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Keh - Keaton Energy Holdings Limited - Preliminary Summarised Audited Group

Release Date: 28/05/2009 15:16:07      Code(s): KEH
KEH - Keaton Energy Holdings Limited - Preliminary summarised audited group     
results                                                                         
for the year ended 31 March 2009                                                
Keaton Energy Holdings Limited                                                  
(Incorporated in the Republic of South Africa)                                  
(Registration number 2006/011090/06)                                            
JSE share code: KEH      ISIN: ZAE000117420                                     
("Keaton Energy" or "the company" or "the group")                               
PRELIMINARY SUMMARISED AUDITED GROUP RESULTS                                    
For the year ended 31 March 2009                                                
Summarised Consolidated Income Statement                                        
Note      1 April      1 March 2007                
                                       2008 to 31   to 31 March                 
                                       March 2009   2008 R`000                  
                                       R`000                                    
Revenue                                 5 424        -                          
Cost of sales                           (1 874)      -                          
Gross profit                            3 550        -                          
Other income                            677          915                        
Administrative and other      4         (13 623)     (8 945)                    
operating expenses                                                              
Mining and related expenses   4         (10 078)     (4 904)                    
Share appreciation rights               (4 126)      (424)                      
expense                                                                         
Impairment losses                       (4 214)      -                          
Operating loss before net     3         (27 814)     (13 358)                   
finance income                                                                  
Net finance income                      44 509       11 223                     
Net profit / (loss) before              16 695       (2 135)                    
taxation                                                                        
Income taxation expense       5         (11 853)     (2 523)                    
Profit / (Loss) for the year            4 842        (4 658)                    
Number of shares (`000)                                                         
Weighted average (basic)                142 248      50 902                     
Weighted average (diluted)              145 783      52 902                     
Earnings / (Loss) per share                                                     
(cents)                                                                         
Basic                         6         3.4          (9.2)                      
Headline                      6         6.4          (9.2)                      
Diluted                       6         3.3          (9.2)                      
Headline diluted              6         6.2          (9.2)                      
Summarised Consolidated Balance Sheet                                           
                             Note      31 March     31 March                    
2009 R`000   2008 R`000                  
Assets                                                                          
Non-current assets                      59 112       40 557                     
Current assets                7         386 237      313 349                    
Total assets                            445 349      353 905                    
Equity and liabilities                                                          
Capital and reserves                    437 189      336 738                    
Current liabilities           8         8 160        17 167                     
Total equity and liabilities            445 349      353 905                    
Summarised Consolidated Cash Flow Statement                                     
                                       1 April      1 March 2007                
                                       2008 to 31   to 31 March                 
March 2009   2008 R`000                  
                                       R`000                                    
Cash flows from operating               7 390        1 536                      
activities                                                                      
Cash flows from investing               (31 411)     (20 440)                   
activities                                                                      
Cash flows from financing               90 483       326 139                    
activities                                                                      
Net increase in cash and cash           66 462       307 235                    
equivalents                                                                     
Cash and cash equivalents at            307 236      1                          
the beginning of the year                                                       
Cash and cash equivalents at            373 698      307 236                    
the end of the year                                                             
Summarised Consolidated Statement of Changes in Equity                          
          Share    Share-based  Accumulated  Total        Minority       Total  
capital  payment      loss R`000   attributable shareholders`  R`000  
          and      transactions              to equity    interest              
          premium  R`000                     holders of   R`000                 
          R`000                              the company                        
R`000                              
Balance at -*       -            (324)        (324)        -*             (324) 
28                                                                              
February                                                                        
2007                                                                            
Ordinary   332 474  -            -            332 474      -              332   
shares                                                                    474   
issued for                                                                      
cash                                                                            
Share-     14 861   424          -            15 285       -              15    
based                                                                     285   
payments                                                                        
Share      (6 038)  -            -            (6 038)      -              (6    
issue                                                                     038)  
expenses                                                                        
Total      -        -            (4 658)      (4 658)      -*             (4    
recognised                                                                658)  
income and                                                                      
expense                                                                         
for the                                                                         
period                                                                          
(Loss for                                                                       
the                                                                             
period)                                                                         
Balance at 341 297  424          (4 982)      336 739      -              336   
31 March                                                                  739   
2008                                                                            
Ordinary   100 000  -            -            100 000      -              100   
shares                                                                    000   
issued for                                                                      
cash                                                                            
Share-     1 000    4 126        -            5 126        -              5 126 
based                                                                           
payments                                                                        
Share      (9 517)  -            -            (9 517)      -              (9    
issue                                                                     517)  
expenses                                                                        
Total      -        -            4 841        4 841        -              4 841 
recognised                                                                      
income and                                                                      
expense                                                                         
for the                                                                         
year                                                                            
(Profit                                                                         
for the                                                                         
year)                                                                           
Balance at 432 780  4 550        (141)        437 189      -              437   
31 March                                                                  189   
2009                                                                            
* Nominal amounts                                                               
Notes                                                                           
The financial results are presented for the year ended 31 March 2009.  Prior    
period figures represent the 13-month period from 1 March 2007 to 31 March 2008.
