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Reviewed condensed interim consolidated results for the six months ended 30 September 2014
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 2014
Salient features
Improved safety performance at both Vanggatfontein and Vaalkrantz
Gross profit up 6% to R124.5 million
Cash and cash equivalents up 63% to R113.2 million
Total coal sales up 7% to 1.45Mt
Revenue up 10% to R783 million
Cash generated from operations up 54% to R315.6 million
HEPS of 13.7 cents per share down from 19.4 cents due to increased number of shares in issue and increased finance
costs
Commentary
Dear Shareholder
Keaton Energy is pleased to report another record period of safe production, growth and cash generation for the six
months ended 30 September 2014 (“the period” or “1H FY2015”), in line with expectations. We continued executing our growth
strategy while maintaining our long-life cash generating Vanggatfontein Colliery at optimal production levels and
enhancing the performance at Vaalkrantz Colliery.
Safety
The safety performance at both group collieries remained excellent for the period: Vanggatfontein reported a lost time
injury frequency rate (LTIFR) of 0.04 (1H FY2014: 0.10) and Vaalkrantz a LTIFR of 0.12 (1H FY2014: 0.17). Keaton Energy
commends all involved for this performance.
Operational review
Vanggatfontein delivered 1.20Mt of washed 2- and 4-Seam thermal coal to Eskom during the period (1H FY2014: 1.14Mt),
a pleasing 5% improvement on the previous corresponding production record. In addition, 5-Seam metallurgical coal sales
increased 18% over the comparable period to 65 006t (1H FY2014: 55 154t). No toll washing took place during the period
(1H FY2014:145 785t) as all capacity was utilised for own production. Discard and slurry sales reduced to 131 985t (1H
FY2014: 555 963t) as discards were used in on-site construction activities.
Production of domestic and export anthracite at Vaalkrantz increased significantly to 191 898t compared to 154 145t in
1H FY2014. This 24% growth highlights the success of the company’s drive to not only maintain, but grow production at
this important source of high quality anthracite. Given that the geological conditions nonetheless remain challenging, we
are pleased to report the improved safety performance that accompanied the increased production.
Group operating and financial performance
Group revenue increased by 10% to R783 million (1H FY2014: R709.8 million) due to steady state operational performance
at Vanggatfontein and higher domestic and export anthracite sales at Vaalkrantz.
The group achieved a planned gross profit of R124.5 million or 16% of revenue (1H FY2014: R117.2 million or 17% of
revenue). Cost of sales increased by R65.9 million or 11% on the back of increased production volumes at both
Vanggatfontein and Vaalkrantz. Production costs were managed closely and cost containment remains an on-going focus at both
operations.
The increase in other income relates mainly to the settlement of the DRA matter.
Profit from operations was not only consistent with the comparable period but also against plan. Net profit before tax
decreased from R63.7 million to R57.6 million on the back of increased finance costs following the drawdown of the
Investec finance facility in FY2014, the benefit of which will flow once Moabsvelden commences production.
Headline earnings per share decreased from 19.4 cents at 30 September 2013 to 13.7 cents at period end. Given the
consistent operational performance this difference is explained by the issue of 32 647 838 new shares in February 2014 and
the increased finance costs referred to above.
Capital investment for the group totalled R242.8 million for the period, compared to R139.7 million at September 2013.
The majority, R228.2 million, was spent at Vanggatfontein, primarily on on-going mine development relating to stripping
costs and the opening of Pit 4.
Cash and cash equivalents increased by R43.7 million primarily due to cash flows generated from operating activities
of R315.6 million (1HFY2014: R205.3 million), which were offset by cash flows from investing activities of R282.9 million
(1HFY2014: R134 million).
