Go Back Email this Link to a friend


Keaton Energy Holdings Limited - Reviewed Condensed Interim Consolidated Results For The Six Months Ended 30 September 2016

Release Date: 28/11/2016 08:30:00      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 condensed interim consolidated results for the six months ended 30 September 2016

Preparation of condensed interim consolidated financial statements
The condensed interim consolidated financial statements for the six months ended 30 September 2016 have been reviewed
in terms of the Companies Act of South Africa. 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 condensed interim consolidated financial statements were published on 28 November 2016 and can be found on the
company's website.


Salient features
- Revenue from continuing operations R580 million (1H FY16 - R563 million)
- R63 million debt repaid
- HEPS from continuing operations 13 cents per share up from 2.6 cents 
- Operating profit from continuing operations of R78 million (1H FY16 - R59 million)
- Integrated Water Use Licence granted for Moabsvelden
- R31 million gain on conclusion of a settlement agreement with the IDC
- Total borrowings decreased by R82 million

Commentary

Dear shareholder
The six months ended 30 September 2016 (the period or 1H FY17) were characterised by continued steady-state operations 
at Vanggatfontein and the placing of loss making Vaalkrantz Colliery on care and maintenance from 1 May 2016 whilst 
awaiting section 11 ministerial consent for its disposal. Following the end of the reporting period, the Moabsvelden 
Project was finally awarded its Integrated Water Use Licence. The significant recovery in global coal prices has given 
the group flexibility to pursue alternative options in respect of the Moabsvelden offtake.

Safety
Safety remains a management focus area and Keaton continues to strive for a zero-harm environment at all operations. 
Safety statistics are released quarterly. During Q2 FY17, Vanggatfontein reported an improved progressive rolling 
LTIFR per 200 000 man hours worked of 0.46 (Q1 FY17: 0.92) and Vaalkrantz a LTIFR of 0.00 (Q1 FY17: 0.01). However, 
this operation was placed on care and maintenance on 1 May 2016 and thus the numbers are not comparable.

Operational review
Vanggatfontein delivered 1.139Mt of washed 2 and 4-Seam thermal coal to Eskom (1H FY16: 1.192Mt), a decrease of 52 372t 
or 4%. Temporary pit sequencing constraints were largely responsible for the decrease in Eskom sales. 5-Seam 
metallurgical coal sales decreased 36% over the comparable period to 35 961t from 56 156t in line with the geological 
model. Discard and slurry sales were 242 415t (1H FY16: 17 704t).

Group financial performance
During the six months, Vanggatfontein generated revenue of R434.6 million from coal sales (1H FY16: R453.5 million). 
The decrease in revenue was as a result of reduced 5-Seam and Eskom sales volumes. The reduced Eskom sales were however 
offset by the annual contractual price adjustment. Transport revenue for the period was R145.8 million (1H FY16: 
R109.8 million) as a result of longer delivery distances. Transport cost paid to suppliers similarly increased. The 
gross profit from continuing operations was R89.5 million or 15% of revenue (1H FY16: R119.2 million or 21% of revenue). 
The decrease was as a result of the reduced 5-Seam sales discussed above, a decrease in yields achieved on the Eskom 
product and a higher than planned strip ratio.

Other income of R31.7 million for the six months is mainly attributable to the recognition of a once-off credit of 
R30.8 million after concluding a settlement agreement with the Industrial Development Corporation (IDC). The company 
reached an agreement with the IDC on 31 August 2016 to acquire their preference shares in LME for R8.8 million in 
full and final settlement of the preference share liability of R39.6 million.

Net profit before taxation from continuing operations was R50.4 million (1H FY16: R33.8 million). Earnings and headline 
earnings per share from continuing operations were 13.0 cents (1H FY16: 2.6 cents).

Cash and cash equivalents, which includes discontinued operations, decreased by R14.6 million during the six months to 
R34.3 million. Operations generated net cash of R228.3 million (1H FY16: R307.4 million). The main reason for the 
decrease of R79.1 million is the decrease in gross profit explained above. Investing activities utilised cash of 
R190.5 million during the six months (1H FY16: R277.5 million). This is mainly due to additions to property, plant and 
equipment of R200.1 million (1H FY16: R241.5 million) primarily spent on ongoing mine development at Vanggatfontein. 
This was offset by a net withdrawal from restricted cash/investments of R9.3 million (1H FY16: R9.9 million). Financing 
activities utilised cash of R52.4 million during the six months (1H FY16: R34.1 million), due to borrowings of 
R54.4 million (1H FY16: R34.1 million) being repaid, offset by an additional drawdown of R2 million on the Investec Bank 
Limited working capital facility (1H FY16: Rnil).

Coal Resource and Coal Reserve statement
Other than normal coal depletion as a result of mining activities during the six months to 30 September 2016, there were 
no significant changes to the previously reported group Coal Resource and Reserve estimates as reported in the 
31 March 2016 Integrated Annual Report.

