JSE-listed coal junior Keaton Energy’s medium-term goal is to develop into a five-million-ton-a-year saleable coal producer by 2017 – a step closer to its longer-term strategy of becoming a midtier coal miner.

The company plans to increase anthracite output from its KwaZulu-Natal footprint through its Koudelager, Mooiklip and Balgray projects, as well as from its Braakfontein thermal coal project, near Newcastle.

The company’s strategy was highlighted by Keaton Energy CEO Mandi Glad during a visit last week to the company’s Vanggatfontein colliery, located 14 km south-east of Delmas, in Mpumalanga.

Keaton Energy will also aim to diversify its product mix, from mainly producing domestic thermal and anthracite coal to producing export thermal coal, through its Braakfontein project and the expected acqui- sition of ASX-listed Xceed Resources’ Moabsvelden project, located about 3 km from the Vanggatfontein operation.

Glad said Keaton Energy expected its acquisition of Moabs-velden to close by February 19, 2014.

The Moabsvelden project, which is estimated to produce 1.4-million tons of saleable coal, is expected to produce a combination of export- and Eskom-quality thermal coal from the first quarter of 2015.

Keaton Energy’s rationale for acquiring Moabsvelden is the significant synergies between Moabsvelden and Vanggatfontein, as a result of their proximity to each other, which will yield oper- ational and financial benefits. Moabsvelden has a credit- approved project finance term sheet, a mining right and environ- mental authorisation in terms of the National Environmental Management Act.

Although Xceed Resources has undertaken a feasibility study on the project, Keaton will under- take its own feasibility and design study during the first half of 2013/14, as the operating model will be modified from the stand-alone model evaluated in the Xceed feasibility study, owing to Moabsvelden’s integration into the broader Vanggatfontein operation in order to use existing infrastructure.

Further, Keaton Energy will continue to improve the efficiency of its operations as it did in the first half of the 2013/14 financial year, when it replaced its opencast mining contractor, opened up two additional pits and optimised the front end of its processing plant at Vanggatfontein.

The company also plans to increase its cash generation and advance its project pipeline.

The Vanggatfontein mine comprises three pits that are being mined by privately owned multidisciplinary construction company Liviero. The operation has a production capacity of 350 000 t/m of run-of-mine 2-seam, 4-seam and 5-seam coal using the opencast mining method.

The mine site infrastructure comprises coal-washing facilities with a capacity of 600 t/h, which include a 100 t/h 5-seam coal washing plant producing low-contaminant, duff, peas and nuts, which are vitrinite dominant and bituminous, for the domestic metallurgical industry, and a 500 t/h coal washing plant producing domestic thermal coal for State-owned power utility Eskom.

These facilities are currently operated by outsourced plant operation and maintenance specialist Minopex.

The infrastructure also consists of a tailings facility operated by mining solutions company Fraser Alexander; twin-lined slimes facilities and a coarse discard facility, with related water dams; drainage systems; water and power reticulation; and a stockpile area.

Early in November, Keaton Energy reported that the Vanggat-fontein colliery, which sold 1 198 000 t of coal for the first six months of the 2013/14 financial year, ending September 30, increased coal deliveries by 55% to its main consumer, Eskom’s Tutuka power station, near Standerton; Komati power station, near Middleburg; and Grootvlei power station, near Balfour. All these power stations are in Mpumalanga.

From its sales in the first half of the 2013/14 financial year, the Vanggatfontein mine was able to generate revenue of R585-million.

Keaton Energy notes that it strives towards remaining fatality- free and was able to achieve a lost-time injury-free rate of 0.10 at Vanggatfontein in the first half of the 2013/14 financial year, compared with a rate of 0.20 in the first six months of the 2012/13 financial year.

Glad highlighted that the Keaton Energy group’s financial performance had improved in the last six months as a direct result of the Vanggatfontein operation.

The group’s revenue increased 70% to R710-million in the first half of the 2013/14 financial year, compared with R417-million in the comparable first half of the 2012/13 financial year. Its cost of sales increased by R137-million, or 30%, on the back of increased production volumes, mainly at Vanggatfontein, and other income more than doubled to R9-million, mainly as a result of increased discard and slurry sales of 555 963 t at Vanggatfontein.

Glad noted that Vanggatfontein is a long-life asset that was operating at steady state. “This enables us to achieve our future goals of generating solid revenues and strong cash flows and reducing debt and making capital investments in ongoing mine development.”