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Keaton Energy Holdings Limited - Reviewed Interim Group Results For The Six Months Ended 30 September 2012

Release Date: 29/11/2012 07:05:00      Code(s): KEH     
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)
Reviewed Interim Group Results for the six months ended 30 September 2012

Introduction
The period under review was a company maker.  Despite losses being incurred, difficulties were overcome and opportunities taken at both mining
operations, which have laid the foundation for sustainable, safe and profitable operations going forward. The second half of FY2013 is expected to generate
a much improved financial performance following decisive actions taken during this period, which have already yielded demonstrable benefits in the
latter part of the first six months.

Salient features
 Improvement in group safety performance
 183% increase in group production to 1.8 million tonnes compared with 1H FY2012
   Significantly improved performance at Vanggatfontein after changing mining contractor in June 2012
   Productivity gains at Vaalkrantz despite poor geological conditions
 255% increase in group revenue to R417.3 million compared with 1H FY2012
 Loss of R64.2 million for 1H FY2013 compared with profit of R8.4 million for 1H FY2012
   Sales of R31 million deferred to 2H FY2013 due to transport strike
   Expected decline in 5-seam production and sales
   Poor performance by original mining contractor at Vanggatfontein
   Poor geological conditions at Vaalkrantz
   Increased depreciation charges as a result of the early adoption of an accounting interpretation (IFRIC 20)
 Commenced development of Pit 3 at Vanggatfontein
 Sterkfontein and Braakfontein studies due by end 2012

Commentary
Safety, health and environment
The group continues to focus on safety, health and environmental matters. It is pleasing that the LTIFR (Lost Time Injury Frequency Rate) 
at the open-pit Vanggatfontein Colliery decreased to 0.20 (0.38 for 2H FY2012), while that at the narrow-seam, underground 
Vaalkrantz Anthracite Colliery maintained a LTIFR of 0.45 despite difficult geological conditions. We remain vigilant and continue to 
strive towards a zero harm environment.

Operational summary
738 498 tonnes of 4 and 2-seam coal were delivered to Eskom in the period under review (1H FY2012: 230 042 tonnes). As expected, 5-seam coal 
production declined in line with the mine plan, as 5-seam from Pit 1 was depleted; 31 272 tonnes of 5-seam were sold into the domestic metallurgical market 
(1H FY2012: 99 232 tonnes). 5-seam coal production is set to increase in the second half of FY2013 as Pit 3 develops. 
Vanggatfontein benefitted greatly from the appointment of a new mining contractor, Liviero Mining, in June 2012, replacing the previous
underperforming contractor. A smooth transition led to productivity improvements, successive monthly production records and simultaneous decreases in unit costs.
Mine managements optimisation of the available mining faces saw significant in-pit and run-of-mine inventories being available at the end of the
period. A significant quantity of product stock remained undelivered at the end of the period as a direct result of the transport strike during the last
week of September. This will deliver immediate benefits in the second half of the financial year.
Performance at Vaalkrantz was pleasing with investment in underground mining equipment leading to immediate productivity improvements. However,
difficult geological conditions encountered during the period offset much of these gains. 
53 445 tonnes of mid-ash export anthracite were produced and sold during the period under review (since acquisition for the three months ended 31
March 2012: 43 500 tonnes), while 97 873 tonnes of premium low-ash anthracite were sold into the domestic metallurgical market (since acquisition for
the three months ended 31 March 2012: 69 463 tonnes). 

Financial summary
The groups revenue for the period was R417.3 million (1H FY2012: R117.7 million). The significant increase is attributable to the ramp-up in sales
to Eskom, nearing full capacity, and the inclusion of six months sales from the recently acquired (in December 2011) Leeuw Mining and Exploration
Proprietary Limited (LME). These were offset by the impact of the transport strike, the under-performance of the original mining contractor at
Vanggatfontein, challenging geological conditions at the Vaalkrantz operation and the expected decline in 5-seam production.
The group recorded a gross loss of R37.9 million compared to the gross profit of R22.3 million for the comparative period in FY2012. The main reason
for the gross loss was the lower than expected sales as well as additional depreciation charges relating to the early adoption of IFRIC 20. Costs
were well contained during the first half of 2013 although were negatively impacted by winter electricity tariffs. Further cost-saving initiatives are
planned for the second half of FY2013.
The group recorded a total comprehensive loss of R64.2 million for 1H FY2013 compared to R8.4 million profit for the comparable period of FY2012 and
R103.7 million profit for 2H FY2012 (largely made up of a gain on the acquisition of LME). Headline loss per share of 21.1 cents for 1H FY2013
decreased when compared to the headline earnings for 1H FY2012 of 8.4 cents.
Cash and cash equivalents decreased by R33.1 million due to capital investment of R71.4 million largely at Vanggatfontein and the repayment of R34.7
million of the Nedbank project finance facility. These were offset by cash generated from operations and R8.7 million cash raised from investors in
July 2012.

