Johannesburg - The recovery of global coal prices bolstered Keaton Energy’s expectations of exports, Mandi Glad, the chief executive, said yesterday as the miner improved revenue in the half year to September.
Thermal coal prices nearly doubled since the beginning of the year as China cut domestic production and weather disruptions in producing regions resulted in tighter supply.
Delivering the results, Glad said the significant recovery in global coal prices had given the group flexibility to pursue alternative options for an off-take agreement for its Moabsvelden project.
“The market is aware that we have spoken about Moabsvelden as an exclusive Eskom supplier, but with the recovery of coal prices we see an opportunity where we can produce coal for export into the Indian market,” said Glad.
The Moabsvelden project is a proposed 1.5 million to 1.6 million ton a year thermal coal mine near Vanggatfontein.
“We will take a decision in terms of an off-take agreement that will make sense for the future of the company. There are a number of considerations we have to look at,” she said. Eskom’s requirement that suppliers be 50 percent or more black owned was one of the considerations, Glad said.
She said the company would speak to banks once the off taker had been identified.
“A number of local institutions have concerns regarding exposure to Eskom,” she said, referring to the decision by two asset management firms, including South Africa’s Futuregrowth, to pull their investments in the utility owing to fears about its corporate governance standards.
Sibonginkosi Nyanga, an analyst with Momentum SP Reid Securities, said yesterday that the export coal market had become attractive because of higher prices. “We have seen an up tick in coal price this year. The coal price outperformed market (expectations), even Keaton Energy’s competitor, Wescoal said it had finalised a series of coal contracts in line with its plans to supply a million tons of coal a year into the export market.”
Keaton Energy’s annual production is about 2 million tons of coal from its Vanggatfontein mine in Mpumalanga. It said the temporary pit sequencing constraints led to a drop in Eskom sales from Vanggatfontein colliery. The colliery delivered 1.139 million tons of washed 2- and 4-Seam thermal coal to Eskom from 1.192 million tons last year, a drop of 52 372 tons. The Vaalkrantz Colliery was placed on care and maintenance in May amid a force majeure event, and the drought. Keaton said as a result of placing Vaalkrantz on care and maintenance it had seen the monthly cost of running the mine cut from R5m to R1.5m.
In terms of results, Keaton posted R580m revenue in the six months to September 30 from continuing operations compared with R563m in the corresponding period last year. No dividend was paid as gross profit from continuing operations was R89m, or 15 percent of revenue, compared with R119m and 21 percent of revenue in the corresponding period last year.
On the production side, the Moabsvelden project was finally awarded its Integrated Water Use Licence in the half year under review.
Keaton Energy shares inched up 0.96 percent on the JSE yesterday to close at R1.05.