‘Sordid circle’ delivers R56.5m blow to Keaton

[miningmx.com] – CORRUPT practices at Keaton Energy’s KwaZulu-Natal province Vaalkrantz metallurgical mine put pay to the coal firm’s planned dividend and drove it to a R71.9m net loss for the year ended March 31.

David Salter, non-executive chairman and CEO, Mandi Glad, pulled no punches in their assessment of a “disastrous fourth quarter” in which the company uncovered coal theft which had been perpetrated by its regional management with outside contractors. The outcome was a loss of R24.7m in coal sales.

“There was collusion between people that we trust and so we had to look at the whole operation,” said Salter. “We had to then replan and take an impairment because all the information we had been receiving [including information affecting reserves and resources] about the mine was bullshit,” he added.

Glad described how the coal sector in KwaZulu-Natal was “a sordid circle” and that the company had replaced Vaalkrantz management with individuals “outside it”. Criminal and civil charges had been brought against one person with four others likely to be charged shortly, said Glad.

The outcome was a total impairment of Vaalkrantz of R56.5m. Consequently, headline earnings per share declined to 0.4 cents from 30.3 cents in the previous financial year. Shares in Keaton were unmoved in Johannesburg today, but they have fallen 41% in the last three months, and are 14% lower over the last seven trading days.

It wasn’t all bad news as Keaton’s flagship mine, the Vanggatsfontein mine near Delmas in Mpumalanga province increased production and contributed towards a R90m increase in cash generation for the year.

As a result, Keaton repaid debt totalling R83m with some R72.7m paid against the firm’s Investec term facility. Cash and cash equivalents increased by R3m year-on-year.

Glad said that plans to push the button on its Moabsvelden project, essentially a satellite pit of Vanggatfontein, were being delayed while the company waited on an integrated water use licence from the South African government. “We expect it any day now,” she said.

A feasibility study into a second project, Braakfontein, would be completed by October and once producing coal would take Keaton to five million tonnes in annual coal sales.