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Keaton Energy Holdings Limited - Reviewed Provisional Condensed Consolidated Results For The Year Ended 31 March 2014

Release Date: 25/06/2014 08:00:00      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 provisional condensed consolidated results for the year ended 31 March 2014

SALIENT FEATURES
200% increase in HEPS to 30.3 cps.
49% increase in group revenue to R1.4 billion.
R219 million gross profit in FY14 compared with a gross loss of R27 million in FY13.
Vanggatfontein achieved steady state with sales increasing by 45% to 2.3  million tonnes.
Acquisition of Xceed for R195 million concluded. 
R350 million financing facility concluded.
Fatality-free since inception in 2007.
LTIFR at Vaalkrantz improved to 0.23 compared with 0.36 in FY13.
Vanggatfontein LOM increased to 17+ years.

COMMENTARY
Dear Shareholder
During the 2014 financial year Keaton Energy delivered on its promises. We are safe. We are profitable. We are growing
towards 5Mtpa of saleable coal. Vanggatfontein, our long life open pit colliery has reached steady state, while
production at Vaalkrantz has stabilised in the face of difficult mining conditions and labour issues. The following commentary
summarises the group?s key activities during the year. Our Integrated Annual Report will be published in July 2014. 

Safety
Safety is of paramount importance to the group. Our continuous focus on safety, coupled with intensive safety training
initiatives and rigorous management, resulted in the group maintaining its excellent safety record. Vaalkrantz ended
the year with a 0.23 Lost Time Injury Frequency Rate (?LTIFR?) compared with 0.36 for the comparative period while
Vanggatfontein suffered two Lost Time Injuries, leading to a LTIFR of 0.09, an increase from zero in FY13. We congratulate all
involved in keeping our workplaces safe.

Markets
Our coal is sold into four distinct markets:
1.  Domestic thermal coal contracted to Eskom;
2.  5-Seam coal and premium anthracite to domestic metallurgical customers;
3.  B-grade coal to domestic customers; and
4.  Anthracite exported to Brazil, through our off-take partner Gunvor International BV.
Our relationship with Eskom, our biggest customer by volume, has continued to strengthen through the delivery of a
consistent quality product to a number of their power stations.
Our entire 5-Seam and premium anthracite production remains in great demand locally and all product is sold as it is
produced.
At Vanggatfontein we have begun washing our own B-grade material, thereby utilising spare plant capacity and
diversifying our product and customer base. We are also marketing discard and slurry to minimise our long term environmental
liabilities.

Operational review
Vanggatfontein
FY14 saw Vanggatfontein reach steady state. The colliery delivered 2 192 519 tonnes of washed 2- and 4-Seam thermal coal to 
Eskom, an increase of 45% from the previous year?s 1 509 681 tonnes. 5-Seam metallurgical coal sales increased 49% to 
97 635 tonnes  from 65 661 tonnes. The increased utilisation of the 5-Seam plant for own coal allowed limited washing of 
other coals: 145 785 tonnes were toll-washed and 10 328 tonnes of B-grade market development product was produced. Discard 
and slurry sales totaled 844 334 tonnes for FY14, compared with 454 083 tonnes in FY13, an increase of 86%.
This long life colliery now forms the backbone of the soon to be enlarged Vanggatfontein-Moabsvelden complex which
will, with the Braakfontein project, form the core of the growing Keaton group of companies.
Vaalkrantz
Vaalkrantz dispatched 303 837 tonnes of anthracite to domestic and international metallurgical markets, a 7% decrease
over the previous year?s 326 597 tonnes. The operation continued to suffer from extremely difficult mining conditions in
the West Alfred section of the mine which limited production. Unprotected industrial action in August 2013 resulted in
the group restructuring this operation and outsourcing the mining to a contractor. Our steadfast efforts in turning this
operation to profitability have started delivering results in the new financial year.
It is pleasing to note that despite these difficulties, the colliery?s safety performance improved, a testament to the
dedication and application of all those involved. 
Group operating and financial performance
Group revenue increased by 49% from R919 million in FY13 to R1 373 million in FY14. The increase was as a result of
improved operational performance at Vanggatfontein leading to increased deliveries of both thermal coal to Eskom and
5-Seam metallurgical coal to domestic customers. 
The group recorded a gross profit of R219 million for FY14 compared to a gross loss of R27 million in FY13. This
improvement in results began in the second half of FY13 and has continued with increased production at Vanggatfontein,
improved operational efficiencies and the changed business model at Vaalkrantz. Production costs were controlled tightly and
cost containment remains a key focus at both operations. 
Depreciation for the year increased 53% to R359 million, in line with the increased production at Vanggatfontein.
Administrative and other operating expenses increased by 30%. Whilst our head office team has been strengthened with the
appointment of a Chief Operating Officer and Environmental and SLP managers, the main driver of this increase is the
transaction costs associated with the Xceed Resources Limited (?Xceed?) acquisition.
Total comprehensive income increased to R65 million compared to a loss of R132 million in FY13. Headline earnings per
share increased from a loss of 30.2 cents in FY13 to a profit of 30.3 cents in FY14. The net asset value per share
increased 14% to 408 cents.
Capital investment for the group totalled R301 million in FY14 compared to R210 million in FY13. The majority of
capital was spent at Vanggatfontein, with some R294 million being invested, mainly applied to stripping costs and the opening
up of pit 4.
Cash and cash equivalents at the end of the year increased by R50 million as a result of improved operational cash
flows. The group concluded a R350 million financing facility with Investec Bank Limited. The proceeds of this facility were
applied to the Xceed transaction and the retirement of the Nedbank project finance facility used for the development of
Vanggatfontein.