Looking ahead
In the short term, our growth focus will be on securing both an offtake agreement and development funding for the 
Moabsvelden Project along with obtaining the long awaited section 11 consent for the LME transaction. Our operational 
focus will remain on ensuring Vanggatfontein?s consistent performance.

With the pending attractive Vanggatfontein/Moabsvelden expansion and a significantly simplified and lean corporate 
structure we are well placed for the future.

On behalf of the Board

David Salter                      Mandi Glad
Non-Executive Chairman            Chief Executive Officer

Bryanston
25 November 2016

Condensed interim consolidated statement of profit or loss and other comprehensive income

                                                                             Six months ended              Year ended     
                                                                      30 September      30 September         31 March    
                                                                              2016              2015             2016    
   R'000                                                   Notes         (Reviewed)        (Reviewed)        (Audited)   
   CONTINUING OPERATIONS                                                                                                 
   Revenue                                                     2           580 405           563 286        1 032 080    
   Cost of sales                                                          (490 861)         (444 054)        (868 777)    
   Gross profit                                                2            89 544           119 232          163 303    
   Other income                                                3            31 750               626           41 192    
   Mining and related expenses                                             (20 332)          (10 758)        (181 966)    
   Administrative expenses                                                 (22 630)          (50 309)        (139 036)    
   Operating profit/(loss) before net finance cost                          78 332            58 791         (116 507)    
   Net finance cost                                                        (27 889)          (24 953)         (54 160)    
   Finance income                                                            2 165             1 557            4 046    
   Finance cost                                                            (30 054)          (26 510)         (58 206)    
   Net profit/(loss) before taxation                                        50 443            33 838         (170 667)    
   Income taxation (expense)/credit                            4           (12 191)          (24 319)           2 168    
   Net profit/(loss) from continuing operations                             38 252             9 519         (168 499)    
   DISCONTINUED OPERATIONS                                                                                               
   Loss from discontinued operations, net of taxation          5           (17 240)         (106 461)        (128 776)    
   Net profit/(loss) for the period                                         21 012           (96 942)        (297 275)    
   Other comprehensive income                                                                                            
   Items that may be reclassified to profit or loss                                                                      
   Foreign currency translation reserve gain                                   106               249            1 841    
   Total comprehensive income                                               21 118           (96 693)        (295 434)    
   Net profit/(loss) attributable to:                                                                                     
   Owners of the company                                                    20 835           (66 252)        (250 588)    
   Non-controlling interest                                                    177           (30 690)         (46 687)    
                                                                            21 012           (96 942)        (297 275)    
   Total comprehensive income attributable to:                                                                            
   Owners of the company                                                    20 941           (66 003)        (248 747)    
   Non-controlling interest                                                    177           (30 690)         (46 687)    
                                                                            21 118           (96 693)        (295 434)    
   Earnings per share                                                                                                    
   Basic earnings per share (cents)                            6               7.1             (29.4)           (99.7)    
   Diluted earnings per share (cents)                          6               7.1             (29.4)           (99.7)    
   Earnings per share - continuing operations                                                                            
   Basic earnings per share (cents)                            6              13.0               2.6            (62.2)    
   Diluted earnings per share (cents)                          6              13.0               2.5            (62.2)    


Condensed interim consolidated statement of financial position
                                                                                  At              At               At    
                                                                        30 September        31 March     30 September    
                                                                                2016            2016             2015    
   R'000                                                   Notes           (Reviewed)       (Audited)       (Reviewed)   
   ASSETS                                                                                                                
   Property, plant and equipment                               7             646 280         668 297          691 106    
   Intangible assets                                                         503 665         504 568          662 808    
   Investments and loans                                                       5 221           5 221            5 216    
   Restricted cash                                                             7 423           7 423           10 986    
   Restricted investments                                                     30 326          35 226           32 616    
   Total non-current assets                                                1 192 915       1 220 735        1 402 732    
   Restricted cash                                                                 -           4 168                -    
   Inventory                                                                  34 394          36 651           49 230    
   Trade and other receivables                                               128 564         105 149          102 002    
   Taxation                                                                        -             917              898    
   Cash and cash equivalents                                                  34 251          43 379           58 249    
   Assets held-for-sale                                        8              63 056          83 812          120 281    
   Total current assets                                                      260 265         274 076          330 660    
   Total assets                                                            1 453 180       1 494 811        1 733 392    
   EQUITY                                                                                                                
   Stated capital                                                            850 051         850 051          701 977    
   Share-based payment reserve                                                35 616          33 665           29 567    
   Other reserves                                                             21 031          20 925           19 334    
   Accumulated loss                                                         (444 975)       (465 810)         (54 903)    
   Total equity attributable to owners of the company                        461 723         438 831          695 975    
   Non-controlling interest                                                   54 189          54 012            7 621    
   Total equity                                                              515 912         492 843          703 596    
   LIABILITIES                                                                                                           
   Borrowings                                                  9             183 128         189 605          228 796    
   Mine closure and environmental rehabilitation provision                   264 161         263 472          238 104    
   Vendor liability                                                           31 769          30 226           30 987    
   Deferred taxation                                                         130 810         124 275          153 475    
   Deferred income                                                                 -               -            5 418    
   Total non-current liabilities                                             609 868         607 578          656 780    
   Borrowings                                                  9             125 913         201 682          111 552    
   Trade and other payables                                                  129 341         106 183          145 423    
   Taxation                                                                    7 793           2 732                -    
   Liabilities held-for-sale                                   8              64 353          83 793          116 041    
   Total current liabilities                                                 327 400         394 390          373 016    
   Total equity and liabilities                                            1 453 180       1 494 811        1 733 392    
   The accompanying notes are an integral part of these condensed interim consolidated financial statements.


