning process and an improved property market should also help after portfolio revaluations led to £37 million of property losses in the period. "We have the building blocks in place and we are right on track," said Lloyd.