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Keaton Energy Holdings Limited - Proposed Acquisition Of The Entire Issued Share Capital Of Xceed, Specific Issue Of Shares For Cash, Cautionary

Release Date: 26/08/2013 07:15:00      Code(s): KEH     
Keaton Energy Holdings Limited
(A company incorporated in the Republic of South Africa with Registration number:
2006/011090/06)
ISIN: ZAE000117420
JSE Share Code: KEH
("Keaton")

PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF XCEED
RESOURCES LIMITED (?XCEED?) AND SPECIFIC ISSUE OF SHARES FOR CASH TO A
RELATED PARTY
CAUTIONARY ANNOUNCEMENT


1. INTRODUCTION

Keaton wishes to announce that it has entered into a scheme implementation deed (the ?Scheme
Implementation Deed?) dated 23 August 2013 with Xceed in terms of which it will make an offer to
acquire the entire issued share capital of Xceed by way of a scheme of arrangement (the
?Scheme") in accordance with Part 5.1 of the Australian Corporations Act 2001, as amended (the
?Transaction"). Under the proposed Scheme, Xceed will become a wholly owned subsidiary of
Keaton and Xceed will be delisted from the Official List of the Australian Securities Exchange
(?ASX?).


2.   TERMS OF THE SCHEME, RATIONALE AND RELATED MATTERS

Certain terms of the Scheme, the rationale and related matters are set out in the joint
announcement by Keaton and Xceed released simultaneously with this announcement. Keaton
shareholders are referred to that announcement which should be read in conjunction with this
announcement. Capitalised terms used in this announcement have been defined in the
aforementioned joint announcement.


3.   INFORMATION ON XCEED

Xceed is an Australian-based public company engaged in the exploration and development of
coal projects in the Republic of South Africa. It is listed on the ASX and presently has a market
capitalisation of approximately AU$15.5 million. Xceed?s primary focus has been the development
of coal projects located within South Africa?s premier coal fields, which are supported by
established infrastructure and are readily capable of reaching their markets.

Xceed holds three projects: Moabsvelden in which Xceed holds a 74% interest is located 3km
from Keaton?s existing Vanggatfontein colliery near Delmas; Roodepoort located 3km from
Exxaro?s New Clydesdale colliery and Bankfontein located 5km from Xstrata?s Tselentis colliery.

Moabsvelden is an open pit thermal coal project for which a Mining Right was issued in May 2013
and a project finance term sheet was signed in March 2013 with Standard Bank. It is expected to
have a mine life in excess of fifteen years at a run of mine (?ROM?) production rate of 2.4 million
tonnes per annum (?mtpa?) producing export quality, as well as domestic quality, thermal coal.
The project has a JORC (?Joint Ore Reserves Committee?) compliant predominantly measured
               1                                                                   1
coal resource of 65.3 million tonnes, including a JORC compliant coal reserve of 44 million
tonnes. It is expected that construction of the mine will commence in 2014 with a ramp up to 2.4
mtpa of ROM production over a 9 month period.
                                                                                      2
Roodepoort is a shallow thermal coal project for which a 29.3 million tonne SAMREC (The South
African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves)
compliant coal resource was declared in July 2013.
                                                                                                                 3
Bankfontein is a predominantly underground thermal coal project for which a 13.7 million tonne
SAMREC compliant coal resource was declared in July 2013.

     1-   Competent Person?s Report for the Moabsvelden Project, Project Number GMXP11034 July 2013 prepared by
          Gemecs (Pty) Limited

     2-   Competent Person's Report for the Roodepoort Project, Project Number GMXP12025 July 2013 prepared by
          Gemecs (Pty) Limited

     3-   Competent Person?s Report for the Bankfontein Project. Project Number GMXP12025 July 2013 prepared by
          Gemecs (Pty) Limited



4.   FUNDING ARRANGEMENTS WITH A RELATED PARTY

The Purchase Consideration of A$19,670,060.90 will be settled through a cash payment of
A$0.14 for every Xceed fully paid ordinary share held by Xceed shareholders (based on
140,500,435 Xceed shares in issue). Gunvor Group Ltd (?Gunvor?), which holds a 23.92% stake
in Keaton through its wholly owned subsidiary Plusbay Limited ("Plusbay"), will provide up to
US$18,000,000.00 in funding to Keaton to enable the company to pay the Purchase
Consideration to Xceed shareholders.