Development pipeline
Over the past three years our management team has worked hard to optimise our existing collieries and to bring new
resources into the pipeline for continued growth.
Moabsvelden
The greenfields Moabsvelden project was acquired in February 2014 when Keaton Energy purchased the entire issued share
capital of Australian Stock Exchange (ASX) listed Xceed. Moabsvelden represents a significant opportunity for the group
to grow its Delmas footprint by utilising existing processing capacity, infrastructure and management at
Vanggatfontein.
Koudelager
During the financial year 13 additional boreholes were drilled to develop our understanding of all five of the Vryheid
Coalfield seams. Koudelager?s geological model and coal resource have been updated and a feasibility study is planned
to commence by mid-2014. The coal resource currently stands at 12.3 Mt, but determining the best extraction method
remains a challenge. An application for a prospecting right over a contiguous property has been submitted to the DMR and it is
our intention to extend the drilling grid into this property with a view to expanding the Koudelager coal resource.
Braakfontein
A final phase of feasibility drilling on Braakfontein was completed in December 2013, which included 17 in-fill
boreholes and an 8-hole opencast-underground interface line to establish the conditions that could be expected along the axis
of the underground access decline. This process is being expanded to include remote geophysics to provide the detail
required for underground mine planning. Upon conclusion of this final phase of exploration, a feasibility study will be
conducted to establish the economics of an export and domestic quality thermal coal producer in the Newcastle area.
Other exploration projects
A comprehensive confirmatory and in-fill drilling programme has been planned and will be executed upon the award of the 
Mining Right at Balgray, which is expected before the end of the first quarter of FY15. Balgray is located 7km north-east 
of the town of Utrecht in KwaZulu-Natal. Historical drilling data on the property indicates a target Gus seam deposit of 
between 10Mt and 14Mt with an average seam thickness of 1.3 metres. At Mooiklip, a first-phase of exploration drilling 
will be conducted during the first half of FY15 with a view to determining whether the property will deliver an anthracite 
resource of economic quantity.

Resource and Reserve Statement
The Vanggatfontein Colliery Run-of-Mine (ROM) coal reserve increased by 26.5% from 45.2 million tonnes (31 March 2013)
to 57.2 million tonnes on the back of a 107% increase in the coal resource from 70.3 million tonnes (31 March 2013) to
145.7 million tonnes. This increase is exclusively due to the inclusion of the Western Resource Block which had not been
included in the 2013 resource estimate.  In addition, the Xceed acquisition resulted in the inclusion of an additional
98.0 million tonnes coal resource consisting of the Moabsvelden (55.5 million tonnes), Bankfontein (16.1 million tonnes)
and Roodepoort (26.4 million tonnes) projects. The Moabsvelden project contributes an additional 43.9 million tonnes
ROM coal reserve. Other than normal coal depletion as a result of mining activities during the year, there were no further
significant changes to the previously reported coal resource and reserve estimates. All tonnages are reported on a
mineable tonnes in-situ (MTIS) basis.
An updated Resource and Reserve Statement for the group will be released in July 2014 as part of the Integrated Annual
Report. The full report will be available on the company?s website at www.keatonenergy.co.za. 

Litigation
The matters between Keaton Mining Proprietary Limited (?Keaton Mining?) and DRA Minerals Projects Proprietary Limited
(?DRA?) and Megacube Mining Proprietary Limited (?Megacube?) as previously reported are proceeding to arbitration. The
Megacube matter is set down for arbitration in February 2015 whilst dates for the hearing of the DRA matter are still to
be finalised.

