Following a year in which Keaton Energy says it delivered on its promises to “be profitable, be safe and grow”, the coal producer has delivered a solid set of financial and production results, posting triple-digit percentage increases in gross profit, earnings and operating profit for the year ended March 31.

A “delighted” Keaton CEO Mandi Glad told investors last week that the company had realised an “impressive” 902% increase in gross profit to R219-million on the back of a 49% increase in revenue to R1.4-billion, up from R919-million in the prior year.

Similarly, headline earnings a share improved by 200%, swinging to 30.3c for the 12 months in comparison with a loss of 30.2c in the previous fiscal period, while net asset value a share increased by 14% to 408c.

“We attribute this performance to our Vanggatfontein colliery, in KwaZulu-Natal, reaching steady-state, leading to increased deliveries of both thermal coal to [energy utility] Eskom and 5-seam metallurgical coal to domestic customers,” she commented.

Cash from operating activities increased 117% from R192-million in 2013 to R417-million in the year under review.

Cash and cash equivalents grew by R50-million, up 255%, at the end of the year owing to improved operational cash flow.

The group’s flagship Vanggatfontein colliery delivered 2.2-million tons of washed 2- and 4-seam thermal coal to Eskom, an increase of 45% on the prior year’s 1.5-million tons, while 5-seam metallurgical coal sales saw an increase of 49% to 97 635 t, up from 65 661 t in the prior period.

Increased use of the 5-seam plant for own coal allowed limited washing of other coals, with only 145 785 t being toll washed and 10 328 t of B-grade market development product being produced.

Discard and slurry sales increased by 86% from 454 083 t to 844 334 t.

Anthracite sales to domestic and international markets from the nearby Vaalkrantz, meanwhile, decreased by 7% to 303 837 t from the previous year’s 326 597 t, as the operation continued to experience “extremely difficult” mining conditions, which limited production.

August 2013 saw unprotected industrial action at the colliery, which resulted in the group restructuring the operation and outsourcing the mining to a contractor.

“Our persistent efforts to turn this operation to profitability have already started to deliver positive results in the 2015 financial year,” Glad noted.

Xceed Resources
Meanwhile, looking to further expand its resource portfolio, over the period, Keaton acquired ASX-listed Xceed Resources, which has an interest in three coal projects in South Africa – the Moabsvelden, Roodepoort and Bankfontein projects – with a combined total resource of 114.4-million tons.

“Following the all-cash acquisition of Xceed in February, the long life Moabsvelden colliery, in KwaZulu-Natal, will now form the backbone of the soon-to-be-expanded Vanggatfontein-Moabsvelden complex which will, with the Braakfontein project, form the core of the growing Keaton group of companies,” noted Glad.

Elaborating on Keaton’s funding sources, she said the group had secured a R350-million financing facility from Investec Bank over the period, which included a R300-million term loan and a R50-million working capital facility.

R170-million of the term loan was used to retire the balance of an existing Nedbank project finance facility at Vanggatfontein, while the remaining R130-million of the term loan, net of costs, partly funded the Xceed acquisition.

The acquisition would go some way towards Keaton achieving its medium-term strategy of becoming a five-million-ton-a-year producer.

Moabsvelden Development
The group’s primary focus will now shift to the development of Moabsvelden, at which design work on the 1.4-million-ton-a-year colliery is currently under way and due to be concluded by August.

Keaton expects to receive environmental permitting for the project by November, while the announcement of the developer to be awarded the plant and opencast mine construction contract will be made in September.

Plant construction will begin in November and is expected to conclude in September 2015, with first run-of-mine (RoM) coal expected in August of that year.

“Plant commissioning would then begin by November, with RoM coal being temporarily processed through Vanggatfontein’s colliery until its completion. First product from the plant is expected by November, while the operation will ramp up to steady-state production by March 2016,” Glad explained.