THE owner of Yorkshire’s Maltby Colliery today said it was no longer pursuing a merger deal with the UK’s biggest coal mining firm.

Hargreaves Services, which sources, handles and transports a wide range of bulk materials, announced in March that it was reviewing the possibility of a tie-up with UK Coal. It said today that while UK Coal had many valuable assets it no longer wished to proceed with its interest.

UK Coal has surface mining operations as well as three active deep mines in northern and central England - at Kellingley, Thoresby and Daw Mill.

Shares fell by 1% today as UK Coal offset any investor disappointment over the failure of the merger by revealing that the current rate of production at its mines had been in line with expectations.

Production last year was at the lower end of the group’s forecasts, while preparation for a new coal face at its Daw Mill deep mine in the West Midlands was recently hindered by difficult geological conditions.

It admitted in March that the Hargreaves merger interest could help address its exposure to the volatile performance of its deep mines.

Durham-based Hargreaves produces more than 1.2 million tonnes of coal per year at Maltby, a site it acquired from UK Coal in February 2007. About 60% of Maltby’s total output is supplied under a long-term contract with Drax power station, Europe’s largest coal-fired power plant.

It is also a leading logistics firm and provides management services to utilities firms including Scottish Power, E.On and British Energy.