HomeEnergy MineralsKeaton share price up after contract award

Keaton share price up after contract award

Keaton Energy MD
Paul Miller
Johannesburg, South Africa — MININGREVIEW.COM — 22 July 2010 – The share price of JSE-listed Keaton Energy Holdings Limited (Keaton Energy) “’ a start-up coal exploration and development company “’ has risen 5% on the news that it has clinched a seven-year contract to supply energy coal to South African state-owned power utility Eskom.

“This is part of Eskom’s medium-term coal procurement programme and we’ve finally agreed on the commercial terms,” Keaton Energy MD Paul Miller told Mining Weekly Online.

The deal has triggered the go-ahead for the expenditure of R180-million to develop the second phase of Keaton’s new Vanggatfontein opencast coal project, near Delmas, in Mpumalanga province.

Last month, Keaton announced that it was spending R158-million on the development of Vanggatfontein’s first phase to produce – from October – up to 30 000 t/m of No 5 seam quality bituminous coal, which sells in the domestic market at prices higher than export prices.

Keaton’s 74%-held Keaton Mining is to supply 16.5-million tonnes of steam coal to Eskom from Vanggatfontein’s second phase. The No 2 and No 4 seam coal will be mined for a seven-year period beginning in April, and supplying various Eskom power stations.

Production will start at 50 000 t/m and ramp up to 200 000 t/m by July 2011.

“If mining was simple, we would have had just enough money, but it never is, so we will look to raise a small amount of project finance,” Miller explained.

On the No 2 and No 4 pit coming through from April, Miller said: “That’s quite an aggressive timeline. The first phase of the project, the R158-million phase, was to establish the No 5 seam operation and the second phase of the project is to establish the No 2 and the No 4 seam operation, and we are on site pouring concrete already for the No 5 seam operation.”

Miller said that the No 5 seam metallurgical coal could not be directly compared with coking coal: “It’s a bituminous coal that has metallurgical application in the domestic industry. It’s coal that goes into furnaces.”