Keaton CEO concerned about Vaalkrantz wage talks

12th June 2013 By: Idéle Esterhuizen

JOHANNESBURG (miningweekly.com) – JSE-listed Keaton Energy CEO Mandi Glad expressed her concern over possible labour unrest at the company’s Vaalkrantz anthracite colliery, in KwaZulu-Natal, citing wage negotiations with the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union.

“Vaalkrantz is likely to be affected, we are finding that the gap between what we believe is reasonable and, in fact, affordable for us [and workers’ wage demands] is significantly greater than it has ever been before,” she told Mining Weekly Online at the company’s financial year-end presentation, in Sandton, without disclosing the unions’ wage demands.

The NUM has demanded increases of up to 60% from gold and coal mining companies, which are negotiating through the Chamber of Mines.

“Although we came through last year unscathed, I am a little concerned that this year...might result in job losses,” Glad noted, while emphasising that the company would take whatever measures it could to avert a strike.

Meanwhile, Keaton Energy’s revenue grew by 94% to R919-million during the year under review, aided by increased sales of thermal coal to State utility Eskom and the inclusion of 12 months of Vaalkrantz sales, compared with only three-and-a-half months in the previous year.

However, poor mining performance, a transport strike and challenging geological conditions in the first half of the year, as well as poor plant performance throughout the year at Vanggatfontein, in Mpumalanga, had a negative impact on the group.

The company recorded a gross loss of R27-million during the year, compared with a gross profit of R15-million in 2012.

On the production front, output from Vaalkrantz fell by 7% year-on-year to 326 597 t of anthracite to domestic and international metallurgical customers. Production was limited by difficult mining conditions in the West Alfred section of the mine.

Vanggatfontein delivered 1.5-million tons of washed two- and four-seam thermal coal to Eskom during the year, marking an increase of 58% from the previous year’s 955 504 t.

This despite the miner’s decision to close Pit 1 at Vanggatfontein, as it was no longer economical. The closure resulted in a loss on the derecognition of the asset of R51-million.

Consequently, the miner’s total comprehensive income declined to a loss of R132-million, compared with a profit of R112-million the previous year.

Headline earnings a share declined from a profit of 9.5c in 2012 to a loss of 30.2c in the 2013 financial year. Further, Keaton Energy’s cash and cash equivalents decreased by R41-million, mainly owing to capital investment, funding of additional rehabilitation commitments of R7-million and the repayment of R42-million of the company’s project finance facility with Nedbank.

Total debt repayments of R47.9-million decreased the company’s total borrowings by R12.5-million. However, the decrease was offset by finance costs of R25.1-million and a foreign exchange loss of R10-million.

The group also completed concept studies on the Braakfontein and Sterkfontein projects during the year under review, which resulted in an increased resource at Sterkfontein. Keaton Energy indicated that both projects would be advanced in the 2014 financial year, with Braakfontein taking priority.

Drilling for portal placement at the new Koudelager project commences next month and mining is planned to begin during the course of the 2014 financial year.

Significantly, group total coal reserves increased 55% in 2013, to 95.2-million tons, and group total coal resources grew by 15% to 260-million tons.

Keaton Energy had, this week, also concluded the acquisition of Mooiklip Anthracite project from Southern African-focused junior mining and exploration company BSC Resources, while a further four acquisitions were in process.

Looking ahead, Glad said the group would continue to pursue its longer-term strategy of becoming a five-million-ton-a-year coal producer, through pursuing acquisitions, developing internal projects and optimising its operations.

“We remain confident that the current financial year will be a year of profit and growth for the group,” she stated, while adding that the first two months of the new year had delivered significantly optimistic results.

Glad, however, pointed out that the group’s rising debt resulted in the need for “a balancing act” to achieve the company’s goals of making acquisitions, increasing its cash reserves and paying out dividends.

“Although our balance sheet at the moment does not look like it would support it [acquisitions]…with the support of our major stakeholders, I am confident that we will find a way to fund any acquisition that we would want to pursue,” she assured.