Condensed interim consolidated statement of changes in equity
                                                                                                           Total
                                                                                          (Accu-          equity
                                                                Share-                   mulated    attributable           Non-
                                                                 based                    loss)/       to owners    controlling
                                                    Stated     payment       Other      retained          of the       interest        Total    
   R'000                                           capital     reserve    reserves      earnings         company           (NCI)      equity    
   Balance at 31 March 2015                        692 929      26 546      19 085       103 073         841 633         (3 375)     838 258    
   Net loss for the period                               -           -           -       (66 252)        (66 252)       (30 690)     (96 942)    
   Other comprehensive income for the period             -           -         249             -             249              -          249    
   Transactions with owners of the company        
   recognised directly in equity                                
   Ordinary shares issued                            9 048           -           -             -           9 048              -        9 048    
   Share-based payments                                  -       3 021           -             -           3 021              -        3 021    
   Change in ownership interest in subsidiaries          -           -           -       (91 724)        (91 724)        41 686      (50 038)    
   Balance at 30 September 2015                    701 977      29 567      19 334       (54 903)        695 975          7 621      703 596    

   Balance at 31 March 2016                        850 051      33 665      20 925      (465 810)        438 831         54 012      492 843    
   Net profit for the period                             -           -           -        20 835          20 835            177       21 012    
   Other comprehensive income for the period             -           -         106             -             106              -          106    
   Transactions with owners of the company        
   recognised directly in equity                                                                            
   Share-based payments                                  -       1 951           -             -           1 951              -        1 951    
   Balance at 30 September 2016                    850 051      35 616      21 031      (444 975)        461 723         54 189      515 912    


Condensed interim consolidated statement of cash flows
                                                                             Six months ended            Year ended
                                                                     30 September      30 September        31 March    
                                                                             2016              2015            2016    
   R'000                                                                (Reviewed)        (Reviewed)       (Audited)   
   Cash flows from operating activities(1)                                228 302           307 397         470 184    
   Cash flows from investing activities(2)                               (190 468)         (277 523)       (404 356)    
   Cash flows from financing activities(3)                                (52 440)          (34 102)        (89 489)    
   Net decrease in cash and cash equivalents                              (14 606)           (4 228)        (23 661)    
   Cash and cash equivalents at the beginning of the period                48 885            72 546          72 546    
   Cash and cash equivalents at the end of the period                      34 279            68 318          48 885    
  (1) Operations generated net cash of R228.3 million during the six months (30 September 2015: R307.4 million) after
      taking net finance cost of R7.4 million (30 September 2015: R13.2 million) into account. Refer to note 2 for 
      additional information regarding the reasons for the decrease in cash generated by operations.
  (2) Investing activities utilised cash of R190.5 million during the six months (30 September 2015: R277.5 million).
      This is mainly due to cash additions to property, plant and equipment of R200.1 million (30 September 2015: 
      R241.5 million) which was offset by a net withdrawal from restricted cash/investments of R9.3 million 
      (30 September 2015: R9.9 million).
  (3) Financing activities utilised cash of R52.4 million during the six months (30 September 2015: R34.1 million). 
      This is mainly due to borrowings repaid of R54.4 million (30 September 2015: R34.1 million) which was offset 
      by an additional drawdown of R2 million on the Investec Bank Limited working capital facility 
      (30 September 2015: Rnil).
                                                
Segment report
                                                                Revenue                                Operating profit/(loss) before depreciation/amortisation
                                          Six months ended       Year ended     Six months ended       Six months ended       Year ended     Six months ended 
   R'000                                 30 September 2016    31 March 2016    30 September 2015      30 September 2016    31 March 2016    30 September 2015 
   Vanggatfontein Colliery(1)(4)                   580 405        1 032 080              563 286                285 766          620 228              343 875 
   Vaalkrantz Colliery(1)(5)(7)                     18 626          176 822              103 082                (16 574)        (138 870)            (113 842)
   Sterkfontein Project                                  -                -                    -                      -                -                    - 
   Keaton Energy Holdings 
   Limited(2)                                       61 784          130 082               52 260                  7 884         (169 248)             (84 520)
   Keaton Administrative and                                                                                                                         
   Technical Services 
   Proprietary Limited(2)                           18 174           35 621               24 255                  2 673           (9 378)              (2 151)
   Leeuw Braakfontein Project                            -                -                    -                  3 390         (174 518)             (10 738)
   Koudelager Project(7)                                 -                -                    -                      -                -                    - 
   Moabsvelden Project(2)                                -                -                    -                  3 374          (59 428)                (297)
   Other segments(3)(8)                                  -                -                    -                (57 766)             (19)              (2 851)
   Total segments                                  678 989        1 374 605              742 883                228 747           68 767              129 476 
   Reconciliation to statements  
   of profit or loss and other   
   comprehensive income and  
   financial position
   Intersegment, deferred
   taxation and other
   consolidation adjustments                       (79 958)        (165 703)             (76 515)                59 343          134 723               65 672 
                                                   599 031        1 208 902              666 368                288 090          203 490              195 148 
   Net finance cost(6)
   Elimination of discontinued operations
   Net profit/(loss) before taxation
   Total assets and liabilities

