Wrap Text
Reviewed provisional condensed consolidated results for the year ended 31 March 2015
Keaton Energy Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2006/011090/06
JSE share code: KEH ISIN ZAE000117420
(“Keaton Energy or “the company” or “the group”)
Reviewed provisional condensed consolidated results for the year ended 31 March 2015
Salient features
Cash generated from operations up 29% to R536.9 million
R83 million of debt repaid
Vaalkrantz impairment of R56.5 million and reversal of related DTA of R35.9 million
Significant coal theft and corruption discovered at Vaalkrantz
Revenue up 5% to R1.45 billion
Total coal sales up 10% to 2.85Mt
HEPS of 0.4 cents per share down from 30.3 cents per share
Fatality at Vaalkrantz
New management team at Vaalkrantz
Commentary
Dear shareholder
A solid first half of the year was marred by a fatality and the discovery of significant coal theft and corruption at
the group’s Vaalkrantz Colliery during the last quarter of the year. Although results from our long-life, thermal coal
Vanggatfontein Colliery were as forecast for the full year, the group’s results were considerably below plan. Management
has acted quickly to restructure, re-evaluate and optimise operations at Vaalkrantz.
The following commentary summarises the group’s key activities during the year. Our Integrated Annual Report will be
published on our website during July 2015.
Safety
Zero harm remains a key focus for the group and safety is of paramount importance. Regrettably, a fatality occurred at
Vaalkrantz Colliery in February 2015 as reported previously, when Mr Sihle Petros Xulu lost his life in an isolated
fall of ground. We again extend our heartfelt condolences to the family, friends and colleagues of Mr Xulu. A full
investigation was conducted into the accident and, based on the findings, the entire safety system at Vaalkrantz was
redesigned and our focus on safety reinforced.
The Lost Time Injury Frequency Rate (per 200 000 hours worked) was 0.10 at Vanggatfontein (2014: 0.09) and 0.22 at
Vaalkrantz (2014: 0.23).
Overview
Our two collieries, Vanggatfontein and Vaalkrantz, produce thermal coal for supply to Eskom as well as a range of
specialist coals for the domestic and export metallurgical industries, namely: 5-Seam coal and premium anthracite for
domestic metallurgical customers; B-grade coal for domestic customers; and anthracite exported to Brazil through off-take
partner Glencore.
Operational review
Vanggatfontein
Vanggatfontein continued to achieve its targets while retaining its good safety record. The colliery delivered 2 278
761 tonnes of washed 2- and 4-Seam thermal coal to Eskom, up 4% on the previous year’s 2 192 519 tonnes, and 5-Seam
metallurgical coal sales increased 29% to 126 107 tonnes from 97 635 tonnes. Discard and slurry sales were negligible as the
materials were used for onsite activities, whereas in 2014 discard and slurry sales totalled 844 334 tonnes.No third
party toll washing took place during the year due to full utilisation of the dedicated 5-Seam plant for our own coal.
B-grade coal sales of 46 554 tonnes were achieved (2014: 10 328 tonnes) as the product gained market acceptance.
Construction of the filter press plant progressed well during the year. Once commissioned, it will reduce the
colliery’s environmental footprint and improve raw water utilisation.
Vaalkrantz
The colliery suffered a tough year. The fatality and consequent disruption of production impacted performance.
Further, R24.7 million of product stock losses were identified in the last quarter of the financial year, which was deeply
disappointing. We took decisive action and initiated a thorough investigation by multiple agencies who not only confirmed
the loss, but also a variety of other corrupt practices at the colliery. Collusion between our employees and external
contractors has cost us dearly, notwithstanding production of anthracite coal being up 30% to 395 450 tonnes, including the
newly introduced high ash product.
A new management team is in place at the colliery and is making progress towards overcoming the losses of the last year.
A full review of all aspects of the Vaalkrantz business resulted in an impairment charge of R56.5 million and a related
deferred tax asset reversal of R35.9 million.
