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Keh - Keaton Energy - Condensed Reviewed Group Results For The Six-month Period

Release Date: 26/11/2008 14:00:02      Code(s): KEH
KEH - Keaton Energy - Condensed Reviewed Group Results For The Six-Month Period 
Ended 30 September 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 REVIEWED GROUP RESULTS                                                
for the six-month period ended 30 September 2008                                
Condensed Consolidated Income Statement                                         
Note    6 months to  7 months to 13 months     
                                        30 September 30          to             
                                        2008         September   31 March       
                                        R`000        2007        2008           
(Reviewed)   R`000       R`000          
                                                     (Unaudited) (Audited)      
                                                                                
Other income                      3       458          134         915          
Administrative and other          4       (14 339)     (2 225)     (14 272)     
operating expenses                                                              
Operating loss before net finance         (13 881)     (2 091)     (13 357)     
income / (costs)                                                                
Net finance income / (costs)      5       22 406       (15)        11 222       
Net profit / (loss) before                8 525        (2 106)     (2 135)      
taxation                                                                        
Income taxation (expense) /       6       (6 617)      373         (2 523)      
benefit                                                                         
Profit / (Loss) for the period            1 908        (1 733)     (4 658)      
                                                                                
Attributable to:                                                                
Equity holders of the parent              1 908        (1 733)     (4 658)      
Minority shareholders                     -            -           -            
Profit / (Loss) for the period            1 908        (1 733)     (4 658)      
                                                                                
Number of shares (`000)                                                         
Weighted average (basic)                  141 658      70          50 902       
Weighted average (diluted)                145 158      70          52 902       
Earnings / (Loss) per share       7                                             
(cents)                                                                         
Basic  / Headline                         1.35         (2 475.71)  (9.15)       
Diluted / Headline diluted                1.31         (2 475.71)  (9.15)       
Condensed Consolidated Balance Sheet                                            

                           Not  30 September  31 March 2008                     
                           e    2008                                            
                                             R`000                              
R`000         (Audited)                          
                               (Reviewed)                                       
Assets                                                                          
                                                                                
Non-current assets          8    55 461        40 556                           
Current assets              9    381 950       313 349                          
                                                                                
Total assets                     437 411       353 905                          

Equity and liabilities                                                          
                                                                                
Capital and reserves        10   432 220       336 738                          
Current liabilities         11   5 191         17 167                           
                                                                                
Total equity and                 437 411       353 905                          
liabilities                                                                     

Condensed Consolidated Statement of Changes in Equity                           
          Share       Share-    Accumu-   Total attribu- Minority  Total        
          capital     based     lated     table to       share-    R`000        
and         payment   loss      equity holders holders`               
          premium     transac-  R`000     of the Company interest               
          R`000       tions               R`000          R`000                  
                      R`000                                                     
Balance at -           -         (324)     (324)          -         (324)       
28                                                                              
February                                                                        
2007                                                                            
(Audited)                                                                       
Ordinary   -           -         -         -              -         -           
shares                                                                          
issued                                                                          
Minority   -           -         -         -              -         -           
shareholde                                                                      
rs`                                                                             
interest                                                                        
Total      -           -         (1 733)   (1 733)        -         (1          
recognised                                                          733)        
income and                                                                      
expense                                                                         
for the                                                                         
period -                                                                        
Loss for                                                                        
the period                                                                      
Balance at -           -         (2 057)   (2 057)        -         (2          
30                                                                  057)        
September                                                                       
2007                                                                            
(Unaudited                                                                      
)                                                                               
                                                                                
Ordinary   332 474     -         -         332 474        -         332         
shares                                                              474         
issued for                                                                      
cash                                                                            
Share-     14 860      424       -         15 284         -         15 284      
based                                                                           
payments                                                                        
Share      (6 038)     -         -         (6 038)        -         (6          
issue                                                               038)        
expenses                                                                        
Minority   -           -         -         -              -         -           
shareholde                                                                      
rs`                                                                             
interest                                                                        
Total      -           -         (2 925)   (2 925)        -         (2          
recognised                                                          925)        
income and                                                                      
expense                                                                         
for the                                                                         
period -                                                                        
Loss for                                                                        
the period                                                                      
                                                                                
