While consistent year-on-year output from thermal coal producer Keaton Energy’s stalwart Vanggatfontein operation bolstered the junior’s productive performance in the first six months of the financial year, it was unable to offset a disappointing showing by the company’s Vaalkrantz asset, which led to the group swinging from a profit of R35.3-million in the 2014 period to a loss of R96.9-million for the six months ended September 30.
The KwaZulu-Natal-based Vaalkrantz operation continued to experience challenging geological conditions subsequent to March 31, which, coupled with the closure of two production sections as a result of safety concerns and difficult mining conditions, depressed coal prices, increased costs and lower-than-expected yields resulted in the board committing to dispose of the operation, along with its associated Balgray and Koudelager projects.
CEO Mandi Glad said on a conference call last week that the company had since received an offer to buy the operations and expected to complete the sale within the next 12 months.
“The new management team at Vaalkrantz has made significant progress in restructuring the operation, but has been faced with continuing geological difficulties and legacy issues surrounding major coal theft . . . I still believe [the operation] has potential, perhaps in a smaller, more focused group.
“[Offload] negotiations are progressing and have led the board to classify the bulk of the KwaZulu-Natal assets as held-for-sale and discontinued operations,” she commented.
Mining Weekly reported in July that Keaton had laid a criminal charge and had several others pending over the alleged theft of R24.7-million worth of coal from its troubled Vaalkrantz colliery, where the company suspected that employees colluded with third parties on a scale that necessitated a R56.5-million impairment, plus a related deferred tax asset reversal of R35.9-million.
Meanwhile, the company stated last week that production of domestic and export anthracite at Vaalkrantz had decreased from 191 898 t to 176 089 t year-on-year, while the operation generated revenue of R103.1-million over the six months – a R41.6-million decrease on the first half of the prior year.
Looking to the group’s continuing operations, Glad told shareholders that the Vanggatfontein mine had performed “according to plan”, delivering 1.19-million tons of washed 2- and 4-Seam thermal coal to energy utility Eskom – some 4 367 t short of last year’s record production.
Sales of 5-Seam metallurgical coal decreased 14% over the comparable period to 56 156 t – in line with the geological model.
“Owing to current domestic market conditions, B-grade sales were negligible, at 25 951 t,” she commented.
Vanggatfontein generated revenue of R453.5-million from coal sales in the six months, while transport revenue narrowed year-on-year, from R173.2-million to R109.8-million, as a result of shorter delivery distances.
Keaton posted an overall gross profit from continuing operations of R119.2-million – a slight slip from the R123.7-million in the first half of the prior fiscal period.
Net profit before tax from continuing operations narrowed year-on-year, from R56.3-million to R33.8-million, while earnings and headline earnings per share from continuing operations declined from 8.7c to 2.6c in the six months ended September 30.