Segment report continued
                                                         Depreciation/amortisation                    Operating profit/(loss) after depreciation/amortisation
                                          Six months ended       Year ended     Six months ended       Six months ended       Year ended     Six months ended 
   R'000                                 30 September 2016    31 March 2016    30 September 2015      30 September 2016    31 March 2016    30 September 2015 
   Vanggatfontein Colliery(1)(4)                  (225 473)        (442 377)            (238 118)                60 293          177 851              105 757 
   Vaalkrantz Colliery(1)(5)(7)                       (107)          (3 992)              (3 080)               (16 681)        (142 862)            (116 922)
   Sterkfontein Project                                  -                -                    -                      -                -                    - 
   Keaton Energy Holdings 
   Limited(2)                                            -                -                    -                  7 884         (169 248)             (84 520)
   Keaton Administrative and                                                                                                                         
   Technical Services 
   Proprietary Limited(2)                           (1 525)          (3 267)              (1 620)                 1 148          (12 645)              (3 771)
   Leeuw Braakfontein Project                            -                -                    -                  3 390         (174 518)             (10 738)
   Koudelager Project(7)                                 -                -                    -                      -                -                    - 
   Moabsvelden Project(2)                                -                -                    -                  3 374          (59 428)                (297)
   Other segments(3)(8)                                  -                -                    -                (57 766)             (19)              (2 851)
   Total segments                                 (227 105)        (449 636)            (242 818)                 1 642         (380 869)            (113 342)
   Reconciliation to statements  
   of profit or loss and other   
   comprehensive income and  
   financial position
   Intersegment, deferred
   taxation and other 
   consolidation adjustments                           107              863                    -                 59 450          135 586               65 672    
                                                  (226 998)        (448 773)            (242 818)                61 092         (245 283)             (47 670)    
   Net finance cost(6)                                                                                          (27 889)         (54 160)             (24 953)    
   Elimination of discontinued operations                                                                        17 240          128 776              106 461    
   Net profit/(loss) before taxation                                                                             50 443         (170 667)              33 838    
   Total assets and liabilities

Segment report continued
                                                                Segment assets                                               Segment liabilities
                                                        At               At                   At                     At               At                   At
   R'000                                 30 September 2016    31 March 2016    30 September 2015      30 September 2016    31 March 2016    30 September 2015
   Vanggatfontein Colliery(1)(4)                   863 549          881 547              933 996              1 025 295        1 051 402            1 094 843
   Vaalkrantz Colliery(1)(5)(7)                    116 293          137 063              149 508                489 978          469 253              437 401
   Sterkfontein Project                             66 007           66 043               66 064                 76 615           74 971               74 201
   Keaton Energy Holdings 
   Limited(2)                                      996 054          954 511              932 764                 58 680           24 009               69 827
   Keaton Administrative and                                                                                                                        
   Technical Services 
   Proprietary Limited(2)                           13 011           11 623               25 176                 57 335           56 444               53 210
   Leeuw Braakfontein Project                      154 285          153 527              311 664                123 027          124 129              116 925
   Koudelager Project(7)                             3 730            3 730                5 785                      -                -                    -
   Moabsvelden Project(2)                          304 494          342 107              340 433                 96 072          134 367               72 934
   Other segments(3)(8)                             21 873          334 043              322 098                 67 822          129 485              117 268
   Total segments                                2 539 296        2 884 194            3 087 488              1 994 824        2 064 060            2 036 609
   Reconciliation to statements  
   of profit or loss and other   
   comprehensive income and  
   financial position
   Intersegment, deferred
   taxation and other 
   consolidation adjustments                    (1 086 116)      (1 389 383)          (1 354 096)            (1 057 556)      (1 062 092)          (1 006 813) 
                                                 1 453 180        1 494 811            1 733 392                937 268        1 001 968            1 029 796 
   Net finance cost(6)
   Elimination of discontinued operations
   Net profit/(loss) before taxation
   Total assets and liabilities                  1 453 180        1 494 811            1 733 392                937 268        1 001 968            1 029 796 
   (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) Coal sales to a major customer as a percentage of revenue exceeded 95% (31 March 2016 and 30 September 2015: 92%).
   (5) Coal sales to a major customer as a percentage of revenue amounted to 100% (31 March 2016: three major customers
       73%, 14% and 10%. 30 September 2015: two major customers 67% and 19%).
   (6) 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.
   (7) Classified as a discontinued operation, refer to note 5.
   (8) Amalahle Exploration Proprietary Limited and the Balgray prospecting rights included in other segments are
       classified as discontinued operations, refer to note 5.