Balance at 341 296     424       (4 982)   336 738        -         336         
31 March                                                            738         
2008                                                                            
(Audited)                                                                       
Ordinary   100 000     -         -         100 000        -         100         
shares                                                              000         
issued for                                                                      
cash                                                                            
Share-     1 000*      2 003     -         3 003          -         3 003       
based                                                                           
payments                                                                        
Share      (9 429)*    -         -         (9 429)        -         (9          
issue                                                               429)        
expenses                                                                        
Minority   -           -         -         -              -         -           
shareholde                                                                      
rs`                                                                             
interest                                                                        
Total      -           -         1 908     1 908          -         1 908       
recognised                                                                      
income and                                                                      
expense                                                                         
for the                                                                         
period -                                                                        
Profit for                                                                      
the period                                                                      

Balance at 432 867     2 427     (3 074)   432 220        -         432         
30                                                                  220         
September                                                                       
2008                                                                            
(Reviewed)                                                                      
* Included in the share issue expenses are R1 million worth of legal fees       
settled with the issue of 100 000 shares at R10 each in the Company.            
Condensed Consolidated Cash Flow Statement                                      
                          6 months to     7 months to  13 months to 31          
                         30 September    30 September March 2008                
                         2008            2007         R`000                     
R`000           R`000        (Audited)                 
                         (Reviewed)      (Unaudited)                            
                                                                                
