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Keh - Keaton Energy Holdings Limited - Reviewed Interim Condensed Group Results

Release Date: 25/11/2009 16:29:03      Code(s): KEH
KEH - Keaton Energy Holdings Limited - Reviewed Interim Condensed Group Results 
for the Six-Month Period Ended 30 September 2009                                
Keaton Energy Holdings Limited                                                  
(Incorporated in the Republic of South Africa)                                  
(Registration number 2006/011090/06)                                            
JSE code: KEH & ISIN: ZAE000117420                                              
("Keaton Energy" or "the Company" or "the Group")                               
Key features                                                                    
- First major project, Vanggatfontein, gets go-ahead                            
- 30 000 tpm of premium-priced 5 Seam metallurgical coal for domestic market    
- Strong cash position - R366 million                                           
- R8 million Klip Colliery stockpiles sold after reporting period               
- Sterkfontein Project drilling continues                                       
- successful completion of acquisition of contiguous prospecting right          
- well timed to benefit from improving market conditions                        
REVIEWED INTERIM CONDENSED GROUP RESULTS for the six-month period ended         
30 September 2009                                                               
Condensed Consolidated Statement of Comprehensive Income                        
                               6 months to     6 months to         Year to      
30 Sep 2009     30 Sep 2008     31 Mar 2009      
R`000                  Note      (Reviewed)      (Reviewed)       (Audited)     
Revenue                               9 853               -           5 424     
Cost of sales                       (9 413)               -         (1 874)     
Gross profit                            440               -           3 550     
Other income              3           1 779             458             677     
Administrative and                                                              
other operating expenses  4         (7 744)         (7 527)        (13 623)     
Mining and related                                                              
expenses                  4         (5 671)         (4 809)        (10 078)     
Share appreciation                                                              
rights                                                                          
income/(expense)          5           4 521         (2 003)         (4 126)     
Impairment and net                                                              
realisable value losses   6         (5 926)               -         (4 214)     
Operating loss before                                                           
net finance income                 (12 601)        (13 881)        (27 814)     
Net finance income                   15 493          22 406          44 509     
Net profit before taxation            2 892           8 525          16 695     
Income taxation expense   7         (3 891)         (6 617)        (11 853)     
(Loss)/Profit for the                                                           
period                                (999)           1 908           4 842     
Total comprehensive                                                             
(expense)/                                                                      
income for the period                 (999)           1 908           4 842     
(Loss)/Profit and Total                                                         
comprehensive                                                                   
(expense)/ income for                                                           
the period                                                                      
attributable to:                                                                
Owners of the Company                 3 883           1 908           4 842     
Non-controlling interest            (4 882)               -               -     
(999)           1 908           4 842      
Number of shares (`000)                                                         
Weighted average (basic)            143 552         141 658         142 248     
Weighted average (diluted)          143 587         145 158         145 783     
Earnings per share (cents)                                                      
Basic                     8             2.7             1.4             3.4     
Headline                  8             3.4             1.4             6.4     
Basic diluted             8             2.7             1.3             3.3     
Headline diluted          8             3.4             1.3             6.2     
Condensed Consolidated Statement of Financial Position                          
                                               30 Sep 2009     31 Mar 2009      
R`000                                  Note      (Reviewed)       (Audited)     
Assets                                                                          
Non-current assets                        9          87 338          59 112     
Current assets                           10         382 650         386 237     
Total assets                                        469 988         445 349     
Equity and liabilities                                                          
Shareholder`s equity                                453 851         437 189     
Non-controlling interest                              2 845               -     
Total equity                                        456 696         437 189     
Current liabilities                      11          13 292           8 160     
Total equity and liabilities                        469 988         445 349     
Condensed Consolidated Statement of Cash Flows                                  
                               6 months to     6 months to         Year to      
30 Sep 2009     30 Sep 2008     31 Mar 2009      
R`000                            (Reviewed)      (Reviewed)       (Audited)     
Cash flows from                                                                 
operating activities                  2 973           (254)           7 390     
Cash flows from                                                                 
