HomeNewsCorrupt practices at Vaalkrantz sees Keaton Energy report R71.9M net loss

Corrupt practices at Vaalkrantz sees Keaton Energy report R71.9M net loss

South African coal junior Keaton Energy has suffered significant financial setbacks at its Vaalkrantz colliery following corrupt practices and coal theft.

This was revealed following the announcement of the company’s year-end financial results to 31 March 2015. Despite reporting a gross profit of R203.5 million (from a R1.45 billion revenue), the company revealed a net loss of R71.9 million.

Wash plant at Vaalkrantz
Wash plant at Keaton Energy’s Vaalkrantz colliery

This was due mainly to once–off charges of R24.7 million relating to a provision raised for coal losses as a result of theft, a R56.5 million impairment recognised at the Kwa-Zulu Natal based Vaalkrantz, and a R35.9 million deferred tax write-back related to the impairment.

“A challenging year was exacerbated in the last quarter by the discovery of R24.7 million in stock discrepancies at Vaalkrantz.  The extent of the collusion between trusted employees and external contractors was deeply disappointing and was not confined to coal theft,” says CEO Mandi Glad. The mine also suffered a fatality in February.

A new management team has been appointed at Vaalkrantz and criminal charges have been laid against certain ex-employees. The legal process is on-going.

Glad says the new management team is making good progress in reversing the losses. “However, we will continue to assess the continued viability of the mine taking into account other factors, such as the geologically difficult conditions.”

Notwithstanding these difficulties, Vaalkrantz grew its anthracite sales of 395 450t by 30% year on year and introduced a new high ash product in line with optimisation objectives.

Increase in total coal sales thanks to Vanggatfontein

Keaton’s long-life, Delmas-based Vanggatfontein colliery remains on track, achieved its set targets and maintained its good safety record.

As a result, its thermal coal sales increased by 4% to 2.279 Mt, metallurgical coal sales by 29% to 126 107 t and anthracite sales by 30% to 395 450 t. Total coal sales increased 10% to 2.85Mt.

Headline earnings per share declined to 0.4 cents from 30.3 cents, with earnings per share falling from 30.3 cents to a loss of 13.8.

Delays at Moabsvelden

Keaton Energy’s key new development, Moabsvelden, located close to Vanggatfontein, faced delays in the year due to regulatory challenges, including the issue of an amended water use licence. On the upside Glad points out that off-take negotiations with Eskom are progressing well and she expresses confidence in securing the necessary funding. “Getting Moabsvelden developed remains our key short-term priority.”

“We operate in a very tough environment. However we will continue to focus on running efficient, cash-generative operations such as Vanggatfontein, optimising Vaalkrantz and bringing development projects such as Moabsvelden on stream.” Vanggatfontein is expected to maintain its performance with a steady supply to Eskom in terms of the secure medium- to long-term contract.

“We believe we have implemented all the necessary changes at Vaalkrantz and are optimistic that the new management and systems will improve performance.”

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