JOHANNESBURG (miningweekly.com) – JSE-listed Keaton Energy has posted “exceptional” results for the six months ended September 30, lifting headline earnings a share 192% to 19.4c a share, compared with the loss a share of 21.1c in the first half of the previous financial year.

The coal mining and development company said in an interim results statement on Monday that the earnings boost was driven by “outstanding” production results at its Vanggatfontein colliery, which increased coal deliveries by 55% for the first six months of the 2014 financial year.

The Mpumulanga-based colliery delivered 1.2-million tonnes of washed 2- and 4-seam thermal coal to Eskom in the first half of the 2014 financial year, compared with 738 498 t in the comparable half year.

The mine’s 5-seam metallurgical coal sales into the domestic market increased by 76%, from 31 272 t in the comparable half year, to 55 154 t at end September.

“Additionally, Vanggatfontein washed 145 785 t of third-party coal during the period under review versus none in the comparable half year. Discard and slurry sales from the operation totalled 555 963 t for the period, compared with 174 251 t in the comparable half yea – an increase of 220%, reducing both the group’s environmental footprint and rehabilitation obligation,” said Keaton.

CEO Mandi Glad told Mining Weekly Online on Monday that several interventions and efficiencies had kicked in over the last few months, driving higher production and boosting the operation’s migration to a steady-state colliery.

“We replaced our contractor around 14 months ago. We paid a lot of attention to the front end of our plant, where we were having issues with oversight material, and we opened pit three, so there were several factors that resulted in this improvement,” she commented.

Further, the establishment of pit four began from operational cash flows, which Glad said would allow for greater flexibility and optimisation of future mining activities.

“Vanggatfontein is a long-life asset which is now operating at steady-state and which enables us to generate solid revenues and strong cash flows, reduce debt and make capital investments on ongoing mine development,” she said.

Further, despite continuing challenging geological conditions and labour disruptions, the Vaalkrantz colliery, in KwaZulu-Natal, sold 154 145 t of anthracite for the first half of this year, compared with 151 248 t for the comparable half-year, an increase of 2%.

“Because Vaalkrantz is so geologically complex, we would be extremely happy if we could maintain the current level of production. There’s certainly no possibility of growing it,” said Glad.

GROUP FINANCIAL PERFORMANCE

Group revenue increased 70% to R710-million in the first half of the 2014 financial year, compared with R417-million in the comparable period in the prior year, mostly on the back of a significantly improved performance at Vanggatfontein.

Despite increased sales volumes at Vaalkrantz in the first half of 2014, revenue decreased 6% as a result of reduced sales prices both domestically and internationally.

Group gross profit was R117-million or 17% of revenue for the period under review, compared to a gross loss of R38-million or 9% of revenue for the corresponding period in the 2013 financial year. 

Cost of sales increased by R137-million, or 30%, on the back of increased production volumes, mainly at Vanggatfontein.

Meanwhile, other income more than doubled to R9-million, mainly as a result of increased discard sales at Vanggatfontein.

The income tax expense of R21-million was mainly attributable to the utilisation of estimated tax losses and unredeemed capital expenditure relating to Vanggatfontein.

After-tax net profit for the period increased 166% to R42-million, compared with an after-tax net loss of R64-million in the corresponding period.

Capital investment for the group totalled R143-million for the period, compared with R71-million for the corresponding period.

The majority of capital was spent at Vanggatfontein, chiefly on ongoing mine development of R135-million, while cash generated from operations amounted to R205-million, but was offset by capital investments of R143-million and debt repayments of R39-million.

XCEED RESOURCES ACQUISITION

The company further reported that it expected its acquisition of ASX-listed Xceed Resources to close by the end of February, with Xceed’s Moabsvelden project expected to produce a combination of export and Eskom quality thermal coal from January 2015.

The South African coal miner announced, in August, that it had made a play for Xceed, advancing its strategy of growing into a five-million-tonne-a-year producer.

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

“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 National Environmental Management Act approval,” Glad commented.

Looking ahead, she said the company’s longer-term strategy of becoming a larger producer would remain its focus and, with, Vanggatfontein having achieved steady-state, it now formed a “solid foundation” from which Keaton could maximise cash generation and expand and diversify its product mix.

“Prudent operational and financial management will enable us to balance the funding of our growth while rewarding shareholders,” she said.