investing activities               (11 055)        (19 828)        (31 411)     
Cash flows from                                                                 
financing activities                      -          91 571          90 483     
Net (decrease)/increase in                                                      
cash and cash equivalents           (8 082)          71 489          66 462     
Cash and cash equivalents                                                       
at the beginning of the period      373 698         307 236         307 236     
Cash and cash equivalents                                                       
at the end of the period            365 616         378 725         373 698     
Condensed Consolidated Statement of Changes in Equity                           
                                                    Share-        Retained      
Share       based       earnings/      
                                   capital and     payment        (Accumu-      
R`000                                   premium     reserve     lated loss)     
Balance at 1 April 2008 (Audited)       341 296         424         (4 982)     
Total comprehensive income                                                      
for the period                                -           -           1 908     
Issue of ordinary shares                100 000           -               -     
Share-based payment transactions          1 000       2 003               -     
Share issue expenses                    (9 429)           -               -     
Balance at 30 September 2008                                                    
(Reviewed)                              432 867       2 427         (3 074)     
Total comprehensive income                                                      
for the period                                -           -           2 933     
Share-based payment transactions              -       2 123               -     
Share issue expenses                       (87)           -               -     
Balance at 31 March 2009 (Audited)      432 780       4 550           (141)     
Total comprehensive                                                             
income/(expense) for the period               -           -           3 883     
Share-based payment transactions         17 300     (4 521)               -     
Non-controlling interest resulting                                              
from acquisition of a subsidiary              -           -               -     
Balance at 30 September 2009                                                    
(Reviewed)                              450 080          29           3 742     
                                                          Non-                  
controlling       Total      
R`000                                     Total        interest      equity     
Balance at 1 April 2008 (Audited)       336 738               -     336 738     
Total comprehensive income for the                                              
period                                    1 908               -       1 908     
Issue of ordinary shares                100 000               -     100 000     
Share-based payment transactions          3 003               -       3 003     
Share issue expenses                    (9 429)               -     (9 429)     
Balance at 30 September 2008 (Reviewed) 432 220               -     432 220     
Total comprehensive income                                                      
for the period                            2 933               -       2 933     
Share-based payment transactions          2 123               -       2 123     
Share issue expenses                       (87)               -        (87)     
Balance at 31 March 2009 (Audited)      437 189               -     437 189     
Total comprehensive income/(expense)                                            
for the period                            3 883         (4 882)       (999)     
Share-based payment transactions         12 779               -      12 779     
Non-controlling interest resulting from                                         
acquisition of a subsidiary                   -           7 727       7 727     
Balance at 30 September 2009 (Reviewed) 453 851           2 845     456 696     
Notes:                                                                          
1. During the six-month period ended 30 September 2009 the Group`s Klip         
Colliery continued its operations and is nearing the end of its life. The Group 
finalised a successful acquisition (contiguous to its existing Sterkfontein     
Project), whilst the return on its externally invested funds contributed R15.5  
million during the period. Accounting adjustments (including the share          
appreciation rights income, impairment and net realisable value losses, and the 
allocation of losses to non-controlling interests) had a net positive impact of 
R3.5 million on the results and basic earnings per share. The overall results   
for the period remain characteristic of a company in the process of financing   
its exploration and evaluation activities and developing its first major        
project, Vanggatfontein, previously known as the Delmas Project.                
2. The financial results are presented for the six-month period ended           
30 September 2009. Comparable period figures represent the six-month period     
ended 30 September 2008. Although not required in terms of IAS 34: Interim      
Financial Reporting, the comparative statement of comprehensive income,         
statement of changes in equity and cash flow statement for the year ended 31    
March 2009 have also been included.                                             
The condensed consolidated results for the six-month period ended 30 September  
2009 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 condensed           
consolidated financial statements are measured and presented and disclosures    
included, in accordance with IAS 34: Interim Financial Reporting. The           
accounting policies applied are, except for recognition of non- controlling     
interests in losses (early adoption of IAS 27: Consolidated and Separate        
Financial Statements (revised) and applying IAS 1: Presentation of Financial    
Statements (revised)), consistent with those applied in the annual financial    
statements for the year ended 31 March 2009.                                    