   
Notes to the condensed interim consolidated financial statements
1 Basis of preparation and accounting policies
  The condensed consolidated interim financial statements are prepared in accordance with International Reporting
  Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices
  Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and the requirements of the
  Companies Act of South Africa. The accounting policies applied in the preparation of these interim financial statements are
  in terms of International Financial Reporting Standards and are consistent with those applied in the previous annual
  financial statements.

2 Revenue and gross profit
  Vanggatfontein delivered 1.139Mt of washed 2- and 4-Seam thermal coal to Eskom (30 September 2015: 1.192Mt and for
  the year ended 31 March 2016: 2.238Mt), a decrease of 52 372t or 4%. Sales of 5-Seam metallurgical coal decreased by 36%
  over the comparable period to 35 961t in line with the geological model (30 September 2015: 56 156t and for the year
  ended 31 March 2016: 98 252t). Production of B-grade coal was discontinued as reported previously (30 September 2015 and
  for the year ended 31 March 2016: 25 951t).

  During the six months Vanggatfontein generated revenue of R434.6 million from coal sales (30 September 2015: R453.5 million 
  and for the year ended 31 March 2016: R830 million). The decrease in revenue was as a result of reduced 5-Seam and Eskom
  sales volumes. The impact of reduced sales volumes to Eskom was offset by the annual contractual price adjustment.

  Transport revenue for the period was R145.8 million (30 September 2015: R109.8 million and for the year ended 31 March 2016: 
  R202.1 million). The increase in transport revenue was as a result of longer delivery distances.

  The gross profit from continuing operations was R89.5 million or 15% of revenue (30 September 2015: R119.2 million or 21% of 
  revenue and for the year ended 31 March 2016: R163.3 million or 16% of revenue). The decrease was as a result of the reduced 
  5-Seam and B-grade sales discussed above, a decrease in yields achieved on the Eskom product and a higher than expected strip 
  ratio impacted by a temporary sequencing constraint in the two pits.

3 Other income
  Other income of R31.7 million for the six months ended 30 September 2016 is mainly attributable to the recognition
  of a once-off credit of R30.8 million after concluding a settlement agreement with the Industrial Development Corporation
  (IDC) for the Leeuw Mining and Exploration Proprietary Limited (LME) preference share obligation. 

  During November 2004, the IDC subscribed for 60 cumulative redeemable preference shares in LME. In terms of the agreement, 
  LME had to pay, on each dividend date, the relevant preference dividend and had to commence redeeming the preference shares 
  in equal instalments during the 2008 financial year. During the 2011 financial year, the IDC agreed to reschedule repayments 
  on the preference shares when the company acquired LME, and an addendum to the preference shares agreement was concluded with
  the new settlement date, being 31 October 2015. Due to the operational underperformance of LME, the liability could not be 
  settled on 31 October 2015. During the 2016 financial year, the company entered into a Sale of Shares and Claims Agreement 
  with Bayete Energy Resources Proprietary Limited (BER) to dispose of LME (refer to note 5). The IDC preference shares were 
  specifically excluded from the sale and the company agreed to take over this liability from LME.

  The company reached an agreement with the IDC on 31 August 2016 to acquire the preference shares from the IDC for R8.8 million 
  in full and final settlement of the preference share liability of R39.6 million. In terms of the agreement the R8.8 million is 
  payable in five equal monthly instalments, which commenced in October 2016.

4 Income taxation expense
  The income taxation expense of R12.2 million for the six months ended 30 September 2016 is mainly attributable to Keaton Mining
  Proprietary Limited's normal taxation expense of R5.7 million as well as deferred taxation expense of R6.7 million, driven by 
  the continued profitable performance at Vanggatfontein. The deferred taxation liability in the statement of financial position 
  accordingly increased when compared to the liability at 31 March 2016.

5 Discontinued operations
  As reported in the prior year, the Board of Directors committed to a plan to dispose of the Vaalkrantz operation, Balgray 
  Project, Koudelager Project as well as the Mooiklip Project. This disposal group is classified as a discontinued operation 
  as it is part of a single coordinated plan to dispose of the group's anthracite assets (separate major line of business) 
  which are all situated in KwaZulu-Natal (geographic area of operations). 

  The Braakfontein Thermal Coal Project, held by Leeuw Braakfontein Colliery Proprietary Limited (LBC), a wholly owned
  subsidiary of LME, is specifically excluded. LBC, which will be unbundled from LME, will become a direct wholly owned
  subsidiary of the company.

