Keaton hopeful of anthracite exit in next few months

JOHANNESBURG (miningweekly.com) – JSE-listed Keaton Energy is steadily making a “strong comeback” with its earnings for the first half of the 2017 financial year improving substantially after the idling of its lossmaking Vaalkrantz colliery, in KwaZulu-Natal, and the continued steady-state operations at its Vanggatfontein operation, in Mpumalanga.

However, the company is flagging the long-awaited Section 11 Ministerial consent for the sale of its anthracite assets, incorporated into the LME group, which housed Vaalkrantz, the Balgray, Koudelager and Mooiklip projects, as critical.

“It is a chapter that needs to be closed,” CEO Mandi Glad told investors during a conference call on Monday, pointing to the R1.5-million a month price-tag on the care and maintenance of the mothballed Vaalkrantz since May.

Glad described the company’s “extreme focus” on completing the sale “as soon as possible”, with the hope of exiting the anthracite industry in its entirety within “a month or two”.

In February 2016, Keaton concluded an agreement with BER to dispose of the assets housed under wholly owned subsidiary LME, excluding the Braakfontein thermal coal project, which will be unbundled into a Keaton subsidiary.

Following the impact of the ongoing global decline in coal prices, a force majeure declared on LME by its biggest customer and the unavailability of water on the back of a continued drought, LME embarked on a Section 189A process for the retrenchment of all employees during April.

Meanwhile, in the short term, Keaton’s operational focus will remain on ensuring Vanggatfontein’s consistent performance, while its growth focus is firmly fixed on securing both an offtake agreement and development funding for the Moabsvelden project, in Mpumalanga, which was finally awarded its integrated water-use licence (IWUL).

“We have been holding our breathe for the IWUL,” Glad said, pointing out that, with the licence in hand, preliminary discussions with financial institutions and the securing of an offtake agreement from State-owned power utility Eskom were now key foci moving forward.

“The significant recovery in global coal prices has given the group flexibility to pursue alternative options in respect of the Moabsvelden project,” she added.

FINANCIAL PERFORMANCE
The group posted half-year earnings and headline earnings a share from continuing operations of 13c for the six months to September 30, up from the 2.6c apiece reported in the corresponding period last year.

Operating profit from continuing operations during the six months under review edged up to R78-million, compared with the R59-million posted in the first half of the prior year.

Net profit from continuing operations increased from R9.5-million in the six months to September 2015 to R38.2-million in the first half of the current financial year, while gross profit was down to R89.5-million from R119.2-million during the same period.

Revenue from continuing operations in the first half under review increased to R580-million from the prior year’s first-half revenue of R563-million.

During the first half of the year, Keaton had repaid R63-million debt and decreased total borrowings by R82-million.