Wrap Text
KEH - Keaton Energy Holdings Limited - Preliminary summarised audited group
results for the year ended 31 March 2012
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")
PRELIMINARY SUMMARISED AUDITED GROUP RESULTS
FOR THE YEAR ENDED 31 MARCH 2012
KEY FEATURES
2.7Mtpa production platform established across two operations
1.2Mt coal produced and sold
Revenue soars to R474m from R35m
145% increase in HEPS to 25.2cps
31% increase in NAV per share to R4.45
COMMENTARY
Dear shareholder
The 2012 financial year has seen the Keaton Energy group - now in its fifth
year of existence - firmly establish the platform required to comfortably
exceed its stated target of 2Mt production a year. We have attained this both
through greenfields exploration and development and through acquisition, our
landmark achievements being the exploration, development and start of
production at our Vanggatfontein Colliery (Vanggatfontein) in South Africa`s
Mpumalanga province, and our acquisition of a controlling interest in Leeuw
Mining and Exploration (Pty) Limited (LME). A key focus in respect of the
latter has been turning around LME`s under-performing Vaalkrantz Colliery
(Vaalkrantz) in KwaZulu-Natal province. The ensuing commentary briefly covers
some of the year`s activities, ahead of publication of our integrated report
in June 2012.
Safety
Our safety performance, while showing a pleasing level of achievement, points
to a need for continued effort. This is expected in a group such as ours,
simultaneously operationalising a new mine and turning around another.
At Vanggatfontein, where production ramp-up began late in FY11 and continued
apace in FY12, the Lost Time Injury Frequency Rate (LTIFR) deteriorated from
zero to 0.38 per million man hours worked. The imperative here is to ensure
that - through intensive safety training initiatives and rigorous management
- safety standards measure up to the challenges of increasing production.
During the year the outsourced safety, health and environment (SHE) service-
provider was replaced with an experienced in-house SHE manager.
At Vaalkrantz, there was a marked improvement in safety performance. The
LTIFR declined to 0.45 per million man hours worked from 3.4. This shows that
improved safety performance can go hand in hand with improved production
performance.
Markets
Our coal is sold into three distinct markets:
- domestic thermal coal contracted to Eskom;
- 5 Seam coal and premium low-ash anthracite to domestic metallurgical
customers; and
- mid-ash anthracite exported to Brazil for iron ore pellet production, by
our offtake partner, Gunvor International.
Our washed product supplied to Eskom has been well-received by Eskom`s power
stations. However, the challenge to meet Eskom`s demand for our coal remains.
Provided we continue producing a consistent, quality product we believe
Eskom`s power stations will take everything we can produce.
The 5 Seam market has been resilient, despite smelter operators cutting back
on electricity usage. Prices are good, and it is unlikely that our 5 Seam
product will be substituted by other coal blends as all the alternative
blends include high-cost imported coking coal.
Domestic anthracite demand is the strongest of the markets we sell into, and
as a consequence enjoys premium prices. This is because the coal`s
specific application, in particular in the ferro-chrome smelting industry, is
only substitutable by imported coking coal.
Iron ore pellet production capacity in Brazil is being expanded when Brazil`s
annual demand for anthracite already exceeds South Africa`s anthracite export
capacity. The alternative is to import anthracite from countries further
afield, like the Ukraine. South Africa has a logistics advantage which we
expect to result in support for the current prices.
Group operating and financial performance
In FY12, the group produced and sold a total of 1.2Mt of coal, reflecting
both the continued production build-up at Vanggatfontein and the inclusion of
production from LME`s Vaalkrantz. Revenue of R474 365 518, which includes
R78m in transport revenues of Eskom coal, was substantially higher than the
previous year`s R35 162 539.
Cost of sales increased to R408 123 144, reflecting the increase in sales.
After accounting for mining and related expenses of R10 349 958 and other
expenses and income, operating profit for the year was R56 605 065. A gain of
R114 384 579, reflecting the LME acquisition, boosted operating profit,
before finance income and costs, to R170 989 644. Profit for the year, after
taxation of R8 283 269, was R149 300 760 compared with R7 197 179 in the
previous year.
Headline earnings per share (HEPS) increased by 145% to 25.2c, earnings per
share (EPS) by 783% to 90.9c, and net asset value per share by 31% to R4.45.
Detailed operational review
Vanggatfontein
At Vanggatfontein, total run of mine (ROM) production increased to 2.1Mt from
some 137 000t, reflecting the on-going production build-up during the year.
Total saleable production rose to 1.1Mt from around 57 000t.
Work continues apace to achieve the planned steady-state 4 and 2 Seam
production level of 175 000tpm of saleable coal from the 145 000tpm
production achieved in the period.