Corporate activities
FY14 has been an eventful year for the group. In May 2013 a special resolution was adopted whereby ordinary shares
were converted into ordinary shares with no par value. This resolution also approved the increase in authorised shares from
250 million to 750 million shares.
In February 2014 we concluded the acquisition of Xceed for R195 million, which brought a further 44 million tonnes of
attributable coal reserves under our control. Xceed?s Moabsvelden project, sited a mere 3.5 km from Vanggatfontein, will
be brought into production by end 2015. 
In concluding the above transaction, the group made a specific issue of 32 647 838 ordinary no par value shares for
cash to Plusbay Limited, a wholly-owned subsidiary of Gunvor Group Limited. This share issue raised R58 million which was
applied to the Xceed purchase price. The balance of the purchase price was funded through the Investec Bank Limited
financing facility and own cash.
Mr Jeroen Schurink was appointed to the board as a non-executive director, with effect from 7 March 2014. Mr Schurink
brings considerable industry expertise as the Chief Investment and Operating Officer for the Gunvor Group. Following the
resignation of Ms Michelle Taylor, Ms Anelia Schutte-Bouwer joined us as Company Secretary, with effect from 7 March
2014.

Looking ahead(1)
We continue to pursue our primary long-term strategy of becoming a 5Mtpa producer. Following the optimisation of our
Vanggatfontein operation, we will now focus on advancing our internal pipeline of projects. The acquisition of Xceed and
its Moabsvelden project has added considerably to the group?s coal resources and reserves. Planning for the commissioning 
of Moabsvelden by the end of the 2015 calendar year will be our single biggest challenge for FY2015. Moving our other,
pre-existing projects up the value chain will continue as planned. In particular identifying and securing additional
reserves for Vaalkrantz, as conditions at Vaalkrantz become ever more difficult. Continuing and enhancing our Kwa-Zulu
Natal footprint is a key objective of the group. 
The steady state Vanggatfontein colliery and the changed business model at Vaalkrantz should ensure on-going
consistent results over the long term which should be borne out when our interim results are released in November 2014.
We anticipate the undeveloped Moabsvelden project will produce a combined total of approximately 1.4 million tonnes of 
export- and Eskom-quality thermal coal per annum when it commences production in 2015. Moabsvelden offers clear-cut 
operational and financial synergies with Vanggatfontein due to these mines being just 3.5 km apart.
In order to realise our goal of producing 5Mtpa, we will also continue to pursue appropriate acquisition opportunities
where these offer value for our shareholders. 
On behalf of the Board


David Salter                        Mandi Glad
(Non-Executive Chairman)            (Chief Executive Officer)
20 June 2014

Preparation of provisional condensed consolidated financial statements
The provisional condensed consolidated financial statements for the year ended 31 March 2014 have been reviewed in
terms of the Companies Act 71, 2008. Their preparation was supervised by the Chief Financial Officer, Jacques Rossouw, 
a Chartered Accountant (SA). The directors of the company take responsibility for these results.
The provisional condensed consolidated financial statements were published on 25 June 2014 and can be found on the
company?s website.

(1)Any forward looking comments included in this announcement have not been reviewed by the auditors.

PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME                                     

                                                                          Year ended                      
  R?000                                              Notes        31 March          31 March   
                                                                      2014              2013   
                                                                 (Reviewed)         (Audited)  
  Revenue                                                2       1 372 605           918 807   
  Cost of sales                                                 (1 153 869)         (946 081)   
  Gross profit/(loss)                                    2         218 736           (27 274)   
  Other income                                                      12 983            10 594   
  Mining and related expenses                            6         (11 476)          (70 492)   
  Net gain on financial instruments                                    781             2 485   
  Administrative and other operating expenses            3         (70 893)          (54 723)   
  Operating profit/(loss) before net finance cost                  150 131          (139 410)   
  Net finance cost                                                 (47 734)          (32 199)   
  Finance income                                                     2 834             2 109   
  Finance cost                                                     (50 568)          (34 308)   
  Net profit/(loss) before taxation                                102 397          (171 609)   
  Income taxation (expense)/credit                       4         (37 975)           39 335   
  Net profit/(loss) for the year                                    64 422          (132 274)   
  Other comprehensive income                                                                   
  Foreign exchange translation gain                                    356                 -   
  Total comprehensive income                                        64 778          (132 274)   
  Net profit/(loss) attributable to:                                                           
  Owners of the company                                             59 529           (84 491)   
  Non-controlling interest                                           4 893           (47 783)   
                                                                    64 422          (132 274)   
  Total comprehensive income attributable to:                                                  
  Owners of the company                                             59 885           (84 491)   
  Non-controlling interest                                           4 893           (47 783)   
                                                                    64 778          (132 274)   
  Basic earnings per share (cents)                       5            30.3             (44.2)   
  Diluted earnings per share (cents)                     5            30.0             (44.2)   
  The accompanying notes are an integral part of these provisional condensed consolidated financial statements.                                              
                                                                                               

PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

  R?000                                                      Notes             At                 At   
                                                                         31 March           31 March   
                                                                             2014               2013   
                                                                        (Reviewed)          (Audited)  
  Assets                                                                                               
  Property, plant and equipment                                  6        797 155            776 070   
  Intangible assets                                              7        700 688            424 131   
  Investments and loans                                          7          5 152                  -   
  Deferred tax                                                   4         17 144             51 832   
  Restricted cash                                                           7 423              7 423   
  Restricted investments                                         7         47 269             26 683   
  Trade and other receivables                                    8         37 610                  -   
  Total non-current assets                                              1 612 441          1 286 139   
  Restricted investments                                                    3 453                  -   
  Inventory                                                                35 081             38 493   
  Trade and other receivables                                             151 336             85 215   
  Cash and cash equivalents                                                69 556             19 614   
  Total current assets                                                    259 426            143 322   
  Total assets                                                          1 871 867          1 429 461   
  Equity                                                                                               
  Stated capital                                                          692 929                  -   
  Share capital                                                                 -                192   
  Share premium                                                                 -            640 711   
  Share-based payment reserve                                              18 788             12 497   
  Other reserves                                                 8         19 215            (18 751)   
  Retained earnings                                                       134 102             74 573   
  Total equity attributable to owners of the company                      865 034            709 222   
  Non-controlling interest                                       7         51 183            (23 185)   
  Total equity                                                            916 217            686 037   
  Liabilities                                                                                          
  Borrowings                                                     9        341 838            235 390   
  Long-term financial liabilities                                             604                304   
  Mine closure and environmental rehabilitation provision       10        215 181            137 451   
  Provisions                                                     7         30 575                  -   
  Deferred tax                                                   4         87 357             87 353   
  Total non-current liabilities                                           675 555            460 498   
  Borrowings                                                     9         51 713             49 428   
  Mine closure and environmental rehabilitation provision       10              -              2 859   
  Trade and other payables                                      11        227 101            229 801   
  Taxation                                                                  1 281                838   
  Total current liabilities                                               280 095            282 926   
  Total equity and liabilities                                          1 871 867          1 429 461   
  The accompanying notes are an integral part of these provisional condensed consolidated financial statements.                                              


PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

  R?000                                       Notes     Stated    Share       Share     Share-     Other    Retained       Total        Non-      Total    
                                                       capital   capital     premium     based   reserves   earnings      equity        con-      equity   
                                                                                       payment                          attribu-    trolling               
                                                                                       reserve                          table to    interest               
                                                                                                                          owners      (?NCI?)              
                                                                                                                          of the                           
                                                                                                                         company                           
  Balance at 31 March 2012                                   -       189     632 054     6 180    (18 751)   159 064     778 736      24 598     803 334   
  Total comprehen-sive income for the year                   -         -           -         -          -    (84 491)    (84 491)    (47 783)   (132 274)   
  Transactions with owners of the company 
  recognised directly in equity                                                                                        
  Ordinary shares issued for cash                            -         3       9 020         -          -          -       9 023           -       9 023   
  Share issue expenses                                       -         -        (363)        -          -          -        (363)          -        (363)   
  Share-based payments                                       -         -           -     6 317          -          -       6 317           -       6 317   
  Balance at 31 March 2013                                   -       192     640 711    12 497    (18 751)    74 573     709 222     (23 185)    686 037   
  Net profit for the year                                    -         -           -         -          -     59 529      59 529       4 893      64 422   
  Other comprehensive income for the year                    -         -           -         -        356          -         356           -         356   
  Transfer of share capital and share 
  premium to stated capital(1)                         640 903      (192)   (640 711)        -          -          -           -           -           -   
  Transactions with owners of the company 
  recognised directly in equity                                                                                        
  Ordinary shares issued for cash                 7     58 048         -           -         -          -          -      58 048           -      58 048   
  Share issue expenses                            7     (6 022)        -           -         -          -          -      (6 022)          -      (6 022)   
  Share-based payments                                       -         -           -     6 291          -          -       6 291           -       6 291   
  Share-based payment reserve relating to the 
  issue of shares at a discount                   8          -         -           -         -     37 610          -      37 610           -      37 610   
  Change in ownership interest in subsidiaries                                                                                                             
  Acquisition of Xceed Resources Limited          7          -         -           -         -          -          -           -      69 475      69 475   
  Balance at 31 March 2014                             692 929         -           -    18 788     19 215    134 102     865 034      51 183     916 217  
  
  (1) A special resolution in terms of regulation 31 of the Companies Act Regulations 2011 was adopted at the general meeting held on 28 May 2013, whereby 
  all ordinary par value shares were converted into ordinary shares with no par value. It was resolved that all 250 million authorised ordinary shares and 
  191.7 million issued ordinary shares with a par value of 0.1 cents be converted into ordinary shares with no par value and that the share capital account 
  and the share premium account of the company be transferred to the stated capital account.                                                                                                                                 


PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                        Year ended                     
  R?000                                                         31 March          31 March   
                                                                    2014              2013   
                                                               (Reviewed)         (Audited)  
  Cash flows from operating activities                           416 913           191 798   
  Cash flows from investing activities                          (500 123)         (216 946)   
  Cash flows from financing activities                           133 152           (15 787)   
  Net increase/(decrease) in cash and cash equivalents            49 942           (40 935)   
  Cash and cash equivalents at the beginning of the year          19 614            60 549   
  Cash and cash equivalents at the end of the year                69 556            19 614   


  SEGMENTAL REPORT

                                                                 Revenue             Operating profit/(loss)       
                                                                                       before depreciation/          
                                                                                          amortisation                  
  R?000                                                   Year to        Year to      Year to      Year to       
                                                         31 March       31 March     31 March     31 March       
                                                             2014           2013         2014         2013       
  Vanggatfontein Colliery (1) (5)                       1 127 215        645 860      545 060       98 140       
  Sterkfontein Project                                          -              -            -            -       
  Keaton Energy Holdings Limited (2)                      108 178         90 490       59 273       59 981       
  Keaton Administrative and Technical 
  Services Proprietary Limited (2)                         26 469         20 241         (537)       1 917       
  Vaalkrantz Colliery (1) (5)                             245 390        272 948        2 119       30 826       
  Leeuw Braakfontein Project                                    -              -       (9 420)      (9 999)       
  Koudelager Project                                            -              -            -            -       
  Moabsvelden Project (2)                                     175              -         (278)           -       
  Other segments (2) (3)                                      450              -       (1 746)      (1 368)       
  Total segments                                        1 507 877      1 029 539      594 471      179 497       
  Reconciliation to statements of profit or loss and
  other comprehensive income and financial position                                                              
  Intersegment, deferred tax and other consolidation     (135 272)      (110 732)     (95 707)     (91 800)       
  adjustments (6)                                                                                                
                                                        1 372 605        918 807      498 764       87 697       
  Net finance cost (4)                                                                                           
  Net profit/(loss) before taxation                                                                              
  Total assets and liabilities                                                                                   

  
  SEGMENTAL REPORT (continued)

                                                      Depreciation/amortisation    Operating profit/(loss)      Segment assets           Segment liabilities                  
                                                                                     after depreciation/                                                                            
                                                                                        amortisation                                                                            
  R?000                                                  Year to      Year to     Year to      Year to        Year to      Year to        Year to      Year to   
                                                        31 March     31 March    31 March     31 March       31 March     31 March       31 March     31 March   
                                                            2014         2013        2014         2013           2014         2013           2014         2013   
  Vanggatfontein Colliery (1) (5)                       (308 632)    (184 641)    236 428      (86 501)       910 519      807 140      1 177 759    1 135 924   
  Sterkfontein Project                                         -            -           -            -         65 924       65 513         60 947       56 783   
  Keaton Energy Holdings Limited (2)                           -            -      59 273       59 981        962 794      801 363          4 450        4 061   
  Keaton Administrative and Technical 
  Services Proprietary Limited (2)                          (584)        (209)     (1 121)       1 709         10 753        7 424         20 888       16 186   
  Vaalkrantz Colliery (1) (5)                            (39 417)     (42 258)    (37 298)     (11 431)       176 429      196 697        294 685      329 599   
  Leeuw Braakfontein Project                                   -            -      (9 420)      (9 999)       331 212      317 199         81 156       67 248   
  Koudelager Project                                           -            -           -            -         25 990       23 552              -            -   
  Moabsvelden Project (2)                                      -            -        (278)           -        294 141            -         26 812            -   
  Other segments (2) (3)                                       -            -      (1 746)      (1 368)       330 819       19 667        109 421       23 083   
  Total segments                                        (348 633)    (227 108)    245 838      (47 609)     3 108 581    2 238 555      1 776 118    1 632 884   
  Reconciliation to statements of profit or loss and
  other comprehensive income and financial position                                                               
  Intersegment, deferred tax and other consolidation           -            -     (95 707)     (91 800)    (1 236 714)    (809 094)      (820 468)    (889 460)   
  adjustments (6)                                                                                                                                                
                                                        (348 633)    (227 108)    150 131     (139 410)     1 871 867    1 429 461        955 650      743 424   
  Net finance cost (4)                                                            (47 734)     (32 199)                                                           
  Net profit/(loss) before taxation                                               102 397     (171 609)                                                           
  Total assets and liabilities                                                                              1 871 867    1 429 461        955 650      743 424   


(1) Revenue represents sales to external customers only.
(2) Revenue represents intersegment sales only.
(3) Includes the subsidiaries Amalahle Exploration Proprietary Limited, Labohlano Trading 46 Proprietary Limited,
    Ausco Finance Proprietary Limited, Ausco Services Proprietary Limited, Focus Coal Investments Proprietary Limited, Xceed
    Resourced Limited and the Balgray prospecting rights.
(4) Net finance cost is not 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 92% (91% at 31 March 2013).
(6) During the current financial reporting period the Group changed the information that it presents to the CODM. The
    Group no longer presents deferred tax assets and liabilities per segment, but instead only considers deferred tax
    assets and liabilities on a Group wide basis. Accordingly, deferred tax assets and liabilities are now shown as a reconciling
    item between reportable segments and IFRS reported figures. For the prior period the segment report has not been
    restated to reflect this change, as management is of the view that the change in reportable amounts are not material.

