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KEH - Keaton Energy Holdings Limited - Vanggatfontein Capex expected to peak at

Release Date: 01/09/2010 12:42:01      Code(s): KEH
KEH - Keaton Energy Holdings Limited - Vanggatfontein Capex expected to peak at 
R430 Million                                                                    
Keaton Energy Holdings Limited                                                  
(Incorporated in the Republic of South Africa)                                  
(Registration number 2006/011090/06)                                            
JSE share code: KEH  ISIN: ZAE000117420                                         
("Keaton Energy")                                                               
JSE-listed 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  
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       
Sterkfontein was approaching the feasibility stage and capital estimates for its
development were expected in Q4 of 2011, Miller said.                           
Queries:  James Duncan                                                          
         Russell & Associates                                                   
         +27 11 880-3924 (office)                                               
+27 82 892 8052 (mobile)                                               
1 September 2010                                                                
Nedbank Capital                                                                 
Date: 01/09/2010 12:42:01 Supplied by www.sharenet.co.za                     
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