Production of 5 Seam metallurgical coal from Vanggatfontein for the domestic
market increased by 146% to 140kt. While the quality of 5 Seam product is
consistently good, geological conditions in Pit 1 have been more variable
than anticipated, resulting in disappointing levels of 5 Seam production.
Optimisation of Vanggatfontein`s mine plan is well in hand and will involve
development of the colliery`s third open pit during calendar 2012. Pit 3 is
expected to produce a steady supply of 5 Seam and higher yielding 4 and 2
Seam coal.
Vaalkrantz
At Vaalkrantz, where Keaton Energy took effective control form mid-December
2011, total ROM production almost doubled to 560 000t with total saleable
production up by 94% to 351 000t for the full 12 months.
Total anthracite sales rose by 76% to 376 000t: 169 000t was exported, an
increase of 83%, and 207 000t was sold into the domestic market, an increase
of 70%.
Contributing factors to this turnaround, included:
- Keaton Energy`s early 2011 refinancing of LME, which meant existing capital
equipment could be refurbished and new equipment bought, and development of
the West Adit could be completed; and
- new management appointments and the moving in-house of certain previously
outsourced functions.
Capital expenditure was down 19% to R30 300 001 as the development of the
West Adit is now complete.
Development pipeline
The Braakfontein and Sterkfontein projects must be advanced in FY 2013. This
will see a regulatory review being completed at Braakfontein, followed
by the initiation of permitted mining activities.
This will not immediately result in coal production but will lay the
groundwork for accelerated development once all ancillary regulatory
approvals are received (the project already has a mining right).
The Sterkfontein project will see the completion of a scoping study as the
first step towards a full feasibility study.
Reserve and Resource Statement
The Reserve and Resource statement will be included in the Integrated Report,
to be released in June 2012.
Corporate activities
During the year under review, there were several Board changes and re-
assignments. Jacques Rossouw succeeded Johan Schonfeldt as Financial
Director; Peet Snyders resigned as an executive director; and Dirk Jonker,
Managing Director of Gunvor International BV, joined as a non-executive
director. Executive Director: Marketing and New Business Development Mandi
Glad assumed responsibility for the company`s operations as Executive
Director: Operations and continues to have responsibility for coal marketing
and regulatory matters. Managing Director Paul Miller assumed responsibility
for new business development.
Looking ahead
In the short term, to consolidate our position as a 2Mtpa producer delivering
thermal and metallurgical coal into domestic and export markets, our primary
objectives are to complete the production build-up at Vanggatfontein, so that
this operation delivers consistently in terms of both quantity and quality
into our Eskom contract obligation, and to complete the operational
turnaround at Vaalkrantz.
Longer term, our strategy is to attain 5Mtpa mid-tier producer status. We now
have a track-record of success in terms of greenfields exploration and
development on which to advance our projects and prospects, and we have also
proved our ability to identify distressed assets and turn these to account.
Stakeholders can expect us to vigorously pursue both avenues of growth in the
years ahead.
On behalf of the Board
David Salter
(Chairman)
Paul Miller
(Managing Director)
30 May 2012
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended
31 March 31 March
2012 2011
Note R R
Revenue 474 365 518 35 162 539
Cost of sales (408 123 144) (23 094 923)
Gross profit 2 66 242 374 12 067 616
Other income 3 25 544 215 383 302
Mining and related expenses (10 349 958) (10 924 236)
Net gain on financial instruments 1 689 569 -
Administrative and other
operating expenses (26 521 135) (19 602 216)
Results from operating activities 56 605 065 (18 075 533)
Gain on business combination 4 114 384 579 -
Operating profit/(loss) before
net finance (cost)/income 170 989 644 (18 075 533)
Net finance (cost)/income (13 405 615) 18 698 910
Finance income 17 541 785 20 193 307
Finance costs 11 (30 947 400) (1 494 397)
Net profit before taxation 157 584 029 623 377
Income taxation (expense) /credit (8 283 269) 6 573 802
Profit for the year 149 300 760 7 197 179
Other comprehensive income for
the year, net of tax - -
Total comprehensive income for
the year 149 300 760 7 197 179
Total comprehensive income
attributable to:
Owners of the company 159 543 956 15 186 005
Non-controlling interest (10 243 196) (7 988 825)
Total comprehensive income for
the year 149 300 760 7 197 179
Basic earnings per share (cents) 5 90.9 10.3
Diluted earnings per share (cents) 5 90.9 10.3
The accompanying notes are an integral part of these summarised consolidated
