Modern Mining November 2015

COAL

by the third quarter of calendar 2016. We may still meet this target but there are certainly no guarantees. With Vanggatfontein working well, we’re under no real pressure with Moabsvelden and we can afford to delay its development.” Glad is in no doubt, however, that Moab­ svelden is an outstanding project. “We’ve always said it is a good project and we maintain this view. It has about 80 % of the resources of Vanggatfontein and once it is in operation – at a projected rate of about 2,5 or 2,6 Mt/a (ROM) – it will turn our Delmas complex into a roughly 6 Mt/a (ROM), 4 Mt/a (saleable) producer. Given that it will use Vanggatfontein’s infra- structure, the capex is relatively low at around R300 million. The main new works we will have to undertake are an expansion of washing capacity at Vanggatfontein by about 300 t/h and the construction of a dedicated 5 km long haul road to link the properties.” After Moabsvelden, the next most likely project for Keaton to develop is Braakfontein, located 10 km south-east of Newcastle in KZN, which would produce mainly an A-grade coal for export from both opencast and under- ground operations. Says Glad: “Although we’re currently updating our feasibility study on Braakfontein, I can’t see it being developed in the current market. It simply wouldn’t be via- ble at current international coal prices. It also requires a significant capex of R600 million, which is quite formidable for a company of Keaton’s size. I have no doubt it will be devel- oped in time but I think it is still some way off.” Turning to the Vaalkrantz mine, Keaton’s only other producing asset apart from Vanggatfontein, Glad says a new management team is in place at the colliery and that the

processing being channelled through existing capacity at Vanggatfontein. “Moabsvelden remains at the top of our project pipeline but it is not going to be devel- oped according to the original timeline we had in mind, which envisaged first production by the end of this year,” comments Glad. “Firstly, although we have a mining right in place we do not yet have an Integrated Water Use Licence (IWUL) and it is no longer possible – as it used to be – to start mining without one. We have been told that the issue of the licence is immi- nent but this could mean anything from days to months. “Secondly, we can’t proceed until we have an offtake agreement with Eskom. The problem here is that Eskom is now asking its suppliers of coal to have a 50 % plus 1 share empowerment structure in place. Keaton as a company is fully empowered in terms of the Mining Charter with a 26 % holding by BEE groups at present. We’re in the process of ‘flipping’ our empowerment from the asset level to the holding company and this – together with some other shareholder changes – should see Keaton Energy Holdings emerging shortly as probably a 30 % empow- ered company. “We believe in empowerment and have every intention of moving up to the 50 % + 1 level but it’s not going to happen overnight,” she con- tinues. “Our share price currently trades at a significant discount to our net asset value, so how do we do a deal? We’re looking at various strategies to get us to where we want to be but, as I say, it’s going to be difficult to achieve in the present market so Moabsvelden is, at the very least, a year or two away. We said in our 2015 annual report that we would target first product

Charging up drilled inter- burden block beneath the 4-Seam in the VG4 pit.

“With Vanggat­ fontein working well, we’re under no real pressure with Moabsvelden and we can afford to delay its development.”

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