The UK’s biggest coal producer, based in Doncaster, has admitted to "deep-rooted problems" after it recorded losses of more than £100 million for the second year in a row.UK Coal, which has three deep mines in the Midlands and Yorkshire and employs nearly 3,000 people, has already taken some "immediate and difficult" steps to improve performance while it works on a full strategic plan that it hopes will identify a viable business model.

In a stark assessment of the business, new chairman Jonson Cox said production levels were consistently short of expectations, while costs have grown "relentlessly" with labour costs per employee up to £61,000 from £44,000 in 2006.It reported pre-tax losses of £124.6 million for last year, following on from £129.1 million in 2009 and £15.6 million the year before.While deep mine production improved slightly to 7.2 million tonnes, the company’s Daw Mill colliery near Coventry suffered a four-month "face-gap" as a result of its failure to open a new panel of coal before the previous face was exhausted. The company warned it faced a similar situation this year.Mr Cox, who joined the company in November, said: "It will be clear to those who have followed UK Coal that the causes of these severe losses are deeply rooted and require a complete overhaul of strategy and execution."The company has saved £12 million by withdrawing an inflation-linked pay award and reducing the size of its head office, while it has warned of the need to close the current final salary pension schemes.Mr Cox added: "The urgent need for further change has been communicated clearly to all colleagues and unions and we believe that the message is understood."UK Coal, which meets around 5% of the UK’s electricity needs, added that a wide-ranging strategy review was well advanced and should identify steps needed for its deep and surface mines and its property division.The company said total debt rose to £242.4 million last year but that its banking facilities had been renewed to July 2012.