Part of the funding provided by Gunvor will be raised via the issue of 32,631,692 new Keaton
ordinary shares to Plusbay in terms of a specific issue of shares for cash, at an issue price of
R1.7782/new Keaton share (the ?Specific Issue?), which represents a 10% discount to the 30
trading day volume weighted average price (?VWAP?) of Keaton shares on the JSE for the period
ended 22 August 2013.

The balance of the funds provided by Gunvor will be in the form of a prepayment by Gunvor SA
(a wholly owned subsidiary of Gunvor), which is contingent upon the approval of the Specific
Issue by Keaton?s shareholders and which prepayment will be settled over a period of time via the
physical delivery of export quality coal to be produced at Moabsvelden (the ?Prepayment?). The
Prepayment will be done on normal commercial terms. Keaton retains the option to fund a portion
of the Purchase Consideration from its own cash reserves.

As Plusbay is a material shareholder of Keaton, and hence a related party to Keaton, the Specific
Issue will require Keaton?s Board of directors to obtain a fairness opinion from an independent
expert, which opinion will be included in the circular to Keaton?s shareholders. In addition Keaton
shareholders will be required to vote on an ordinary resolution, which requires a 75% approval by
shareholders (excluding Gunvor and its associates), to approve the Specific Issue.


5. CATEGORISATION OF THE TRANSACTION

The Transaction is categorized as a Category 1 transaction in terms of the Listings Requirements
of the JSE and accordingly will require, inter alia, the approval of Keaton shareholders in a
general meeting. As detailed above, the Specific Issue also requires shareholder approval. A
circular incorporating a notice of general meeting is in the course of preparation and will, subject
to regulatory approvals, be posted to shareholders on or about 60 days from the date of this
announcement.

6. CAUTIONARY ANNOUNCEMENT

Keaton is in the process of compiling the pro forma financial effects of the Scheme and the
Specific Issue and until such time as these have been published, shareholders are advised to
exercise caution when dealing in the company?s securities.


Johannesburg
26 August 2013

Corporate advisers:                              [Qinisele Resources logo] & [Ceres Capital logo]
Legal adviser in Australia:                      [Ashurst logo]
Legal adviser to in South Africa:                [Norton Rose Fulbright logo]
Investment Bank and Sponsor:                     [Nedbank Capital logo]


This press release includes mineral reserve and resource information prepared in accordance
with the South African Code for the Reporting of Exploration Results, Mineral Resources and
Mineral Reserves (the ?SAMREC Code?).

Competent Person Statement
Mr Kobus Dippenaar, who is the Competent Person for Xceed Resources Limited, consents to
the inclusion in this release of all coal resource information relating to Xceed in the form and
context in which they appear for the purposes of both the JORC Code and the SAMREC Code.
Mr Dippenaar has a honours degree in geology and is a professional natural scientist registered
with the South African Council for Natural Scientific Professions (SACNASP), membership
number 400060/98. Mr Dippenaar is also a member of the Geological Society of South Africa
(GSSA) and is a senior coal geologist at Gemecs He has 21 years? experience relevant to the
style of mineralisation and type of deposit under consideration, and to the activity which he is
undertaking, to qualify as a Competent Person for the purposes of both and the SAMREC Code
and JORC Code. Further information on Xceed?s resource statement and Competent Persons
disclosure is available in the resource statements released in the Xceed 2012 Annual Report and
the Xceed website.

The Coal Reserve estimate was prepared by Mr Van Reenen Jewaskiewitz, who is a registered
Professional Mining Engineer with the Engineering Council of South Africa (ECSA) (a Recognised
Overseas Professional Organisation) and has a Mine Managers Certificate of competency for
coal mines. He has more than 25 years? experience in the South African coal and minerals
industries. Mr Jewaskiewitz is a full time employee of Xceed Resources Limited and has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration
and to the activity which he is undertaking to qualify as a Competent Person as defined in the
2004 Edition of the ?Australasian Code for Reporting of Exploration, Mineral Resources and Ore
Reserves?. Mr Jewaskiewitz consents to the inclusion in the ASX release of the matters based on
his information in the form and context in which it appears.

Date: 26/08/2013 07:15:00 Supplied by www.sharenet.co.za                     
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