3. Other income includes an amount of R1.6 million representing a damages       
claim in terms of the default by the original coal buyer at Klip Colliery.      
4. Administration, other operational, mining and related expenses include:      
- employee benefit costs (excluding the share appreciation rights income) of    
R5.6 million;                                                                   
- consulting, legal, audit and professional fees of R2.5 million;               
- non-executive directors` fees of R1.0 million;                                
- listing and investor relations costs of R1.0 million;                         
- head office lease costs of R0.4 million; and                                  
- depreciation charges not included in cost of sales of R0.4 million.           
Note: Mining and related expenses mainly include that portion of management and 
employees` time spent directly on exploration and production subsidiaries,      
direct consulting fees by mining and exploration contractors and compensation   
paid to surface right holders. Administration and other operating expenses      
mainly include the remainder of the employee benefit costs, non-executive       
directors` fees, listing and investor relation costs.                           
5. Share appreciation rights income                                             
One of the main participants of the share incentive scheme resigned. The net    
positive adjustment of R4.5 million is as a result of the reversal of the share 
appreciation right expenses recognised in previous periods.                     
6. Impairment and net realisable value losses                                   
Operations at Klip Colliery have been downscaled during the period (refer to    
Commentary) resulting in a sharp decrease in the remaining life of mine         
tonnages. This decrease resulted in the weighted average cost per ton           
increasing significantly, and low quality stockpiles having to be written down  
by R4.9 million to their net realisable value. An additional impairment of      
R1.1 million resulted from capitalised mine development cost at Klip Colliery.  
Other smaller impairment adjustments (net income of R0.04 million) have also    
been recognised.                                                                
7. Income taxation expense mainly comprises current taxation expense of         
R3.2 million and a Secondary Tax on Companies of R0.7 million.                  
8. Earnings per share:                                                          
The calculation of basic earnings per share is based on the profit for the      
period (attributable to owners of the Company) of R3.9 million and a weighted   
average of 143 551 676 ordinary shares in issue during the period. The net      
impairment losses of R1.0 million (refer note 6 above) were added back as a     
reconciling adjustment between the basic and headline earnings per share for    
the current period, resulting in headline earnings of R4.9 million.             
The calculation of diluted earnings per share is based on the same profit of    
R3.9 million and headline earnings of R4.9 million, with the weighted average   
number of ordinary shares being adjusted to 143 586 887 as a result of granted  
notional shares.                                                                
IAS 27: Consolidated and Separate Financial Statements (revised) prohibit the   
retrospective adjustment of losses attributable to non-controlling interests.   
However, for comparative purposes, the profit/total comprehensive income        
attributable to owners of the Company would have been R4.9 million had IAS 27   
revised been applied for the six-month period ended 30 September 2008,          
resulting in the basic/headline/diluted/headline diluted earnings per share     
being 3.4 cents.                                                                
9. The movement in non-current assets includes the fair value of R30.1 million  
relating to the acquisition of prospecting rights.                              
10. Current assets include:                                                     
- cash of R365.6 million;                                                       
- coal stockpiled of R8.1 million;                                              
- trade and other receivables of R3.3 million;                                  
- interest receivable of R3.8 million; and                                      
- value-added tax recoverable of R1.8 million.                                  
