Keaton green lights R130m coal mine

David McKay | Wed, 25 Nov 2009 17:57
[miningmx.com] -- KEATON Energy, the R744m coal producer and exploration business, said it would close its Klip colliery in the first quarter of 2010, but would also spend R130m in the first phase development of its Vanggatfontein project.

Paul Miller, CEO of Keaton Energy, one of South Africa's few successful coal junior mining firms, said the first phase of Vanggatfontein would see some 30,000 tonnes of metallurgical grade coal produced a month.

First production in the third quarter of next year "should be well timed for the expected market upswing," he said.

Some premium pricing for domestically consumed coal had also been introduced into the market after ferroalloy producers switched their furnaces back on, he said.

Construction of phase 1 also included a processing plant with nameplate capacity of 50,000 tonnes/month.

"While the development of phase 1 will be the company's focus for the next six months, a decision was also likely during this time on phase 2," said Miller in a statement to the JSE.

Phase 2 would produce thermal coal but this turned on conclusion of an offtake agreement with Eskom, South Africa's electricity utility.

The cost of the first phase would be financed from R366m in cash reserves, funds that were raised ahead of Keaton's listing in 2008.

Shares in Keaton Energy were 1.17% higher at the close of the JSE. The firm was last trading at R5.20/share.

Closure of the Klip colliery, situated in the Balmoral/Ogies district, was because "the small mine" had been worked out, the company said.

Commenting on other prospects, Miller said he was confident Keaton's Sterkfontein project would become "a major new mine" as market conditions improved.

But there were question marks over the progress of some of the Amalahle prospects. Preparatory work ahead of a mining right application to government had been completed, but Miller said the firm was in an unresolved legal dispute with Anglo Coal, a business division of Anglo American, over the Amalahle's Braamspruit project.

Keaton reported diluted headline share earning of 3.4c for the six months ended September 2009 from 1.3c a year ago.