financial statements.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At At
31 March 31 March
2012 2011
Note R R
Assets
Non-current assets
Property, plant and equipment 6 884 372 226 479 452 733
Intangible assets 7 423 887 606 65 074 564
Deferred tax 2 170 949 6 659 583
Long-term financial assets 8 - 131 611 684
Restricted cash 7 423 204 6 280 204
Restricted investments 9 13 027 029 -
Total non-current assets 1 330 881 014 689 078 768
Current assets
Inventory 23 117 016 7 938 819
Trade and other receivables 104 324 841 47 389 166
Restricted cash 6 600 000 12 000 000
Cash and cash equivalents 60 549 397 27 000 085
Total current assets 194 591 254 94 328 070
Total assets 1 525 472 268 783 406 838
Equity
Share capital 10 188 752 171 547
Share premium 10 632 053 833 567 717 887
Share-based payment reserve 6 180 562 2 394 727
Other reserves (18 751 111) -
Retained earnings 186 593 754 21 019 688
Total equity attributable to
owners of the company 806 265 790 591 303 849
Non-controlling interest 34 270 652 (9 757 139)
Total equity 840 536 442 581 546 710
Liabilities
Non-current liabilities
Borrowings 11 248 156 340 -
Long-term financial liabilities 612 909 -
Mine closure and environmental
rehabilitation provision 12 112 856 645 46 052 596
Deferred tax 93 837 860 -
Total non-current liabilities 455 463 754 46 052 596
Current liabilities
Borrowings 11 49 176 373 -
Mine closure and environmental
rehabilitation provision 12 326 211 326 211
Trade and other payables 179 355 824 154 872 462
Taxation 613 664 608 859
Total current liabilities 229 472 072 155 807 532
Total equity and liabilities 1 525 472 268 783 406 838
The accompanying notes are an integral part of these summarised consolidated
financial statements.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2012
Share-
based
Share Share payment Retained
capital premium reserve earnings
R R R R
Balance at
31 March 2010 144 841 449 935 213 203 923 5 833 683
Profit and total
comprehensive income
for the year - - - 15 186 005
Transactions with
owners of the company
recognised directly
in equity
Ordinary shares
issued for cash 14 484 65 164 096 - -
Ordinary shares
issued for
consideration
other than cash 12 222 54 987 777 - -
Share-based payments - - 2 190 804 -
Share issue expenses - (2 369 199) - -
Balance at
31 March 2011 171 547 567 717 887 2 394 727 21 019 688
Profit and total
comprehensive income
for the year - - - 159 543 956
Transactions with
owners of the
company recognised
directly in equity
Ordinary shares
issued for
consideration
other than cash 17 205 76 402 795 - -
Share-based payments - - 3 785 835 -
Share issue expenses - (66 848) - -
Reserves attributable
to business
combination - - - -
Share-based payments
transferred
(refer note 13) - (12 000 000) - -
Changes in ownership
interests in
subsidiaries
Business combination
(refer note 4) - - - -
Dilution of non-
controlling interests
(refer note 4) - - - 6 030 109
Balance at
31 March 2012 188 752 632 053 834 6 180 562 186 593 753
The accompanying notes are an integral part of these summarised consolidated
financial statements.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
for the year ended 31 March 2012
Total
equity
attributable Non-
to owners control-
Other of the ling Total
reserves company interest equity
R R R R
Balance at
31 March 2010 - 456 117 660 (1 768 314) 454 349 346
Profit and total
comprehensive income
for the year - 15 186 005 (7 988 825) 7 197 180
Transactions with
owners of the company
recognised directly
in equity
Ordinary shares
issued for cash - 65 178 580 - 65 178 580
Ordinary shares
issued for
consideration
other than cash - 54 999 999 - 54 999 999
Share-based payments - 2 190 804 - 2 190 804
Share issue expenses - (2 369 199) - (2 369 199)
Balance at
31 March 2011
(Audited) - 591 303 849 (9 757 139) 581 546 710
Profit and total
comprehensive income
for the year - 159 543 956 (10 243 196) 149 300 760
Transactions with
owners of the
company recognised
directly in equity
Ordinary shares
issued for
consideration
other than cash - 76 420 000 - 76 420 000
Share-based payments - - 3 785 835 -
Share issue expenses - (66 848) - (66 848)
Reserves attributable
to business
combination (30 751 111) (30 751 111) - (30 751 111)
Share-based payments
transferred
(refer note 13) 12 000 000 - - -
Changes in ownership
interests in
subsidiaries
Business combination
(refer note 4) - - 60 301 096 60 301 096
Dilution of non-
controlling interests
(refer note 4) - 6 030 109 (6 030 109) -
Balance at
31 March 2012 (18 751 111) 806 265 790 34 270 652 840 536 442
The accompanying notes are an integral part of these summarised consolidated
financial statements.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended
31 March 31 March
2012 2011
R R
Cash flows from operating activities
Cash receipts from customers 438 300 224 15 162 539
Cash paid to suppliers and employees (296 993 535) (27 559 562)
