Keaton’s fi­nance costs af­fect earn­ings

Share price dropped 11%

The Star Early Edition - - COMPANIES - Di­neo Faku

EMERG­ING coal pro­ducer and de­vel­oper, Keaton En­ergy, has warned that higher fi­nance costs to fund its Moab­svelden open-pit ther­mal coal mine near Delmas, and a share is­sue in Fe­bru­ary will weigh heav­ily on earn­ings for the half-year to Septem­ber.

The Keaton share dropped by 11 per­cent on the JSE on Fri­day as in­vestors voted with their feet after the company flagged that head­line earn­ings a share would de­cline by be­tween 32 per­cent and 27 per­cent. Keaton is a JSE-listed ju­nior coal pro­ducer whose main as­set Vang­gat­fontein in Mpumalanga sold 93 per­cent of its out­put to Eskom on a longterm con­tract.

The earn­ings drop is as a re­sult of more shares in is­sue dur­ing the pe­riod after more than 32 647 838 new shares were is­sued in Fe­bru­ary.

“As well as in­creased fi­nance costs fol­low­ing the draw­down of the In­vestec fi­nance fa­cil­ity, the ben­e­fit will flow only once pro­duc­tion com­mences at Moab­svelden,” said the company in the trad­ing up­date on Fri­day. Head­line earn­ings a share will likely fall to be­tween 13.2c and 14.2c a share, com­pared to 19.4c a share for the com­par­a­tive pe­riod last year.

Ba­sic earn­ings a share for the pe­riod would drop by be­tween 37 per­cent and 31 per­cent to be be­tween 12.3c and 13.3c a share, com­pared to 19.4c a share for the com­par­a­tive pe­riod last year.

Keaton’s fi­nan­cial re­sults for the half-year to Septem­ber will be re­leased on Wed­nes­day.

The Moab­svelden mine is ex­pected to pro­duce 1.4 mil­lion tons a year by next year of ex­port and Eskom qual­ity ther­mal coal at about R30 mil­lion.

Keaton plans to sell twothirds of pro­duc­tion from the mine to Eskom, and ex­port the dif­fer­ence. The op­er­a­tion will likely reach steady state in the first quar­ter of 2016.

After Moab­svelden, Keaton would de­velop ei­ther Balgray or Koude­lager in KwaZulu-Natal, which would en­able the group to meet its medium-term tar­get of pro­duc­ing 5 mil­lion tons a year of saleable coal.

Keaton has a long-term con­tract to sup­ply Eskom with ap­prox­i­mately 2.1 mil­lion tons of ther­mal coal a year un­til 2020.

An­a­lysts be­lieved Keaton was in a po­si­tion to gen­er­ate im­pres­sive cash flows.

In Fe­bru­ary Keaton con­cluded a fi­nanc­ing fa­cil­ity with In­vestec in which the bank pro­vided Keaton with a R300m term loan and a R50m work­ing cap­i­tal fa­cil­ity.

Of the R300m, R170m had been used to set­tle the re­main- ing bal­ance of the project fi­nance fa­cil­ity ad­vanced by Ned­bank in 2011 for the con­struc­tion of the Vang­gat­fontein coal wash­ing plant and an­cil­lary fa­cil­i­ties.

About R130m of the term loan would be used partly to pur­chase Xceed Re­sources, and the work­ing cap­i­tal fa­cil­ity of R50m was avail­able for gen­eral pur­poses.


Keaton’s Vang­gat­fontein Col­liery 5 Seam (fore­ground). The ju­nior coal pro­ducer warns its head­line earn­ings will fall by be­tween 32 per­cent and 27 per­cent.

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