Group financial performance
Group revenue increased by 5% to R1.45 billion from R1.37 billion in the previous year due to increased sales volumes
at both Vanggatfontein and Vaalkrantz. This translated into a gross profit of R203.5 million or 14% of revenue, down
slightly year-on-year given a decrease in overall yields at Vaalkrantz, a decrease in metallurgical sales prices at both
operations and the loss in production due to the fatality in February 2015.
Other income increased from R13 million in FY14 to R19.9 million in FY15 as a result of the settlement of the DRA
matter.
Mining and related expenses increased from R11.5 million in FY14 to R126.4 million in FY15. The increase relates
mainly to the R56.5 million impairment recognised at Vaalkrantz, the R24.7 million provision raised for coal losses as a
result of theft at Vaalkrantz and incremental SLP spend at both operations.
Income taxation expense increased year-on-year as a result of the reversal of previously recognised deferred taxation
assets relating to Vaalkrantz as a result of the impairment assessment performed.
Net loss for the year was R71.9 million compared to a net profit of R64.4 million in FY14 as a result of the once-off
charges referred to above. Consequently, headline earnings per share declined to 0.4 cents from 30.3 cents.
Capital investment for the group totalled R452.3 million in FY15 compared to R301 million in FY14. The majority,
R431 million, was spent at Vanggatfontein primarily on ongoing mine development relating to stripping costs. Capital
investment at Vaalkrantz totalled R19.5 million mainly relating to the development of the new Enyati Alfred section.
During the year the group repaid debt of R83 million with R72.7 million being repaid against the Investec term
facility.
Cash and cash equivalents increased by R3 million year-on-year. Cash generated by operations of R536.9 million
compared to R416.9 million in FY14, was offset by capital development and debt repayments as described above.
Project update
Moabsvelden
Moabsvelden remains our short-term growth priority. The initiation of construction of this expansion to Vanggatfontein
awaits the grant of its water use licence and the conclusion of a Coal Supply Agreement with Eskom.
Resource and Reserve Statement
Other than normal coal depletion as a result of mining activities during the year, there was a significant change to
the Vaalkrantz reserve following further evaluation of this geologically complex asset. An updated Resource and Reserve
Statement for the group will be released in July 2015 as part of the Integrated Annual Report. The full report will be
available on the company’s website at www.keatonenergy.co.za.
Directorate
Gunvor SA, the group’s largest shareholder, changed its nominated directors during the year. Dirk Jonker resigned on 1
July 2014 and Meindert Witteveen, Head of Coal and Iron Ore at Gunvor SA, was appointed as a non-executive director
with effect from 5 September 2014. The Board thanks Mr Jonker for his contribution over the past three years. Post
year-end, Jeroen Schurink resigned with effect from 30 June 2015 and Hoang Gia Mai, Gunvor SA Chief Investment Officer,
was appointed as non-executive director effective 1 July 2015. The Board thanks Mr Schurink for his contribution to the
company.
Outlook
Vanggatfontein is expected to maintain its consistent performance, delivering into its long-term contract with Eskom
and also providing the local market with high-grade metallurgical and B-grade coal. We will continue to drive the
turnaround at Vaalkrantz and push towards profitable operations. We are confident that we have implemented the necessary
changes to overcome the operational setbacks at the colliery and optimistic that the new management team and systems will
improve performance. However, we will continue to evaluate the ongoing viability of this geologically challenging mine both
constantly and critically.
At Moabsvelden we are addressing regulatory requirements and expect these to be resolved in the near future. Off-take
negotiations with Eskom are progressing well and we are confident of securing appropriate funding for the project.
In addition, we are investigating the most strategic road to achieving Eskom’s B-BBEE requirements that will further
entrench this critical relationship while strengthening our balance sheet and future shareholder returns.
Preparation of provisional condensed consolidated financial statements
The provisional condensed consolidated financial statements for the year ended 31 March 2015 have been reviewed in
terms of the Companies Act, 71 of 2008. Their preparation was supervised by the Chief Financial Officer, Jacques Rossouw,
a Chartered Accountant (SA). The directors of the company take responsibility for these results. The provisional
condensed consolidated financial statements were published on 24 June 2015 and can be found on the company’s website.