  The company entered into a Sale of Shares and Claims Agreement with BER on 11 February 2016 to dispose of the disposal group.
  Only one material suspensive condition has to be met for the sale to become effective, being the section 11 consent from the 
  Minister of Mineral Resources in terms of the Mineral Petroleum and Resources Development Act, 28 of 2002 (MPRDA). The company 
  also simultaneously entered into a management agreement with Witbank Mineral Resources Proprietary Limited (WMR), a related 
  party to BER, for the management of LME up to and until the Sale of Shares and Claims Agreement with BER becomes unconditional.

  As a consequence of the occurrence of a force majeure event, namely the drought, management decided to place Vaalkrantz Colliery 
  on care and maintenance with effect from 1 May 2016. The Sale of Shares and Claims Agreement as well as the Management Agreement
  are still effective although some of the clauses of the Management Agreement have been temporarily suspended as a result of the 
  force majeure event.

   Results - discontinued operations
                                                                   Six months ended             Year ended 
                                                            30 September      30 September        31 March 
                                                                    2016              2015            2016 
   R'000                                                       (Reviewed)        (Reviewed)       (Audited)
   DISCONTINUED OPERATIONS                                                                                 
   Revenue                                                        18 626           103 082         176 822 
   Cost of sales                                                 (30 311)         (130 197)       (209 022)
   Gross loss                                                    (11 685)          (27 115)        (32 200)
   Other income                                                        -                 -           4 715 
   Operating expenses                                             (4 966)          (79 487)        (99 651)
   Operating loss before net                                                                               
   finance (cost)/income                                         (16 651)         (106 602)       (127 136)
   Net finance (cost)/income                                        (589)              141          (1 640)
   Finance income                                                    710               417           1 102 
   Finance cost                                                   (1 299)             (276)         (2 742)
   Net loss before taxation                                      (17 240)         (106 461)       (128 776)
   Taxation                                                            -                 -               - 
   Loss from discontinued operations, net of taxation            (17 240)         (106 461)       (128 776)
   Net loss attributable to:                                                                               
   Owners of the company                                         (17 240)          (72 011)        (94 326)
   Non-controlling interest                                            -           (34 450)        (34 450)
                                                                 (17 240)         (106 461)       (128 776)

   No gain or loss was recognised for the remeasurement in terms of IFRS 5 as the carrying amount of the disposal 
   group was lower than the fair value less costs to sell.

   Cash flows - discontinued operations
                                                       Six months ended           Year ended 
                                              30 September      30 September        31 March 
                                                      2016              2015            2016 
   R'000                                         (Reviewed)        (Reviewed)       (Audited)
   Cash flows from operating activities            (21 420)          (18 702)        (36 921) 
   Cash flows from investing activities                 77           (10 964)        (13 700) 
   Cash flows from financing activities                (29)               (8)            (74) 

6 Earnings and net asset value per share
  The calculation of basic and diluted earnings per share is based on a profit for the six months ended 30 September
  2016 (attributable to owners of the company) of R20.8 million (30 September 2015: loss of R66.3 million and for the year
  ended 31 March 2016: loss of R250.6 million). The weighted average number of shares used in calculating basic earnings
  per share for the year was 292 million (30 September 2015: 225.5 million and for the year ended 31 March 2016: 
  251.3 million). The weighted average number of shares used in calculating diluted earnings per share for the six months 
  was 292.4 million (30 September 2015: 229 million and for the year ended 31 March 2016: 251.3 million).

                                                           Six months ended             Year ended 
                                                    30 September      30 September        31 March 
                                                            2016              2015            2016 
                                                       (Reviewed)        (Reviewed)       (Audited)
   Basic earnings per share (cents)                          7.1             (29.4)          (99.7)
   Continuing operations                                    13.0               2.6           (62.2)
   Discontinued operations                                  (5.9)            (32.0)          (37.5)
   Diluted earnings per share (cents)(1)                     7.1             (29.4)          (99.7)
   Continuing operations(2)                                 13.0               2.5           (62.2)
   Discontinued operations(3)                               (5.9)            (32.0)          (37.5)
   Headline earnings per share (cents)                       7.1              (6.2)          (26.9)
   Continuing operations                                    13.0               2.6           (16.5)
   Discontinued operations                                  (5.9)             (8.8)          (10.4)
   Diluted headline earnings per share (cents)(1)            7.1              (6.2)          (26.9)
   Continuing operations(2)                                 13.0               2.6           (16.5)
   Discontinued operations(3)                               (5.9)             (8.8)          (10.4)