Litigation
Keaton Mining terminated its contract mining agreement with Megacube Mining Proprietary Limited at Vanggatfontein on 5 July 2012 in accordance with
the provisions of the agreement. This subsequently led to Megacube lodging a claim for R42.5 million against Keaton Mining. We are defending this
claim vigorously in terms of the contracts dispute resolution provisions. Furthermore, Keaton Mining has lodged a damages claim for R119 million against
Megacube relating to breaches of several provisions of the contract.

Looking ahead
The group is well positioned with a balanced portfolio of producing assets and a pipeline of internal growth projects.
Operationally, Vanggatfontein is benefitting from a change in mining contractor and improved plant performance. The long term 4 and 2-seam Eskom
contract continues to provide the backbone of the operation. Stringent unit cost control and continuous performance improvement are paramount and will
receive attention in the months ahead.
The development of Pit 3 at Vanggatfontein, funded from cashflow, sees additional 5-seam coal becoming available. In addition, to ensure full
utilisation of the 5-seam plant, a 40 000 tonne per month toll washing contract has been entered into with Eskom.
Vaalkrantz continues to produce niche metallurgical coal and, when the current geologically difficult areas are worked through, will increase
production.
Two major internal growth projects, Braakfontein (48 million tonne resource) and Sterkfontein (69 million tonne resource), are the subject of
studies by external groups of consultants. It is expected that the various consultants will deliver their reports before the end of 2012, allowing the group
to make investment decisions early in 2013. In addition, work to extend the existing life of mine at Vaalkrantz continues.
The group continues to evaluate external growth opportunities in line with its stated growth objectives. However, the inflated price expectations
encountered in potential transactions of interest have precluded their closure.

Leadership
During the period under review, Paul Miller stepped down as Managing Director after having led the group from being an unlisted, greenfields
explorer to being a significant producer with a strong pipeline of growth projects. Rowan Karstel took over briefly before Mandi Glad, founder of Keaton and,
at various times, former operations director, sales and marketing director and business development director was appointed CEO on 7 September 2012.
On 27 November 2012, Gerard Kemp was appointed as an independent non-executive director to the board. 

On behalf of the Board
David Salter                     Mandi Glad
(Executive chairman)            (Chief executive officer)
27 November 2012

Preparation of condensed interim consolidated financial statements
The condensed interim consolidated financial statements for the six months ended 30 September 2012 have been reviewed in terms of the Companies Act
71, 2008. Their preparation was supervised by the group financial director, Jacques Rossouw, a Chartered Accountant (SA).
The condensed interim consolidated financial statements were published on 29 November 2012.

  Condensed consolidated statement of comprehensive income

                                                                                 Six months ended                  Year ended   
                                                                         30 Sept                  30 Sept              31 Mar   
                                                                            2012                     2011                2012   
  R000                                                        Note   (Reviewed)            (Reviewed)(1)        (Audited)(2)  
  Revenue                                                        2       417 332                  117 695             474 366   
  Cost of sales                                                        (455 237)                 (95 388)           (459 793)   
  Gross (loss)/profit                                            2      (37 905)                   22 307              14 573   
  Other income                                                             4 363                    2 902              25 544   
  Mining and related expenses                                            (9 936)                  (3 553)            (10 350)   
  Net gain on financial instruments                                        1 018                        -               1 690   
  Administrative and other operating expenses                           (27 460)                 (10 776)            (26 521)   
  Results from operating activities                                     (69 920)                   10 880               4 936   
  Gain on business combination                                                 -                        -             114 385   
  Operating (loss)/profit before net finance (cost)/income              (69 920)                   10 880             119 321   
  Net finance (cost)/income                                             (13 797)                      180            (13 405)   
  Finance income                                                           1 097                   10 663              17 542   
  Finance costs                                                         (14 894)                 (10 483)            (30 947)                                                                                                                    
  Net (loss)/profit before taxation                                     (83 717)                   11 060             105 916   
  Income taxation credit/(expense)                               4        19 477                  (2 668)               6 184   
  Total comprehensive income for the period                             (64 240)                    8 392             112 100   
  Total comprehensive income attributable to:                                                                                   
  Owners of the company                                                 (40 015)                   14 475             132 016   
  Non-controlling interest                                              (24 225)                  (6 083)            (19 916)   
  Basic earnings per share (cents)                               3        (21.0)                      8.4                75.2   
  Diluted earnings per share (cents)                             3        (21.0)                      8.4                75.2   
  The accompanying notes are an integral part of these condensed interim consolidated financial statements.                                                                      
 (1) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost in the 
     production phase of a surface mine, but had no effect on previously presented results.                                                                       
 (2) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost in the 
     production phase of a surface mine. Refer to the notes to the condensed interim consolidated financial statements, note 1.3.                                                                       