On behalf of the Board
David Salter Mandi Glad
(Non-Executive Chairman) (Chief Executive Officer)
Bryanston
24 June 2015
Any forward looking comments included in this announcement have not been reviewed by the auditors.
Provisional condensed consolidated statement of profit or loss and other comprehensive income
Year ended
R’000 Notes 31 March 31 March
2015 2014
(Reviewed) (Audited)
Revenue 2 1 447 701 1 372 605
Cost of sales (1 244 182) (1 153 869)
Gross profit 2 203 519 218 736
Other income 3 19 931 12 983
Mining and related expenses 4 (126 390) (11 476)
Administrative expenses (60 206) (70 112)
Operating profit before net finance cost 36 854 150 131
Net finance cost (49 743) (47 734)
Finance income 6 150 2 834
Finance cost (55 893) (50 568)
Net (loss)/profit before taxation (12 889) 102 397
Income taxation expense 5 (58 966) (37 975)
Net (loss)/profit for the year (71 855) 64 422
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign exchange translation (loss)/gain (130) 356
Total comprehensive income (71 985) 64 778
Net (loss)/profit attributable to:
Owners of the company (31 029) 59 529
Non-controlling interest (40 826) 4 893
(71 855) 64 422
Total comprehensive income attributable to:
Owners of the company (31 159) 59 885
Non-controlling interest (40 826) 4 893
(71 985) 64 778
Basic earnings per share (cents) 6 (13.8) 30.3
Diluted earnings per share (cents) 6 (13.8) 30.0
The accompanying notes are an integral part of these provisional condensed consolidated financial statements.
Provisional condensed consolidated statement of financial position
R’000 Notes At At
31 March 31 March
2015 2014
(Reviewed) (Audited)
Assets
Property, plant and equipment 7 768 618 797 155
Intangible assets 716 434 700 688
Deferred taxation 5 - 17 144
Investments and loans 5 216 5 152
Restricted cash 10 780 7 423
Restricted investments 68 306 47 269
Trade and other receivables 8 - 37 610
Total non-current assets 1 569 354 1 612 441
Restricted investments - 3 453
Inventory 54 110 35 081
Trade and other receivables 9 179 456 151 336
Taxation 1 903 -
Cash and cash equivalents 72 546 69 556
Total current assets 308 015 259 426
Total assets 1 877 369 1 871 867
Equity
Stated capital 692 929 692 929
Share-based payment reserve 26 546 18 788
Other reserves 19 085 19 215
Retained earnings 103 073 134 102
Total equity attributable to owners of the company 841 633 865 034
Non-controlling interest (3 375) 51 183
Total equity 838 258 916 217
Liabilities
Borrowings 10 251 741 341 838
Long-term financial liabilities - 604
Mine closure and environmental rehabilitation provision 11 270 058 215 181
Provisions 31 769 30 575
Deferred taxation 5 129 179 87 357
Deferred income 8 5 418 -
Total non-current liabilities 688 165 675 555
Borrowings 10 109 375 51 713
Short-term financial liabilities 68 -
Trade and other payables 12 216 843 227 101
Taxation - 1 281
Provisions 4 24 660 -
Total current liabilities 350 946 280 095
Total equity and liabilities 1 877 369 1 871 867
The accompanying notes are an integral part of these provisional condensed consolidated financial statements.
