JOHANNESBURG (miningweekly.com) – JSE-listed coal junior Keaton Energy's medium-term goal is to grow to a five-million-ton-a-year saleable coal producer by 2017; a step closer to its longer-term strategy of becoming a midtier coal producer.

The company planned to increase anthracite output from its KwaZulu-Natal footprint through its Koudelager, Mooiklip and Balgray projects, as well as from its Braakfontein thermal coal project, near Newcastle.

The company’s strategy was highlighted by Keaton Energy CEO Mandi Glad at a site visit last week to the company's Vanggatfontein colliery, located 14 km south-east of Delmas, in Mpumalanga.

Keaton Energy would also aim to diversify its product mix from mainly producing domestic thermal and anthracite coal to producing export thermal coal, through its KwaZulu-Natal-based Braakfontein project and the expected acquisition of ASX-listed Xceed Resources’ Moabsvelden project, located about 3 km from the Vanggatfontein operation.

Glad said that Keaton Energy expects its acquisition of Moabsvelden to close by February 19, 2014.

The Moabsvelden project is expected to produce a combination of export and Eskom quality thermal coal from the first quarter of 2015.

Keaton Energy’s rationale behind the acquisition of Moabsvelden is that significant synergies exist between Moabsvelden and Vanggatfontein, as a result of their proximity to each other, which will yield substantial operational and financial benefits.

The Moabsvelden project already has a credit-approved project finance term sheet, a mining right and environmental authorisation in terms of the National Environmental Management Act.

Although Xceed Resources has already undertaken a feasibility study on the project, Keaton will undertake its own feasibility and design study during the first half of 2014, as the operating model will be modified from the stand-alone model evaluated in the Xceed feasibility study, owing to the fact that Moabsvelden will be integrated into the broader Vanggatfontein operation, in order to use existing infrastructure.

Further, Keaton Energy will continue to improve the efficiency of its operations as it did in the first half of the 2014 financial year when it replaced its opencast mining contractor, opened up two additional pits and optimised the front end of its processing plant at Vanggatfontein.

The company also plans to increase its cash generation and advance its project pipeline.

The Vanggatfontein mine currently comprises three pits with a combined face length of about 1 700 m, which are being mined by privately owned multidisciplinary construction company Liviero. The operation has a production capacity of 350 000 t/m run-of-mine 2-seam, 4-seam and 5-seam coal from the three opencast pits.

The mine site infrastructure comprises a 500 t/h 2-Seam and 4-Seam coal washing facility producing domestic thermal coal for State-owned power utility Eskom, as well as a 100 t/h 5-seam coal washing plant producing low contaminant, vitrinite dominant, bituminous duff, peas and nuts for the domestic metallurgical industry. These facilities are currently operated by outsourced plant operation and maintenance specialist Minopex.

The infrastructure also consists of a tailings facility operated by mining solutions company Fraser Alexander, twin-lined slimes facilities and a coarse discard facility with related pollution control dams, drainage systems, water and power reticulation and a stockpile area.

Earlier this month, Keaton Energy reported that the Vanggatfontein colliery, which sold 1 198 000 t of coal for the first six months of the 2014 financial year, ending September 30, increased coal deliveries by 55% to its main consumer Eskom.

From its sales in the first half of the 2014 financial year, the Vanggatfontein mine was able to generate revenue of R585-million.

Keaton Energy notes that it strives towards remaining fatality free and has been able to achieve a lost time injury-free rate of 0.10 at Vanggatfontein in the first half of the 2014 financial year, compared with the first six months of the 2013 financial year’s rate of 0.20.

Glad highlighted that the Keaton Energy group’s financial performance had improved in the last six months as a direct result of the Vanggatfontein operation.

The first half of the 2014 financial year saw the group’s revenue increase 70% to R710-million, compared with R417-million in the comparable period in the previous financial year, its cost of sales increased by R137-million, or 30%, on the back of increased production volumes, mainly at Vanggatfontein and other income more than doubled to R9-million, mainly as a result of increased discard and slurry sales, totalling 555 963 t for the period, at Vanggatfontein.

Glad noted that Vanggatfontein is a long-life asset and is operating at steady-state. “This enables us to achieve our future goals of generating solid revenues and strong cash flows, reducing debt and making capital investments in ongoing mine development.”