Projects
Moabsvelden
The greenfields Moabsvelden Project was acquired in February 2014 when Keaton Energy acquired the entire issued share
capital of Xceed Resources Limited. The rationale for the acquisition was the integration of the Moabsvelden Project
into the Vanggatfontein Colliery complex, taking advantage of our existing local operational footprint. Discussions on the
Eskom Coal Supply Agreement have progressed positively, while further submissions have been made to support the
application for an Integrated Water Use Licence. Negotiations regarding the acquisition of the surface rights for the complete
Mining Right area are on-going. Boxcut excavation is planned to commence during the first quarter of FY2016, subject to
the timeous receipt of all necessary regulatory approvals.
Braakfontein
A detailed percussion drilling phase to provide structural information regarding the dip of the coal seams on
Braakfontein was completed during September 2014. The results of this exercise have been positive and have provided the
confidence for us to proceed with a Feasibility Study for a combined opencast and underground mine at Braakfontein.
Mooiklip
After the execution of the Mooiklip Prospecting Right during August 2014 a first phase of drilling was concluded
during October 2014. A six borehole second phase is currently being considered on the basis of the encouraging first
phase quality and structural findings.
Coal resource and coal reserve statement
Other than normal coal depletion as a result of mining activities during the six months to 30 September 2014, there
were no significant changes to the previously reported group Coal Resource and Coal Reserve estimates as reported in the
31 March 2014 Integrated Annual Report.
Litigation
As previously announced, subsidiary Keaton Mining Proprietary Limited successfully concluded a final settlement
agreement with DRA Mineral Projects Proprietary Limited (“DRA”).
Directorate
With effect from 1 July 2014 Dirk Jonker resigned from the board. The board thanks Mr Jonker for his contribution over
the past three years. Meindert Witteveen, head of Coal and Iron Ore at Gunvor SA, was appointed as a non-executive
director with effect from 5 September 2014.
Looking ahead
Our medium-term focus remains becoming a 5Mtpa producer.
Emphasis in the short to mid term will remain on optimal operation of our existing collieries whilst continually
improving our safety performance. Additional revenue streams will flow from initiatives such as the belt filter plant at
Vanggatfontein which will not only introduce a new saleable product but at the same time reduce our environmental
footprint.
Planning for our new colliery at Moabsvelden is proceeding largely to schedule albeit with some potential delays in
receipt of certain regulatory approvals.
Looking to year end we anticipate, as was communicated at our year-end results in June 2014, ending the year with
similar results to last year.
On behalf of the board
David Salter Mandi Glad
(Non-Executive Chairman) (Chief Executive Officer)
18 November 2014
Preparation of condensed interim consolidated financial statements
The condensed interim consolidated financial statements for the six months ended 30 September 2014 have been reviewed
in terms of the Companies Act 71, 2008, as amended. Their preparation was supervised by the group Chief Financial
Officer, Jacques Rossouw, a Chartered Accountant (SA). The condensed interim consolidated financial statements were
published on 19 November 2014 and can be found on the company’s website.
