Keaton Energy bags Leeuw Mining

[] — KEATON Energy has bought 74% of unlisted coal exporter Leeuw Mining (Leeuw) for R74.8m, payable mainly in Keaton stock issued at a price 15% above the levels at which Keaton has been trading on the JSE.

The deal has been struck on a price of 450c per Keaton share compared with Monday’s opening price of 390c.

According to Keaton MD Paul Miller, the main advantages of the deal are that it gives Keaton direct access to the export market as well as ownership of a number of projects which are well advanced in their development.

Keaton will also acquire an important new anchor shareholder – Swiss energy trader Gunvor – which will own up to 25% of the company.

The controlling shareholder will remain the Pouroulis family, although its interest will be diluted from about 50% to about 40%. Keaton was founded by mining entrepreneur Loucas Pouroulis.

Leeuw was set up eight years ago through a BEE transaction with Anglo American’s coal division to acquire the Vaalkrantz anthracite colliery along with various other assets in KwaZulu-Natal (KZN).

Leeuw holds a 207,000t/year export allocation through the Richards Bay Coal Terminal in terms of the Quattro export programme and owns a dedicated railway siding facility near Vaalkrantz.

But the deal was structured on debt finance and Leeuw got into financial difficulties in 2009 during the global financial crisis when demand from its main customers in the metallurgical industry dried up.

Miller commented, “Leeuw Mining became a distressed asset because the company was overgeared.’

He added that, in addition to the operating Vaalkrantz colliery and the RBCT allocation, Leeuw controlled four other coal properties in KZN and had already received new order mining rights for two of them while applications for mining rights had been put in over the other two.

“Combined with our existing Vanggatfontein and Sterkfontein projects this acquisition gives us more projects at multiple points along the development curve where a significant amount of the regulatory work has already been done,” said Miller.

“For a small company like ourselves developing projects like these is going to be a pleasure.”

The four main coal properties acquired are the Koudelager, Balgray and Mpati anthracite projects and the Braakfontein thermal coal project.

Mining rights have already been granted to Koudelager – which will provide future anthracite supply to the existing Vaalkrantz plant – and Braakfontein which Miller said will be capable of producing about 1mt/year for an economic life of at least 20 years.

He added: “We have a lot of historical data on Braakfontein but because it was privately owned the resource is not yet SAMREC compliant. Braakfontein has a mining right and also owns all its surface rights as well as being situated next to Newcastle on a railway line so this is a well-advanced project.’

Mining right applications have been put in for Mpati near Dundee and Balgray near Utrecht.

In terms of the deal Keaton is issuing shares to Anglo American Thermal Coal, the Anglo Khula Mining Fund and Leeuw’s founding shareholder JPI Leeuw and Associates (JPI) as well as converting a R10m loan that Keaton had made to Leeuw into equity.

JPI, Anglo American Thermal Coal and Anglo Zimele will then sell their Keaton shares to Plusbay Limited which is an associate of Gunvor but JPI will remain a 26% shareholder in Leeuw.

Filippo Faralla, Gunvor’s coal manager in South Africa, said: “The transaction marks our entry into South African coal production, complements our growing non-oil energy business and is another significant step in our development as a leading, integrated energy company.”

The writer owns shares in Keaton Energy.