Cash generated from /
(utilised in) operations 141 306 689 (12 397 023)
Finance income received 3 798 613 18 034 802
Finance costs paid (702 302) (19 620)
Taxation paid (1 608 653) (2 642 296)
Net cash flows from operating activities 142 794 347 2 975 863
Cash flows from investing activities
Additions to property, plant and
equipment to expand operations (329 214 525) (294 303 716)
Acquisition of LME loans and
instalment sale agreement - (71 222 667)
Loans advanced to LME (5 242 513) -
Acquisition of subsidiary,
net of cash acquired 21 129 619 -
Proceeds on disposal of
Intangible, exploration
and evaluation asset 1 754 386 297 261
Additions to exploration and
evaluation assets (52 309) (3 858 572)
Investment in restricted investments (965 571) -
Net decrease in restricted cash balances 3 438 534 826 444
Net cash flows from investing activities (309 152 379) (368 261 251)
Cash flows from financing activities
Proceeds from the issue of shares - 65 178 581
Payment of share issue expenses (66 847) (2 369 199)
Borrowings repaid (311 716) -
Borrowings raised 204 540 594 -
Transaction costs relating to
project finance arrangements (4 254 687) (5 604 460)
Net cash flows from financing activities 199 907 344 57 204 921
Net increase/(decrease) in cash and
cash equivalents 33 549 312 (308 080 467)
Cash and cash equivalents at the
beginning of the year 27 000 085 335 080 552
Cash and cash equivalents at the
end of the year 60 549 397 27 000 085
NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of accounting
The preliminary summarised consolidated results for the year ended 31 March
2012 incorporate extracts of the group`s unqualified audited financial
statements. The summarised consolidated financial statements for the year
ended 31 March 2012 have been prepared in accordance with the recognition and
measurement requirements of IFRS and the presentation and disclosure
requirements of IAS 34: Interim Financial Reporting and are presented in
accordance with the South African Companies Act 2008 and the AC 500 standards
as issued by the Accounting Practices Board.
These summary financial statements have been extracted from the complete set
of financial statements on which the auditors, KPMG Inc, have expressed an
unqualified audit opinion. KPMG has also issued an unqualified audit report
on these summary financial statements stating that these summarised results
are consistent in all material respects with the complete financial
statements. A copy of the auditor`s reports is available for inspection at
the Company`s registered office.
For a better understanding of the group`s financial position and results of
operations, these summarised consolidated results are to be read in
conjunction with the group`s audited annual financial statements for the year
ended 31 March 2012, which have been prepared in accordance with
International Financial Reporting Standards, and which are expected to be
posted on or about 30 June 2012.
The accounting policies applied are consistent with those applied in the
annual financial statements for the year ended 31 March 2011.
2. REVENUE AND GROSS PROFIT
The group sold 140 133 metric tonnes of 5 Seam coal from its Mpumalanga-based
Vanggatfontein Colliery into the domestic metallurgical market for the year
ended 31 March 2012 (31 March 2011: 48 397 metric tonnes), whilst thermal
coal sales to Eskom amounted to 957 225 metric tonnes (no production in prior
periods).
Revenue also includes approximately three and a half months of anthracite
sales from the Kwa-Zulu Natal-based Vaalkrantz Colliery amounting to
R92.5 million. Refer to note 4.
The group achieved a gross profit of R66.2million or 14% of revenue for the
year ended 31 March 2012 (31 March 2011: R12.1 million or 34%).
The decrease in gross profit is as a result of the product mix, which weighed
more towards thermal coal for the year from its Vanggatfontein Colliery.
Gross profit includes three and a half months of higher margin anthracite
sales from the Vaalkrantz Colliery.
3. OTHER INCOME
Included in other income is gain of R19.1 million relating to the refinancing
of LME, which was concluded in the 2011 financial year. The group obtained a
loan and preference shares from Anglo Operations Limited at a discount to
their carrying values at that point in time in the records of LME, when the
arrangement was concluded in the 2011 financial year. On
14 December 2011, the effective date of the LME acquisition (refer to note 4
below), the group recognised the difference in the fair value of loans in the
records of the company and their carrying values in the records of LME in the
statement of comprehensive income.
4. GAIN ON BUSINESS COMBINATION
On 14 December 2011, following Ministerial consent, the group obtained
control (71.11% of the issued share capital) of LME, an anthracite producer
in the Northern parts of Kwa-Zulu Natal.