Condensed interim consolidated statement of profit or loss and other comprehensive income
Six months ended Year ended
R’000 Note 30 September 30 September 31 March
2014 2013 2014
(Reviewed) (Reviewed) (Audited)
Revenue 2 783 044 709 768 1 372 605
Cost of sales (658 499) (592 609) (1 153 869)
Gross profit 2 124 545 117 159 218 736
Other income 3 18 597 9 184 12 983
Mining and related expenses (24 473) (10 615) (11 476)
Administrative expenses (36 165) (31 089) (70 112)
Operating profit before net finance cost 82 504 84 639 150 131
Net finance cost (24 876) (20 907) (47 734)
Finance income 3 240 822 2 834
Finance cost (28 116) (21 729) (50 568)
Net profit before taxation 57 628 63 732 102 397
Income taxation expense 4 (22 373) (21 402) (37 975)
Net profit after taxation 35 255 42 330 64 422
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation reserve 25 - 356
Total comprehensive income 35 280 42 330 64 778
Net profit attributable to:
Owners of the company 28 735 37 236 59 529
Non-controlling interest 6 520 5 094 4 893
35 255 42 330 64 422
Total comprehensive income attributable to:
Owners of the company 28 760 37 236 59 885
Non-controlling interest 6 520 5 094 4 893
35 280 42 330 64 778
Basic earnings per share (cents) 5 12.8 19.4 30.3
Diluted earnings per share (cents) 5 12.6 19.4 30.0
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Condensed interim consolidated statement of financial position
R’000 Note At At At
30 September 31 March 30 September
2014 2014 2013
(Reviewed) (Audited) (Reviewed)
Assets
Property, plant and equipment 6 799 006 797 155 764 206
Intangible assets 702 071 700 688 414 289
Investments and loans 5 216 5 152 -
Deferred tax 23 640 17 144 31 164
Restricted cash 7 423 7 423 7 423
Restricted investments 56 320 47 269 30 009
Trade and other receivables 7 - 37 610 -
Total non-current assets 1 593 676 1 612 441 1 247 091
Restricted investments 3 512 3 453 -
Inventory 43 837 35 081 41 428
Taxation 868 - -
Trade and other receivables 8 227 612 151 336 163 085
Cash and cash equivalents 113 241 69 556 62 870
Total current assets 389 070 259 426 267 383
Total assets 1 982 746 1 871 867 1 514 474
Equity
Stated capital 692 929 692 929 640 903
Share-based payment reserve 22 576 18 788 16 828
Other reserves 19 240 19 215 (18 751)
Retained earnings 162 837 134 102 111 809
Total equity attributable to owners of the company 897 582 865 034 750 789
Non-controlling interest 47 609 51 183 (18 091)
Total equity 945 191 916 217 732 698
Liabilities
Borrowings 9 312 020 341 838 203 689
Long-term financial liabilities 729 604 275
Mine closure and environmental rehabilitation provision 10 234 185 215 181 170 888
Provisions 32 106 30 575 -
Deferred income 7 5 418 - -
Deferred tax 4 115 926 87 357 88 068
Total non-current liabilities 700 384 675 555 462 920
Borrowings 9 72 018 51 713 63 315
Mine closure and environmental rehabilitation provision 10 - - 549
Trade and other payables 11 265 153 227 101 254 608
Taxation - 1 281 384
Total current liabilities 337 171 280 095 318 856
Total equity and liabilities 1 982 746 1 871 867 1 514 474
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Condensed interim consolidated statement of changes in equity
for the six months ended 30 September 2014
R’000 Stated Share Share Share- Other
capital capital premium based reserves
payment
reserve
Balance at 31 March 2013 - 192 640 711 12 497 (18 751)
Total comprehensive income for the period - - - - -
Transfer of share capital and share premium to stated capital(1) 640 903 (192) (640 711) - -
Transactions with owners of the company recognised directly in equity
Share-based payments - - - 4 331 -
Balance at 30 September 2013 640 903 - - 16 828 (18 751)
Balance at 31 March 2014 692 929 - - 18 788 19 215
Net profit for the period - - - - -
Other comprehensive income for the period - - - - 25
Dividends(2) - - - - -
Transactions with owners of the company recognised directly in equity
Share-based payments - - - 3 788 -
Balance at 30 September 2014 692 929 - - 22 576 19 240
Condensed interim consolidated statement of changes in equity (continued)
for the six months ended 30 September 2014
R’000 Retained Total Non- Total
earnings equity con- equity
attribu- trolling
table to interest
owners (“NCI”)
of the
company
Balance at 31 March 2013 74 573 709 222 (23 185) 686 037
Total comprehensive income for the period 37 236 37 236 5 094 42 330
Transfer of share capital and share premium to stated capital(1) - - - -
Transactions with owners of the company recognised directly in equity
Share-based payments - 4 331 - 4 331
Balance at 30 September 2013 111 809 750 789 (18 091) 732 698
Balance at 31 March 2014 134 102 865 034 51 183 916 217
Net profit for the period 28 735 28 735 6 520 35 255
Other comprehensive income for the period - 25 - 25
Dividends(2) - - (10 094) (10 094)
Transactions with owners of the company recognised directly in equity
Share-based payments - 3 788 - 3 788
Balance at 30 September 2014 162 837 897 582 47 609 945 191
(1) A special resolution in terms of regulation 31 of the Companies Act Regulations 2011 was adopted at the general meeting
held on 28 May 2013, whereby all ordinary shares were converted into ordinary shares with no par value. It was resolved that
all 250 million authorised shares and 191.7 million issued ordinary shares with a par value of 0.1 cents be converted into
ordinary shares with no par value and that the share capital account and the share premium account of the company be
transferred to the stated capital account.
