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Keh - Keaton Energy - Condensed Audited Group Results For The 13-month Period

Release Date: 28/05/2008 15:00:02      Code(s): KEH
KEH - Keaton Energy - Condensed Audited Group Results For The 13-Month Period   
                        Ended 31 March 2008                                     
Keaton Energy Holdings Limited                                                  
(formerly Tricoal Holdings Limited)                                             
(Incorporated in the Republic of South Africa)                                  
(Registration number 2006/011090/06)                                            
JSE code: KEH & ISIN code: ZAE000117420                                         
("Keaton Energy" or "the company" or "the group")                               
CONDENSED AUDITED GROUP RESULTS FOR THE 13-MONTH PERIOD ENDED 31 MARCH 2008     
Condensed Consolidated Income Statement                                         
                             Note      1 March 2007  10 April 2006              
to            to                         
                                       31 March 2008 28 February                
                                       R`000         2007                       
                                                     R`000                      

Other income                 3         915           -                          
Administrative and other     4         (14 272)      (380)                      
operating expenses                                                              
Operating loss before net              (13 357)      (380)                      
finance income                                                                  
Net finance income           5         11 222        (6)                        
Net loss before taxation               (2 135)       (386)                      
Income taxation expense      6         (2 523)       62                         
Loss for the period                    (4 658)       (324)                      
                                                                                
Attributable to:                                                                
Equity holders of the parent           (4 658)       (324)                      
Minority shareholders                  -             -                          
Loss for the period                    (4 658)       (324)                      
                                                                                
Number of shares (`000)                                                         
Weighted average (basic)               50 902        70                         
Weighted average (diluted)             51 002        70                         
Loss per share (cents)       7                                                  
Basic                                  9.2           463.3                      
Diluted                                9.2           463.3                      
Condensed Consolidated Balance Sheet                                            
                                                                                
Not  31 March    28 February                   
                                 e    2008        2007                          
                                      R`000       R`000                         
Assets                                                                          

Non-current assets               8    40 556      141                           
Current assets                   9    313 349     1                             
                                                                                
Total assets                          353 905     142                           
                                                                                
Equity and liabilities                                                          
                                                                                
Capital and reserves             10   336 738     (324)                         
Non-current liabilities          10   -           297                           
Current liabilities              11   17 167      169                           
                                                                                
Total equity and liabilities          353 905     142                           
                                                                                
Condensed Consolidated Statement of Changes in Equity                           
               Share     Share-   Accumu-    Total       Minority   Total       
capital   based    lated loss attribu-    share-     R`000       
               and       payment  R`000      table to    holders`               
               premium   transac-            equity      interest               
               R`000     tions               holders of  R`000                  
R`000               the                                
                                             company                            
                                             R`000                              
Ordinary       -         -        -          -           -          -           
shares                                                                          
issued                                                                          
Minority       -         -        -          -           -          -           
shareholders                                                                    
` interest                                                                      
Total          -         -        (324)      (324)       -          (324)       
recognised                                                                      
income and                                                                      
expense for                                                                     
the period                                                                      
(Loss for                                                                       
the period)                                                                     
Balance at     -         -        (324)      (324)       -          (324)       
28 February                                                                     
2007                                                                            
                                                                                
Ordinary       332 474   -        -          332 474     -          332 474     
shares                                                                          
issued for                                                                      
cash                                                                            
Share-based    14 860    424      -          15 284      -          15 284      
payments                                                                        
Shares issue   (6 038)   -        -          (6 038)     -          (6 038)     
expenses                                                                        
Minority       -         -        -          -           -          -           
shareholders                                                                    
`                                                                               
interest                                                                        
Total          -         -        (4 658)    (4 658)     -          (4 658)     
recognised                                                                      
income and                                                                      
expense for                                                                     
the period                                                                      
(Loss for                                                                       
the period)                                                                     
                                                                                