11. Current liabilities include:                                                
- trade and other payables of R6.4 million;                                     
- environmental rehabilitation provisions of R3.3 million; and                  
- taxation of R3.7 million.                                                     
12. Issuances of equity during the period:                                      
                                             Six months to         Year to      
30 Sep 2009     31 Mar 2009      
Number of shares (000)                           (Reviewed)       (Audited)     
Issued share capital                                                            
At beginning of period                              142 841         132 741     
Issued for cash during the period                         -          10 000     
Share-based payments                                  2 000             100     
At end of period                                    144 841         142 841     
13. No dividends have been declared nor are any proposed for the period under   
review.                                                                         
14. The net asset value per share at 30 September 2009 is 315 cents (303 cents  
as at 30 September 2008).                                                       
15. Segment information                                                         
Refer to the Commentary below for a description of the projects (segments) of   
the Group. The Group can be segmented as follows:                               
                                               30 Sep 2009     31 Mar 2009      
R`000                                            (Reviewed)       (Audited)     
Total segment assets                                                            
Keaton Mining (Pty) Limited -                                                   
Sterkfontein Project                                 23 382          23 288     
Keaton Mining (Pty) Limited -                                                   
Vanggatfontein Project                               24 287          22 672     
Keaton Mining (Pty) Limited -                                                   
Klip Colliery                                        12 795          16 653     
Amalahle Exploration (Pty) Limited -                                            
Projects                                              1 853           1 379     
Labohlano Trading 46 (Pty) Limited -                                            
Sterkfontein Project                                 33 700               -     
Keaton Energy Holdings Limited -                                                
Cash resources                                      365 682         375 819     
Total operating segments` assets                    461 699         439 811     
Assets not allocated to segments                      8 289           5 538     
                                                   469 988         445 349      
6 months to     6 months to         Year to      
                               30 Sep 2009     30 Sep 2008     31 Mar 2009      
R`000                            (Reviewed)      (Reviewed)       (Audited)     
Segment revenue                                                                 
Keaton Mining (Pty) Limited -                                                   
Klip Colliery (all external                                                     
customers)                           11 447               -           5 424     
Keaton Administrative and                                                       
Technical Services (Pty) Limited                                                
(inter-segment revenues)              5 724           4 999          10 033     
Total operating segments` revenue    17 171           4 999          15 457     
Klip Colliery - damages claim                                                   
disclosed under other income        (1 594)               -               -     
Consolidation adjustments           (5 724)         (4 999)        (10 033)     
                                     9 853               -           5 424      
                               6 months to     6 months to         Year to      
30 Sep 2009     30 Sep 2008     31 Mar 2009      
R`000                            (Reviewed)      (Reviewed)       (Audited)     
Segment profit or loss                                                          
Keaton Energy Holdings                                                          
Limited */**                        (4 913)         (4 436)        (26 005)     
Keaton Administrative and                                                       
Technical Services                                                              
(Pty) Limited *                       3 622         (3 256)         (6 452)     
Keaton Mining (Pty) Limited *       (9 514)         (3 914)         (4 859)     
Amalahle Exploration                                                            
(Pty) Limited *                     (1 087)           (961)         (4 217)     
Other exploration subsidiaries *      (617)         (1 314)         (3 946)     
Total operating segments`                                                       
results *                          (12 509)        (13 881)        (45 479)     
Consolidation adjustments              (92)               -          17 665     
                                  (12 601)        (13 881)        (27 814)      
* Operating loss before net finance income and taxation.                        
** Excludes finance income of R15.5 million.                                    
16. The Group`s capital commitments are:                                        
R`000                                                           30 Sep 2009     
Environmental rehabilitation guarantees issued                        2 592     
Exploration and mine development expenditure                                    
authorised, but not contracted                                      135 214     
Exploration and mine development expenditure                                    
authorised and contracted                                             4 725     
There was no change to the Group`s contingent liabilities during the period.    
17. KPMG Inc., the Company`s independent auditors, have reviewed the 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.                                                                         
18. Coal Reserve and Resource Statements                                        
There was no change to the Coal Resource and Reserve Statements at the Group`s  
Vanggatfontein, Sterkfontein and Leeuwfontein Projects (as released in May      
2009). The Klip Colliery tonnages decreased as discussed in note 6.             
COMMENTARY                                                                      
Indicating continued progress towards its target of producing 2 million tonnes  
per annum of saleable coal, the board has authorised development of the first   
phase of the Group`s first major project, Vanggatfontein Project (previously    
known as the Delmas Project), for which regulatory approvals were received      
during the period under review.                                                 
Cash position                                                                   
The Group`s total cash position as at 30 September 2009 amounted to R366        
million. A further amount of R8 million was invested in coal stockpiles at the  
Klip Colliery, which were sold after the reporting period.                      
Safety, health and the environment                                              
The safety performance of the Group in the period under review has been         
acceptable. Some 25 374 hours were worked on-site with no lost time injuries    
recorded. The Group has not had any material health or environmental issues.    
Corporate governance                                                            
Dr Steven Rupprecht, technical director, resigned during the period.            