(2) On subsidiary level, Keaton Mining Proprietary Limited declared dividends of R38.8 million (of which R29.1 million has
been paid as at 30 September 2014) to its shareholders during the six months.
Condensed interim consolidated statement of cash flows
Six months ended Year ended
R’000 30 September 30 September 31 March
2014 2013 2014
(Reviewed) (Reviewed) (Audited)
Cash flows from operating activities 315 644 205 313 416 913
Cash flows from investing activities (282 899) (134 016) (500 123)
Cash flows from financing activities 10 940 (28 041) 133 152
Net increase in cash and cash equivalents 43 685 43 256 49 942
Cash and cash equivalents at the beginning of the period 69 556 19 614 19 614
Cash and cash equivalents at the end of the period 113 241 62 870 69 556
Segmental Report
for the six months ended 30 September 2014
Revenue Operating profit/(loss)
before depreciation/amortisation
R’000 Six Year to Six Six Year to Six
months 31 March months months 31 March months
ended 2014 ended ended 2014 ended
30 Sept 30 Sept 30 Sept 30 Sept
2014 2013 2014 2013
Vanggatfontein Colliery (1) (5) 638 369 1 127 215 584 835 346 431 545 060 268 575
Vaalkrantz Colliery (1) (6) 144 675 245 390 124 933 11 060 2 119 8 910
Sterkfontein Project - - - - - -
Keaton Energy Holdings Limited (2) 81 571 108 178 58 031 54 935 59 273 42 659
Keaton Administrative and Technical
Services Proprietary Limited (2) 17 290 26 469 12 796 (351) (537) 1 021
Leeuw Braakfontein Project - - - (4 050) (9 420) (6 416)
Koudelager Project - - - - - -
Moabsvelden Project (2) 88 175 - (944) (278)
Other segments (2) (3) 225 450 - (11 853) (1 746) 752
Total segments 882 218 1 507 877 780 595 395 228 594 471 315 501
Reconciliation to statements of profit
or loss and other comprehensive income
and financial position
Intersegment, deferred tax and other
consolidation adjustments (7) (99 174) (135 272) (70 827) (78 458) (95 707) (58 071)
783 044 1 372 605 709 768 316 770 498 764 257 430
Net finance cost (4)
Net profit before taxation
Total assets and liabilities
(1) Revenue represents sales to external customers only.
(2) Revenue represents intersegment sales only.
(3) Includes the subsidiaries Amalahle Exploration Proprietary Limited, Labohlano Trading 46 Proprietary Limited,
Ausco Finance Proprietary Limited, Ausco Services Proprietary Limited, Focus Coal Investments Proprietary Limited and
Xceed Resourced Limited.
(4) Net finance cost is not reported as forming part of each segment profit or loss as these are not measured or
reported to the chief operating decision maker (“CODM”) in connection with the segment but rather on a collective
company/group basis.
(5) Coal sales to major customers as a percentage of revenue equals 91% (92% at 31 March 2014 and 92% at 30 September
2013).
(6) Coal sales to three major customers amounted to 47%, 20% and 14% (31 March 2014: three major customers 36%, 41%
and 17%. 30 September 2013: coal sales to three major customers 40%, 38% and 13%).