By acquiring an interest in LME, the group obtained an approximate 200 000
tonne Quattro Scheme Participation of the Richards Bay Coal Terminal (RBCT)
per annum, a foothold in the local anthracite market and various coal
resources and projects in the region.
In the three and a half months following the effective date up to the
reporting date, the LME group contributed revenue of R92,5 million and profit
before tax, before eliminating inter group transactions of
R14,5 million.
The following summarises the major classes of consideration transferred, and
the recognised amounts of assets acquired and liabilities assumed at the
acquisition date.
Consideration transferred:
Equity instruments (16 622 222 ordinary
shares in Keaton Energy Holdings Limited
(the Holding Company)) 74 799 999
Purchase price adjustment on equity
instruments issued 1 (30 751 111)
Cash claimed from non-controlling
interest (NCI) 2 (10 000 000)
Total consideration transferred 34 048 888
- 1 The fair value of shares issued was based on the listed share price of
the holding company at 14 December 2011 (bid price) being R2,65 per share.
- 2 Cash claimed from NCI refers to a contractual claim which the company had
in terms of the sales of shares agreement against the total consideration
paid to the NCI for the equity stake acquired, following the due diligence
process.
Identifiable assets acquired and liabilities assumed:
Property, plant and equipment 189 798 330
Intangible, exploration and
evaluation assets 359 139 360
Cash and cash equivalents 11 129 619
Restricted investments 11 911 139
Inventory: consumables 2 561 846
Inventory: anthracite stockpiles 4 541 087
Trade and other receivables 27 384 799
Borrowings (254 220 443)
Deferred taxation (91 656 683)
Mine closure and environmental
rehabilitation provision (15 878 833)
Trade and other payables (35 975 658)
Total 208 734 563
Net cash acquired
Cash and cash equivalents acquired
through business combination 11 129 619
Cash claimed from NCI
(refer to note above) 10 000 000
Net cash acquired through business
combination 21 129 619
Included in the acquisition date
values above are the following
fair value adjustments:
Property, plant and equipment 112 778 504
Intangible, exploration and evaluation
assets 341 723 777
Anthracite stockpiles 1 330 350
Long-term financial liabilities (612 909)
Total 455 219 722
Fair value adjustments disclosed above are supported by:
- Property, plant and equipment - independent valuations by competent persons
and indexing based on historical producer price indexes (PPI).
- Intangible exploration and evaluation assets - Geological data, initial
feasibility studies, assumptions regarding future cost structures and mining
models, assumptions regarding future coal prices and the Weighted Average
Cost of Capital (WACC) of the group adjusted to incorporate assumptions and
risks associated with each cash generating unit identified.
- Anthracite stockpiles - market prices.
- Trade and other liabilities - independent valuations by competent persons.
If new information obtained within one year from the acquisition date about
facts or circumstances that existed at the acquisition date identifies
adjustments to the above amounts, or any additional provisions that existed
at the acquisition date, then the acquisition values will be revised.
Gain on business combination
A gain on business combination was recognised as a result of the acquisition
as follows:
Total consideration transferred 34 048 888
Non-controlling interest based on
their proportionate interest in the
recognised amounts of the assets and
liabilities of LME 60 301 096
Fair value of identifiable net assets (208 734 563)
Gain on business combination (114 384 579)
At the time the company concluded the refinancing agreement with LME in
October 2010, the LME group was a financially distressed, capital-scarce
group facing possible liquidation. The injection of additional capital
assisted the completion of developing the West Adit, purchasing of urgently
required equipment and payment of overdue trade payables. Various other
changes were also implemented in areas such as management, marketing, payroll
and human resources. Between this date and the date the last of the
conditions precedent were met, which was approximately one year later the
group turned around production, generated cash, and serviced its debt as well
as invested in additional capital. The above initiatives as well as the
initial value placed on the undeveloped properties owned by the LME group,
resulted in a valuation at the effective date which exceeded the acquisition
consideration and consequently resulted in a gain on the business combination
being recognised.
The group incurred acquisition-related costs of R2.6 million related to
external legal fees, due diligence costs and brokerage fees. These costs have
been recognised in administrative and other operating expenses in the
consolidated statements of comprehensive income.
Dilution of non-controlling interest
At reporting date, the company exercised a call option in terms of the
R10 million convertible loan granted to LME in the 2011 financial year.
In terms of the loan agreement, the company had the right to acquire the
shares held by Leeuw Braakfontein Colliery (Proprietary) Limited (LBC), a
100% subsidiary of LME, in LME, through the settlement of the convertible
loan. The effect of the settlement resulted in a dilution of the non-
controlling interest by 2.89%, thereby increasing the company`s shareholding
in the LME group to a 74% equity interest.