Provisional condensed consolidated statement of changes in equity
R’000 Note Stated Share Share Share- Other
capital capital premium based reserves
payment
reserve
Balance at 31 March 2013 - 192 640 711 12 497 (18 751)
Net profit for the year - - - - -
Other comprehensive income for the year - - - - 356
Transfer of share capital and share premium to stated capital(1) 640 903 ( 192) (640 711) - -
Transactions with owners of the company recognised directly in equity
Ordinary shares issued for cash 58 048 - - - -
Share issue expenses (6 022) - - - -
Share-based payments - - - 6 291 -
Share-based payment reserve relating to the issue of shares at a discount 8 - - - - 37 610
Change in ownership interest in subsidiaries
Acquisition of Xceed Resources Limited - - - - -
Balance at 31 March 2014 692 929 - - 18 788 19 215
Net loss for the year - - - - -
Other comprehensive income for the year - - - - (130)
Dividends(2) - - - - -
Transactions with owners of the company recognised directly in equity
Share-based payments - - - 7 758 -
Balance at 31 March 2015 692 929 - - 26 546 19 085
Provisional condensed consolidated statement of changes in equity (continued)
R’000 Note Retained Total Non- Total
earnings equity controlling equity
attribu- interest
table to (NCI)
owners
of the
company
Balance at 31 March 2013 74 573 709 222 (23 185) 686 037
Net profit for the year 59 529 59 529 4 893 64 422
Other comprehensive income for the year - 356 - 356
Transfer of share capital and share premium to stated capital(1) - - - -
Transactions with owners of the company recognised directly in equity
Ordinary shares issued for cash - 58 048 - 58 048
Share issue expenses - (6 022) - (6 022)
Share-based payments - 6 291 - 6 291
Share-based payment reserve relating to the issue of shares at a discount 8 - 37 610 - 37 610
Change in ownership interest in subsidiaries
Acquisition of Xceed Resources Limited - - 69 475 69 475
Balance at 31 March 2014 134 102 865 034 51 183 916 217
Net loss for the year (31 029) (31 029) (40 826) (71 855)
Other comprehensive income for the year - (130) - (130)
Dividends(2) - - (13 732) (13 732)
Transactions with owners of the company recognised directly in equity
Share-based payments - 7 758 - 7 758
Balance at 31 March 2015 103 073 841 633 (3 375) 838 258
(1) A special resolution in terms of regulation 31 of the Companies Act Regulations 2011 was adopted at the
general meeting held on 28 May 2013, whereby all ordinary par value shares were converted into ordinary shares
with no par value. It was resolved that all 250 million authorised ordinary shares and 191.7 million issued
ordinary shares with a par value of 0.1 cents be converted into ordinary shares with no par value and that the
share capital account and the share premium account of the company be transferred to the stated capital account.
(2) On subsidiary level, Keaton Mining Proprietary Limited declared and paid dividends of R52.8 million
(2014: R nil) to its shareholders during the year. The company holds a 74% interest in Keaton Mining Proprietary
Limited.
Provisional condensed consolidated statement of cash flows
Year ended
R’000 31 March 31 March
2015 2014
(Reviewed) (Audited)
Cash flows from operating activities 536 917 416 913
Cash flows from investing activities (508 883) (500 123)
Cash flows from financing activities (25 044) 133 152
Net increase in cash and cash equivalents 2 990 49 942
Cash and cash equivalents at the beginning of the year 69 556 19 614
Cash and cash equivalents at the end of the year 72 546 69 556
Segmental report
Operating profit/(loss) Depreciation/
Revenue before depreciation/amortisation amortisation
R’000 Year to Year to Year to Year to Year to Year to
31 March 31 March 31 March 31 March 31 March 31 March
2015 2014 2015 2014 2015 2014
Vanggatfontein Colliery(1)(4) 1 181 055 1 127 215 626 861 545 060 (423 026) (308 632)
Vaalkrantz Colliery(1) (5) 266 647 245 390 (88 810) 2 119 (18 328) (39 417)
Sterkfontein Project - - - - - -
Keaton Energy Holdings Limited(2) 144 701 108 178 (26 702) 59 273 - -
Keaton Administrative and Technical Services
Proprietary Limited(2) 38 137 26 469 5 261 (537) (900) (584)
Leeuw Braakfontein Project - - (8 644) (9 420) - -
Koudelager Project - - - - - -