(7) During the previous financial reporting period the Group changed the information that it presents to the CODM.
The Group no longer presents deferred tax assets and liabilities per segment, but instead only considers deferred tax
assets and liabilities on a group wide basis. Accordingly, deferred tax assets and liabilities are now shown as a
reconciling item between reportable segments and IFRS reported figures. For the period ending 30 September 2013, the segment
report has not been restated to reflect this change, as management is of the view that the change in reportable amounts are
not material.
Segmental Report (continued)
for the six months ended 30 September 2014
Operating profit/(loss) after
Depreciation/amortisation depreciation/amortisation
R’000 Six Year to Six Six Year to Six
months 31 March months months 31 March months
ended 2014 ended ended 2014 ended
30 Sept 30 Sept 30 Sept 30 Sept
2014 2013 2014 2013
Vanggatfontein Colliery (1) (5) (223 973) (308 632) (152 676) 122 458 236 428 115 899
Vaalkrantz Colliery (1) (6) (9 861) (39 417) (19 896) 1 199 (37 298) (10 986)
Sterkfontein Project - - - - - -
Keaton Energy Holdings Limited (2) - - - 54 935 59 273 42 659
Keaton Administrative and Technical
Services Proprietary Limited (2) (417) (584) (219) (768) (1 121) 802
Leeuw Braakfontein Project - - - (4 050) (9 420) (6 416)
Koudelager Project - - - - - -
Moabsvelden Project (2) - - - (944) (278) -
Other segments (2) (3) (15) - - (11 868) (1 746) 752
Total segments (234 266) (348 633) (172 791) 160 962 245 838 142 710
Reconciliation to statements of profit
or loss and other comprehensive income
and financial position
Intersegment, deferred tax and other
consolidation adjustments (7) - - - (78 458) (95 707) (58 071)
(234 266) (348 633) (172 791) 82 504 150 131 84 639
Net finance cost (4) (24 876) (47 734) (20 907)
Net profit before taxation 57 628 102 397 63 732
Total assets and liabilities
Segmental Report (continued)
for the six months ended 30 September 2014
Segment assets Segment liabilities
R’000 Six Year to Six Six Year to Six
months 31 March months months 31 March months
ended 2014 ended ended 2014 ended
30 Sept 30 Sept 30 Sept 30 Sept
2014 2013 2014 2013
Vanggatfontein Colliery (1) (5) 969 367 910 519 885 427 1 205 592 1 177 759 1 199 233
Vaalkrantz Colliery (1) (6) 181 535 176 429 232 194 319 156 294 685 270 405
Sterkfontein Project 66 053 65 924 73 752 63 296 60 947 59 159
Keaton Energy Holdings Limited (2) 1 020 779 962 794 855 491 4 893 4 450 5 676
Keaton Administrative and Technical
Services Proprietary Limited (2) 15 542 10 753 11 572 26 926 20 888 19 640
Leeuw Braakfontein Project 334 284 331 212 316 265 89 380 81 156 157 692
Koudelager Project 26 112 25 990 25 548 - - 6 595
Moabsvelden Project (2) 337 487 294 141 - 71 684 26 812 -
Other segments (2) (3) 330 913 330 819 7 703 111 729 109 421 27 644
Total segments 3 282 072 3 108 581 2 407 952 1 892 656 1 776 118 1 746 044
Reconciliation to statements of profit
or loss and other comprehensive income
and financial position
Intersegment, deferred tax and other
consolidation adjustments (7) (1 299 326) (1 236 714) (893 478) (855 101) (820 468) (964 268)
1 982 746 1 871 867 1 514 474 1 037 555 955 650 781 776
Net finance cost (4)
Net profit before taxation
Total assets and liabilities 1 982 746 1 871 867 1 514 474 1 037 555 955 650 781 776
Notes to the condensed interim consolidated financial statements
1. Accounting policies
1.1 Basis of accounting
The condensed interim consolidated financial statements for the six months ended 30 September 2014 are prepared in
accordance with International Financial 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. They should be read in conjunction with
the audited financial statements for the year ended 31 March 2014, which have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The accounting
policies are consistent with those described and applied in the consolidated audited financial statements.
