Keaton to ride out storm in troubled coal sector

[miningmx.com] – KEATON Energy would “ride out the storm” of poor coal prices, said Keaton Energy CEO, Mandi Glad.

Commenting in the firm’s December quarter production figures, in which the Vanggatfontein colliery in Mpumalanga province proved the mainstay, Glad said the coal sector was “highly stressed”, but that “… the soon to be streamlined Keaton is positioned to ride out the storm”.

December quarter production from Vanggatfontein was about 4,000 tonnes higher quarter-on-quarter at 544 237 tonnes whilst 5-seam metallurgical coal sales were down 40% at 18 456 tonnes in line with the mine’s geological model.

No B-grade coal was produced due to poor market conditions and discard and slurry sales were negligible, the company said.

Production from Keaton’s KwaZulu-Natal province metallurgical mine, Vaalkrantz, plummeted 71%. This is the mine that Keaton has earmarked for sale and is the reason Glad said that the group would be restructured.

In June, Keaton said it had uncovered ‘corrupt practices’ at Vaalkrantz which resulted in a loss of R24.7m in coal sales. Chairman David Salter was moved to describe the illegal activities as part of a “sordid circle”.

Said Glad in the December quarter report: “Yet again, our long life Vanggatfontein colliery has performed consistently and continues to generate excellent production and cash flow numbers.

“Our troubled Natal operations are in the process of being sold but despite this achieved an improved safety performance over the last quarter”.

There was no additional comment on whether the group had decided to press ahead with the development of the Moabsvelden project. The property is near Vanggatfontein and was bought through the R195m successful takeover of Australian-listed Xceed Resources in February 2014. The mine was supposed to start construction in the current financial year and is slated to supply 1.4mt a year (mtpa).

Keaton Energy is 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 in a Miningmx report published in November. “From Keaton’s perspective, we have options currently,” she said.

“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.