www.miningmx.com | energy Newcomer Keaton plans 2-5mtpa coal output

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Paul Miller, MD Keaton Energy

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Newcomer Keaton plans 2-5mtpa coal output
Allan Seccombe
Posted: Wed, 24 Oct 2007

[miningmx.com] -- KEATON Energy plans to raise R300m towards its two key coal projects in South Africa, which could produce two million tonnes of coal within three years. The company will list on the JSE�s main board before March 2009, said managing director Paul Miller.

Keaton, which has two its two main projects near Bethal and Delmas in South Africa�s main coal fields, will raise up to R150m in a private placement in November and then a similar amount in an initial public offering (IPO) ahead of the listing, he said.

The Delmas project promises to be the flagship venture and is planned to be an opencast mine. Drilling has only started this October. But Keaton is so positive about the project its board has agreed to appoint consultants to prepare for a mining right application.

We have more than enough coal

Keaton wants to have measured resources ahead of the listing and the Sterkfontein property near Bethal must be transferred to the company from the empowerment company holding it at the moment, Miller said.

Sterkfontein will be an underground mine, with a twin decline shaft and a washing plant. The project will cost upwards of R200m. Preliminary results show 40% of the coal is high-grade export quality thermal coal, 40% lower-grade thermal coal and 20% discards.

Keaton will not play the role of a consolidator on the South African coal fields, a claim made by many other smaller coal companies, he said. Instead, it will look for growth through buying contiguous coal properties and partnering empowerment companies in new prospecting applications.

�We don�t need to consolidate. We have more than enough coal with the assets we have. We are not in the business of buying up other people�s proven resources,� he said, adding Keaton wanted to come in far down the value chain and build up value for shareholders.

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Miller said the company could grow to output of five million tonnes of coal, both thermal and metallurgical, with the existing asset base.

On listing, the founders, including the Pouroulis family, a family already well known in the South African platinum and diamond sectors, management and companies that have accepted shares as payment will hold some 40% of the company.

Miller estimates Keaton will have a market capitalisation of between R1.2bn and R1.5bn.

Keaton will not immediately seek out export markets, Miller said, arguing that domestic prices were near export parity levels for export-grade coal.

He raised the point that Indian thermal coal users burnt the same low-grade coal that South African power utility Eskom uses. Eskom buys about 20% of its coal on the spot market.

�If that market opens up it will become very interesting,� he said.

Keaton will only begin talking to prospective buyers of its coal, including Eskom, once it has a measured resource.

Drilling at Delmas should be completed by the end of November and geological modelling completed in January. It could submit a mining rights application for the opencast project during the first half of 2009. It takes nine to 12 months for the government to process a mining right.

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