Balance at     341 296   424      (4 982)    336 738     -          336 738     
31 March                                                                        
2008                                                                            
Condensed Consolidated Cash Flow Statement                                      
1 March     10 April                    
                                        2007 to     2006 to                     
                                        31 March    28 February                 
                                        2008 R`000  2007                        
R`000                        
                                                                                
Cash flows from operating               1 537       (297)                       
activities                                                                      
Cash flows from investing               (20 441)    -                           
activities                                                                      
Cash flows from financing               326 139     298                         
activities                                                                      
Net increase in cash and cash           307 235     1                           
equivalents                                                                     
Cash and cash equivalents at the        1           -                           
beginning of the period                                                         
Cash and cash equivalents at the        307 236     1                           
end of the period                                                               
Notes                                                                           
The financial results in this statement are presented for the 13-month period   
ended 31 March 2008. Prior period figures represent the period from             
incorporation, 10 April 2006, to 28 February 2007. The overall results for the  
period are characteristic of an exploration company in the process of           
financing its exploration and evaluation activities.                            
The condensed consolidated results for the 13-month period ended 31 March 2008  
incorporate extracts of the group`s unqualified audited financial statements,   
and are prepared in accordance with International Financial Reporting           
Standards (IFRS), the Listings Requirements for the JSE Limited (JSE) and the   
South African Companies Act, 61 of 1973 (as amended). These condensed           
consolidated financial statements are prepared in accordance with IAS 34:       
Interim Financial Reporting. The accounting policies applied are consistent     
with those applied in the annual financial statements for the period ended 28   
February 2007. For a better understanding of the group`s financial position     
and results of operations, these condensed consolidated results are to be read  
in conjunction with the group`s audited annual financial statements for the 13- 
month period ended 31 March 2008, which include all disclosures required by     
IFRS, and which are expected to be released on or about 17 June 2008.           
The group did not generate any mining revenue during the period. Other income   
includes sublease income and consulting fees.                                   
Administrative and other operating expenses include:                            
employee costs of R5.8 million;                                                 
consulting, legal and professional fees of R4.1 million;                        
mining and exploration costs that were not capitalised of R1.4 million;         
investor relations costs of R0.6 million; and                                   
operating lease costs of R0.5 million.                                          
The group has received interest of R11.3 million mainly on R312 million in      
seed capital raised during November / December 2007.                            
Income taxation expense comprises current taxation expense of R3.0 million,     
deferred taxation credits of R0.6 million and a secondary tax on companies of   
R0.1 million. The company has paid R2.2 million in tax during the period.       
Loss per share:                                                                 
The calculation of basic, diluted and headline loss per share is based on the   
loss for the 13- month period of R4.7 million. The weighted average number of   
shares in issue is 50 902 474. The diluted weighted average number of shares    
in issue is 51 002 474, but as the group is in a loss position, there is no     
dilutive impact on the basic loss per share. There are no reconciling           
adjustments between the basic and headline loss per share.                      
Capital exploration expenditure for the 13-month period under review amounted   
to R37.5 million. Drilling and related expenses amounted to R23.5 million.      
Also included in the R37.5 million is an amount of R14 million as a result of   
the exploration right acquisition agreement concluded between the company,      
Keaton Mining and Rutendo Mining (the 26% minority shareholder in Keaton        
Mining). Consent in terms of section 11 of the Mineral and Petroleum Resources  
Development Act (MPRDA) was received on 20 February 2008 for the cession of     
four exploration rights to Keaton Mining. In terms of the shareholders`         
agreement, the purchase price was settled through the issue of 2 000 000        
ordinary shares at R1 each in the share capital of the company on the           
registration of notarial deeds of transfer. As no formal valuation could be     
performed on the exploration rights acquired at the time of the agreement,      
accounting rules require that the share-based payment be accounted for at the   