The following summarises the effect of the company`s ownership interest in
the LME group:
Company`s ownership interest on the
effective date 148 433 465
Effect of increase in the company`s
ownership interest 6 030 351
Fair value of identifiable net assets 10 388 633
Company`s ownership interest at
reporting date 164 852 449
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 2012 (attributable to owners of the company) of
R159.5 million (31 March 2011: R15.2 million) and a weighted average number
of shares in issue during the year of 175 584 048 (31 March 2011:
148 102 328).
Year ended
31 March 31 March
2012 2011
Total earnings per ordinary share (cents)
Basic earnings 90.9 10.3
Diluted earnings 90.9 10.3
Headline earnings 25.2 10.3
Diluted headline earnings 25.2 10.3
Reconciliation of headline earnings net of tax and non-controlling interests:
Year ended
31 March 2012 31 March 2011
R R R R
Gross Net Gross Net
Net profit for the year
attributable to owners
of the company 159 543 956 15 186 005
Adjusted for:
Loss on disposal of
property, plant and
equipment 121 574 64 774 - -
Profit on disposal of
intangible, exploration
and evaluation assets (538 215) (286 761)
Reversal of impairment
of intangible,
exploration and
evaluation assets (1 216 171) (647 976) - -
Gain on business
combination (114 384 579) (114 384 579) - -
Total headline earnings 44 289 414 15 186 005
Cents Cents
Headline earnings per share 25.2 10.3
Diluted headline earnings per share 25.2 10.3
Net asset value per share (cents)
At At
31 March 31 March
2012 2011
Number of shares in issue 188 752 600 171 547 644
Net asset value per share (cents) 445 339
6. PROPERTY, PLANT AND EQUIPMENT
The increase of R404.9 million from 31 March 2011 is as a result of capital
investments at the Vanggatfontein Colliery as well as items of property,
plant and equipment acquired through the business combination (refer to note
4).
Investment at the Vanggatfontein Colliery comprised boxcut developments
(R92.1 million) mainly in pit two, deferred stripping (R121.8 million) mainly
in pit one, mine infrastructure development (R38.5 million), an increase in
rehabilitation assets as a result of an increase in rehabilitation
liabilities (R44.7 million) and other net additions
(R6.9 million). These have been offset by depreciation charges of
R88.9 million.
Property, plant and equipment acquired through the business combination
amounted to R189.8 million.
7. INTANGIBLE ASSETS
The increase in intangible assets of R358.8 million mainly relates to
acquisitions through the business combination (refer to note 4) to the value
of R359.2 million, offset by amortisation expenses of R0.4 million.
Intangible assets acquired in the business combination comprise
R301.3 million relating to mining rights and prospecting rights,
R22.7 million relating to the RBCT Quattro Scheme Participation and
R35.2 million relating to other exploration and evaluation expenses.
8. LONG TERM FINANCIAL ASSETS
Long term financial assets comprise various loans advanced to LME and
preference shares acquired in LME in terms of the refinancing agreements
entered into between the company and LME during the 2011 financial year. On
the effective date the loans were transferred to loans in subsidiaries which
are eliminated for group purposes.
9. RESTRICTED INVESTMENTS
Restricted investments include investments to the value of R11.9 million held
by the environmental rehabilitation trusts which were acquired through the
LME business combination. The environmental trust funds are irrevocable
trusts under the group`s control. Contributions to the trusts are invested in
Sanlam and Momentum unit trusts where the underlying funds invest in equity
instruments and money market investments, both local and foreign. The unit
trust investments are designated at fair value through profit or loss and
recognised at fair value. These investments provide for the estimated cost of
rehabilitation at the end of the life of the group`s mines. Income earned on
the investments, consisting of dividend income and local and foreign interest
are reinvested.
10. SHARE CAPITAL AND SHARE PREMIUM
During the year, the company issued 16.6 million shares relating to the
acquisition of LME (refer to note 4) at a price of R4.50 per share.
An additional 0.58 million shares were issued as settlement of brokerage fees
relating to the LME acquisition. These shares were issued at a
price of R2.78 per share.
11. BORROWINGS
On 1 April 2011 Keaton Mining (Proprietary) Limited (Keaton Mining) entered
into a project financing facility with Nedbank Limited to the value of
R230 million and a further standby debt facility of R25 million. The facility
attracts interest at Jibar plus 5% and is repayable in sculptured quarterly
payments commencing 30 June 2012 and ending 31 March 2017. Various
guarantees, representations, warranties, undertakings, indemnities and
pledges, normal to project financing arrangements, have been given by both
Keaton Mining and the company (as guarantor). As at 31 March 2012 draw-downs
to the value of R204.4 million have been made, whilst interest of
R21.1 million has been accrued. These were offset by unamortised transaction
costs amounting to R8.5 million. As at 31 March 2012 the group was in
compliance with all project finance covenants related to the Vanggatfontein
Colliery.
