JOHANNESBURG (miningweekly.com) – Coal mining company Keaton Energy, which described as “disastrous” its performance in the three months to March 31, confirmed on Wednesday that one criminal charge had already been laid and several others were pending over the alleged theft of R24.7-million worth of coal from its troubled Vaalkrantz colliery in KwaZulu-Natal, where the company suspects that employees colluded with third parties on a scale that necessitated a R56.5-million impairment, plus a related deferred tax asset reversal of R35.9-million.

The company’s investigation so far points to the fiddling of surveys, the changing of stockpile names and the moving of coal product out of the mine, invoiced as discard.

One criminal charge has already been laid “and I would guess that in the next two weeks that will be quadrupled – at least. As we dig deeper, new worms are crawling out,” Keaton CEO Mandi Glad told Creamer Media’s Mining Weekly Online at question time, after the Johannesburg Stock Exchange-listed company reported a net after-tax loss for the 12 months to March 31 of R71.9-million.

Vaalkrantz had been emerging from a period of geological and operational difficulty when the company discovered the missing coal.

After investigating further, it found that not only were some of its trusted employees allegedly colluding corruptly with external contractors, but also seemingly engaging in many other “interesting things”, which prompted management to go through every facet of the entire operation with a fine-tooth comb.

“Because of that, we’ve now taken an impairment on the mine because we saw that certain information we’d been given was absolute bullshit, and we’ve had to look at the whole operation afresh,” nonexecutive chairperson Dr David Salter said.

A completely new management team had been installed and a completely new plan was being implemented, which plunged the group as a whole into a heavy loss for the year, despite the flagship Vangattfontein colliery, in Mpumalanga, lifting its own earnings before interest, taxation, depreciation and amortisation (Ebitda) by 15% to R627-million on the sale of 2.45-million tonnes of coal.

In sharp contrast, the R89-million negative Ebitda at Vaalkrantz was “shocking and scary”.

This time last year Keaton posted a net after-tax profit of R64.4-million.

Glad said in response to a questioning investor that many steps had already been taken to mitigate a repeat of the collusion and theft risk and recruitment processes, which were seen as the real problem, were also being tightened.

“It’s about the integrity of human beings,” Glad commented.

In the same ill-fated three months to March 31, Keaton suffered its first ever fatality – also at Vaalkrantz – when employee Sihle Petros Xulu died in a fall-of-ground incident.

In addition, one of its contractors was liquidated, which resulted in a reduction of 230 operational personnel in one day at a shaft that has since been found to be part of the alleged collusion and corruption.

Keaton CFO Jacques Rossouw reported 5% higher overall group revenue of R1.45-billion, 29% higher operational cash generation of R537-million, 10% higher coal sales of 2.85-million tonnes, debt repayment of R83-million but a 99% plunge in headline earnings per share to 0.4c a share from 30.3c a share this time last year.

The revenue of R1.45-billion in the 12 months to March 31 was made up of R1.18-billion from Vangattfontein and R267-million from Vaalkrantz.

Cost of sales was up 8%, mainly on cash costs rising 10% to R1.2-billion, attributable to Vangattfontein.

Despite Glad’s reference to a “sordid circle” operating in KwaZulu-Natal, she was convinced that the company should not leave the province, given that Vaalkrantz was now being moved in the right direction and that projects in the province, including Koudelager and Balgray, provided opportunities to get the province’s business back on track.

KwaZulu-Natal's current water availability was a problem, however, and although Vaalkrantz had sufficient water to see it through the dry season, if it did not rain in due season the problem would worsen.

From a business perspective, she described the company’s relationship with Eskom as “solid and sound” and that the State power utility was paying on time and interacting positively, which was giving the company confidence to proceed with its Moabsvelden project, in Mpumalanga, on the same basis as it had successfully proceeded with Vangattfontein.

On Keaton meeting Eskom’s requirement of its coal suppliers being majority-owned by black shareholders, Glad said in response to Mining Weekly Online that it was the intention of the company to be 50%-plus-one-share black-owned in the next 24 months.

“From that perspective, Eskom is prepared to work with us if we show them a clear plan. We don’t have to be black-owned on the day when we sign contracts, provided our plan is clear, Eskom buys into it and we deliver on it,” Glad said, adding that the company’s exposure to the export market was small, with its anthracite going into the Brazilian market at attractive prices.

Keaton’s Vangattfontein and Vaalkrantz produce thermal coal for supply to Eskom as well as a range of specialist coals for the domestic and export metallurgical industries, including five-seam coal and premium anthracite for domestic metallurgical customers, B-grade coal for domestic customers and anthracite exported through offtake partner Glencore, the mining and marketing giant listed in London, Hong Kong and Johannesburg.