                                                                                
Cash flows from operating  (254)           (3 472)      1 537                   
activities                                                                      
Cash flows from investing  (19 828)        (11 496)     (20 441)                
activities                                                                      
Cash flows from financing  91 571          15 231       326 139                 
activities                                                                      
Net increase in cash and   71 489          263          307 235                 
cash equivalents                                                                
Cash and cash equivalents  307 236         510          1                       
at the beginning of the                                                         
period                                                                          
Cash and cash equivalents  378 725         773          307 236                 
at the end of the period                                                        
Notes                                                                           
1.   The financial results in this statement are presented for the six-month    
    period ended 30 September 2008. Comparable period figures represent the     
seven-month period ended 30 September 2007. During 2007 the Company changed 
    its year-end from 28 February to 31 March. Although not required in terms   
    of IAS 34: Interim Financial Reporting, the income statement, statement of  
    changes and equity and cash flow statement for the 13-month period from 1   
March 2007 to 31 March 2008 have also been included. The overall results    
    for the period are characteristic of an exploration company in the process  
    of financing its exploration and evaluation activities. This also results   
    in the prior periods not being comparable.                                  
2.   The condensed consolidated results for the six-month period ended 30       
    September 2008 are prepared in accordance with IAS 34: Interim Financial    
    Reporting, the Listings Requirements for the JSE Limited (JSE) and the      
    South African Companies Act, 61 of 1973 (as amended). The accounting        
policies applied are consistent with those applied in the annual financial  
    statements for the period ended 31 March 2008.                              
3.   The Group did not generate any mining revenue during the period. It was    
    only subsequent to 30 September 2008 that the first coal at the Group`s     
Klip Colliery was sold (refer to commentary below). Other income includes   
    sublease income and consulting fees.                                        
4.   Administrative and other operating expenses include:                       
    -    employee costs of R8.1 million;                                        
-    audit, consulting, legal and professional fees of R2.6 million;        
    -    investor relations costs of R1.1 million;                              
    -    mining and exploration costs that were not capitalised of R0.4 -       
         million; and                                                           
-    operating lease costs of R0.3 million.                                 
5.   The Group has received interest of R22.4 million mainly from term deposits 
    at all the major banks of South Africa.                                     
6.   Income taxation expense comprises current taxation expense of R5.6 million,
deferred taxation debits of R0.6 million and a secondary tax on companies   
    of R0.4 million. The Company has paid R6.3 million in tax during the        
    period, mainly as a result of interest earned in the Company. Deferred tax  
    assets in terms of the losses incurred by subsidiary companies are not yet  
recognised.                                                                 
7.   Earnings per share:                                                        
    The calculation of basic, headline, diluted and headline diluted earnings   
    per share is based on the profit for the six-month period of R1.9 million.  
The weighted average number of shares in issue is 141 658 233. The diluted  
    weighted average number of shares in issue is 145 158 233. The Company was  
    in a loss position for the 13 months ended 31 March 2008, therefore there   
    was no dilutive impact on the basic loss per share. There are no            
reconciling adjustments between the basic and headline earnings / (loss)    
    per share for all periods presented.                                        
8.   Capital expenditure for the six-month period under review amounted to R15.8
    million. Drilling, exploration and feasibility study expenses amounted to   
R14.6 million, whilst R1.0 million has been spent on infrastructure         
    development at the Klip Colliery. The rest of the capital expenditure       
    relates to head office assets.                                              
9.   Current assets include:                                                    
-    cash of R378.7 million; and                                            
    -    value-added tax recoverable of R2.5 million.                           
10.  The Company listed on the main board of the JSE on 22 April 2008 by way of 
    an introduction of its ordinary shares. A private placement of 10 000 000   
ordinary shares of the Company coincided with the listing. These shares     
    were placed at R10 each resulting in a total of R100 million capital being  
    raised.                                                                     
11.  Current liabilities include:                                               
-    amounts payable to exploration service vendors of R1.7 million;        
    -    employee benefit accruals of R1.5 million;                             
    -    other payables of R1.1 million; and                                    
    -    taxes payable of R0.6 million.                                         
12.  No dividends have been declared nor are any proposed for the period under  
    review.                                                                     
13.  The net asset value per share at 30 September 2008 is 303 cents.           
14.  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):                                                                    
                                      30 September 31 March                     
2008         2008                          
    Sterkfontein Project (Bethal)     23 260       22 107                       
    Delmas Project                    18 336       8 079                        
    Klip Colliery (Ogies)             8 800        7 340                        
Amalahle Exploration Prospect     2 339        -                            
    (Ermelo)                                                                    
    Cash resources                    378 725      307 236                      
    Total operating segment assets    431 460      344 762                      
Assets not allocated to segments    5 951        9 143                      
                                        437 411      353 905                    
    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 production 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.                            
15.  KPMG Inc., the Company`s independent auditors, have reviewed the condensed 
    interim financial information contained in this condensed interim report    
    and have expressed an unmodified conclusion on the condensed interim        
    financial information. Their review report is available for inspection at   
the Company`s registered office.                                            
Commentary                                                                      
The six months to 30 September 2008 have seen the Group build on the momentum   
created during the previous reporting period.  Much has been achieved since     
March 2008, with the most significant corporate event being the listing of      
Keaton Energy`s shares on the JSE`s main board on 22 April 2008.  The listing   
had been preceded by a private placing of 10 000 000 shares at R10 per share.   
The R100 million raised in the private placing supplemented the R312 million    
seed capital raised six months earlier, late in 2007.  The Group is thus well   
capitalised and in a good position to comfortably weather the current period of 
global market instability.                                                      
Progress made                                                                   