During the year the group`s Klip Colliery (previously the Klipfontein Project)  
started production. The overall results for the year, however, are              
characteristic of an exploration company in the process of financing its        
exploration and evaluation activities, with the return on its invested funds    
resulting in a small profit for the year.                                       
The preliminary summarised consolidated results for the year ended 31 March 2009
incorporate extracts of the group`s unqualified audited financial statements,   
and are prepared in accordance with International Financial Reporting Standards 
(IFRS), the Listings Requirements of the JSE Limited (JSE) and the South African
Companies Act, 61 of 1973 (as amended). These summarised consolidated financial 
statements are presented and disclosures included in accordance with IAS 34:    
Interim Financial Reporting. The accounting policies applied are consistent with
those applied in the annual financial statements for the 13-month period ended  
31 March 2008. For a better understanding of the group`s financial position and 
results of operations, these summarised consolidated results are to be read in  
conjunction with the group`s audited annual financial statements for the year   
ended 31 March 2009, which include all disclosures required by IFRS, and which  
are expected to be posted on or about 19 June 2009.                             
As mentioned above, mining revenue of R5.4 million resulted in a gross profit of
R3.6 million during the year. After accounting for other income of R0.7 million,
administration and other operating expenses of R13.6 million, mining and related
costs of R10.1 million (refer note below note 4), a share appreciation rights   
expense of R4.1 million, impairment losses of R4.2 million, net finance income  
of R44.5 million and a taxation charge of R11.9 million, the profit for the year
was R4.8 million (basic and headline earnings per share of 3.4 and 6.4 cents    
respectively). Other income includes sublease income and consulting fees.       
Administration, other operation, mining and related expenses include (prior     
period figures included in brackets):                                           
employee benefit costs (excluding the share appreciation rights expense) of R9.0
million (R4.8 million). As at 31 March 2009, the group had ten (nine) permanent 
employees / contractors;                                                        
consulting, legal, audit and professional fees of R5.6 million (R4.1 million).  
Fees relating to the listing have been netted against share premium;            
non-executive directors` fees of R2.2 million (R0.2 million), of which R0.7     
million was paid to directors of subsidiary companies;                          
listing and investor relations costs of R2.0 million (R0.6 million);            
head office lease costs of R0.7 million (R0.5 million); and                     
depreciation charges not included in cost of sales of R0.7 million (R0.4        
million).                                                                       
Note: Mining and related costs mainly include costs recovered from exploration  
subsidiaries in terms of their management agreements with Keaton Administrative 
and Technical Services (Pty) Limited, direct consulting fees by mining and      
exploration contractors and compensation paid to surface right holders.         
Administration and other operating expenses mainly include costs not recovered  
from exploration subsidiaries i.e. certain employee benefit costs, non-executive
directors` fees, listing and investor relation costs.                           
Income taxation expense comprises current taxation expense of R10.2 million,    
deferred taxation expense of R0.5 million and a secondary tax on companies of   
R1.1 million. The company has paid R10.1 million in tax during the year.        
Earnings/ (Loss) per share:                                                     
The calculation of basic earnings / (loss) per share is based on the profit /   
(loss) for the period (attributable to equity holders of the parent) of R4 841  
349 (2008 - loss of R4 657 882) and a weighted average of 142 248 143 (2008 - 50
902 474) ordinary shares in issue during the period. As the group was in a loss 
position at 31 March 2008, the dilutive ordinary shares had no dilutive impact  
on the basic loss per share for 31 March 2008. An impairment loss of R4.2       
million was added back as a reconciling adjustment between the basic and        
headline earnings per share for the current year.                               
