[miningmx.com] –JUNIOR coal miner Keaton Energy is bullish about the domestic coal market and will spend close to R430m by early next year in order to get a share of the “lucrative’ domestic market.
Keaton has channelled R158m into Phase One of its first major coal mining project, the Vanggatfontein in Mpumalanga, and expects the first production at the project to start in November.
The target is to produce 30 000 tonnes of high quality number 5 seam metallurgical coal from open-pit mining by March next year.
MD Paul Miller is confident the Vanggatfontein will play a major role in the supply of A-grade coal in the local industry after funding the project from its cash reserves of around R335m.
Miller told MiningMX that “this is precisely the right time to bring to account an asset such as Vanggatfontein.’
Phase Two at Vanggatfontein would be dedicated to producing coal for state power supplier Eskom after the company secured a 7-year contract with the utility.
The project is set to start in April 2011 and Keaton conceded it still had to go back to the markets to raise further funding.
Keaton expected Phase Two to churn out 200 000 tonnes of coal per month from seam two and seam four. The company will wash the coal on-site before distributing it to Eskom.
According to Keaton’s operations manager Peet Snyders, the Eskom target would be achieved by July 2011, before a four-month period of ramping-up production begins.
“The development of this domestic-destined coal project came at a time when international markets were experiencing great turbulence and Eskom was also looking at securing production under its medium-term plan,” said Miller.
“We are able to access its 3.4 million tonne, open-pit reserve of high-quality metallurgical coal quickly and easily and to deliver this into the domestic market.’
Eskom has not confirmed which power stations Keaton would supply with coal.
The company was looking to produce between 100 000 tonnes to 150 000 tonnes of product for the first four months into a coal market that produces about 1.2 million tonnes a year.
“We are still a fairly small player,’ said Miller.
“We are looking to produce just over 1% of the market’s total coal output per year.’
The 1.5m wide number 5 seam plant is expected to produce 100 tonnes an hour and reach 600 tonnes an hour at full capacity.