[miningmx.com] – KEATON Energy said it would return to profit-making in the current 2014 financial year following a solid first two months, and added that its strategic goal of becoming a 5 million tonnes/year miner of thermal and metallurgical coal was intact.
These comments come after a disappointing performance in the 2013 financial year of which the low-lights were below budget thermal coal throughput to Eskom, a disappointing capital raising exercise, and litigation.
These problems posed to management – which was restructured during the 12 months under review – were compounded by operational challenges including the exhaustion of Pit 1 at Keaton Energy’s flagship Vanggatfontein colliery near Ermelo.
Group revenue nearly doubled in the year owing to the full impact of Keaton Energy’s purchase of the Vaalkrantz anthracite mine in KwaZulu-Natal, but lower than planned thermal sales, higher depreciation charges owing to higher output at Vanggatfontein and the de-recognition of the Pit 1 asset at the colliery had a greater negative effect.
The outcome was a total loss of R132m which compares to a profit of R112m in the 2012 financial year, itself aided by the recognition of Leeuw Mining, the company that Keaton Energy bought in order to take possession of Vaalkrantz.
Newly installed CEO, Mandi Glad, and her executive chairman, David Salter, will be keeping a watchful eye on the company’s cash position which fell to R19.6m as of March 31, 2013 from R60.5m in the previous financial year.
Cash generation of R217m was relatively strong, helped by R9m raised from the below par capital raising in the first month of the 2013 financial year. But repayment of R42m in Nedbank loans and funding of Pit 3 at Vanggatfontein from cash flow, while testament to Keaton Energy’s robustness, still puts pressure on operational performance in the current financial year, especially were export prices for Keaton Energy’s met coal to falter during the year.
Promisingly, Glad said the first two months of the current financial year had been record-breaking in terms of production.
“Although FY13 presented the Keaton Energy group with some challenges, we
believe that these have been or are in the process of being overcome and we remain confident that the current financial year will be a year of profit and growth for the group,” said Glad in comments to the published results announcement today.
She added that the group had pursued merger and acquisition opportunities in the year but these had “foundered on price” or for technical reasons. Intriguingly, Keaton felt it necessary to say that it had “… retained the financial support of its principal shareholders” which include mining entrepreneur, Loucas Pouroulis.
Keaton Energy is proceeding with litigation against Megacube, owned by Sentula Mining, which was fired as contractor to Vanggafontein during the last financial year and which is subsequently claiming unpaid contract fees. Keaton Energy is countering with claims of its own. Keaton Energy was also in litigation against DRA, a consulting engineer. Both cases are expected to be heard in the current financial year.
“We continue to pursue our longer-term strategy of becoming a 5Mtpa producer,” said Glad in comments to the published results.
“Accordingly, we are now in a period of optimising operations, advancing our internal pipeline of projects and aggressively pursuing acquisition opportunities where these offer value for our shareholders,” she said.
