Keaton Energy in takeover talks after expressions of interest

Mandi Glad, CEO, Keaton Energy

KEATON Energy said it had received “expressions of interest from various parties” regarding the takeover of the company – an announcement that added 7% to the firm’s share price today.

Keaton Energy, which produces about two million tonnes a year (Mtpy) of coal from its Vanggatfontein mine in Mpumalanga province, is now worth R277m having doubled in value in the last 30 days.

It gave few other details except to say the interest was “non-binding” and that the firm was assessing the merits of the offers. It had said in an earlier announcement that it had entered into “discussions” that might affect its share price.

The offers come at a time when Keaton is facing the challenge of having to finance its $20m to $25m (R285m to R355m) Moabsvelden project, a proposed 1.5 to 1.6Mtpy thermal coal mine near Vanggatfontein.

The close proximity of the two mines means that Moabsvelden will benefit from shared infrastructure which Keaton Energy CEO, Mandi Glad, said was a “cut and paste”. It is envisaged that some four million tonnes a year in coal will be produced by the combined operations. The coal would be sold to Eskom and to the export market.

One possible bidder for Keaton Energy is Coal of Africa (CoAL) which has stated on several occasions that it’s in the market for acquisitions in order to provide cash flow whilst it built its own projects.

CoAL recently brought the curtain down on a A$126.4m bid for Universal Coal, which is listed in Australia, after it failed to secure a long-term coal contract with Eskom in time.

Whilst a blow to CoAL’s fortunes, Brown said in September that the firm had resolved to continue looking for corporate opportunities. “The current company focus is to obtain a cash generating asset for the group,” he said in CoAL’s September quarter report.

“This will allow the company access to sufficient funds over time to cover company overheads, pre-project development costs for the Makhado project, and all regulatory charges to ensure the continuation of full compliance on all current assets,” he said. Makhado is expected to cost several billions of rands to develop.

“The increase in thermal and hard coking coal prices over the last quarter leaves the coal industry with a positive outlook and we are committed to maximising the benefit of this market for our shareholders,” said Brown.

Brown declined to comment on Keaton’s announcement today. Shares in CoAL have, however, increased 13% taking its market capitalisation to about R1.1bn.

Keaton would provide CoAL with both cash flow and growth potential. In addition to Moabsvelden, Keaton also owns the Braakfontein project which Glad said could produce between 1.5 to 2Mtpy.

“But it is very far off in terms of development,” said Glad in an interview with Miningmx in June. “The focus is to get Moabsvelden up and running.”