  Condensed consolidated statement of financial position

                                                                              At                 At            At   
                                                                         30 Sept             31 Mar       30 Sept   
                                                                            2012            2012(1)       2011(1)   
  R000                                                      Note      (Reviewed)          (Audited)    (Reviewed)  
  Assets                                                                                                            
  Property, plant and equipment                                 5        772 977            832 703       636 067   
  Intangible assets                                                      424 358            423 888        65 092   
  Deferred tax                                                            72 897             16 638         3 740   
  Long-term financial assets                                                   -                  -       142 834   
  Restricted cash                                                          7 423              7 423        13 023   
  Restricted investments                                                  22 845             13 027             -   
  Total non-current assets                                             1 300 500          1 293 679       860 756   
  Inventory                                                               64 316             23 117         9 502   
  Trade and other receivables                                             83 451            104 325        54 113   
  Restricted cash                                                              -              6 600        31 000   
  Cash and cash equivalents                                               27 468             60 549        26 281   
  Total current assets                                                   175 235            194 591       120 896   
  Total assets                                                         1 475 735          1 488 270       981 652   
  Equity                                                                                                            
  Share capital                                                              192                189           171   
  Share premium                                                          640 711            632 054       567 718   
  Share-based payment reserve                                              9 344              6 180         2 834   
  Other reserves                                                        (18 751)           (18 751)             -   
  Retained earnings                                                      119 049            159 064        35 495   
  Total equity attributable to owners                                                  
  of the company                                                         750 545            778 736       606 218                                                                                                
  Non-controlling interest                                                   373             24 598      (15 840)   
  Total equity                                                           750 918            803 334       590 378   
  Liabilities                                                                                                       
  Borrowings                                                    7        241 060            248 156       188 041   
  Long-term financial liabilities                                            290                613             -   
  Mine closure and environmental rehabilitation provision       6         99 807            112 857        77 520   
  Deferred tax                                                           129 944             93 838             -   
  Total non-current liabilities                                          471 101            455 464       265 561   
  Borrowings                                                    7         39 077             49 176        19 075   
  Mine closure and environmental rehabilitation provision       6            225                326           326   
  Trade and other payables                                      8        213 529            179 356       106 271   
  Taxation                                                                   885                614            41   
  Total current liabilities                                              253 716            229 472       125 713   
  Total equity and liabilities                                         1 475 735          1 488 270       981 652   
  The accompanying notes are an integral part of these condensed interim consolidated financial statements.                                                           
  (1) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost 
  in the production phase of a surface mine. Refer to the notes to the condensed interim consolidated financial statements, note 1.3.                                                             
  
  Condensed consolidated statement of changes in equity
  for the six months ended 30 September 2012