Moabsvelden Project(2) 88 175 635 (278) - -
Other segments(2)(3) 225 450 (3 454) (1 746) (18) -
Total segments 1 630 853 1 507 877 505 147 594 471 (442 272) (348 633)
Reconciliation to statements of profit or loss
and other comprehensive income and financial position
Intersegment, deferred taxation assets and liabilities
and other consolidation adjustments (183 152) (135 272) (26 021) (95 707) - -
1 447 701 1 372 605 479 126 498 764 (442 272) (348 633)
Net finance cost(6)
Net (loss)/profit before taxation
Total assets and liabilities
Segmental report (continued)
Operating profit/(loss) Segment assets Segment liabilities
after depreciation
amortisation
R’000 Year to Year to At At At At
31 March 31 March 31 March 31 March 31 March 31 March
2015 2014 2015 2014 2015 2014
Vanggatfontein Colliery(1)(4) 203 835 236 428 937 241 910 519 1 150 739 1 177 759
Vaalkrantz Colliery(1) (5) (107 138) (37 298) 137 444 176 429 357 639 294 685
Sterkfontein Project - - 66 014 65 924 72 703 60 947
Keaton Energy Holdings Limited(2) (26 702) 59 273 961 941 962 794 23 967 4 450
Keaton Administrative and Technical Services
Proprietary Limited(2) 4 361 (1 121) 17 254 10 753 47 866 20 888
Leeuw Braakfontein Project (8 644) (9 420) 305 465 331 212 98 614 81 156
Koudelager Project - - 26 140 25 990 - -
Moabsvelden Project(2) 635 (278) 339 985 294 141 72 454 26 812
Other segments(2)(3) (3 472) (1 746) 333 232 330 819 113 421 109 421
Total segments 62 875 245 838 3 124 716 3 108 581 1 937 403 1 776 118
Reconciliation to statements of profit or loss
and other comprehensive income and financial position
Intersegment, deferred taxation assets and liabilities
and other consolidation adjustments (26 021) (95 707) (1 247 347) (1 236 714) (898 292) (820 468)
36 854 150 131 1 877 369 1 871 867 1 039 111 955 650
Net finance cost(6) (49 743) (47 734)
Net (loss)/profit before taxation (12 889) 102 397
Total assets and liabilities 1 877 369 1 871 867 1 039 111 955 650
(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 90% (92% at 31 March 2014).
(5) Coal sales to major customers as a percentage of revenue equals 39% and 37% (31 March 2014: 46%, and 37%).
(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.
Notes to the provisional condensed consolidated financial statements
1. Accounting policies
1.1 Basis of accounting
The provisional condensed consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for provisional reports and the requirements
of the Companies Act of South Africa. The Listings Requirements require provisional reports to be
prepared in accordance with the framework concepts and the measurement and recognition requirements
of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial
Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34
Interim Financial Reporting. The accounting policies applied in the preparation of the provisional
condensed consolidated financial statements are in terms of IFRS and are consistent with those
applied in the previous consolidated financial statements.
2. Revenue and gross profit
Vanggatfontein delivered 2 278 761 tonnes of washed 2- and 4-Seam thermal coal to Eskom during
the year, an increase of 4% from the previous year’s 2 192 519 tonnes. Sales of 5-Seam metallurgical
coal increased 29% to 126 107 tonnes from 97 635 tonnes. The increased utilisation of the dedicated
5-Seam plant did not allow for any third-party toll washing (31 March 2014: 145 785 tonnes) and B-grade
coal production was limited to 46 554 tonnes (31 March 2014: 10 328 tonnes). Negligible discard and
slurry sales took place due to the materials being used for onsite activities (31 March 2014: 844 334 tonnes).
Vanggatfontein generated revenue of R865.7 million from coal sales (31 March 2014: R779.3 million)
and transport revenue of R315.3 million (31 March 2014: R336.8 million) during the year. The decrease
in transport revenue was as a result of a decrease in transport rates as received from Eskom and
shorter delivery distances.
Vaalkrantz sold 395 450 tonnes of anthracite to domestic and international metallurgical markets,
a 30% increase over the previous year’s 303 837 tonnes and generated revenue of R266.6 million
(31 March 2014: R245.4 million) for the year.