As part of the project finance covering security arrangement the company had
to restrict R50 million of its cash as a standby equity deposit in favour of
the Vanggatfontein Colliery. At 31 March 2012 the entire deposit of
R50 million had been invested in the project, to further finance development
and working capital requirements.
12. MINE CLOSURE AND ENVIRONMENTAL REHABILITATION PROVISION (LIABILITY)
The increase in the rehabilitation liability of R66.8 million comprise
additional disturbances at the Vanggatfontein Colliery amounting to
R44.8 million and a rehabilitation liability assumed as part of the business
combination of R15.9 million relating to the Vaalkrantz Colliery. Unwinding
expenses of the previously recognised rehabilitation liability amounted to
R6.1 million, which was included in finance costs for the year.
13. SHARE BASED PAYMENTS TRANSFERRED
The transfer relates to a share based payment transaction concluded between
the company, Keaton Mining and Rutendo Mining (Proprietary) Limited during
the 2008 financial year. The transfer is made to ensure consistent treatment
in transactions where share based payments are made. Shares issued in share
based payment transactions are fair valued at transaction date and the
difference in the issue price and the fair value is recorded in other
reserves. Previously the difference was recorded in share premium.
14. COMMITMENTS AND CONTINGENCIES
The group`s capital commitments are:
At At
31 March 31 March
2012 2011
Exploration and mine development
expenditure authorised and contracted 13 955 382 42 118 108
Exploration and mine development
expenditure authorised but not
contracted 55 681 948 42 219 481
69 637 733 84 337 589
All contracted amounts will be funded through existing funding mechanisms
within the group.
Further rehabilitation guarantees to the value of R16 million were issued
during the year. Payment guarantees of R3.5 million in favour of the
electricity provider and R10 million in favour of the diesel provider,
secured by bank deposits, were issued during the year. R28 million of
existing payment guarantees expired and the related restricted cash released.
Contingent liabilities
The Workforce Group (Pty) Ltd (Workforce) has issued summons against LME
whereby it is claiming the sum of R3.2 million for alleged breaches of a
staff management services agreement, in that LME has failed to pay certain
invoices rendered by Workforce. LME is to defend the matter on the basis that
the amounts claimed are incorrect and furthermore that it has a counterclaim
against Workforce in respect of, inter alia, overpayments relating to VAT and
breaches of the agreement by Workforce. Workforce have included in the
summons a further claim against LME for the sum of
R1.1 million in respect of an alleged debt owed by Asambeni Mining (Pty) Ltd,
which Workforce allege LME accepted liability for. LME will defend these
claims vigorously.
15. SUBSEQUENT EVENTS
There were no significant events after 31 March 2012 up to the date of this
report.
16. DIVIDENDS
No dividends have been declared nor are any proposed for the year ended
31 March 2012 (31 March 2011: Rnil).
17. COAL RESERVE AND RESOURCE STATEMENT
An updated coal reserve and resource statement will be published with our
annual report which is expected to be posted on or about 30 June 2012.
During the 2012 financial year the Vanggatfontein Colliery produced
0.96 million tonnes of thermal coal and 0.16 million tonnes of metallurgical
coal. The Vaalkrantz Colliery produced 0.11 million tonnes of anthracite
since the effective date of the business combination.