fair value of the shares on the date of the grant, i.e. the date that the       
vesting conditions were met (20 February 2008). This resulted in the            
exploration rights being acquired at R7 a share (being the value which the      
company raised seed capital at during the last two months in 2007), or R14      
million in total.                                                               
Current assets include:                                                         
cash of R307.2 million;                                                         
interest receivable of R2.2 million; and                                        
value-added tax recoverable of R3.6 million.                                    
The company initially funded its operations through unsecured founder loans,    
which were repaid during January 2008. Further funding of R15 million was       
received from the Kleo Trust, a trust associated with the Pouroulis family.     
This loan was later converted into ordinary shares in the company. Nedbank      
Capital contributed R5 million to share capital (5 million shares at R1 each).  
In the period November to December 2007, the company raised R312 million in     
seed capital (before share issue expenses of R5.5 million) from selected        
investors through the issue of 44.6 million ordinary shares at R7 each.         
Current liabilities include:                                                    
amounts payable to exploration service vendors of R5.7 million;                 
other payables of R9.4 million (mainly consulting fees payable to the group`s   
advisors in terms of the group`s seed capital raising and structuring); and     
taxation of R0.9 million.                                                       
No dividends have been declared nor are any proposed for the period under       
review.                                                                         
The net asset value per share at 31 March 2008 is 254 cents.                    
Segment information:                                                            
Refer to the commentary below for a description of the projects (segments) of   
the group. The total assets of the group can be segmented as follows (R`000):   
                                     31 March 2008 28 February                  
                                                  2007                          
Sterkfontein Project             22 107        79                           
    Delmas Project                   8 079         -                            
    Klipfontein Project              7 340         -                            
    Cash resources                   307 236       -                            
Other                            9 143         63                           
                                     353 905       142                          
The segment reporting has been prepared in accordance with IFRS 8 - Operating   
Segments (IFRS 8) which defines requirements for the disclosure of financial    
information of an entity`s operating segments. The standard requires            
segmentation based on the group`s internal organisation. The segments did not   
commence mining activities and as a result no revenue nor any segment results   
were generated.                                                                 
The group discloses its operating segments according to the entity components   
regularly reviewed by the chief operating decision makers. Segment information  
is prepared in conformity with the measure that is reported to the chief        
operating decision makers.                                                      
Post-balance sheet events:                                                      
On 18 April 2008, Dr S.M. Rupprecht, one of the executive directors, was        
granted a conditional bonus award of 1 500 000 share appreciation rights        
(offer price of R10) in terms of the company`s long-term share incentive        
scheme. These rights were awarded and accepted in terms of the Keaton Energy    
Long-Term Performance Incentive Scheme and are subject to specific performance  
criteria.                                                                       
Also refer to information regarding the Amalahle Prospect and the company`s     
listing on the JSE disclosed under the commentary below.                        
KPMG Inc`s unmodified auditors` reports included in the annual financial        
statements and on the  condensed financial statements contained in this         
condensed report are available for inspection at the company`s registered       
office.                                                                         
COMMENTARY                                                                      
We are pleased to present to you your company`s audited condensed annual        
results for the 13-month period ended 31 March 2008.                            
This period has been significant in the establishment of Keaton Energy,         
culminating in the listing of the company`s ordinary shares on the main board   
of the JSE soon after the close of the reporting period. It was in this         
reporting period that Keaton Energy`s 74% held subsidiary, Keaton Mining,       
concluded an agreement with Rutendo Mining to acquire the Sterkfontein and      
Klipfontein Projects and was awarded the exploration right to the Delmas        
Project. These three projects formed the basis for the establishment of the     
company.                                                                        
Structure finalised                                                             
The group`s structure was finalised during 2007 and was designed from           