                                                                                                                                            Total                             
                                                                                                                                           equity                             
                                                                                                                                         attribu-                             
                                                                                                    Share-                               table to         Non-                
                                                                                                     based                                 owners     control-                
                                                                                                      pay-                                 of the         ling        Total   
                                                                             Share        Share       ment     Retained        Other         com-     interest        Total   
  R000                                                                    capital      premium    reserve     earnings     reserves         pany         (NCI)      equity   
  Balance at 31 March 2011                                                     171      567 718      2 395       21 020            -      591 304      (9 757)      581 547                   
  Total comprehensive income for the period                                      -            -          -       14 475            -       14 475      (6 083)        8 392   
  Transactions with owners of the company recognised directly in equity                                                                                                       
  Share-based payments                                                           -            -        439            -            -          439            -          439   
  Balance at 30 September 2011                                                 171      567 718      2 834       35 495            -      606 218     (15 840)      590 378                   
  Balance at 31 March 2012 as previously reported                              189      632 054      6 180      186 594     (18 751)      806 266       34 271      840 537                   
  Effects of adopting IFRIC 20(1)                                                -            -          -     (27 530)            -     (27 530)      (9 673)     (37 203)                   
  Revised balance at 31 March 2012                                             189      632 054      6 180      159 064     (18 751)      778 736       24 598      803 334                   
  Total comprehensive income for the period                                      -            -          -     (40 015)                  (40 015)     (24 225)     (64 240)   
  Transactions with owners of the company recognised directly in equity                                                                                                       
  Share-based payments                                                                               3 164            -            -        3 164            -        3 164   
  Ordinary shares issued for cash                                                3        8 657          -            -            -        8 660            -        8 660   
  Balance at 30 September 2012                                                 192      640 711      9 344      119 049     (18 751)      750 545          373      750 918                                                                                                                                                              
 (1) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost in the production phase of a surface mine.
     Refer to the notes to the condensed interim consolidated financial statements, note 1.3.                                                                                                        
                                                                                   
  Condensed consolidated statement of cash flows

                                                                             Six months ended              Year ended   
                                                                     30 Sept                  30 Sept          31 Mar   
                                                                        2012                     2011            2012   
  R000                                                           (Reviewed)            (Reviewed)(1)    (Audited)(2)  
  Cash flows from operating activities                                62 926                   39 787         129 520   
  Cash flows from investing activities                              (81 123)                (242 099)       (295 878)   
  Cash flows from financing activities                              (14 884)                  201 593         199 907   
  Net (decrease)/increase in cash and cash equivalents              (33 081)                    (719)          33 549   
  Cash and cash equivalents at the beginning of the period            60 549                   27 000          27 000   
  Cash and cash equivalents at the end of the period                  27 468                   26 281          60 549   
  (1) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost 
      in the production phase of a surface mine, but had no effect on previously presented results.                                                               
  (2) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost 
      in the production phase of a surface mine. Refer to the notes to the condensed interim consolidated financial statements, note 1.3.                                                               

  Segmental report
  for the six months ended 30 September 2012

                                                                                                                                                             
                                                                                                                          Operating profit/(loss)                            
                                                                                                                             before depreciation/                            
                                                                                               Revenue                              amortisation                            
                                                                                  6 months                  6 months     6 months                 6 months   
                                                                                     ended      Year to        ended        ended      Year to       ended   
                                                                                   30 Sept       31 Mar      30 Sept      30 Sept       31 Mar     30 Sept   
  R000                                                                               2012         2012         2011         2012         2012        2011   
  Vanggatfontein Mine (1) (5)                                                      283 879      381 828      117 695       36 105       93 234      45 495   
  Sterkfontein Project                                                                   -            -            -            -            -           -   
  Klip Colliery                                                                          -            -                         -            -               
  Keaton Energy Holdings Limited (2)                                                 2 525        4 188        2 129     (13 985)     (14 495)     (7 251)   
  Keaton Administrative and Technical Services Proprietary Limited (2)              10 295       11 783        4 095          581      (1 618)     (1 053)                                    
  Vaalkrantz Colliery (1)                                                          133 453       92 538            -       22 875       36 763           -   
  Leeuw Braakfontein Colliery                                                            -            -            -            -            -           -   
  Koudelager                                                                             -            -            -            -            -           -   
  Other segments (3)                                                                     -            -            -        (122)        2 053         870   
  Total segments                                                                   430 152      490 337      123 919       45 454      115 937      38 061   
  Reconciliation to statements of comprehensive income and financial position                                                                                
  Intersegment and other consolidation adjustments                                (12 820)     (15 971)      (6 224)         (71)       12 207         109   
                                                                                   417 332      474 366      117 695       45 383      128 144      38 170   
  Gain on business combination                                                                                                                               
  Net finance (cost)/income (4)                                                                                                                              
  Assets/liabilities not allocated to segments                                                                                                               
  Net profit/(loss) before taxation                                                                                                                          
  Total assets and liabilities                                                                                                                                
  (1) Revenue represents sales to external customers only.
  (2) Revenue represents intersegment sales only.
  (3) Includes the subsidiaries Amalahle Exploration Proprietary Limited and Labohlano Trading 46 Proprietary Limited and the Mpati and Balgray
      prospecting rights acquired through the business combination during the year ended 31 March 2012.
  (4) Net finance cost/income is no longer reported as forming part of each segment profit or loss as these are not measured or reported to the chief
      operating decision maker (CODM) in connection with the segment but rather on a collective company/group basis.
  (5) Coal sales to major customers as a percentage of revenue equals 91% (92% at 31 March 2012. At 30 September 2011 two major customers as a
      percentage of revenue were between 21% and 40% each).
  (6) The comparative information for the period 30 September 2011 has been re-presented as a result of the early adoption of IFRIC 20  Stripping
      cost in the production phase of a surface mine, but had no effect on previously presented results.
  (7) The comparative information for the period 31 March 2012 has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost
      in the production phase of a surface mine. Refer to the notes to the condensed interim consolidated financial statements, note 1.3.