The group recorded a gross profit of R203.5 million or 14% of revenue for the year ended 31 March 2015
(31 March 2014: R218.7 million). The decrease in gross profit is mainly attributable to a decrease in
overall yields at Vaalkrantz, a decrease in metallurgical sales prices at both operations and the loss
in production due to the fatality in February 2015.
3. Other income
The increase year-on-year 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 12
for additional information.
4. Mining and related expenses
The increase in mining and related expenses year-on-year mainly relates to:
(i) Impairment recognised on Vaalkrantz assets of R56.5 million. Vaalkrantz has been experiencing
challenging geological conditions. This, coupled with depressed coal prices, increased costs and lower
than expected yields, resulted in a critical re-review of the colliery’s life-of-mine plan. Using the
updated life-of-mine plan of five years, contractual coal prices and a real discount rate of 15% (2014: 12%)
the group calculated the recoverable amount for Vaalkrantz (using a value-in-use model), which resulted
an impairment charge of R56.5 million. A 5% decrease in the coal prices used in the model would have resulted
in an additional impairment of R52 million.
The extent of the taxable profits to be realised over the revised life-of-mine plan did not support
the previously recognised deferred taxation asset relating to assessed losses and capital allowances. As
a result, the deferred taxation asset had to be reversed, as detailed in note 5.
(ii) Stock theft of R24.7 million, which was discovered at Vaalkrantz during the last quarter of the
financial year. A thorough investigation undertaken by multiple agencies pointed to collusion between an
employee and third parties. Criminal charges were laid against the employee. A provision for this amount
was raised to replace the stock that was sold to customers in anticipation of delivery.
(iii) Incremental social and labour plan spend of R8.3 million and salary-related expenses of
R11.8 million.
(iv) Loss on disposal of property, plant and equipment of R3.6 million.
5. Income taxation expense
The income taxation expense of R59 million for the year ended 31 March 2015 is mainly attributable to:
Keaton Mining Proprietary Limited taxation expense of R46.4 million, as a result of the utilisation of
unredeemed capital expenditure due to 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 2014.
Leeuw Mining and Exploration Proprietary Limited net taxation expense of R16.7 million after the reversal
of the previously recognised deferred taxation asset relating to Vaalkrantz Colliery of R35.9 million,
referred to in note 4. The non-recognition of this deferred taxation asset is the main reason for the
group’s high effective taxation rate in the current year.
6. Earnings and net asset value per share
The calculation of basic and diluted earnings per share is based on a loss for the year ended 31 March 2015
(attributable to owners of the company) of R31 million (31 March 2014: profit of R59.5 million). The weighted
average number of shares used in calculating basic earnings per share for the year was 224.4 million
(31 March 2014: 196.4 million). The weighted average number of shares used in calculating diluted earnings
per share for the year was 228 million (31 March 2014: 198.5 million).
Year ended
31 March 31 March
2015 2014
(Reviewed) (Audited)
Total earnings per ordinary share (cents)
Basic earnings (13.8) 30.3
Diluted earnings(1) (13.8) 30.0
Headline earnings 0.4 30.3
Diluted headline earnings 0.4 30.0
(1) Anti-dilutive in current year
Reconciliation of headline earnings (net of tax and NCI):
R’000
Net (loss)/profit for the year attributable to owners of the company (31 029) 59 529
Loss on disposal of property, plant and equipment 1 882 24
Loss on disposal of intangible asset - 27
Impairment of assets 30 120 -
Total headline earnings 973 59 580
Net asset value per share
Number of shares in issue (millions) 224.4 224.3
Net asset value per share (cents) 373 408
7. Property, plant and equipment
The net decrease of R28.5 million from 31 March 2014 is mainly attributable to the following:
- Capital investments at Vanggatfontein of R431 million (attributable mainly to mine development of
R394.3 million and the construction of the filter press plant of R34.8 million). The rehabilitation
assets at Vanggatfontein also increased by R38.1 million, relating to the increase in the rehabilitation
liability. Refer to note 11; and
- Capital investments at Vaalkrantz of R19.5 million (mainly relating to the development of the new Enyati
Alfred Central production section of R12.4 million).
