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KEH - Keaton Energy Holdings Limited - Keaton Energy to acquire export foothold

Release Date: 14/02/2011 16:32:02      Code(s): KEH
KEH - Keaton Energy Holdings Limited - Keaton Energy to acquire export foothold 
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")                                              
KEATON ENERGY TO ACQUIRE EXPORT FOOTHOLD                                        
Johannesburg, South Africa. 14 February 2011. Keaton Energy Holdings Limited    
(Keaton Energy; JSE: KEH; www.keatonenergy.co.za) announced today that it plans 
- in a two-stage transaction - to refinance and acquire a 74% interest in South 
African export coal producer Leeuw Mining and Exploration (Pty) Limited (LME).  
The transaction will result in Keaton Energy acquiring an export foothold; a    
new major shareholder in Plusbay Limited (Plusbay), an affiliate of Gunvor Group
Limited (Gunvor; www.gunvorgroup.com) one of the world`s leading energy trading 
companies; and will also safeguard more than 400 jobs in LME`s operations.      
LME`s founding shareholder JPI Leeuw and Associates (Pty) Limited (JPI) will    
remain a 26% shareholder in LME.                                                
Keaton Energy Managing Director Paul Miller said: "This transaction will be     
good for Keaton Energy shareholders; provide a partial exit for existing LME    
shareholders to, in part, pursue other mining initiatives; and contributes      
significantly to the economy of Northern Kwazulu-Natal.                         
It will give Keaton Energy a controlling interest in an existing mining         
operation; significantly increase its portfolio of advanced development         
projects; provide vital access to export markets and a wider customer base;     
and will mark a major step towards Keaton Energy`s objective of becoming a      
mid-tier coal producer with a diverse range of projects to complement our       
major Vanggatfontein and Sterkfontein projects in Mpumalanga."                  
The transaction consideration will be settled through the issue of new Keaton   
Energy shares, and R10 million in cash through the settlement of an existing    
loan to LME.                                                                    
The transaction - which is subject to relevant regulatory approvals and         
fulfillment of various conditions precedent - will also see Geneva-based        
energy trader Gunvor, through its affiliate Plusbay, become a key shareholder   
in Keaton Energy, with the intention to obtain a seat on the Keaton Energy      
Commenting on the transaction, Filippo Faralla, Gunvor`s Coal Manager in South  
Africa, said: "The transaction continues our expansion by sector and geography. 
It marks our entry into South African coal production and complements our       
growing non-oil energy business, and is another significant step in our         
development as a leading integrated energy company."                            
David Salter, Keaton Energy`s Chairman, welcomed Gunvor`s introduction into     
the company as a mark of approval and said: "It is pleasing that Gunvor has     
recognised the achievements of Keaton Energy`s management since listing and     
is joining with us to develop Keaton Energy into a robust and sustainable       
South African coal producer."                                                   
Willy Leeuw, Chief Executive Officer of LME, said, "the team at LME have worked 
hard over a period of eight years to take a portfolio of prospecting projects up
the value curve right through to producing coal for export. We look forward to  
partnering with Keaton Energy and Gunvor to take the company and its Kwazulu-   
Natal projects to the next stage of development."                               
LME owns and operates the Vaalkrantz Anthracite Colliery (Vaalkrantz) near      
Vryheid in South Africa`s Kwazulu-Natal province.  Vaalkrantz has been in       
production since 2003.                                                          
In addition, LME has:                                                           
*    a 207 000tpa participation in Richards Bay Coal Terminal`s (RBCT) Quattro  
export programme and a dedicated railway siding facility near Vaalkrantz;   
*    a number of new order prospecting and mining rights over other Kwazulu-    
    Natal coal properties, including:                                           
*    the Koudelager anthracite project, which will provide a future run-of-mine 
anthracite supply to the existing Vaalkrantz plant;                         
*    the Braakfontein thermal coal project, near Newcastle;                     
*    the Balgray anthracite project near Utrecht; and                           
*    the Mpati anthracite project near Dundee.                                  
In terms of the refinancing of LME, Keaton Energy will acquire:                 
*    various loans and claims in LME from Anglo Operations Limited, acting      
    through its Anglo American Thermal Coal Division, (AOL) for R47 million, to 
be settled by the issue of 10 444 444 new Keaton Energy ordinary shares at  
    R4.50 per share; and                                                        
*    40 preference shares in LME from Anglo Khula Mining Fund (Proprietary)     
    Limited (AKMF) for R8 million, to be settled by the issue of 1 777 778      
Keaton Energy ordinary shares at R4.50 per share.                           
The total consideration for the acquisition of the AOL loans and claims and the 
AKMF preference shares is R55 million.  AOL and AKMF will then dispose of their 
Keaton Energy ordinary shares to Plusbay.                                       
In terms of the acquisition of 74% of LME, Keaton Energy will acquire:          
*    54% from JPI and 10% from Anglo American Zimele Limited (Anglo Zimele) for 
    14 177 778 and 2 444 444 new Keaton ordinary shares respectively, at a      
price of R4.50 per share, with a resulting total purchase consideration of  
    R74.8 million.                                                              
*    10% through the settlement of a R10 million short-term convertible loan    
    recently provided to LME by Keaton Energy.                                  
JPI and Anglo Zimele will then dispose of their Keaton Energy ordinary shares to
James Duncan                                                                    
Russell and Associates                                                          
+27 11 880-3924 (office)                                                        
+27 82 892 8052 (mobile)                                                        
All statements in this media release, other than historical facts, that         
address exploration activities and mining potential are forward-looking         
statements. Although Keaton Energy believes the expectations expressed in       
such forward-looking statements are based on reasonable assumptions, such       
statements should not in any way be construed as guarantees of future           
performance. Factors that could cause developments to differ materially from    
those expressed include exploration results, technical analysis and lack of     
availability to the company of necessary capital to progress its projects.      
The company is subject to specific risks inherent in the exploration and mining 
business and general economic and business conditions.                          
Nedbank Capital                                                                 
14 February 2011                                                                
Date: 14/02/2011 16:32:02 Supplied by www.sharenet.co.za                     
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information disseminated through SENS.                                          

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