  Segmental report (continued)
  for the six months ended 30 September 2012
                                                                                                                                                                             
                                                                                                           Operating profit/(loss)                                                                                                                     
                                                                                                               after depreciation/                                                                                                                     
                                                                       Depreciation/amortisation                     amortisation                            Segment assets                          Segment liabilities                                
                                                                   6 months                   6 months     6 months                 6 months                                                                                            
                                                                      ended       Year to        ended        ended      Year to       ended             At        Year to             At             At        Year to            At   
                                                                    30 Sept        31 Mar      30 Sept      30 Sept       31 Mar     30 Sept        30 Sept         31 Mar        30 Sept        30 Sept         31 Mar       30 Sept   
   R000                                                               2012          2012         2011         2012         2012        2011           2012           2012           2011           2012           2012          2011   
   Vanggatfontein Mine (1) (5)                                     (93 152)     (108 039)     (27 137)     (57 047)     (14 805)      18 358        794 293        793 053        729 945      1 044 619        940 515       803 004   
   Sterkfontein Project                                                                                                                              65 271         65 092         65 426         55 049         53 606        55 476   
   Klip Colliery                                                                                                                                                                    1 849                                         331   
   Keaton Energy Holdings Limited (2)                                                                      (13 985)     (14 495)     (7 251)        790 065        739 697        605 973          7 950          3 373         2 625   
   Keaton Administrative and Technical Services 
   Proprietary Limited (2)                                             (117)         (315)        (153)        464       (1 933)     (1 206)         10 067         10 271          3 778         19 999         20 637        13 549   
   Vaalkrantz Colliery (1)                                          (22 034)      (14 854)                     841       21 909                     283 595        287 202                       343 198        336 974                                                                                                                                                                                                          
   Leeuw Braakfontein Colliery                                                                                                                      291 338        291 338                        53 857         48 934                
   Koudelager                                                                                                                                        23 552         23 552                                                         
   Other segments (3)                                                                                         (122)       2 053          870         18 841         19 999          1 072         16 932         18 333        16 576   
   Total segments                                                 (115 303)     (123 208)     (27 290)     (69 849)      (7 271)      10 771      2 277 022      2 230 204      1 408 043      1 541 604      1 422 372       891 561
   Reconciliation to statements of comprehensive 
   income and financial position                                                                                                                                                                             
   Intersegment and other consolidation adjustments                                                            (71)      12 207          109      (801 287)      (741 934)      (453 902)      (816 787)      (737 436)     (511 116)                                                                                                                                                                 
                                                                  (115 303)     (123 208)     (27 290)     (69 920)       4 936       10 880     1 475 735      1 488 270        954 141        724 817        684 936       380 445 
   Gain on business combination                                                                                         114 385                                                                                                       
   Net finance (cost)/income (4)                                                                           (13 797)     (13 405)         180                                                                                            
   Assets/liabilities not allocated to segments                                                                                                                                   27 511                                      10 829   
   Net profit/(loss) before taxation                                                                       (83 717)      105 916      11 060                                                                                            
   Total assets and liabilities                                                                                                                   1 475 735      1 488 270       981 652        724 817        684 936       391 274    
  (1) Revenue represents sales to external customers only.
  (2) Revenue represents intersegment sales only.
  (3) Includes the subsidiaries Amalahle Exploration Proprietary Limited and Labohlano Trading 46 Proprietary Limited and the Mpati and Balgray
      prospecting rights acquired through the business combination during the year ended 31 March 2012.
  (4) Net finance cost/income is no longer reported as forming part of each segment profit or loss as these are not measured or reported to the chief
      operating decision maker (CODM) in connection with the segment but rather on a collective company/group basis.
  (5) Coal sales to major customers as a percentage of revenue equals 91% (92% at 31 March 2012. At 30 September 2011 two major customers as a
      percentage of revenue were between 21% and 40% each).
  (6) The comparative information for the period 30 September 2011 has been re-presented as a result of the early adoption of IFRIC 20  Stripping
      cost in the production phase of a surface mine, but had no effect on previously presented results.
  (7) The comparative information for the period 31 March 2012 has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost
      in the production phase of a surface mine. Refer to the notes to the condensed interim consolidated financial statements, note 1.3.