2. Revenue and gross profit
Vanggatfontein delivered 1 196 133t of washed 2- and 4-Seam thermal coal to Eskom during the six months, a pleasing 5%
improvement over the previous corresponding production record (30 September 2013: 1 142 702t and for the year ended 31
March 2014: 2 192 519t). In addition, 5-Seam metallurgical coal sales increased 18% over the comparable period to 65
006t (30 September 2013: 55 154t and for the year ended 31 March 2014: 97 635t). No toll washing took place during the
period (30 September 2013:145 785t and for the year ended 31 March 2014: 145 785t) as all capacity was utilised for own
production. B-grade product sold increased to 22 029t (30 September 2013: nil and for the year ended 31 March 2014: 10
328t).
During the six months Vanggatfontein generated revenue of R465.2 million from coal sales (30 September 2013: R400.1
million and for the year ended 31 March 2014: R779.3 million) and transport revenue of R173.2 million (30 September 2013:
R171.8 million and for the year ended 31 March 2014: R336.8 million).
Production of domestic and export anthracite at Vaalkrantz increased significantly to 191 898t versus 154 145t for the
comparable period (and for the year ended 31 March 2014: 303 837t). This 24% growth highlights the success of the
company’s drive to not only maintain but grow production at this important source of high quality anthracite. During the six
months Vaalkrantz generated revenue of R144.7 million (30 September 2013: R124.9 million and for the year ended 31 March
2014: R245.4 million).
The group recorded a gross profit of R124.5 million or 16% of sales for the six months ended 30 September 2014 (30
September 2013: gross profit of R117.2 million or 17% of sales and for the year ended 31 March 2014: gross profit of R218.7
million or 16% of sales).
3. Other income
The increase for the period mainly relates to a R9.2 million credit on the settlement of the DRA Mineral Projects
Proprietary Limited (“DRA”) liability previously included under Trade and other payables. Refer to note 11 for additional
information.
4. Income taxation expense
The income taxation expense of R22.4 million for the six months ended 30 September 2014 is mainly attributable to the
utilisation of unredeemed capital expenditure by Keaton Mining Proprietary Limited, as a result of the continued
improved operational performance at Vanggatfontein. The deferred tax liability in the statement of financial position
accordingly increased when compared to the liability at 31 March 2014.
5. Earnings and net asset value per share
The calculation of basic and diluted earnings per share is based on a profit for the period ended 30 September 2014
(attributable to owners of the company) of R28.7 million (30 September 2013: profit of R37.2 million and the
year ended 31 March 2014: profit of R59.5 million). The weighted average number of shares used in calculating basic
earnings per share for the period was 224.3 million (30 September 2013: 191.7 million and the year ended 31 March 2014:
196.4 million). The weighted average number of shares used in calculating diluted earnings per share for the period was
228.4 million (30 September 2013: 191.7 million and the year ended 31 March 2014: 198.5 million).
Six months ended Year ended
30 September 30 September 31 March
2014 2013 2014
(Reviewed) (Reviewed) (Audited)
Total earnings per ordinary share (cents)
Basic earnings 12.8 19.4 30.3
Diluted earnings 12.6 19.4 30.0
Headline earnings 13.7 19.4 30.3
Diluted headline earnings 13.4 19.4 30.0
Reconciliation of headline earnings (net of tax and NCI):
R’000
Net profit for the period attributable to owners of the company 28 735 37 236 59 529
Loss on disposal of property, plant and equipment 1 918 - 24
Loss on disposal of intangible asset - - 27
Total headline earnings 30 653 37 236 59 580
Net asset value per share
Number of shares in issue (millions) 224.3 191.7 224.3
Net asset value per share (cents) 421 382 408
6. Property, plant and equipment
The net increase of R1.9 million from 31 March 2014 is mainly attributable to the following:
- Capital investments at Vanggatfontein of R230.2 million (attributable mainly to mine development of R228.2
million). The rehabilitation assets at Vanggatfontein also increased by R14 million, relating to the increase in the
rehabilitation liability. Refer to note 10.