The most important operational event of the six-month period under review was   
the start of mine development at the Group`s 74%-held Klip Colliery, previously 
known as the Klipfontein Project, subsequent to the granting by the Department  
of Minerals and Energy (DME) of a mining permit.  The Klip Colliery will provide
cash flow to the Group for a period of about 10 months in anticipation of the   
development of the much larger Delmas Project.  Coaling began in earnest soon   
after the end of the reporting period under review, with the first run-of-mine  
coal from the project sold locally during October 2008 and dispatched in        
November 2008.  The resulting cash flow is thus not reflected in the reporting  
period under review.                                                            
A priority of the board is to advance the Delmas Project.  A 200-hole drilling  
programme was completed on the project in June 2008, providing sufficient data  
to develop a thorough geological model, a mine plan and to complete process     
plant designs.  This work will all be incorporated in a feasibility study to be 
completed in the next six-month period.  The regulatory work relating to this   
project is also significantly advanced and subsequent to the submission of the  
mining right application in March 2008 a detailed environmental management plan 
(EMP) was submitted to the DME in October 2008, keeping the project on schedule 
for regulatory approval early in 2009.                                          
Limited work was conducted on the Sterkfontein Project during the period as the 
management team has been focusing on advancing the Delmas Project.              
The Group was awarded two additional sets of prospecting rights during the      
period. On the six properties making up the four Amalahle prospecting rights in 
the Ermelo coal field, a preliminary exploration drilling programme has already 
been completed and a detailed assessment of the potential of the properties is  
being prepared for consideration by the board. On the Group`s two Mafla         
prospecting rights in the Klip River coal field, a drilling programme has been  
initiated.  The Mafla prospects total 5 166 hectares in what was historically   
KwaZulu Natal`s most productive coal field.                                     
Safety, health and environment                                                  
The Group has made safety, health and environmental management central to its   
culture and ethos.  The Group reported 30 043 injury-free hours worked on its   
project sites in the period under review.  Suitable health monitoring processes 
have been implemented at the Klip Colliery and an independent environmental     
consultant has been appointed to provide environmental management monitoring    
services.                                                                       
Corporate governance                                                            
Two new independent non-executive directors were appointed during the period.   
Ms Zelda Mostert, a chartered accountant and previously Group Treasurer of      
Harmony Gold and later Chief Financial Officer of Great Basin Gold, will further
strengthen the board`s financial oversight and has agreed to serve on the       
Group`s audit committee.  Mr John Wallington, a mining engineer with 27 years`  
coal industry experience and previously Chief Executive Officer of Anglo Coal,  
will provide considerable industry experience and strategic guidance to the     
Group.                                                                          
Market                                                                          
The six-month period has seen profound volatility in the price of export quality
coal.  The spot price of coal exported via the Richards Bay Coal Terminal (RBCT)
increased dramatically from US$60 per tonne in late 2007 to a high of close to  
US$180 per tonne in July 2008.  Subsequently, prices fell to between US$95 and  
US$100 per tonne by early November 2008.  It must be noted, however, that this  
level is still significantly above the longer term average price for export     
coal, which was as low as US$50 per tonne as recently as May 2007.              
The domestic market for coal has somewhat different dynamics to the             
international markets, with South Africa`s energy crisis remaining as real as   
ever.  Eskom itself is very concerned about the fact that, between 1999 and     
2007, the rate of increase in consumption of coal domestically significantly    
exceeded the rate at which coal production increased.  This is in part what led 
to Eskom depleting its power station stockpiles earlier this year and then being
forced to acquire greater amounts of discard coal to correct the situation as   
part of the emergency coal purchasing programme.  Eskom`s coal burn is likely to
continue to increase at existing power stations and as previously mothballed    
power stations are returned to service.  Interestingly, slower economic growth  
in South Africa is more likely to reduce the severity of future load shedding   
than materially reduce Eskom`s demand for coal.  This demand for coal should    
continue to have a knock-on effect on other domestic coal buyers and, as a      
consequence, the medium-term outlook for domestic coal appears reasonably       
positive.                                                                       
Although significant volatility has been apparent in international coal markets,
the current level of prices for export coal remain reasonable, while the        
domestic coal market has an uniquely South African dynamic shaped by the local  
energy crisis and remains positive.                                             
Looking ahead                                                                   
The focus of the Group remains advancing the Delmas Project to production.  We  
have no reason to doubt that the levels of commitment, passion and ability      
demonstrated thus far will contribute in large measure to achieving these       
objectives. Importantly, the Group has sufficient capital to achieve targeted   
production volumes of the order of 2 million tonnes per annum in the medium     
term.                                                                           
May 2008 Resource Update                                                        
Keaton Energy announced on 28 May 2008 and published in June 2008 a SAMREC      
compliant Coal Resource statement (refer to the Annual Financial Statements for 
the period ended 31 March 2008).  There has been no change to this Coal Resource
Statement at the date of this announcement.                                     
The Delmas Project area`s total mineable in situ Coal Resource is estimated to  
be 178.4 million tonnes, all in the indicated and measured categories.  This has
seen the No. 5 Seam Coal Resource at 4.8 million tonnes, the No. 4 Seam Coal    
Resource at 90.6 million tonnes and the No. 2 Seam Coal Resource at 83.1 million
tonnes.  The amount of mineable in situ coal defined in the measured category is
97.0 million tonnes, with the remaining mineable in situ coal in the indicated  
category totalling 81.4 million tonnes.  The estimated total mineable in situ   
Coal Resource classified as pseudo-anthracite (lean-, or de-volatilised coal) is
41.6 million tonnes, while the estimated total mineable in situ Coal Resource   
classified as bituminous coal (including the 5 Seam Coal Resource) is 136.8     
million tonnes.                                                                 
The Sterkfontein Project area`s total mineable in situ Coal Resource is         
estimated to be 34.8 million tonnes of 4 Seam Coal Resource. The amount of      
mineable in situ coal defined in the measured category is 17.3 million tonnes,  
with the remaining mineable in situ coal in the indicated category totalling    
17.5 million tonnes.                                                            
On behalf of the board                                                          
David Salter                  Paul Miller                                       
(Chairman)                    (Managing Director)                               
26 November 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) Limited                      
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), Z Mostert++, LX     
Mtumtum++, P Pouroulis**+, Dr SM Rupprecht ***, JG Schonfeldt, APE Sedibe+, JN  
Wallington++                                                                    
*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                                                  
Date: 26/11/2008 14:00:01 Supplied by www.sharenet.co.za                     
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