Johannesburg — KEATON Energy plans to raise up to R200m in debt to fund a 200 000-tons-a-month coal project to supply Eskom with coal, CEO Paul Miller said yesterday.

Keaton will bring a 30000-tons-a-month bituminous coal project at the Vanggatfontein mine near Delmas into production at the end of November , and it plans to exploit two other coal seams from April to supply thermal coal to Eskom.

Keaton is one of the beneficiaries of Eskom's decision to buy 20- million tons of coal a year up to 2018, outside of longstanding contracts with regular suppliers. Keaton will supply 2,4-million tons a year of washed coal to various Eskom power plants until that date from the Vanggatfontein mine.

The R158m bituminous coal project will be funded from Keaton's R335m cash reserve, but the thermal coal project will entail Keaton raising between R150m and R200m in project finance before early next year, Mr Miller said.

"We feel this project ticks all the boxes and we've been sounding out major financiers," he said.

One potential hitch could be the supply from Eskom of 5MW of power for the project. Talks are under way, but other mining companies, such as Great Basin Gold , have experienced delays in receiving power from Eskom.

Of the 30000 tons of bituminous coal, about half will be sold into the premium-sized market, which supplies ferromanganese and chrome smelters. Keaton is reluctant to sell this coal under contract, preferring the higher prices available on the spot market.

Mr Miller declined to give a price that this coal could achieve, saying only 65-million tons out of total production of 250-million tons each year had pricing transparency because it was exported. The remainder is sold domestically and these prices are generally not disclosed.

Keaton has undertaken the responsibility to ensure the Eskom-bound coal is delivered to the power plants specified by Eskom.

Vanggatfontein is within sight of the Kendal power plant, but this facility is already well supplied from coal mines in the region.

The coal will be trucked, but the longer-term plan is to move both the bituminous coal and the thermal coal onto rail.

Keaton has secured a railway siding 13km away and is busy with an environmental study so that it can begin loading trains there, Mr Miller said. Keaton has the Sterkfontein coal prospect near Bethal, which has a 69-million ton resource. A development decision on the underground mine, which could yield between 1-million and 2-million tons of coal a year, will be made in 2012.