 Notes to the condensed consolidated financial statements

 1. Accounting policies                         
 1.1 Basis of accounting                        
 The condensed interim consolidated financial statements for the six months ended 30 September 2012 have been prepared in accordance with the recognition, measurement, presentation 
 and disclosure requirements of IAS 34: Interim Financial Reporting and are presented in accordance with the South African Companies Act and the AC500 standards as issued by the 
 Accounting Practices Board. They should be read in conjunction with the annual financial statements for the year ended 31 March 2012, which have been prepared in accordance with 
 International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The accounting policies are consistent with those described and applied 
 in the annual financial statements, except for the early adoption of a new interpretation issued by the IFRS Interpretations Committee, IFRIC 20  Stripping costs in the production 
 phase of a surface mine. Refer to notes 1.2 and 1.3 in this regard.                        
 1.2 Early adoption of IFRIC 20  Stripping costs in the production phase of a surface mine                        
 Stripping costs incurred during the production phase of the groups surface operations, to remove overburden and expose the coal reserve, are capitalised as a stripping activity asset only when:                        
 iii)  it is probable that the future economic benefits (improved access to the coal reserve) associated with the stripping activity will flow to the group;                        
 iii)  the group can identify the component of the coal reserve exposed by the stripping activity; and                        
 iii)  the costs relating to the stripping activity associated with that component can be measured reliably.                        
 The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset (mine development).The stripping activity asset is initially measured at cost, 
 being the accumulation of costs directly attributable to the stripping activity, plus an allocation of directly attributable overhead costs. The group identifies a component as the smallest 
 measurable portion of the coal reserve within a pit, which the stripping activity provides direct access to and is usually identified through survey results. After initial recognition, the stripping 
 activity asset is measured at cost less accumulated depreciation and accumulated impairment losses. The stripping activity asset is depreciated on a systematic basis, over the expected production life 
 of the identified component of the coal reserve.                        
 1.3 Comparative information                        
 As a result of adopting IFRIC 20 the comparative information has been re-presented to comply with the transitional provision as outlined in IFRIC 20 as follows:                        
 Six months ending 30 September 2011 and at 30 September 2011                        
  Reclassification of R63 million between categories of property, plant and equipment.                        
 12 months ending 31 March 2012 and at 31 March 2012                        
   Property, plant and equipment decreased by R13.2 million with a corresponding increase in cost of sales. This also decreased cash flows from operating activities and reduced the investment in cash flows 
    from investing activities by R13.2 million respectively in the condensed consolidated statement of cash flows.                        
   Depreciation expense increased by R38.5 million with corresponding increase in accumulated depreciation.                        
   Deferred tax asset increased by R14.5 million with a corresponding increase in income taxation credit/(expense) in the statement of comprehensive income.                        
   Basic and diluted earnings per share decreased from 90.9 cents to 75.2 cents.                        
   Headline and diluted headline earnings per share decreased from 25.2 cents to 9.5 cents.                        
 2. Revenue and gross (loss) profit/margin                        
 The group sold 31 272 tonnes of 5-seam coal from its Mpumalanga-based Vanggatfontein Colliery into the domestic metallurgical market for the six months ended 30 September 2012 (30 September 2011: 99 232 and 140 241 
 for the year ended 31 March 2012). Deliveries of thermal coal to Eskom for the six months ended 30 September 2012 amounted to 738 498 tonnes (30 September 2011: 230 042 and 955 504 for the year ended 31 March 2012).                         
 From its recently acquired KwaZulu-Natal based Vaalkrantz Colliery (acquired in December 2011), the group sold 97 873 tonnes of anthracite into the domestic metallurgical market and 53 445 tonnes were exported for the 
 six months ended 30 September 2012 (since acquisition, for the three months ended 31 March 2012, the group sold 69 463 tonnes into the domestic metallurgical market and 43 500 tonnes were exported).                                                                                                                                                                                                                                                                                                                                                                                                                          
 The group recorded a gross loss of R37.9 million or (9%) of sales for the period ended 30 September 2012 (30 September 2011: R22.3 million profit or 19% of sales and R14.6 million profit or 3% of sales for the year ended 
 31 March 2012). The decrease in gross margin is as a result of the lower than expected thermal coal sales attributable to lower production volumes during the first quarter of the 2013 financial year, a decrease in 5-seam 
 sales due to the anticipated depletion of Vanggatfontein pit ones 5-seam reserve and the impact of the transport strike during the last week of September 2012. Cost of sales was higher than expected, mainly due to additional 
 depreciation charges as a result of adopting IFRIC 20.    
 3. Earnings and net asset value per share                                                                                                                                                                                                                                                                                            
 The calculation of basic and diluted earnings per share is based on a loss for the period ended 30 September 2012 (attributable to owners of the company) of R40.0 million (30 September 2011: profit of R14.5 million and year ended 