inception to comply with the requirements of the MPRDA and the Mining Charter.  
All of the group`s projects and exploration right applications are held in      
newly-established subsidiaries, each of which has a different Historically      
Disadvantaged South African (HDSA) partner. All services are provided to the    
subsidiaries by Keaton Energy`s 100%-held subsidiary, Keaton Administrative     
and Technical Services (KATS), in terms of standard management agreements,      
whilst staff numbers grew during the period from just one to nine, supported    
through relationships established with a significant number of consultants and  
contractors.                                                                    
Progress made                                                                   
Sterkfontein Project                                                            
Drilling began on the Sterkfontein Project in February 2007, once suitable      
contractors and consultants had been appointed. At the end of the initial       
drilling programme in December 2007, 25 000 metres of drilling had been         
completed, and an in situ mineable resource of 34 million tonnes in the         
indicated and measured categories was declared in March 2008.                   
Delmas Project                                                                  
Keaton Mining was awarded the exploration right to the Delmas Project in        
October 2007 and drilling began in the same month. By December 2007, 6 000      
metres of drilling had been completed and an in situ mineable resource of 171   
million tonnes, principally in the indicated and measured categories, had been  
declared by March 2008. A second phase of drilling was initiated in early 2008  
and was completed by the end of April 2008. This additional data were used in   
the May 2008 updated resource statement which is discussed in more detail       
below. The full mining right application was submitted for the Delmas Project   
on 31 March 2008. It remains the board`s priority to advance the Delmas         
Project into production as soon as possible, with the first quarter of 2009     
targeted for mining to begin, subject to regulatory approvals. Early            
indications are that the Delmas Project will produce mainly steam coal for the  
local market, with secondary products consisting of a small portion of export   
steam coal, a No. 5 Seam product for the metallurgical industry, and a lean     
coal product for blending with other coals, also for the metallurgical          
industry.                                                                       
Klipfontein Project                                                             
This was the first project explored by the group. 34 holes were initially       
drilled and coal was intersected in a localised area of 4.5 hectares.           
Management conducted a review of options available to extract value from this   
project and it was determined that a mining permit application should be        
prepared and submitted to the regional office of the Department of Minerals     
and Energy (DME). A mining permit is a limited form of mining right that        
permits an area of only 1.5 hectares to be disturbed at any one time, to a      
maximum of 4.5 hectares. The Klipfontein Project, although small, should        
provide cash flows to the company for a period of about 10 months while the     
Delmas Project is brought into production.                                      
Amalahle Prospect                                                               
On the 15 April 2008, Amalahle Exploration, a 74%-held subsidiary of Keaton     
Energy was granted four separate exploration rights by the DME. These rights    
cover six discrete properties totalling 1 597 hectares in the Ermelo coal       
field. Exploration is expected to commence in June 2008.                        
Listing                                                                         
During April 2008 irrevocable undertakings were obtained from investors to      
subscribe for 10 000 000 shares at R10 each in the company in advance of the    
listing of the shares on the JSE. The listing took place on 22 April 2008, and  
was the culmination of several months of intensive effort on the part of the    
company`s executives and advisors. The shareholder register at listing          
consisted of 584 shareholders, with 82% of the shares held by South African     
residents. Since being placed prior to listing at R10 per share, the Keaton     
Energy share has traded between R11.55 and R15.50. The successful private       
placing and listing was a vote of confidence both in the new mineral rights     
dispensation and in the new company.                                            
Markets                                                                         
Developments in both the international and domestic coal markets during the     
review period proved very encouraging. The spot price of coal exported via the  
Richards Bay Coal Terminal (RBCT) increased dramatically in the fourth quarter  
of 2007, driven mostly by Indian sub-continent buyers who had switched from     
the Pacific to the Atlantic thermal coal markets. This switch was in part       
driven by supply shocks in the tight Pacific market, for example the            
logistical problems and floods experienced in Australia and the unusually cold  
winter in China. However, it was underlain by the fundamental increase in       
demand in China and India. We expect that long-term real export prices will     
remain higher than their long-term averages. Meanwhile, the domestic market     
has been dramatically affected by South Africa`s current energy crisis. Eskom   
has identified low coal stocks, lower quality coal and wet coal as key          
