JOHANNESBURG (miningweekly.com) – Coal-mining junior Keaton Energy, which invested R275-million in operations while boosting its cash position by 63% to R113.2-million in the six months to September 30, is firming up two new coal-mine projects that will nudge the JSE-listed company towards producing five-million tons of coal a year and committing itself to the payment of dividends.

Gross first-half (H1) profit rose 6% to R124.5-million on 7% higher coal sales at 1.45-million tons and the board has approved a dividend policy that will be implemented during H2.

Keaton CEO Mandi Glad said on Wednesday that a boxcut excavation was scheduled to begin at the greenfield Moabsvelden project during the first quarter of the company’s 2016 financial year and a feasibility study for a combined opencast and underground mine at Braakfontein was under way.

She told a media conference call in which Mining Weekly Online participated that Moabsvelden would be developed as a remote pit to the company’s existing Vanggatfontein, the long-life cash-generating colliery that attained optimal H1 production levels as well as an improved safety performance.

In the second half, the company expected the life-of-mine enhancement project at Vaalkrantz colliery – where H1 production of domestic and export anthracite rose 24% to 191 898 t – to begin delivering results as well as greater domestic offtake from the State electricity utility Eskom.

Keaton CFO Jacques Rossouw reported a 10% increase in revenue to R783-million, 73% of it from Eskom and 18% from the anthracite market.

The cost of sales rose 11% and cash costs rose 3%

The fall of headline earnings a share to 13.7c from 19.4c was the result of more shares in issue and increased finance costs relating to the acquisition of the Australian-listed Xceed Resources, which facilitates the integration of Moabsvelden into what will become the greater Vanggatfontein complex.

At Braakfontein, detailed percussion drilling has firmed up the potential for a combined opencast, underground mine and washing plant for both export and a domestic middling product.

“Existing collieries and projects to be developed will see us hit the five-million-ton-a-year target in the next couple of years,” Glad said.

Most of the H1 capital expenditure of R242.8-million – R228.2-million – was spent on stripping costs at Vanggatfontein and the opening of Pit 4.

Vanggatfontein delivered 5% more washed thermal coal – 1.20-million tons – to Eskom and sold 18% more metallurgical coal at 65 006 t.

Although current coal prices were under downward pressure as a result of supply exceeding demand, Glad commented that attractive long-term fundamentals remained in place for coal, with at least 50% of new Chinese electricity demand expected to be coal-based and new installed coal-fired capacity of 214 GW being targeted in India.

With the bringing on line of Medupi and Kusile domestically, it was hoped that Eskom’s coal-fired generation would increase to 44.5 GW.

Even with the slight reduction in the production of coal in South Africa, coal had maintained its strong position as the leading revenue generator in local mining commodities.

On September 30, Keaton’s net asset value a share was 421c compared with a current market price of only 250c a share.