Keaton Energy released its results today reporting revenue growth to R35m (FY 10: R22m) on the back of increased coal volumes from its Vangatfontein project. EPS also rose from 4.1cps to 10.3cps and put the group on a PE ratio of 28x. No dividend was declared (unsurprisingly) and R27m of cash was left on hand, but the group has secured some decent credit facilities to fund the remainder of its flagship project's growth.

Keaton's Vangatfontein project remains in ramp-up phase as these results only really reflect the Phase 1 / Seam 5 (metallurgic coal) sales into the local market. Directors report that "...there was excellent acceptance of the coal product by the domestic metallurgical market and consequent strong sales of 48 397 tonnes of product during the first four months of production, limited only by the slower than expected ramp-up of plant production due to the exceptionally wet weather in December 2010. Production has stabilised at targeted levels since the end of the financial year."

Phase 2 involves sales of thermal coal to Eskom. The contract for this supply was signed last year and, in fact, subsequently expanded. The group ran into a touch of trouble when the construction and commissioning of the 4 and 2 Seam plant was negatively affected by the failure of the support structure of one of the Dense Medium Separation unit feed bins during pre-commissioning on 28 May 2011. This problem is being resolved, but it is unlikely that production and time targets will not be effected. Keaton was originally contracted to supply thermal coal to Eskom by the end of July 2011.

The group has recently concluded an acquisition of Leeuw Mining and Exploration that comes with further coal operations, reserves and access to Richard's Bay Coal Terminal allocation to the tune of 207,000 tons per annum coupled with a railway siding facility near Vallkrantz. The acquisition was funded by an equity issue that has seen a major new shareholder, Plusbay, entering Keaton. Plusbay is an affiliate of the commodities trading business, Gunvor Group, which may lead to coal trading benefits for Keaton as it begins to push beyond Eskom and into the coal export market.

Coal is as much a mining game as it is a logistics game, so the potential value of this acquisition and the commodity trading partner should not be under estimated.

Overall, Keaton's results prove the viability of its flagship Vangatfontein project and indicate possible future further upside as volumes in Phase 2 come on line. The acquisition has strategic advantage and the group looks to be of relatively sound footing for the future. Now, the lack of liquidity of the share price must just be dealt with...

Another resource company, Pan Africa Resources (PAN, ARB Holdings & Thoughts), released an update of its reserves. More specifically, an upgrade of the gold in situ in its Manica Project and a resource declaration for its PGM Phoenix project. Manica remains a fair way off from development, but the upgrade indicates increasing certainty that the project is economically viable and will eventually get to turning promises into cash. The Phoenix PGM project, though, is almost at this point already and the declaration of resources is mostly a formality.

PAN is still my favourite gold stock and this just adds more weight to my conviction.

Finally, ISA (ISA's Dividend Proposition) released boring administrative SENS today stating that all the resolutions at its AGM were passed by the required number of shareholders. This is non-news... Except for the sneaky little fact that one of its resolutions was giving directors and the company the general authority to repurchase company shares. Interesting.

ISA is a wonderful little dividend payer playing in the ICT security space. Profit growth has been anemic, but with potential to grow as cloud computing gains traction and its related security spending grows.

Still, if ISA starts to apply its cash generation not just into paying dividends, but buying back shares, we could see some upside in its share price. All depends on timing, amount and sustainability.

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