Current assets include:                                                         
cash of R373.7million (2008 : R307.2 million);                                  
coal stockpiled of R7.0 million (2008 : Rnil);                                  
interest receivable of R3.6 million (2008 : R2.2 million); and                  
value-added tax recoverable of R1.7 million (2008 : R3.6 million).              
Current liabilities include:                                                    
amounts payable to exploration service vendors of R1.2 million (2008 : R5.7     
million);                                                                       
amounts received in advance from coal buyers of R1.8 million (2008 : Rnil);     
other trade payables of R0.9 million (2008 : R9.5 million);                     
environmental rehabilitation provisions of R0.6 million (2008 : Rnil); and      
taxation of R2.2 million (2008 : R0.9 million).                                 
  Issuances of equity during the year:                                          
31 March   31 March                  
                                           2009       2008                      
                                           Number of shares (000)               
   Issued share capital                                                         
At beginning of period                  132 741    70                        
   Issued for cash during the year (refer  10 000     129 811                   
   commentary)                                                                  
   Share-based payments                    100         2 860                    
At end of period                        142 841    132 741                   
No dividends have been declared nor are any proposed for the period under       
review.                                                                         
The net asset value per share at 31 March 2009 is 306 cents (2008: 254 cents).  
Segment information:                                                            
Refer to the commentary below for a description of the projects (segments) of   
the group. The group can be segmented as follows (R`000):                       
                                           31 March   31 March                  
2009       2008                      
   Total assets                                                                 
   Keaton Mining (Pty) Limited -           23 288    22 107                     
   Sterkfontein Project                                                         
Keaton Mining (Pty) Limited - Delmas    22 672    8 079                      
   Project                                                                      
   Keaton Mining (Pty) Limited - Klip      16 653    7 340                      
   Colliery                                                                     
Amalahle Exploration (Pty) Limited -    1 379     -                          
   Projects                                                                     
   Keaton Energy Holdings Limited - Cash   375 819   307 236                    
   resources                                                                    
Total operating segments` assets        439 811   344 762                    
   Assets not allocated to segments        5 538       9 143                    
                                           445 349     353 905                  
                                                                                
1 April   1 March 2007               
                                           2008 to   to 31 March                
                                           31 March  2008                       
                                           2009                                 
Segment revenue                                                              
   Keaton Mining (Pty) Limited - Klip      5 424     -                          
   Colliery                                                                     
   Keaton Administrative and Technical     10 033    -                          
Services (Pty) Limited                                                       
   Total operating segments` revenue       15 457    -                          
   Consolidation adjustments               (10 033)    -                        
                                           5 424       -                        

   Segment results                                                              
   Keaton Energy Holdings Limited * / **   (26 005)  (4 870)                    
   Keaton Administrative and Technical     (6 452)   (5 002)                    
Services (Pty) Limited *                                                     
   Keaton Mining (Pty) Limited *           (4 859)   (3 249)                    
   Amalahle Exploration (Pty) Limited *    (4 217)   (414)                      
   Other exploration subsidiaries *        (3 946)   (2 093)                    
Total operating segments` results *     (45 479)  (15 628)                   
   Consolidation adjustments (impairment   17 665    2 271                      
   of investments in subsidiaries)                                              
                                           (27 814)  (13 357)                   
* Operating loss before net finance                                          
   income and taxation                                                          
   ** Excludes finance income of R44.7                                          
   million                                                                      
The group`s  capital commitments are:                                           
                                           31 March   31 March                  
                                           2009       2008                      
   Environmental rehabilitation guarantees  1 260      -                        
issued                                                                       
   Exploration expenditure authorised but   38 155     36 782                   
   not contracted                                                               
   Exploration expenditure authorised and   2 263      5 176                    
contracted                                                                   
There was no change to the group`s contingent liabilities during the year.      
Post-balance sheet events:                                                      
On 7 April 2009 Keaton Energy announced that it had reached agreement on a      
transaction which, on conclusion, will add 2 844 hectares of prospecting rights 
to its 4 009 hectare Sterkfontein Project (the acquisition). The acquisition -  
referred to as the Sterkfontein Extension Prospecting Right - `fills out` the   
areas between Sterkfontein`s North 2 and South Blocks. The acquisition, which is
subject to Ministerial Consent in terms of Section 11 of the MPRDA (The South   
African Mineral and Petroleum Resources Development Act No. 28 of 2002, as      
amended), involves Keaton Energy acquiring a 74% interest in Labohlano Trading  
46 (Pty) Limited, proposed holder of the Sterkfontein Extension Prospecting     
Right, from Money Box Investments 156 (Pty) Limited.                            
