Paul Miller, CEO, Keaton Energy
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» Keaton raises R320m for coal projects
» Newcomer Keaton plans 2-5mtpa coal output
» Xstrata offers $1bn for Eland Platinum

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Eland legacy behind R1bn Keaton
David McKay
Posted: Thu, 13 Dec 2007

[miningmx.com] -- KEATON ENERGY, a coal exploration firm, raised R320m earlier this month – more than double its target. Keaton CEO, Paul Miller, says it has an implied value of R920m, which is impressive considering cash flow is still a long way off.

There are a number of coal juniors, listed and unlisted, struggling to find their way, so why all the confidence in Keaton?

Well, the major reason is that shares in the company were snapped up by all the founders of Eland Platinum, a company Miller helped list while at Nedbank Capital.

Eland was recently bought for about R7bn ($1bn) by Xstrata, making many of its backers wealthy. Clearly, there’s hope Keaton can repeat the success of Eland even though it’s a highly different animal.

Says Miller: “Keaton is different from Eland because it’s coal, not platinum. It’s also a multi-project and in its early stages, whereas Eland was based on a single project.”

However, there’s one spooky parallel. When Eland listed, the platinum price shot up to $1,300/oz from $850/oz.

A similar price appreciation appears to be under way as Keaton sets about forming itself. Recent coal exports from Richards Bay Coal Terminal sold at $104/tonne. In the context of long-term historical prices that’s a massive increase from $25/tonne in the Nineties.

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About nine institutions bought Keaton shares at around R7 a pop; the Pouroulis family also bought shares. Critically, there’ll be another round of fund-raising next year when Keaton lists and – most likely – at a higher price.

Miller acknowledges the trouble of raising capital at two separate prices but adds that Keaton’s backers are unlikely to take a turn on the listing.

As for Keaton’s management, they’re locked into the share for two years post listing. “Though R900m may sound like a lot, other coal juniors – such as GVM Metals and Petmin – are trading at R2.2bn and R2bn respectively. So there’s lots of upside in Keaton,” says Miller.