 31 March 2012: profit of R132 million) and a weighted average number of shares in issue during the period of 190.3 million (30 September 2011: 171.5 million and the year ended 31 March 2012: 175.6 million).                                                                                                                                                                                                                                                                                                   
                                                                   Six months ended              Year ended   
                                                           30 Sept                  30 Sept          31 Mar   
                                                              2012                     2011            2012   
  R000                                                 (Reviewed)            (Reviewed)(1)    (Audited)(2)  
  Total earnings per ordinary share (cents)                                                              
  Basic earnings                                            (21.0)                      8.4            75.2   
  Diluted earnings                                          (21.0)                      8.4            75.2   
  Headline earnings                                         (21.1)                      8.4             9.5   
  Diluted headline earnings                                 (21.1)                      8.4             9.5   
  Reconciliation of headline earnings                                                               
  (net of tax and NCI):                                                              
  Total comprehensive income attributable to 
  owners of the company                                   (40 015)                   14 475         132 016   
  (Profit)/Loss on disposal of property, 
   plant and equipment                                        (69)                                       65   
  (Profit) on disposal of intangible asset                                                            (287)   
  Reversal of impairment of intangible asset                                                          (648)   
  Gain on business combination                                                                    (114 385)   
  Total headline earnings                                 (40 084)                   14 475          16 761   
  Net asset value per share                                                              
  Number of shares in issue (millions)                       191.6                    171.5           188.7   
  Net asset value per share (cents)                            392                      344             426   
 (1) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost in the production phase of a surface mine, 
     but had no effect on previously presented results.                                                               
 (2) The comparative information has been re-presented as a result of the early adoption of IFRIC 20   Stripping cost in the production phase of a surface mine. 
     Refer to the notes to the condensed interim consolidated financial statements, note 1.3                                                              
 4. Income taxation credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 The income taxation credit of R19.5 million for the six months ended 30 September 2012 is mainly attributable to the increase in estimated tax losses and unredeemed 
 capital expenditure relating to Keaton Mining Proprietary Limited. Refer to note 1.3 for the effect IFRIC 20 had on the income taxation credit for the year ended 31 March 2012.                                                                                                                                                      
 5. Property, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 The net decrease of R59.7 million from 31 March 2012 is mainly attributable to the following:  Capital investments at Vanggatfontein Colliery of R71.4 million (attributable to boxcut development of R15.4 million, stripping activity assets of R43.0 million, mine infrastructure 
    of R13.0 million). This was offset by a decrease in the rehabilitation assets of R16.1 million due to a decrease in the rehabilitation liability. Refer to note 6.                                                                                                                                                
   Capital investments at Vaalkrantz Colliery of R7 million (mainly attributable to mine infrastructure and mine equipment).                                                                                                                                                                                                                                                                                                                                                                               
 These were offset by depreciation charges of R121.9 million.                                                                                                                                                                                                                                                                                                                                                                                                                                               
 6. Non-current provisions                                                                                                                                                                                                                                                                               
 The rehabilitation liability at the Vanggatfontein Colliery decreased by R16.1 million during the period as a result of a change in estimate, whilst the previously recognised rehabilitation 
 liability unwound with R2.5 million during the period. The rehabilitation liability at the Vaalkrantz Colliery decreased by R0.8 million during the period, whilst the previously recognised 
 rehabilitation liability unwound with R0.4 million during the period.                                                                                                                                                                                                                                                   
 7. Borrowings                                                                                                                                                                                                                                                                                            