KPMG Inc`s unqualified auditors` reports included in the annual financial       
statements and in the summarised financial statements contained in this         
summarised report are available for inspection at the company`s registered      
office.                                                                         
Coal Reserve and Resource Statements                                            
The group has released new and updated Coal Reserve and Resource Statements for 
its Delmas and Leeuwfontein Projects during the month of May 2009. These are    
available for inspection on the group`s website www.keatonenergy.co.za. There   
was no change to the Coal Resource Statement at the group`s Sterkfontein Project
(released May 2008).                                                            
COMMENTARY                                                                      
Much progress has been made in the period under review. Of the three founding   
projects, the Klip Colliery (previously the Klipfontein Project) is now in      
production, the Delmas Project`s feasibility study is complete with a Coal      
Resource and Reserve Statement having been issued, and the Sterkfontein Project 
has been significantly expanded through corporate action. Progress has also been
made on the exploration pipeline, with two prospects being elevated to project  
status, whilst a number of other prospects are to be relinquished.              
Listing and cash position                                                       
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 million ordinary 
shares of the company coincided with the listing. These shares were placed at   
R10 per share - or R100 million in total (before listing expenses of R9.5       
million).                                                                       
The group`s total cash position as at 31 March 2009 amounted to R373.7 million. 
Given the current global economic turmoil, access to both equity and debt       
markets is becoming increasingly difficult. The Board is therefore applying a   
conservative approach in the employment of the group`s cash resources towards   
its operations. Cash is also conservatively invested across most of South       
Africa`s highest rated financial institutions.                                  
Safety, health and the environment                                              
The safety and health performance of the group in the period under review has   
been acceptable with 54 226 hours worked on-site with no lost time injuries     
recorded. Extensive effort has been made to establish safety monitoring         
processes and procedures and these are working satisfactorily. The Safety,      
Health and Environment Committee of the Board has approved a Safety and Health  
Statement and Policy and its implementation has progressed well.                
Corporate governance                                                            
The Board was strengthened significantly by the appointment of two additional   
independent non-executive directors, Ms Zelda Mostert, who brings extensive     
mining finance skills and experience to the Audit Committee and the Board, and  
Mr John Wallington, a 27-year veteran mining engineer who was previously CEO of 
Anglo Coal. Subsequent to the end of the period under review, Ms Mandi Glad was 
appointed to the Board as the executive director responsible for marketing and  
business development.                                                           
Activities during the year                                                      
During the year the group`s activities have been focused on the following:      
Delmas Project (Delmas): During the year R14.6 million was capitalised on       
exploration, feasibility and related costs (R22.7 million to date). A Coal      
Reserve of 25.9 million tonnes was declared on this project. A decision to      
develop the mine remains dependent on a number of factors including regulatory  
approvals and commercial contract negotiations.                                 
Klip Colliery (Balmoral/Ogies): Apart from acquisition and exploration costs of 
R7.7 million, a further R3.6 million was capitalised on boxcuts and             
infrastructure costs, and R1.7 million on deferred stripping costs. The value of
the stockpile as at 31 March 2009 was R7.0 million as a result of the coal buyer
defaulting on buying commitments. Alternatives buyers were found and coal sales 
resumed subsequent to year end. To December 2008 turnover amounted to R5.4      
million with a gross profit of R3.6 million.                                    
Sterkfontein Project (Bethal): Limited work has been done as the group`s focus  
was on the consolidation of the project area. These efforts culminated in the   
securing of a 74% interest in a 2 844-hectare prospecting right over properties 
intermingled with the existing 4 009 hectares of prospecting rights. R23.3      
million was capitalised on this project to 31 March 2009.                       
Amalahle Prospects (Ermelo): R3.9 million was capitalised on drilling and       
related costs to 31 March 2009. A Coal Resource of 0.9 million MTIS has been    
declared on the Leeuwfontein Project, and preliminary results from the          
Braamspruit Project are looking promising. The validity of the Braamspruit      
prospecting right has been challenged by a neighbouring mining company, and     
further investment in the Braamspruit Project will be dependent on the dispute  
being resolved in the group`s favour. Drilling results for some of the prospects
proved neither commercially viable nor technically feasible and an impairment   
charge of R2.5 million was raised during the year.                              
