Drilling at Keaton’s
Sterkfontein project
 
Johannesburg, South Africa — MININGREVIEW.COM — 02 June 2010 – Coal exploration and development company Keaton Energy Holdings plans to spend some R158 million of its R335 million available cash on developing Phase 1 of its first major mining project “’ Vanggatfontein, near Delmas in Mpumalanga “’ for production of high-quality No 5 Seam metallurgical coal for the domestic market, and on surface right acquisitions.

Commenting on the company’s results for the year ended 31 March 2010, CEO Paul Miller added that the balance of Keaton Energy’s available cash – R177 million – was set aside for Phase 2 of Vanggatfontein, which would target No 2 and No 4 Seam domestic power station coal, and on further exploration and evaluation of existing and new prospecting rights.

“Design of Vanggatfontein Phase 2 is now being optimised as a consequence of our current engagement with power utility Eskom on participation in its 20Mtpa medium-term coal acquisition programme,” Miller added. “Participation could result in Phase 2 being larger than originally anticipated, and there is a possibility Keaton Energy may need to tap into debt capital markets for additional capital to complete Phase 2.”

Miller went on to say that Vanggatfontein’s capacity to deliver both high-quality metallurgical coal from Phase 1 and domestic power station coal from Phase 2, positioned Keaton Energy well to benefit from the on-going recovery in both domestic and international coal markets from the late-2008 market crash. Export coal prices had recovered from their lows of 2009 and appeared to have stabilised above US$80/t, ex Richards Bay Coal Terminal. Domestically, markets were being stimulated both by the Eskom programme and a shortage of low-phosphorous, high-vitrinite, metallurgical coal such as the product to be produced from Vanggatfontein Phase 1.

Bulk earthworks began on the Vanggatfontein project subsequent to the end of the reporting period, and first coal is expected before the end of the 2010 calendar year. Most of the capital approved so far by the Keaton Energy Board for Phase 1 is being invested in land acquisition and plant construction.

Looking longer term, Miller says that – at Keaton Energy’s Sterkfontein project near Bethal in Mpumalanga “’ completion of drilling and geological modelling over the recently consolidated project area of 7 280 hectares would be followed by a full feasibility study to determine the economics of an underground mine producing both export and domestic coal. A recently-announced update estimate doubled Sterkfontein’s resource to 69Mt (mineable in situ).