   (1) Anti-dilutive for the period ended 30 September 2015 and for the year ended 31 March 2016.
   (2) Anti-dilutive for the year ended 31 March 2016.
   (3) Anti-dilutive.
                                                                                Six months ended              Year ended    
                                                                          30 September      30 September        31 March    
                                                                                  2016              2015            2016    
   R'000                                                                     (Reviewed)        (Reviewed)       (Audited)   
   Reconciliation of headline earnings (net of tax and NCI):                                                                
   Continuing operations                                                                                                    
   Net profit/(loss) for the period attributable to owners of the company       38 075             5 759        (156 262)   
   (Profit)/loss on disposal of property, plant and equipment                      (15)              109             135    
   Impairment of intangible assets                                                   -                 -         114 596    
   Headline earnings - continuing operations                                    38 060             5 868         (41 531)   
   Discontinued operations                                                                                                  
   Net loss for the period attributable to owners of the company               (17 240)          (72 011)        (94 326)   
   Profit on disposal of property, plant and equipment                             (39)                -               -    
   Impairment of assets                                                              -            52 095          68 308    
   Headline earnings - discontinued operations                                 (17 279)          (19 916)        (26 018)   
   Total headline earnings                                                      20 781           (14 048)        (67 549)   
   Net asset value per share                                                                                                
   Number of shares in issue (millions)                                          292.0             228.3           292.0    
   Net asset value per share (cents)                                               177               308             169    

7 Property, plant and equipment
  The net decrease of R22 million from 31 March 2016 is mainly attributable to capital investments at Vanggatfontein
  of R199.4 million (attributable mainly to mine development of R195.4 million). The rehabilitation assets increased by 
  R4 million, relating to changes in estimates associated with the environmental rehabilitation liability.

  These were offset by depreciation charges of R225.3 million.

8 Disposal group held-for-sale
  As disclosed in note 5, the Board committed to a plan to sell Vaalkrantz Colliery, the Balgray Project, the Koudelager 
  Project and the Mooiklip Project (disposal group).

   The disposal group comprised of the following assets and liabilities:

                                                                          At                At              At      
                                                                30 September          31 March    30 September    
                                                                        2016              2016            2015    
   R'000                                                           (Reviewed)         (Audited)      (Reviewed)   
   Assets                                                                                                         
   Property, plant and equipment                                      25 513            26 578          38 097    
   Intangible assets                                                   5 962             5 962           9 155    
   Restricted investments                                             30 125            29 651          26 219    
   Inventory                                                             578             4 633           8 829    
   Trade and other receivables                                           850            11 482          26 929    
   Taxation                                                                -                 -             983    
   Cash and cash equivalents                                              28             5 506          10 069    
                                                                      63 056            83 812         120 281    
   Liabilities                                                                                                    
   Borrowings                                                             45                72              97    
   Mine closure and environmental rehabilitation provision            34 971            34 649          31 285    
   Trade and other payables                                            9 052            28 787          59 999    
   Provisions                                                         20 285            20 285          24 660    
                                                                      64 353            83 793         116 041    



  At 30 September 2016, the fair value less costs to sell of the disposal group was unchanged at Rnil. No additional
  impairment loss was recognised. There are no cumulative income or expenses included in OCI relating to the disposal
  group.

9 Borrowings
  Total borrowings decreased by R82.2 million, mainly as a result of debt repayments to the value of R62.9 million
  (R48.6 million on the Investec Bank Limited term loan, R7.4 million on the Vitol loan, R3.9 million on the Investec 
  Bank Limited working capital facility and R3 million on the Gunvor loan (a related party)). Borrowings further 
  decreased by R30.8 million as a result of the agreement reached with the IDC regarding the LME preference shares 
  (refer to note 3) and by R7.5 million as a result of foreign exchange gains included in profit or loss. The decrease 
  was offset by finance costs of R16.4 million.

10 Commitments and contingencies
    The group?s capital commitments are:
                                                                                          At             At           At        
                                                                                30 September       31 March 30 September
                                                                                        2016           2016         2015    
    R'000                                                                          (Reviewed)      (Audited)   (Reviewed)   
    Exploration and mine development expenditure authorised and contracted             4 752          5 696        2 681    
    Exploration and mine development expenditure authorised but not contracted        17 725         22 629       23 014    
                                                                                      22 477         28 325       25 695                 


   All contracted amounts will be funded through existing funding mechanisms within the group and cash generated from
   operations.

   Shareholders are referred to note 32 (iii) of the Annual Financial Statements for the year ended 31 March 2016, included 
   in the company?s Integrated Annual Report. The litigation was successfully defended with Thebe Mining Resources Proprietary 
   Limited and Main Street 1055 Proprietary Limited?s claims dismissed, as announced on 11 October 2016.

   There have been no significant changes to the status of the group?s other contingent liabilities. For detailed disclosure on 
   all contingent liabilities refer to Keaton Energy?s Integrated Annual Report for the year ended 31 March 2016, available on 
   the group?s website at www.keatonenergy.co.za.

11 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 assets/(liabilities),
            either directly or indirectly (that is, as prices) or indirectly (that is derived from prices); and

   Level 3: Inputs for the assets/(liabilities) that are not based on observable market data (that is unobservable
            inputs).

