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JSE-listed Keaton Energy Holdings Limited (Keaton Energy) said today that it expects capital expenditure on its first major coal mining project - Vanggatfontein, near Delmas in South Africa’s Mpumalanga Province – to peak at around R430 million in early 2011.
Hosting a visit by mining journalists to Vanggatfontein today, Keaton Energy Managing Director Paul Miller said that some R158 million had been approved for Phase 1 of the project, development of which is currently being fast-tracked in order to supply up to 30 000 product tonnes per month of high-quality No 5 Seam metallurgical coal from open-pit mining to the lucrative domestic market. First production is expected in November this year. The remaining capex has been approved for surface right acquisitions and for Phase 2 of the project, which will be developed to supply some 16.5 million tonnes of No 2 Seam and No 4 Seam power station coal over seven years to power utility Eskom in terms of contract negotiations concluded with Keaton Energy in July this year. Phase 2 planning is well advanced, with steady-state open-pit production of 200 000 product tonnes per month expected to be achieved in July 2011. Miller said that, while most of the approved capital for Phase 1 and Phase 2 could be met from Keaton Energy’s cash reserve of R335 million (as at 31 March 2010), it would be necessary to raise project finance for the balance. Given Vanggatfontein’s capacity to supply both metallurgical and power station coal into the domestic market, which was enjoying “renewed interest”, and having sounded out major local lenders, Miller said there was great interest in providing debt capital to complete Vanggatfontein. “This is precisely the right time to bring to account an asset such as Vanggatfontein,” Miller said. “We are able to access its 3.4 million tonne, open-pit reserve of high-quality metallurgical coal quickly and easily, and to deliver this into the domestic market at a time when metallurgical producers have re-started mothballed furnaces; demand far outstrips supply; and prices are buoyant. “Further, with a contract to supply Eskom ‘tucked into our belt’, we are able to bring Vanggatfontein’s 22 million tonne power station coal reserve to account rapidly and cost-effectively.” Looking ahead, Miller said strong domestic demand for both Vanggatfontein’s metallurgical coal and power station coal was expected to continue into the longer term as domestic and global economic recovery continued. This meant that tackling logistics involved in accessing export markets could be deferred until Keaton Energy’s second major project, Sterkfontein, could be brought into production. Sterkfontein was approaching the feasibility stage and capital estimates for its development were expected in Q4 of 2011, Miller said. |