A senior mining executive with considerable coal experience will join the Group 
early in January 2010, when a further announcement will be made.                
Activities during the reporting period                                          
During the period under review the Group`s activities have been focused on the  
following:                                                                      
- Vanggatfontein Project (Delmas): The culmination of two and a half years of   
exploration and regulatory effort saw a Mining Right granted in June 2009 for   
the overall project. The development plan for the project will be phased to     
take into account market conditions and commercial negotiations.                
- Phase 1: 5 Seam Project: The board has approved the development of the        
indicated capital cost of R130 million Vanggatfontein 5 Seam Project as the     
first phase of the overall project. This phase, comprising 3.4 million tonnes   
of 5 Seam metallurgical coal and a 50 000 tonnes per month processing plant, is 
planned to produce 30 000 tonnes per month to take advantage of premium pricing 
in the domestic market, a consequence of the recent return to service of        
smelters by local ferro-alloy producers in response to an anticipated upturn in 
international demand.                                                           
- Phase 2: East Pit Project: The second phase of the project will produce       
thermal coal and is thus dependent on the receipt of a suitable off-take        
agreement from Eskom. The Group responded to Eskom`s recent Request for         
Proposals process to supply domestic power station coal and awaits the power    
utility`s response.                                                             
Further phases may follow, particularly if markets improve for the significant  
resource of mid- and low-volatile coal on the property.                         
- Klip Colliery (Balmoral/Ogies): Operations at the Klip Colliery have been     
downscaled and will be curtailed prior to the end of the first quarter, 2010,   
when this small mine will be worked out. The mine site will be rehabilitated in 
the next reporting period. Subsequent to the default by the life of mine coal   
off-taker, it has been difficult to find a buyer for the remaining production   
of the mine at the prices contracted originally, against the backdrop of        
reduced demand in the domestic market for run-of-mine ("ROM") unwashed coal.    
The remaining ROM coal has been sold however.                                   
- Sterkfontein Project (Bethal): The first phase of the Sterkfontein Extension  
drilling programme is well-advanced on properties contiguous to the east of the 
17.3 million tonne South Block resource.                                        
Coal has been intersected in all 14 holes drilled thus far, and encouragingly   
the thickness of the coal has generally exceeded the expected thickness         
predicted by the geological model. No coal quality data has yet been received   
and a further 17 holes remain to be drilled prior to the completion of an       
updated SAMREC compliant resource statement, targeted for release at the end of 
the first quarter of 2010.                                                      
The Sterkfontein Extension prospecting right, acquired in early in 2009, is     
held by Keaton Energy`s 74% held subsidiary Labohlano Trading 46 (Pty) Limited. 
- Amalahle Prospects (Middelburg):                                              
- Leeuwfontein Project: All preparatory work has been completed in order to     
submit a Mining Right application. Subject to a final review of alternatives    
for the project, particularly as they relate to neighbouring properties, the    
Mining Right application will be submitted.                                     
- Braamspruit Project: The Braamspruit Project continues to be the subject of a 
legal dispute with Anglo Coal, and although some progress was made in the       
period, a final settlement has not been agreed.                                 
Looking ahead                                                                   
The development of the Vanggatfontein 5 Seam Project will be the priority for   
the Group in the next six months. During this time it is also expected that a   
decision will be made on the development of the Vanggatfontein East Pit         
(thermal coal) Project. As indicated, this will be subject to the successful    
conclusion of an off-take agreement. In addition, the board is confident that   
the Group`s Sterkfontein Project will be developed into a major new mine as     
market conditions improve.                                                      
On behalf of the board                                                          
David Salter                                   Paul Miller                      
(Chairman)                                     (Managing Director)              
25 November 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 (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**+, JG Schonfeldt, APE Sedibe+,          
JN Wallington++                                                                 
*British **South African/Cypriot                                                
+non-executive, ++independent non-executive                                     
telephone: +27 11 317 1700                                                      
telefax: +27 11 463 4759                                                        
email: info@keatonenergy.co.za                                                  
Date: 25/11/2009 16:29:02 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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information disseminated through SENS.                                          



                                        
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