Mafla Prospects (Dundee): The prospects proved to be neither commercially viable
nor technically feasible and a charge of R1.5 million was raised as at 31 March 
2009 to fully impair all capitalised exploration and evaluation costs.          
The prospecting rights that are expected to be granted to Keaton Energy`s other 
subsidiaries, Intshe Coal (Pty) Limited, Rafcoal Mining (Pty) Limited and Izwi  
Coal (Pty) Limited, have not yet materialised and these subsidiaries are        
currently treated as being dormant. The total investment in these subsidiaries  
as at 31 March 2009 amounted to R2.1 million (R1.8 million as at 31 March 2008).
Markets                                                                         
Keaton Energy has weathered the recent economic storm successfully following its
listing and equity capital raising. The company raised a significant amount of  
capital to build its first major project, making it unlikely that it will need  
to return to the equity markets or make use of debt markets.                    
The company`s share price performance has been pleasing under difficult market  
circumstances, with the share having traded at or above the pre-listing issue   
price for much of the period under review. In contrast, from the date of the    
company`s listing to 31 March 2009 the JSE/FTSE All Share Index declined by 36%,
the JSE/FTSE Resources 20 Index by 46% and the Nedsec Junior Mining and         
Exploration Index by 68%.                                                       
Export coal prices have fallen significantly from their July 2008 highs,        
although they have recovered somewhat since the end of the financial year under 
review. Domestically, it appears that Eskom`s emergency coal purchase programme 
has seen the power generator rebuild its power station stockpiles successfully, 
abetted by the reduced demand for power from major industrial consumers as a    
direct consequence of the global economic crisis. It is clear, however, that    
Eskom remains concerned about the long-term security of coal supply to its      
existing power stations in and adjacent to the Witbank and Highveld coal fields,
which bodes well for Keaton Energy`s longer term plans.                         
Strategy                                                                        
It is against the background of the market events described above that the      
executive management team fine-tuned the group`s strategy. It remains the       
intention to produce two million tonnes of saleable coal in the medium term,    
growing into a mid-tier coal producer in the longer term - with this production 
from greenfields and brownfields projects where Keaton Energy is able to use its
intellectual and financial resources to take projects up the value curve,       
through rapid project development to production. This strategy has been refined,
however, and the group will now pursue a two-tiered approach:                   
a limited number of large, long-life, resource-intensive projects such as the   
Delmas and Sterkfontein Projects; and                                           
a portfolio of smaller, quick-to-cash-flow projects such as the Klip Colliery   
and the Leeuwfontein Project that will provide the group with operational       
flexibility.                                                                    
Keaton Energy will continue to endeavour to remain lean, with quick decision-   
making, keeping overhead and fixed costs to a minimum and making extensive use  
of outsourcing and contracting.                                                 
Looking ahead                                                                   
The 2009 calendar year should see the long-life Delmas Project turned to        
account, subject to regulatory approvals and commercial contract negotiations.  
Bringing the Delmas Project into production remains the focus of the group for  
the year. Taking the long-life Sterkfontein Project further up the value curve  
will also receive significant attention, particularly since the project area has
now been significantly increased and consolidated.                              
Operations at the Klip Colliery should cease within the next 12 months with a   
view to the Leeuwfontein Project and Braamspruit Project coming on stream in    
2010 and 2011 respectively. Much work will need to be done on taking            
Leeuwfontein and Braamspruit through the regulatory processes before mining can 
be considered. Regulatory work has begun on the Leeuwfontein Project, and will  
begin on the Braamspruit Project in the second half of 2009.                    
The group will continue to make prospecting right applications and will also    
look to partner with existing holders of prospecting and mining rights in order 
to add further projects to the smaller projects portfolio.                      
On behalf of the board                                                          
David Salter        Paul Miller                                                 
(Chairman)          (Managing Director)                                         
28 May 2009                                                                     
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),                     
AB Glad, 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 11 317 1700                                                      
telefax: +27 11 463 4759                                                        
email: info@keatonenergy.co.za                                                  
Date: 28/05/2009 15:16:06 Supplied by www.sharenet.co.za                     
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