NOTES TO THE PROVISIONAL CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
1.1 Basis of accounting
The provisional condensed consolidated financial statements are prepared in accordance with the requirements of the
JSE Limited Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa. The
Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting
Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of the provisional condensed consolidated financial statements are in
terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements.

2. Revenue and gross profit/(loss)
Vanggatfontein delivered 2 192 519 tonnes of washed 2- and 4-Seam thermal coal to Eskom during the year, an increase
of 45% from the previous year?s 1 509 681 tonnes. Sales of 5-Seam metallurgical coal increased 49%, to 97 635 tonnes from
65 661 tonnes, in line with the mine plan. The increased utilisation of the 5-Seam plant allowed limited washing of
other coals: 145 785 tonnes were toll washed and 10 328 tonnes of B-grade market development product was produced. 
Vanggatfontein generated revenue of R779.3 million from coal sales (31 March 2013: R433.7 million), R11.1 million from
toll washing (31 March 2013: R15.5 million) and transport revenue of R336.8 million (31 March 2013: R196.6 million)
during the year.
Vaalkrantz dispatched 303 837 tonnes of anthracite to domestic and international metallurgical markets, a 7% decrease
over the previous year?s 326 597 tonnes. The operation continued to suffer from extremely difficult mining conditions in
the West Alfred section of the mine which limited production. Vaalkrantz generated revenue of R245.4 million (31 March
2013: R272.9 million) for the year.
The group recorded a gross profit of R218.7 million or 16% of revenue for the year ended 31 March 2014 (31 March 2013:
gross loss of R27.3 million). The increase in gross profit was as a result of the improved operational performance at
Vanggatfontein.

3. Administrative and other operating expenses
Administrative and other operating expenses increased by R16.2 million, mainly as a result of acquisition related
costs of R13.2 million attributable to the acquisition of Xceed.

4. Income taxation (expense)/credit
The income taxation expense of R38 million for the year ended 31 March 2014 is mainly attributable to the utilisation
of estimated tax losses and unredeemed capital expenditure by Keaton Mining Proprietary Limited, as a result of the
improved operational performance at Vanggatfontein. The deferred tax asset in the statement of financial position
accordingly decreased when compared to 2013.

5. Earnings and net asset value per share
The calculation of basic and diluted earnings per share is based on a profit for the year ended 31 March 2014(attributable 
to owners of the company) of R59.5 million (31 March 2013: loss of R84.5 million). The weighted average number of
shares used in calculating basic earnings per share for the year was 196.4 million (31 March 2013: 190.9 million). The
weighted average number of shares used in calculating diluted earnings per share for the year was 198.5 million (31 March
2013: 190.9 million).

                                                                                    Year ended                    
                                                                            31 March         31 March   
                                                                                2014             2013   
                                                                           (Reviewed)        (Audited)  
  Total earnings per ordinary share (cents)                                                             
  Basic earnings                                                                30.3            (44.2)   
  Diluted earnings                                                              30.0            (44.2)   
  Headline earnings                                                             30.3            (30.2)   
  Diluted headline earnings                                                     30.0            (30.2)   
  Reconciliation of headline earnings (net of tax and NCI):                                             
  R?000                                                                                                 
  Net profit/(loss) for the year attributable to owners of the company        59 529          (84 491)   
  Loss on derecognition of assets                                                  -           27 276   
  Loss/(profit) on disposal of property, plant and equipment                      24             (476)   
  Loss on disposal of intangible asset                                            27                -   
  Total headline earnings                                                     59 580          (57 691)   
  Net asset value per share                                                                             
  Number of shares in issue (millions)                                         224.3            191.7   
  Net asset value per share (cents)                                              408              358   


6. Property, plant and equipment
The net increase of R21.1 million from 31 March 2013 is mainly attributable to the following:
-  Capital investments at Vanggatfontein of R294.3 million (attributable mainly to mine development of R292.3 million). 
   The rehabilitation assets at Vanggatfontein also increased by R79.4 million, relating to the increase in the
   rehabilitation liability. Refer to note 10.
-  Capital investments at Vaalkrantz of R3.7 million.
-  Other capital investments of R3 million.
These were offset by depreciation charges of R359.3 million (31 March 2013: R235.2 million).
During the prior year a decision was taken to close Pit 1 at Vanggatfontein as it was no longer economic. This
resulted in a loss on derecognition of assets of R51.2 million recorded in mining and related expenses in the statement of
profit or loss and other comprehensive income with a corresponding decrease in mine development assets.

