UK Coal is assessing a merger proposal involving its production-hit deep mines division.

The company, which has surface mining operations as well as the four deep mines in northern and central England, described the approach as highly conditional and at a very preliminary stage.

While it did not name the party involved, UK Coal said the interest could address its exposure to the volatile performance of its deep mines.

Shares in the Doncaster-based company rose by 12.38% to 59p yesterday as investors also digested speculation that Peel Holdings, which owns 28% of the firm, has received an approach for its stake.

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 has been hindered by difficult geological conditions.

It expects production at the site to start in April, rather than this month as previously envisaged.

UK Coal said: “The exposure of the group to the volatile performance in its deep mines is a significant concern to the directors and mitigating the effects of this exposure, by operating improvements or structural means, is a priority.”

The company also has deep mines at Kellingley in Yorkshire and Thoresby and Welbeck in Nottinghamshire, although the Welbeck mine is earmarked for closure.

As well as the deep mines, the firm has surface mines at Steadsburn in Northumberland, Cutacre in Bolton, Lodge House in Derbyshire and Long Moor in Leicestershire.