 Total borrowings decreased by R17.2 million mainly attributable to the total repayments of R34.7 million against the Nedbank project finance facility. This was offset by finance costs of R12.2 million 
 and foreign exchange losses of R4.0 million.                                                                                                                                                                                                                                                      
 8. Trade and other payables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
 Keaton Mining Proprietary Limited (Keaton) vs Megacube Mining Proprietary Limited (Megacube):                                                                                                                                                                                                                        
 Included in trade and other payables in the Statement of Financial Position is an amount of R42.5 million for contract mining services rendered by Megacube for the period June 2012 to July 2012. 
 Keaton is currently disputing payment of these claims and has lodged a claim against Megacube for breaches of several provisions contained in the contract mining agreement (the agreement). Keaton delivered 
 notice of termination of the agreement, to Megacube on 16 May 2012. in accordance with the provisions of the agreement and subsequently terminated the agreement on 5 July 2012.    
 Keaton Mining Proprietary Limited (Keaton) vs DRA Mineral Projects Proprietary Limited (DRA):                                                                                                                                                                                                        
 Also included in trade and other payables is an amount of R33 million which DRA contends as owing as reported in Keaton Energys annual report for the year ended 31 March 2012. The litigation is on-going.                                                                                                                                                                                
 9. Commitments and contingencies                                                         
 The groups capital commitments are:                                                         
 R000                                                         
                                                                                                At                   At            At   
                                                                                           30 Sept               31 Mar       30 Sept   
                                                                                              2012                 2012          2011   
                                                                                        (Reviewed)            (Audited)    (Reviewed)  
  Exploration and mine development expenditure authorised and contracted                     1 780               13 955         1 049   
  Exploration and mine development expenditure authorised but not contracted                33 494               55 682        32 257   
                                                                                            35 274               69 637        33 306   
 All contracted amounts will be funded both through existing funding mechanisms within the group and cash generated from operations. For a detailed disclosure on contingent liabilities refer to Keaton Energys 
 annual report for the year ended 31 March 2012, available on the groups website at www.keatonenergy.co.za. There were no material changes to the matters reported as at 31 March 2012.                                                         
 10. Subsequent events                                                         
 There were no significant events after 30 September 2012 up to the date of this report.                                                         
 11. Dividends                                                         
 No dividends have been declared nor are any proposed for the period ended 30 September 2012 (30 September 2011: Rnil and the year ended 31 March 2012: Rnil).                                                         
 12. Coal reserve and resource statement                                                         
 The Vanggatfontein Colliery coal reserve has been reduced by approximately 4.2 million tonnes, compared to the coal reserve declared at 31 March 2012, as a result of the application of revised modifying factors. 
 In addition to this the Vanggatfontein Colliery coal reserve has been reduced by 0.009 million tonnes of metallurgical coal and 0.9 million tonnes of thermal coal mined during the period. The Vaalkrantz Colliery 
 anthracite reserve has been reduced by 0.3 million tonnes of anthracite mined during the period. There were no further significant changes to the previously reported resource and reserve statements.                                                         
 13. Review report                                                         
 The condensed interim consolidated financial statements for the six months ended 30 September 2012, have been reviewed in accordance with International Standards on 
 Review Engagements 2410  Review of interim financial information performed by the Independent Auditors of the entity by KPMG Inc. Their unmodified review report is available for inspection at the companys registered office.                                                          

Keaton Energy Holdings Limited 
Registered Office:
Ground Floor, Eland House, The Braes, 3 Eaton Avenue, Bryanston, South Africa
(Postnet Suite 464, Private Bag X51, Bryanston, 2021)
Tel: +27 11 317 1700     
Telefax: +27 11 463 4759
E-mail: info@keatonenergy.co.za

Directors:
Dr JD Salter (executive chairman)*, AB Glad (chief executive officer), J Rossouw (financial director), 
LX Mtumtum++, P Pouroulis**+, OP Sadler++, APE Sedibe+, D Jonker***+, GH Kemp++
*British **South African / Cypriot ***Dutch
+non-executive, ++independent non-executive, lead independent director

Company Secretary:
Michelle Taylor

Transfer Secretaries:
Computershare Investor Services South Africa Proprietary Limited
Ground Floor, 70 Marshall Street, Johannesburg, South Africa  
(PO Box 61051, Marshalltown, 2107)

Auditors:
KPMG Inc. 1226 Schoeman Street, Hatfield, Pretoria

www.keatonenergy.co.za
Date: 29/11/2012 07:05:00 Supplied by www.sharenet.co.za                     
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