[miningmx.com] – KEATON Energy CEO, Mandi Glad, said the company was whether to sit out the deterioration in the coal market following a poor first half of its financial year in which it posted a R96.9m loss.
The reversal in fortunes, from a R35.3m profit in the previous interim period, was largely owing to a non-cash items such as R10m interest charge on a dollar-denominated loan, and an impairment charge of R69.8m on its Vaalkrantz anthracite asset in KwaZulu-Natal province.
The company also didn’t have the repeat benefit of the R9m credit following conclusion of a legal matter with DRA, a consultanting firm with which Keaton had tangled, in the previous financial year.
The impairment of Vaalkrantz, which is held in Leeuw Mining, is related to fraudulent activities by members of the mine’s management and has been a factor in Keaton deciding to sell Leeuw Mining, excluding its Braakfontein thermal coal project.
The company has subsequently reported Leeuw Mining as a discontinued operation in its accounts.
“Is it a time to sit tight or is it a time to push and expand,” said Glad in a webcast to announce the interim figures earlier today. “We feel quite happy that we have the flexibility for expansion or we can can sit back and bank the cash,” she said.
The cash refers to the strong performance of Vanggatfontein, a mine near Delmas in Mpumalanga province that supplies Eskom, South Africa’s power utility, with 1.2 million tonnes (mt) of thermal coal in the period under review.
Vanggatfontein generated more than R300m in cash for the first half of the year and helped Keaton reduce net debt by R17m to R272m.
“If we conclude the KZN [Leeuw Mining] disposal successfully, that would leave us with single, long-life operation which is proven to be highly cash generative with the Moabsvelden expansion sitting in the wings,” said Glad.
Keaton bought Moabsvelden through the R195m successful takeover of Australian-listed Xceed Resources in February last year. The mine was supposed to start construction in the current financial year and is slated to supply 1.4mt a year (mtpa).
However, Keaton Energy is still waiting on an integrated water use licence (IWUL) from the South African government – an outcome about which it was sanguine. “We continue to await the IWUL for Moabsvelden and to finalise the off-take agreement [with Eskom],” said Glad. “From Keaton’s perspective, we have options currently.”
“We are very happy with how things are turning out with new-looking Keaton,” said Glad. “We continue to trade at huge 74% discount to net asset value, but management remains focused on managing the company, continuing the cost containment, and that Vanggatfontein will generate cash while the share will take care of itself,” she said.