SEGMENT REPORT
for the year ended 31 March 2012
Operating profit/
(loss) before
depreciation/
Revenue amortisation
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2012 2011 2012 2011
Vanggatfontein
Project 1 381 827 963 35 162 539 106 507 660 3 755 599
Sterkfontein
Project - - - -
Keaton Energy
Holdings Limited 2 4 187 736 4 460 219 (14 494 819) (16 141 372)
Keaton
Administrative
and Technical
Services
(Proprietary)
Limited 2 11 782 788 9 998 199 (1 618 474) (50 200)
Vaalkrantz
Colliery 1 92 537 556 - 36 762 701 -
Leeuw Braakfontein
Colliery - - - -
Koudelager - - - -
Other segments 3 - - 2 054 111 (1 153 035)
Total segments 490 336 043 49 620 957 129 211 179 (13 589 008)
Reconciliation to
statements of
comprehensive
income and
financial
position
Intersegment and
other
consolidation
adjustments (15 970 525) (14 458 418) 12 206 861 (198 059)
474 365 518 35 162 539 141 418 040 (13 787 067)
Gain on business
combination
Net finance
(cost)/income 4
Assets/liabilities
not allocated to
segments
Net profit before
taxation
Total assets
and liabilities
SEGMENT REPORT (CONTINUED)
for the year ended 31 March 2012
Operating profit/
(loss) after
Depreciation/ depreciation/
amortisation amortisation
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2012 2011 2012 2011
Vanggatfontein
Project 1 (69 643 278) (3 869 781) 36 864 382 (114 182)
Sterkfontein
Project - - - -
Keaton Energy
Holdings Limited 2 - 497 853 (14 494 819) (15 643 519)
Keaton
Administrative
and Technical
Services
(Proprietary)
Limited 2 (315 350) (511 423) (1 933 824) (561 623)
Vaalkrantz
Colliery 1 (14 854 347) - 21 908 354 -
Leeuw Braakfontein
Colliery - - - -
Koudelager - - - -
Other segments 3 - - 2 054 111 (1 153 035)
Total segments (84 812 975) (3 883 351) 44 398 204 (17 472 359)
Reconciliation to
statements of
comprehensive
income and
financial
position
Intersegment and
other
consolidation
adjustments - (405 115) 12 206 861 (603 174)
(84 812 975) (4 288 466) 56 605 065 (18 075 533)
Gain on business
combination 114 384 579
Net finance
(cost)/income 4 (13 405 614) 18 698 910
Assets/liabilities
not allocated to
segments
Net profit before
taxation 157 584 030 623 377
Total assets
and liabilities
SEGMENT REPORT (CONTINUED)
for the year ended 31 March 2012
Segment Segment
assets liabilities
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2012 2011 2012 2011
Vanggatfontein
Project 1 830 255 022 554 042 570 940 514 657 614 692 025
Sterkfontein
Project 65 091 857 65 426 032 53 605 734 51 352 465
Keaton Energy
Holdings Limited 2 739 696 997 632 090 769 3 372 733 5 895 119
Keaton
Administrative
and Technical
Services
(Proprietary)
Limited 2 10 270 746 1 807 354 20 637 260 10 392 217
Vaalkrantz
Colliery 1 287 201 529 - 336 973 581 -
Leeuw Braakfontein
Colliery 291 338 019 - 48 933 844 -
Koudelager 23 552 160 - - -
Other segments 3 19 998 712 1 849 166 18 333 174 331 250
Total segments 2 267 405 042 1 255 215 891 1 422 370 983 682 663 076
Reconciliation to
statements of
comprehensive
income and
financial
position
Intersegment and
other
consolidation
adjustments (741 932 774) (488 226 213) (737 435 158) (497 453 943)
1 525 472 268 766 989 678 684 935 825 185 209 133
Gain on business
combination
Net finance
(cost)/income 4
Assets/liabilities
not allocated to
segments 16 417 160 16 650 995
Net profit before
taxation
Total assets
and liabilities 1 525 472 268 783 406 838 684 935 825 201 860 128
1 Revenue represents sales to external customers only
2 Revenue represents intersegment sales only
3 Include the subsidiaries Amalahle Exploration (Proprietary) Limited and
Labohlano Trading 46 (Proprietary) Limited and the Mpati and Balgray
prospecting rights acquired through the business combination
4 Net finance (cost)/income is no longer reported as forming part of each
segment profit or loss as these are not measured or reported to the chief
operating decision maker(CODM) in connection with the segment, but rather on
a collective company/group basis.
Contact details
Registered Office:
Ground Floor, Eland House, The Braes, 3 Eaton Avenue,
Bryanston, South Africa
(Postnet Suite 464, Private Bag X51, Bryanston, 2021)
Telephone: +27 11 317 1700
Telefax: +27 11 463 4759
E-mail: info@keatonenergy.co.za
Website: www.keatonenergy.co.za
Directors:
Dr JD Salter (chairman)*++,
PBM Miller (managing director)
J Rossouw (financial director)
AB Glad (executive director)
LX Mtumtum++, P Pouroulis**+, OP Sadler++,
APE Sedibe+, D Jonker***+
*British **South African / Cypriot ***Dutch
+non-executive, ++independent non-executive
Investor relations:
James Duncan
Russell & Associates
Tel: +27 11 880 3924
Mobile: +27 82 892 8052
E-mail: james@rair.co.za
Company Secretary:
Michelle Taylor
Transfer Secretaries:
Computershare Investor Services South Africa (Pty) Limited
Ground Floor, 70 Marshall Street, Johannesburg, South Africa
(PO Box 61051, Marshalltown, 2107)
Sponsor:
Nedbank Capital
135 Rivonia Road
Sandown 2196
Auditors:
KPMG Inc.
1226 Schoeman Street, Hatfield, Pretoria
Date: 30/05/2012 09:00:03 Supplied by www.sharenet.co.za
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