- Capital investments at Vaalkrantz of R9 million.
- Other capital investments of R3.6 million.
These were offset by depreciation charges of R251.3 million and disposals of R3.6 million.
7. Trade and other receivables and deferred income
As reported in our 31 March 2014 Integrated Annual Report the non-current trade and other receivable of R37.6 million
represented the discount to the fair value of the shares issued to Plusbay Limited, a wholly owned subsidiary of Gunvor
Group Limited, (as part of the acquisition of Xceed Resources Limited) which was accounted for as a share-based
payment. The discount was recognised as an asset as it then related to future financing to be obtained in the form of a USD4
million prepayment for coal.
During the current period, the prepayment of USD4 million (R43 million) was received, with the difference of R5.4
million recognised as deferred income, relating to the coal to be delivered to Gunvor, once production at the Moabsvelden
project commences.
8. Trade and other receivables
As disclosed in note 40 of the 31 March 2014 Integrated Annual Report, the company entered into a share purchase
agreement with JPI Leeuw and Associates Proprietary Limited (JPI) to acquire 18% of the equity interest held by JPI in Leeuw
Mining and Exploration Proprietary Limited for a purchase consideration of R26 million.
As at 30 September 2014 the acquisition of this equity interest has not yet become effective and as such the purchase
consideration paid to date of R14.8 million is accounted for as a prepayment.
9. Borrowings
Total borrowings decreased by R9.5 million, mainly as a result of debt repayments to the value of R32.2 million (R24.6
million relates to the Investec Bank Limited loan). The decrease was offset by finance costs of R18.7 million and a
foreign exchange loss of R4 million included in administrative expenses in profit or loss.
10. Mine closure and environmental rehabilitation provision
The rehabilitation liability at Vanggatfontein increased by R17.9 million during the period. The increase is mainly
attributable to the additional ground disturbances at Pit 3 and Pit 4 as well as the unwinding of interest on previously
recognised rehabilitation liabilities of R7.7 million. These increases were offset by rehabilitation work completed at
Pit 1 of R3.8 million. The rehabilitation liability at Vaalkrantz increased by R1.1 million during the period, due to the
unwinding of interest on previously recognised rehabilitation liabilities.
11. Trade and other payables
Settlement between Keaton Mining Proprietary Limited (“Keaton”) and DRA Mineral Projects Proprietary Limited (“DRA”):
As reported in our 31 March 2014 Integrated Annual Report, trade and other payables included an amount of R33 million
owing to DRA. On 9 September 2014, Keaton reached an agreement (the “Settlement Agreement”) with DRA for the settlement
of all claims and disputes, being both historic and future liabilities arising out of the construction and commissioning
of the Vanggatfontein Coal Processing Plant - Phase Two. As per the Settlement Agreement an amount of R23 million was
paid to DRA.
Keaton Mining Proprietary Limited (“Keaton”) vs Megacube Mining Proprietary Limited (“Megacube”):
Included in trade and other payables is an amounts of R42.5 million owing to Megacube as reported in the 31 March 2014
Integrated Annual Report. This amount is still under legal dispute and there have been no significant changes to the
status as reported in our 31 March 2014 Integrated Annual Report.
12. Commitments and contingencies
The group’s capital commitments are:
At At At
30 September 31 March 30 September
2014 2014 2013
R’000 (Reviewed) (Audited) (Reviewed)
Exploration and mine development expenditure authorised and contracted 34 902 1 548 4 392
Exploration and mine development expenditure authorised but not contracted 28 512 61 361 60 005
63 414 62 909 64 397
All contracted amounts will be funded both through existing funding mechanisms within the group and cash generated
from operations.