These were offset by depreciation charges of R462.3 million (31 March 2014: R359.3 million), as well as
the impairment charge of R56.5 million on Vaalkrantz, discussed in note 4.
8. 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 US$4 million prepayment for coal.
During the current period, the prepayment of US$4 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.
9. Trade and other receivables
As disclosed in 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 31 March 2015 the acquisition of this equity interest has not yet become effective and as such the
purchase consideration paid to date of R25.4 million is accounted for as a prepayment. Also refer to
note 15 for additional information.
10. Borrowings
Total borrowings decreased by R32.4 million, mainly as a result of debt repayments to the value of
R83 million of which R72.7 million relates to the Investec Bank Limited Term Loan. The decrease was offset
by finance costs of R34.8 million, a foreign exchange loss of R8.6 million included in administrative
expenses in the statement of profit or loss and a R5.5 million drawdown of the Investec Bank Limited
Working Capital Facility.
The increase in current borrowings mainly relates to the inclusion of four (quarterly) Investec Bank
Limited repayments (2014: only three payments were included) as well as the IDC preference shares liability
of R32.2 million which is due 31 October 2015.
11. Mine closure and environmental rehabilitation provision
The rehabilitation liability at Vanggatfontein increased by R49.1 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 R15.8 million. These increases were
offset by rehabilitation work completed at Pit 1 of R4.8 million. The rehabilitation liability at
Vaalkrantz increased by R5.7 million during the period, mainly due to the unwinding of interest on
previously recognised rehabilitation liabilities.
12. 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 versus Megacube Mining Proprietary Limited (Megacube)
Included in trade and other payables is an amount 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.
13. Commitments and contingencies
The group’s capital commitments are:
R’000 At At
31 March 31 March
2015 2014
(Reviewed) (Audited)
Exploration and mine development expenditure authorised and contracted 16 830 1 548
Exploration and mine development expenditure authorised but not contracted 44 549 61 361
61 379 62 909
All contracted amounts will be funded both through existing funding mechanisms within the group and cash
generated from operations.
There have been no significant changes to the status of the group’s contingent liabilities. 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.
14. 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
31 March 31 March
2015 2014
(Reviewed) (Audited)
Fair value through profit or loss
Level 1(1) 68 306 47 269
Level 2(2) (68) (604)
Level 2(3) 433 -
Level 3 - -
(1) Level 1 financial assets relate to restricted investments which serve as collateral mainly for
environmental guarantees provided to the DMR. Contributions are mainly invested in Momentum, Stanlib,
Sanlam and the Nedbank Bettabeta Green Exchange Traded Fund (BGreen ETF). These underlying funds invest
in equity instruments and money market investments, both local and foreign. The BGreen ETF index
consists of a selection of stocks from the top 100 largest South African companies listed on the JSE.
These 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.
(3) Level 2 financial assets relate 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 instrument.
The carrying values (less any impairment allowance) of restricted cash, cash and cash equivalents,
investments and loans, trade and other receivables, borrowings, provisions and trade and other payables
are assumed to approximate their fair values.
15. Significant events after 31 March 2015 up to the date of this report
Subsequent to year-end the company entered into a share purchase agreement with JPI to acquire the
remaining 8% of the equity interest held by JPI in Leeuw Mining and Exploration Proprietary Limited
for a purchase consideration of R11 million. Up to date of this report the acquisition of this equity
interest has not yet become effective.
16. Dividends
No dividends have been declared nor are any proposed for the year ended 31 March 2015 (31 March 2014: R nil).
17. Review report
These provisional condensed consolidated financial statements for the year ended 31 March 2015 have
been reviewed by KPMG Inc, in accordance with ISRE 2410, 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 provisional condensed consolidated financial statements identified in the auditor’s
review 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
GH Kemp (Independent)
JHM Schurink***
MT Witteveen***
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: 24/06/2015 09:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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