PERTH (miningweekly.com) – South African coal miner Keaton Energy has made a play for ASX-listed Xceed Resources, advancing its strategy of growing into a five-million-tonne-a-year producer.

Xceed holds an interest in three coal projects in South Africa, including the Moabsvelden, Roodepoort and Bankfontein projects, which have a combined total resource of 114.4-million tonnes.

The junior's most advanced asset is its 74%-owned Moabsvelden, which is located 3 km from Keaton Energy’s Vanggatfontein colliery, in Mpumalanga. The mine is set to start production in late 2014 and will be primarily an Eskom product operation with an export fraction, allowing Keaton Energy to enter the export thermal coal market for the first time.

“This is an exciting opportunity to deliver real value to our shareholders through increased Eskom coal production at a time when the industry is abuzz with Eskom’s impending coal supply shortfall," commented Keaton Energy CEO Mandi Glad.

The acquisition would increase the JSE-listed firm's opencastable coal resource by more than 100-million tonnes and increase the run-of-mine coal reserve in the greater Vanggatfontein colliery area by about 44-million tonnes.

Keaton Energy is offering shareholders 14c in cash for each Xceed share held, valuing the transaction at some A$19.67-million.

The offer is a 27% premium to Xceed’s closing price on August 23, and a 35% premium to the 30-day volume-weighted average price of the company’s shares.

The Xceed board has given its approval of the takeover offer, in the absence of a superior proposal and dependent on the outcome of an independent review.

The takeover offer will see Xceed become a wholly owned subsidiary of Keaton Energy and delist from the ASX.

“Our belief in the company’s Moabsvelden thermal coal project is validated by the fact that an experienced local operator has elected to make an all-cash offer to buy the company at a substantial premium to its current market valuation,” said Xceed MD Ian Culbert.

He noted that the Xceed board also recognised that the outlook for acceptable shareholder returns for several junior mining companies continued to remain subdued, and added that an all-cash offer represented a rare opportunity for Xceed’s shareholders to realise their investment.

Keaton Energy reported that it had entered into an arrangement with shareholder Gunvor Group to fund a maximum $18-million to fund the acquisition.

The funds would be acquired through a combination of shares for cash and a prepayment by Gunvor SA, a subsidiary of the Gunvor group.

Glad said in June that the group was considering four acquisitions to grow its production profile. Earlier this year, it bought the Mooiklip anthracite project from BSC Resources.

The Xceed takeover offer was subject to a number of conditions, including an independent expert concluding that the transaction was in the best interest of shareholders, as well as regulatory and shareholder approval.