Matsushima Coal Mining Co., operator of one of the nation's two remaining coal mines, has told authorities it plans to cut its annual output of 1.2 million tons to 400,000 tons, company sources said Tuesday.

The Nagasaki Prefectural Government was informed of the plan by company President Tsutomu Tashiro, the sources said.

The mining firm is a subsidiary of Mitsui Matsushima Co. and operates the Ikeshima Mine in Sotome, Nagasaki Prefecture.

Talks are under way between the mining company and the Ministry of Economy, Trade and Industry over the plan, the sources said.

Matsushima has been rocked in recent years by difficulties including a tunnel fire last year, gushing water disrupting mining in tunnels and intensive competition from cheaper imports, they said.

On top of this, the central government is set to terminate its policy of subsidizing domestically produced coal by the end of this fiscal year.

Because the policy calls for electric utilities to buy domestically produced coal until the end of fiscal 2006, Matsushima will continue production until that year, the sources said.

But it is contemplating asking authorities to contribute financial resources to enable it to continue operations even until then, they said.

They added that the planned production cutback will probably force the company to eliminate a sizable portion of its workforce of 1,000 at the firm and its affiliates.

The local government and business circles are looking at how to mitigate the negative repercussions of the sharp cuts on the regional economy, they said.