7. Acquisition of Xceed Resources Limited
On 6 February 2014 (?the effective date?), the group acquired the entire issued share capital of Xceed for a cash
consideration of R194.7 million (AUS$ 19.7 million). The acquisition was funded by a specific issue of shares to Plusbay
Limited (discussed below) and the balance by a combination of debt (refer to note 9) and own cash. The transaction was
accounted for as an asset acquisition under IFRS.
A total of 32 647 838 ordinary no par value shares were issued to Plusbay Limited, a wholly-owned subsidiary of Gunvor
Group Limited for cash, at an issue price of R1.7782 per share. The shares were issued at a 10% discount to the
Company?s 30-day Volume Weighted Average Price (?VWAP?) determined one day before 23 August 2013, being the date on which the
Xceed acquisition was announced. The funds raised of R58 million, net of transaction costs of R6 million was utilised to
partially fund the acquisition of Xceed.

  Subsidiaries acquired as part of the Xceed group:    % Shareholding   
  Xceed Resources Limited                                         100   
  Focus Coal Investments Proprietary Limited                      100   
  Neosho Trading 86 Proprietary Limited                            74   
  Ausco Finance Proprietary Limited                               100   
  Ausco Services Proprietary Limited                              100   
                                                                                           
The following summarises the major classes and the recognised amounts of assets and liabilities acquired and consideration 
transferred:                     

Consideration transferred                                     R?000   
Cash                                                        194 657   
Assets and liabilities acquired                                       
Non-current                                                           
Property, plant and equipment                                   261   
Mining asset(1)                                             284 709   
Restricted investments(2)                                     5 726   
Investments and loans(3)                                      5 152   
Vendor provisions(4)                                        (30 072)   
Minority interest(5)                                        (69 475)   
Current                                                               
Cash and cash equivalents                                     2 680   
Trade and other receivables                                     398   
Restricted investments                                        3 372   
Provisions                                                   (3 640)   
Trade and other payables(6)                                  (4 454)   
Total                                                       194 657   

(1) Moabsvelden project owned by Neosho Trading 86 Proprietary Limited (?Neosho?). The Moabsvelden mining asset
    acquisition of R284.7 million is the main reason for the increase in intangible assets in the statement of financial
    position.
(2) The restricted investments are pledged as security for the environmental rehabilitation guarantees issued on
    behalf of Neosho.
(3) Fifteen percent equity interest in two South African coal projects namely Roodepoort and Bankfontein.
(4) Xceed is required to make payments in cash to the founding shareholders of the Moabsvelden Project for the
    acquisition of 74% of the issued share capital of Neosho. These payments are due at various stages of project development in
    accordance with a schedule of performance milestones. The performance milestones, their status at 31 March 2014 and their
    fair values at 31 March 2014 are as follows:


  Performance milestone                                               Status at    Fair value at   
                                                                  31 March 2014    31 March 2014   
                                                                                           R?000   
  Acceptance by the Department of Mineral Resources of an 
  application for a Mining Right at Moabsvelden                        Achieved                -   
  Granting of a Mining Right at Moabsvelden                            Achieved                -   
  Commencement of commercial production at Moabsvelden 
  (includes a success fee of 1% of the vendor payment,
  payable to each of the two advisors)                         Not yet achieved           30 575   


(5) Represents the 26% minority shareholding in Neosho.
(6) Mainly consists of employee termination benefits relating to Xceed?s former management.

8. Non-current trade and other receivables 
Non-current trade and other receivables of R37.6 million represent the difference between the discount to the fair
value of the shares issued to Plusby Limited (refer to note 7) that is accounted for as a share-based payment. The
difference was recognised as an asset as it relates to future financing that will be obtained in the form of US$4 million in
prepayments.

9. Borrowings 
Total interest-bearing borrowings increased by R108.7 million when compared to 2013, mainly attributable to:
- Investec financing facility drawdown of R300 million, net of costs of R4.8 million (refer below);
- debt repayments (capital and interest) of R230.7 million;
- finance costs accrued of R26.6 million;
- foreign exchange losses recognised of R9.2 million; and
- previously capitalised Nedbank issues costs expensed of R8.4 million.
Keaton Mining Proprietary Limited secured a R350 million financing facility from Investec Bank Limited during the year
under review. This facility includes a R300 million term loan and a R50 million working capital facility. R170 million
of the term loan was utilised to settle the remaining balance on the Nedbank project finance facility. The remaining
R130 million of the term loan, net of costs, partly funded the acquisition of Xceed.

