The UK's largest coal producer, which is in talks with a potential buyer, ran up a loss of �10m in the first six months of the year.

RJB Mining, which recorded an underlying profit of �6.6m for the same period last year, saw coal production decline 14% in the 13 mines it operates. Seventeen remain in the UK in all.

But the firm said that the decline of sterling against the dollar, and the possibility of up to �75m in government aid, left the company "well placed" to benefit from an upturn in the world coal market.

The firm's chief executive Richard Budge declined to comment on the implication of the figures on a takeover deal the company is negotiating with an unnamed bidder, thought to be US conglomerate Renco.

Continuing discussions

"Discussions have been continuing... but at this stage no formal offer has been received," said the company profits statement, published on Thursday.

An insider told BBC News Online a formal offer should not be expected until confirmation of the state aid injection is received.

"If I was going to buy a firm, I would like to know if up to �75m was going to be made available to it," the insider said.

The UK government is expected to hear by October whether it will be allowed, under European Union competition rules, to prop up the British coal industry.

The government in July applied to Brussels for permission to subsidise the sector by a total of �100m to compensate collieries for sales lost as power firms switch to other fuels.

Threat lifted

The prospect of government aid has lifted a closure threat from Ellington and Clipstone pits, the statement said.

While coal production declined between January and June, "robust" sales allowed the company to reduce stockpiles by more than a third.

The company has also ordered an audit of its land and property portfolio - thought to extend to almost 50,000 acres - which is seen by City analysts as an attractive asset for any potential bidder.

Shares in RJB, which have underperformed the stock market by more than 90% in the last five years, stood 1p higher at 65.5p in early afternoon trading on Thursday.