Keaton Energy's financial year ended in disaster when the junior coal miner discovered a vast web of theft at one of its two producing mines. Some R25-million in coal was filched by senior managers and led to a review that wiped out its profits. Business Times asked CEO Mandi Glad ... How did you discover your staff were robbing you blind?In terms of our production it takes about three months to fill a vessel, so our export stockpiles run into anything from between 50 000 and 80 000 tons at any point in time. There's obviously an opportunity, when you're carrying those levels of stock, to be able to say there's this many tons on the ground ... and because it's not being shipped there's no reason to check it when you get a survey report that says you've got 80000 tons of X - the numbers stack up and all is good.story_article_left1We concluded our off-take agreement with Gunvor in November last year and entered into an agreement this year with Glencore. In that transition we actually landed up doing three [export] vessels, back-to-back, which we've never done in our history of owning Vaalkrantz.We turned around at a point and the stock wasn't on the ground. And that led us to start investigating, and through that investigation we started to put the puzzle together in terms of how it had happened. Really, it was collusion from senior management with a customer, with our surface logistics contractor ... the circle was huge.Have you any idea how long they'd been stealing from you?I'd say at least 12 months.Can you name any of the contractors?Unfortunately not at this point, on the basis that there is an investigation going on, there are criminal charges being laid.The theft and a fatal accident at Vaalkrantz prompted a review and led to an impairment charge of R56.5-million against the mine. Why is this asset worth so much less than it was, say, a year ago?If you look at when we acquired Vaalkrantz, API4 [Richards Bay's benchmark coal price] was $130 a ton - it's now $60. The economics have changed entirely.Following the fatality, we had a look at roof conditions [in the mine], and obviously we're not in the business of killing people, so we have excluded certain areas on the basis of safety and then further on the basis of economics. For me, it makes perfect sense that the model no longer supports the size of the asset that we had on our books.Does this imply that you may review all your assets, given the drop in the coal price?We only have two assets in operation: Vanggatfontein and Vaalkrantz. Vanggatfontein is not exposed in any way to global coal prices, so obviously it would not be necessary. In terms of our pipeline, of the projects that were set to export coal, we are having a look at. But Vanggatfontein and Moabsvelden [Keaton's next development] are exclusively Eskom suppliers, so it's not necessary.story_article_right2How's your relationship with Eskom? How do your BEE credentials stack up?The way Keaton is structured is that the listed company holds 74% of its subsidiaries, with the difference held by minorities at the asset level. It's our intention in the coming months to flip the 26% at asset level [the mines] up to the listed level [Keaton on the JSE]. In terms of Eskom, the relationship, in my view, is an excellent one. I'd like to believe that it's mutually beneficial - I think we're a reliable supplier and from Keaton's perspective Eskom is a good client to us.So you're not worried that Eskom will tell you you're not empowered enough to do business with?As you know, they've already categorically stated that they will not enter into new contracts with any entity that is not 51% empowered. We have a very transparent relationship with Eskom, and we have a plan. Phase one is the flip of the minorities from asset level to listed level, and then phase two will see us doing a transaction with an empowerment company whereby we would increase our ownership at listed level to 51%. I think provided that plan is clear and committed to and delivered on, I don't believe we'll have any issues with supplying Eskom.What's the time frame you've given to this?Definitely six months for phase one and within 18 months for phase two.Will you have to raise capital, or will the partner you bring fund their involvement?It would need to be someone who comes with cash - the reason for that is it will assist us with the development of Moabsvelden. We would not be then needing to further indebt ourselves. At the moment, the entities that we're talking to are not existing partners, it would be a new partner.Does it distress you that Keaton's paper can't buy much? Your share price has been under pressure for the past five years and is down 50% on a one-year basis.It's hugely distressing! It's perturbing that the market does not seem to support us. I mean, if I have a look at our peers in the rest of the industry, with the R627-million earnings before interest, taxes, depreciation and amortisation at Vanggatfontein - I don't think many of our peers can claim that. We have a proper business, we're generating proper cash. I've stopped looking at the share price as much as I used to. We're trying to run a good, solid business, and the share price will follow or it won't.story_article_left3What's your personal investment in Keaton?At the listed level probably about 3% and at Vanggatfontein - that is subsidiary level - about 13%. So, significant.You're obviously committed then to Keaton?100%. I'm not a CEO who was brought in with no personal involvement. I founded this company, and I think I've continued to show the market that my commitment is there.You're one of very few woman CEOs in the mining industry. Has it been difficult or is it a non-story?It's a non-story for me simply because I won't have it being a story. But I'd be lying if I said my challenges are not greater than my male counterparts. The mining industry has historically been a white Afrikaans male place. I don't speak Afrikaans, I'm a woman, so I think I've had challenges that perhaps my counterparts have not. Having said that, I've never and will never allow it to be something that I even think about.Is there a solid future for Keaton given the difficulties in the export markets and Eskom's own difficulties?Absolutely. We have the benefit of being a junior - we're not carrying massive overheads, so our cost of production simply on the basis that we're a junior is always going to be less, in my view, than the majors. No matter what pressure Eskom is under, the reality is that they are not going to not have to consume in excess of 120million tons of coal a year for the foreseeable future and I think that Keaton and junior coal mining remain exceptionally viable.Talevi is a BDTV presenter..