Keaton’s chief executive has sleepless nights over BEE

JUNIOR coal producer Keaton Energy chief executive Mandi Glad lies awake at night over Eskom’s empowerment targets, while the company has raised concerns that the empowerment targets in the draft mining charter pose a risk to its mining licence.

“The coal space is not a nice space to be in. All the uncertainty around Eskom is keeping us laying awake at night, but we are keeping on” said Glad last week.

Eskom is forcing mining companies to find empowerment partners following its requirement that 50 percent or more of suppliers be in black hands in the future.

Keaton emphasised its concerns in the 2016 annual report released last month.

“The uncertainty created by Eskom’s current position presents a risk given that Keaton Mining is heavily exposed to this anchor customer,” the company said.

This as Eskom’s chief executive, Brian Molefe, told Parliament last month that the company wanted to help small miners and black women through the requirement. The new Eskom requirements saw Keaton’s competitor, Wescoal, announce it was in negotiations to increase its empowerment credentials last month.

Keaton said in its annual report that the draft mining charter was more onerous as it stipulated that if black shareholders in a mining company sold their shares, the company must replace those investors with other black shareholders within three years to maintain empowerment levels at 26 percent.

Targets

“The Mining Charter scorecard reached its term in 2014. A draft charter with more onerous targets has since been gazetted for comment. Unless revised downwards, the targets proposed in the draft charter are likely to pose a threat to both the licence to operate and the viability of mining operations in that it might be impossible to achieve these targets without eroding shareholder value,” the company said.

The Chamber of Mines, which represents 80 percent of mining in South Africa, is seeking a declaratory order from the court on whether the “once-empowered, always-empowered” principle makes original empowerment deals binding in the event empowerment partners sold or lost their shares.

In addition, Keaton said delays in the report that regulatory processes and authorisations might lead to delays in the commissioning of some of South African planned mines and developments, resulting in adverse impact on growth.

“There is also the possibility of tighter regulation of domestic coal prices and export volumes if government’s proposal to declare coal as a strategic mineral is adopted,” the company said.

Keaton’ flagship colliery, Vanggatfontein in Mpumalanga, produces coal for supply to Eskom and metallurgical coal for supply to domestic industrial consumers. The Moabsvelden is its shortterm growth priority, which is billed to be a satellite pit at the Vanggatfontein Colliery.

Full project release awaits the grant of its Integrated water use licence and the conclusion of a coal supply agreement with Eskom.