For a detailed disclosure on all contingent liabilities refer to Keaton Energy’s Integrated Annual Report for the year
ended 31 March 2014, available on the group’s website at www.keatonenergy.co.za
13. Financial risk management activities
Fair value determination
The following table presents the group’s assets and (liabilities) that are measured at fair value by level within the
fair value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets;
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset, either directly or
indirectly (that is, as prices) or indirectly (that is derived from prices); and
Level 3: Inputs for the asset that are not based on observable market data, (that is unobservable inputs).
R’000 At At At
30 September 31 March 30 September
2014 2014 2013
(Reviewed) (Audited) (Reviewed)
Fair value through profit or loss
Level 1(1) 56 320 47 269 30 009
Level 2(2) (729) (604) (275)
Level 3 - - -
(1) Level 1 financial assets relate to restricted investments which serve as collateral mainly for environmental
guarantees provided to the DMR. Contributions are mainly invested in Momentum, Stanlib, Sanlam and the Nedbank Bettabeta
Green Exchange Traded Fund (“Green ETF”). These underlying funds invest in equity instruments and money market investments,
both local and foreign. The BGreen ETF index consists of a selection of stocks from the top 100 largest South African
companies listed on the JSE. These investments are fair value through profit or loss financial assets and recognised at
fair value.
(2) Level 2 financial liabilities relate to an IDC equity linked call option. The option under consideration was
valued by independent professional valuers, using a finite difference scheme for valuation. Assumptions used to value the
option includes a probability linked to the likely IDC preference share redemption period, the spot share price of the
company on date of valuation, a term structure with the Johannesburg Interbank Agree Rate (JIBAR), Forward Rate Agreement
(FRA) and swap data as inputs and volatility.
14. Significant events after 30 September 2014 up to the date of this report
As reported in notes 31 and 40 of the 31 March 2014 Integrated Annual Report, the external shareholder in one of the
company’s subsidiaries exercised its put option. In addition to this on 2 May 2014 the company exercised its call option
in terms of the shareholders agreement relating to two of the company’s exploration subsidiaries. At the date of these
interim results the company is still in process to determine the fair value of these shares and evaluating the necessary
statutory and regulatory permissions required to give effect to the put option.
15. Dividends
No dividends have been declared nor are any proposed for the period ended 30 September 2014 (30 September 2013: Rnil
and the year ended 31 March 2014: Rnil).
16. Review report
These condensed consolidated financial statements for the period ended 30 September 2014 have been reviewed by KPMG,
who expressed an unmodified review conclusion. A copy of the auditor’s review report is available for inspection at the
company’s registered office together with the financial statements identified in the auditor’s report.
Registered Office
Ground Floor, Eland House, The Braes, 3 Eaton Avenue, Bryanston, South Africa
Postnet Suite 464, Private Bag X51, Bryanston, 2021
Tel: +27 11 317 1700
Telefax: +27 11 463 4759
E-mail: info@keatonenergy.co.za
Directors
Non-executive
Dr JD Salter (Chairman)*
LX Mtumtum (Lead independent director)
P Pouroulis**
OP Sadler (Independent)
APE Sedibe
MT Witteveen***
GH Kemp (Independent)
JHM Schurink***
Executive
AB Glad (Chief Executive Officer)
J Rossouw (Chief Financial Officer)
*British **South African/Cypriot ***Dutch
Company Secretary
Anelia Schutte-Bouwer
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown, Sandton, 2196, South Africa
PO Box 785700, Sandton, 2146, South Africa
Transfer Secretaries
Computershare Investor Services South Africa Proprietary Limited
Ground Floor, 70 Marshall Street, Johannesburg, South Africa
PO Box 61051, Marshalltown, 2107
Auditors
KPMG Inc. 1226 Francis Baard Street, Hatfield, Pretoria
www.keatonenergy.co.za
Date: 19/11/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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