 DELMAS (miningweekly.com) – JSE-listed Keaton Energy said on Wednesday that it would produce the first coal from its greenfield Vanggatfontein project by November, which would be followed shortly by the start of production from the mine's second phase, dedicated for use by State-owned power utility Eskom.
Speaking to Mining Weekly Online at the Vanggatfontein site near Delmas, Keaton Energy MD Paul Miller said that the project was the "right type of asset, being developed at the right time".
"The development of this domestic-destined coal project came at a time when international markets were experiencing great turbulence and Eskom was also looking at securing production under its medium-term plan."
Miller said that the first phase of the project would produce metallurgical coal from the number-five seam, at an initial rate of 12 000 t/m from November. The site will then undergo a tight ramp-up schedule and reach capacity of about 30 000 t/m by March next year.
He pointed out that the company had intentionally not signed any offtake agreements for the number-five seam metallurgical coal, seeing that the demand for this type of coal was currently very buoyant. The domestic market for sized coal in this market runs at around 1,2-million tons a year to 1,5-million tons a year.
"Around 50% of our metallurgical product will go into the sized-market, and can be sold at premium prices."
This first phase of development would cost R158-million, which Keaton would fund from its cash reserves of around R335-million.
However, capital expenditure would peak at R430-million, and Miller indicated that the company would need to raise around R150-million to R200-million at the end of the year through debt-finance.
In July, Keaton clinched a seven-year contract to supply energy coal to Eskom.
Keaton operations manager Peet Snyders said that this would be supplied from the second phase of the Vanggatfontein project that would start production in April 2011, and then enter an aggressive ramp-up period of about four months.
In line with the agreement, Keaton would supply the utility with 200 000 t/m of coal from seam two and seam four. Miller noted that Eskom had been suffering from the supply of lower quality coal in recent years, which was why Keaton decided that it would also wash the coal on-site and supply the utility with coal to the right specifications.
Snyders pointed out that the project was focused on environmentally-friendly mining, and would be recycling all the water used on the mine back into the mining operations.
Further, Miller said that an extensive logistics programme would be worked out for the Vanggatfontein site, which would be pared with Eskom's road transport model. "Most junior mining companies in the bulk-commodities industry struggle with the question of logistics. However, we will initially be trucking all our coal from the site, and at the height of capacity we will be pushing out a truck every six minutes. Currently, we are working on ensuring that all possible bottlenecks on the site are dealt with."
The coal miner is also engaged in an environmental-impact assessment to determine the viability of using rail to transport the coal from the Haweklip station.
Keaton financial director Johan Schönfeldt noted that even though the Kendal power station was only a stone's throw away from the Vanggatfontein project, it did not necessarily imply that the mine would be supplying that specific station. He said that the mine would probably supply a return-to-service power station such Grootvlei, or the Majuba plant.
The Vanggatfontein project is a Samrec-compliant 25,9-million tons reserve, of which 22,5-million tons would be supplied to power stations.
Miller said that Keaton believed that domestic and international coal demand would be buoyant for at least another 20 years and said that company was currently not considering moving into other energy markets.
Keaton is also developing the 69-million ton underground Sterkfontein project, predominantly for the supply of export coal, which is preparing to enter feasibility study stage.
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