[miningmx.com] – KEATON Energy (Keaton), the R470m coal junior, is to refinance its balance sheet – an injection of firepower ahead of concluding the R182m takeover of Xceed Resources, expected by February.
The bid for Xceed Resources is being financed with the assistance of Gunvor, the commodities trading group which is Keaton’s major shareholder. Once complete, however, Keaton still has to invest around R240m in Moabsvelden, Xceed’s principle project.
Moabsvelden is near Vanggafontein, Keaton’s flagship asset, and has an estimated 30.7 million tonnes in proven coal reserves and a total of 43.9 million tonnes of total reserves.
Glad said Moabsvelden would be run like a satellite pit of Vanggatfontein sharing infrastructure, such as the wash plant. As a result, the capital required to bring Moabsvelden into production would be less than originally anticipated by Xceed (which was planning a bigger operation in any case). Yet it’s worth noting that the outlay on Moabsvelden is still about half Keaton’s market value.
Keaton has lifted cash reserves to R62.9m at the half-year stage (as of September 30) after a somewhat hairy period in which reserves slipped to just under R20m at the beginning of the 2014 financial year from R27.5m in the comparative half-year.
Jacques Rossouw, Keaton CFO, estimated the company would have doubled cash resources by the year-end, but added that he was also keeping an eye on providing yield to shareholders at some future point. “Potentially there is room for dividends,’ he said.
A dividend is not imminent, however as Keaton is building up to saleable production of about 5.3 million tonnes a year (mpta) by about 2018. Moabsvelden will contribute some 1.4mpta of that target with Koudelager and Braakfontein projects due to come on stream in 2014 and 2016 respectively.
Keaton CEO, Mandi Glad, expressed a touch of frustration the market hadn’t more warmly greeted the company’s recovery. Nonetheless, the stock has done pretty well in the second half of the calendar year. Shares in the company are now only 9.5% off the 12-month high. The company’s value had nearly halved in May.
Said Glad: “If we are lucky, we will be in a position to convince the market of our sustainability and worth’. Glad was commenting following the publication today of Keaton’s half year results in which it staged an impressive R106m year-on-year turnaround posting a R42m taxed profit compared to a R64m loss at in the interim in the 2013 financial year.
All the key metrics look healthier for the coal junior which primarily supplies coal to Eskom, as well as third party washing of thermal coal and the supply of metallurgical coal from its Vanggatfontein and Vaalkranz operations.
Vanggatfontein, situated in Delmas in South Africa’s Mpumalanga province, is the driver of the business, however.
It produced 1.14 million tons (mt) to Eskom, an increase of 55% year-on-year and was the major contributor to an increase in cash generated to R205m of which R135m was ploughed back into Vanggatfontein.