10. Mine closure and environmental rehabilitation provision
The rehabilitation liability at Vanggatfontein increased by R75.8 million during the year. The increase is mainly
attributable to the additional ground disturbances at Pit 3, the opening-up of Pit 4 as well as the unwinding of interest on
previously recognised rehabilitation liabilities of R11.4 million. These increases were offset by rehabilitation work
completed at Pit 1 of R15 million. The rehabilitation liability at Vaalkrantz increased by R2 million during the year,
due to additional environmental disturbances. The short-term portion of the mine closure and environmental rehabilitation
provision decreased by R2.9 million due to rehabilitation work completed at Klip Colliery.

11. Trade and other payables
Included in trade and other payables are amounts of R33 million and R42.5 million owing to DRA Mineral Projects
Proprietary Limited and Megacube Mining Proprietary Limited respectively as reported in the 31 March 2013 Integrated Annual
Report. These amounts are still under legal dispute and there have been no significant changes to the status as reported
in our 31 March 2013 Integrated Annual Report.

12. Commitments and contingencies
The group?s capital commitments are:
                                                                                        At           At   
                                                                                  31 March     31 March   
                                                                                      2014         2013   
  R?000                                                                          (Reviewed)    (Audited)  
  Exploration and mine development expenditure authorised and contracted             1 548        3 864   
  Exploration and mine development expenditure authorised but not contracted        61 361       66 845   
                                                                                    62 909       70 709   
  All contracted amounts will be funded both through existing funding mechanisms within the group and cash generated from 
  operations.                              

For a detailed disclosure on all contingent liabilities refer to Keaton Energy?s Integrated Annual Report for the year
ended 31 March 2013, available on the group?s website at www.keatonenergy.co.za.

13. Financial risk management activities
Fair value determination
The following table presents the group?s assets and liabilities that are measured at fair value by level within the
fair value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets;
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset, either directly or
indirectly (that is, as prices) or indirectly (that is derived from prices);
Level 3: Inputs for the asset that are not based on observable market data, (that is unobservable inputs).

 R?000                                              At           At           
                                              31 March     31 March     
                                                  2014         2013         
 Fair value through profit and loss                                     
 Level 1(1)                                     47 269       26 683      
 Level 2(2)                                       (604)        (304)        
 Level 3                                                                


(1) Level 1 financial assets relate to restricted investments which serve as collateral mainly for environmental
    guarantees provided to the DMR. Contributions are mainly invested in Momentum, Stanlib, Sanlam and the Nedbank Bettabeta
    Green Exchange Traded Fund (BGreen ETF). These underlying funds invest in equity instruments and money market investments,
    both local and foreign. The BGreen ETF index consists of a selection of stocks from the top 100 largest South African
    companies listed on the JSE. These investment are fair value through profit or loss financial assets and recognised at
    fair value.
(2) Level 2 financial liabilities relate to an IDC equity linked call option.  The option under consideration was
    valued by independent professional valuers, using a finite difference scheme for valuation. Assumptions used to value the
    option includes a probability linked to the likely IDC preference share redemption period, the spot share price of the
    company on date of valuation, a term structure with the Johannesburg Interbank Agree Rate (JIBAR), Forward Rate Agreement
    (FRA) and swap data as inputs and volatility. 

14. Significant events after 31 March 2014 up to the date of this report
During May 2014 the external shareholder in one of the Company?s subsidiaries exercised its put option as disclosed in
note 27 (contingent liabilities, commitments and legal disputes) of the 31 March 2013 Integrated Annual Report. The
Company has started the process of determining the fair market value of such shares and evaluating the necessary statutory
and regulatory permissions required to give effect to the put option.
On 23 June 2014, Mr. D Jonker notified the board of his intention to resign as a non-executive director with effect
from 1 July 2014.

15. Dividends
No dividends have been declared nor are any proposed for the year ended 31 March 2014 (31 March 2013: R nil).

16. Review report
These provisional condensed consolidated financial statements for the year ended 31 March 2014 have been reviewed by
KPMG Inc, who expressed an unmodified review conclusion. A copy of the auditor?s review report is available for
inspection at the company?s registered office together with the financial statements identified in the auditor?s report.


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
Non-executive
Dr JD Salter (Chairman)* 
LX Mtumtum (Lead independent director)
P Pouroulis** 
OP Sadler (Independent)
APE Sedibe
D Jonker***
GH Kemp (Independent)
JHM Schurink***
Executive
AB Glad (Chief Executive Officer)
J Rossouw (Chief Financial Officer)
*British **South African/Cypriot ***Dutch

Company Secretary
Anelia Schutte-Bouwer

Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown, Sandton, 2196, South Africa
PO Box 785700, Sandton, 2146, South Africa

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 Francis Baard Street, Hatfield, Pretoria

www.keatonenergy.co.za

Date: 25/06/2014 08:00:00 Supplied by www.sharenet.co.za                     
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