constraints impacting negatively on its ability to provide sufficient           
electricity to the country, and has had a knock-on effect on other domestic     
coal buyers in the market. Domestic coal prices have increased as a             
consequence. Eskom`s positive effect on the domestic market is likely to        
continue beyond the conclusion of the emergency coal purchasing programme as    
its coal burn is increased at its existing power stations, and as previously    
mothballed power stations are to be re-commissioned. Management`s initial       
discussions with Eskom regarding future coal purchases have been encouraging.   
Keaton Energy`s inaugural reporting period has seen an enormous amount          
achieved. The company has been firmly established with the following in place:  
-    a strong management team;                                                  
-    significant advanced development projects;                                 
-    a JSE listing; and                                                         
-    sufficient available capital to achieve target production volumes of 2     
million tonnes per annum in the medium-term.                                    
May 2008 Resource Update                                                        
Keaton Energy published a SAMREC compliant Coal Resource statement in March     
2008.  This Coal Resource statement covered the Sterkfontein and Delmas         
projects and was included in the company`s Pre-Listing Statement. The           
Sterkfontein Coal Resource has not subsequently been updated, however a         
further 33 boreholes totalling 2 400 metres have been drilled, principally for  
mine planning purposes, on the Delmas Project. The additional information from  
these 33 boreholes has been used to improve the company`s confidence in the     
Delmas Project`s Coal Resource estimate.                                        
The Delmas Project area`s total mineable in situ Coal Resource has increased    
marginally from 171.5 million tonnes in the March 2008 estimate to 178.4        
million tonnes in the May 2008 estimate (a 4% increase), all in the indicated   
and measured categories. This has seen the No. 5 Seam Coal Resource increase    
from 3.6 million tonnes to 4.8 million tonnes, the No. 4 Seam Coal Resource     
increase from 84.5 million tonnes to 90.6 million tonnes and the No. 2 Seam     
Coal Resource decrease from 83.4 million tonnes to 83 million tonnes.           
The amount of mineable in situ coal defined in the measured category has        
increased from 60.1 million tonnes in the March 2008 estimate to 97 million     
tonnes in the May 2008 estimate, a 61.4% increase, with the remaining mineable  
in situ coal in the indicated category totalling 81.4 million tonnes, down      
from 111.1 million tonnes. The estimated total mineable in situ Coal Resource   
classified as pseudo-anthracite (lean-, or de-volatilised coal) has decreased   
from 45.3 million tonnes to 41.6 million tonnes, while the estimated total      
mineable in situ Coal Resource classified as bituminous coal has increased      
from 122.6 million tonnes to 132 million tonnes.                                
Looking ahead                                                                   
Looking ahead, much remains to be done. The regulatory process must be          
navigated to ensure that the Klipfontein and Delmas Projects are turned to      
account, surface rights must be acquired, suitable plant delivered and          
appropriate mining contractors appointed - all against tight deadlines. We      
have every confidence that the same levels of commitment, passion and ability   
applied successfully so far, will contribute in large measure to our achieving  
the objectives set out above.                                                   
On behalf of the board                                                          
David Salter                  Paul Miller                                       
(Chairman)                    (Managing Director)                               
27 May 2008                                                                     
Registered Office:                                                              
Ground Floor, Eland House, The Braes, 3 Eaton Avenue, Bryanston, South Africa   
(Postnet Suite 464, Private Bag X51, Bryanston 2021)                            
Transfer Secretaries:                                                           
Computershare Investor Services South Africa (Pty) Ltd                          
Ground Floor, 70 Marshall Street, Johannesburg , South Africa                   
(PO Box 61051, Marshalltown 2107)                                               
Auditors:                                                                       
KPMG Inc.                                                                       
1226 Schoeman Street, Hatfield, Pretoria                                        
Directors:                                                                      
Dr JD Salter (chairman)*++, PBM Miller (managing director), LX Mtumtum++, P     
Pouroulis**+, Dr SM Rupprecht ***, JG Schonfeldt, APE Sedibe+                   
*British, **South African / Cypriot, ***USA, +non-executive, ++independent non- 
executive                                                                       
telephone: +27 0(11) 317 1700                                                   
telefax: +27 0(11) 463 4759                                                     
email: info@keatonenergy.co.za                                                  
28 May 2008                                                                     
Date: 28/05/2008 15:00:01 Supplied by www.sharenet.co.za                     
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