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Keh - Keaton Energy - Operational Update For The Six Months Ended 31 March 2011

Release Date: 07/04/2011 12:30:01      Code(s): KEH
KEH - Keaton Energy - Operational update for the six months ended 31 March 2011 
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")                                              
OPERATIONAL UPDATE FOR THE SIX MONTHS ENDED 31 MARCH 2011                       
Keaton Energy has released the following operational update on its              
Vanggatfontein Project near Delmas ("Vangatfontein" or "the Project") for the   
six months ended 31 March 2011, ahead of the release towards the end of May 2011
of the company`s year-end financial results.                                    
SAFETY                                                                          
Safety performance at Vanggatfontein has been excellent, with 651 645 hours     
worked and no lost time injuries during the period.  At the end of March 2011,  
there were 239 mining staff and contractors and 330 construction contractors on 
site.                                                                           
OPERATIONS                                                                      
Since mobilisation of the mining contractor in July 2010, 3.2 million cubic     
meters of waste have been removed and some 145 107 metric tonnes of 5-Seam run- 
of-mine ("ROM") coal has been produced.                                         
The 5-Seam plant was handed over to the processing contractor at the beginning  
of December 2010 and sales started immediately.   After a slow start in December
2010 some 48 397 metric tonnes of 5-seam nuts, peas and duff has been sold.     
The product has performed well in testing, resulting in good customer           
acceptance.                                                                     
No 4-Seam coal has been exposed and coaling has begun to support the completion 
and commissioning of the No 4 & No 2 Seam plant, on schedule, during April 2011.
The 11kV Eskom overhead transmission line went live at the mine on 5 April 2011,
which was a critical milestone for the successful commissioning of the No 4 & No
2 Seam plant and will also mean that the use of a generator to power the No 5   
Seam plant can be discontinued.  First deliveries of coal to Eskom are planned  
for the second half of May 2011.                                                
ESKOM CONTRACT EXTENDED                                                         
The final Eskom contract terms have changed from those announced on 20 July     
2010.  The quality specification has changed with a concomitant price           
adjustment, but importantly so has the contract period.  Initially some 16.5    
million metric tonnes were to be supplied over seven years; now, some 20.8      
million metric tonnes will be supplied over ten years.                          
Eskom has requested slightly better quality coal which will mean that, while    
much the same ROM volume will be mined on a monthly basis, it will be washed to 
a higher specification with 175 000 metric tonnes of washed coal being delivered
to Eskom every month.  Vanggatfontein`s coal washing capability means that coal 
can be produced according to varying customer requirements.  Production ramp-up 
will begin at 50 000 tonnes per month in May 2011, rising to 175 000 tonnes per 
month four months later.                                                        
NEDBANK CAPITAL PROJECT FINANCE                                                 
The offer of the R255 million project financing from Nedbank Capital announced  
on 6 December 2010 has reached financial close in record time following an      
intensive due diligence of the Project and completion of the legal              
documentation.   First draw-down of R138.5 million took place on 1 April 2011.  
Bryanston                                                                       
7 April 2011                                                                    
Sponsor                                                                         
Nedbank Capital                                                                 
Date: 07/04/2011 12:30:01 Supplied by www.sharenet.co.za                     
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