                                                    At                At              At      
                                          30 September          31 March    30 September
                                                  2016              2016            2015    
   R'000                                     (Reviewed)         (Audited)      (Reviewed)   
   Fair value through profit or loss                                                        
   Level 1(1)                                   60 451            64 877          58 835    
   Level 2(2)                                        -                 -          (2 504)    
   (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 RMB, Peregrine, Momentum, Stanlib and 
       Sanlam. These underlying funds invest in equity instruments and money market investments, both local and 
       foreign. These investments are fair value through profit or loss financial assets and recognised at fair 
       value.
   (2) Level 2 financial liabilities related to Forward Exchange Contracts (FECs). The FECs were valued by an 
       independent financial institution using forward looking market rates until the realisation date of the 
       relevant instruments.

   The carrying values (less any impairment allowance) of restricted cash, cash and cash equivalents, investments and
   loans, trade and other receivables, borrowings, vendor liability and trade and other payables approximate their fair
   values.
   
12 Change in interests in subsidiaries
   During the period, the company restructured certain subsidiaries in the group. As a result the following subsidiaries
   which were indirectly held through Xceed Resources Limited (Australian company) are now directly owned by Keaton Energy
   Holdings Limited: 
   - Focus Coal Investments Proprietary Limited (100%)
   - Neosho Trading 86 Proprietary Limited (74%)
   - Ausco Finance Proprietary Limited (100%)
   - Ausco Services Proprietary Limited (100%)

   There were no changes in the percentage shareholdings in any of the above mentioned subsidiaries.

13 Significant events after 30 September 2016 up to the date of this report
   - The company successfully defended the Thebe Mining Resources Proprietary Limited and Main Street 1055 Proprietary
     Limited's claims, as disclosed in note 10.
   - The company agreed revised repayment terms with Gunvor, as disclosed in note 15.

   There have been no significant changes to the status of the group's other contingent liabilities. For detailed disclosure 
   on all contingent liabilities refer to Keaton Energy's Integrated Annual Report for the year ended 31 March 2016,
   available on the group's website at www.keatonenergy.co.za.

14 Dividends
   No dividends have been declared nor are any proposed for the period ended 30 September 2016 (30 September 2015: Rnil
   and for the year ended 31 March 2016: Rnil).

15 Going concern
   At 30 September 2016, the group's current liabilities exceeded its current assets by R67.1 million (30 September 2015: 
   R42.4 million and for the year ended 31 March 2016: R120.3 million). Further to the going concern position disclosed
   in note 40 to the company's Integrated Annual Report for the year ended 31 March 2016, current liabilities decreased
   during the current period due to a significant portion of the Gunvor liability being reclassified to non-current
   liabilities. Subsequent to 30 September 2016, the company and Gunvor (the Parties) again entered into negotiations to 
   further revise the previously agreed repayment terms. Accordingly, the Parties agreed an extension to the tenor of 
   repayment, which will further alleviate the group's net current liability position. Current borrowings further decreased 
   during the period as a result of the agreement reached with the IDC regarding the LME preference shares (refer to notes 
   3 and 9).
 
   The group continues to generate cash from its long-life Vanggatfontein Colliery whereby it delivers coal under a
   long-term offtake agreement to Eskom and through sales to its domestic metallurgical customers. Cash generated from this
   operation, together with the disposal of the significant loss making Vaalkrantz Colliery, the directors' ability to issue
   further shares for cash and the group's undrawn overdraft facility will ensure adequate funding for the group to continue
   to operate for the foreseeable future. Accordingly, the consolidated financial statements continue to be prepared on
   the going concern basis.

Review report
These condensed consolidated financial statements for the period ended 30 September 2016 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. The auditor's
report does not necessarily report on all of the information contained in this announcement/financial results.
Shareholders are therefore advised, that in order to obtain a full understanding of the nature of the auditor's engagement they
should obtain a copy of the auditor's report together with the accompanying financial information from the company's
registered office.


Registered office
Ground Floor, Eland House, The Braes, 3 Eaton Avenue
Bryanston, 2191 
Postnet Suite 464, Private Bag X51, Bryanston, 2021
Tel:       +27 11 317 1700
Telefax:   +27 11 463 4759
Email:     info@keatonenergy.co.za

Directors
Non-Executive
Dr JD Salter (Chairman)* 
LX Mtumtum (Lead Independent Director)
P Pouroulis** 
OP Sadler (Independent)
APE Sedibe
GH Kemp (Independent)
MT Witteveen***
HG Mai****

Executive
AB Glad (Chief Executive Officer)
J Rossouw (Chief Financial Officer)

*British **South African/Cypriot ***Dutch ****Swiss

Company Secretary
AC 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.
KPMG Hillside, corner of Hillside Street and Klarinet Road,
Lynnwood, Pretoria, 0081
PO Box 11265, Hatfield, 0028


www.keatonenergy.co.za
Date: 28/11/2016 08:30:00 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             . The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.


                                        
Email this JSE Sens Item to a Friend.

Send e-mail to
© 2017 SHARENET (PTY) Ltd, Cape Town, South Africa
Home     Terms & conditions    Privacy Policy
    Security Notice    Contact Details
Market Statistics are calculated by Sharenet and are therefore not the official JSE Market Statistics. The calculation/derivation may include underlying JSE data.