Detailed terms announcement and withdrawal of cautionary 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 “KEH”) DETAILED TERMS ANNOUNCEMENT RELATING TO THE DISPOSAL OF LEEUW MINING AND EXPLORATION PROPRIETARY LIMITED (“LME”) AND AMALAHLE EXPLORATION PROPRIETARY LIMITED (“AMALAHLE”) BY KEATON ENERGY HOLDINGS LIMITED (“KEH”) TO BAYETE ENERGY RESOURCES PROPRIETARY LIMITED (“BER”) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT Introduction The Keaton Energy board of directors is pleased to confirm that KEH has concluded an agreement with BER, whereby KEH will dispose of its wholly owned subsidiary LME by way of a disposal of the Sale Interest (consisting of the “Sale Shares” and the “Sale Claims”) in LME to BER for a consideration of R24 715 000 (“Transaction”) and, in addition, the sale of its wholly owned subsidiary, Amalahle for a consideration of R250 000. The purpose of the Transaction is to dispose of the group’s entire KwaZulu Natal anthracite operations and/or projects. Background The KwaZulu Natal anthracite operations and/or projects consist of the Vaalkrantz Colliery, the Koudelager project and the Balgray project (“LME Operations”) together with the Mooiklip project held in Amalahle. The Braakfontein thermal coal project, held by Leeuw Braakfontein Colliery Proprietary Limited (“LBC”), a wholly owned subsidiary of LME, is specifically excluded from the Transaction. LBC, which will be unbundled from LME, will become a direct wholly owned subsidiary of KEH. The Sale Shares consist of both the ordinary shares held by KEH and the preference shares held respectively by KEH and the Industrial Development Corporation of South Africa Limited (“IDC”). The Sale Claims consist of KEH’s claims on loan account against LME, save for an amount of R24 715 000 (”Deferred Amount”), which will be retained by KEH. The Transaction also provides that KEH disposes of 100% of the ordinary and preference shares held by KEH in Amalahle, including 100% of KEH’s loan claims against Amalahle (“Amalahle Sale Agreement”). Rationale Vaalkrantz Colliery has experienced challenging geological conditions impacting production volumes over the past number of years. This coupled with the closure of two production sections as a result of safety and difficult mining conditions, continued depressed coal prices and uncertainty as to the timing of recovery, increased costs and lower than expected yields resulted in the Board taking the decision, in September 2015, to dispose of the group’s entire KwaZulu Natal anthracite assets. Purchase Consideration The purchase consideration of R24 715 000, in settlement of the Deferred Amount, is payable in the form of a royalty of R20 per saleable ton produced by the LME Operations or bought in and sold and/or beneficiated by the LME Operations with effect from the first business day after all the suspensive conditions have been fulfilled or waived (“Effective date”). The Amalahle Sale Agreement will be for a consideration of R250 000 payable in cash on the first business day after all the suspensive conditions have been fulfilled or waived. The proceeds of the disposal will be utilized within the Keaton Energy group for working capital purposes and the advancing of its project pipeline. As per the 30 September 2015 interim group results, the net asset value of LME was R3 836 305 and the net losses R104 505 879. Conditions Precedent The Transaction is subject to the following suspensive conditions: - The entering into of the Amalahle Sale Agreement and the agreement becoming unconditional; - KEH being satisfied that BER meets the equity ownership requirements of the Broad Based Socio-Economic Empowerment Charter of the South African Mining Industry; - Completion of the acquisition by KEH of the IDC preference shares such that KEH is the holder of such shares; - Written consent from Investec Bank Limited for the disposal of the Sale Interest; - KEH being satisfied in its sole and absolute discretion that following the section 11 consent in terms of the Mineral and Petroleum Resources Development Act 28 of 2002 (“MPRDA”) it shall bear no further responsibility in respect of the rehabilitation liability; - The implementation of the LBC unbundling; - All necessary regulatory approvals and compliance with Applicable Laws having been obtained including but not limited to: o Granting by the Minister of consent in terms of section 11 of the MPRDA regarding change of control in LME and registration thereof at the Mineral and Petroleum Titles Registration Office; o To the extent required, the unconditional approval in writing from the Relevant Competition Authorities in terms of the Competition Act 89 of 1998 in respect of the Transaction; o The approval of the JSE and shareholders of KEH to the extent required. Categorisation The transaction has been categorised as a Category 2 transaction in terms of the JSE Listings Requirements. Withdrawal of Cautionary Announcement Following the release of this announcement caution is no longer required to be exercised by KEH shareholders when dealing in KEH shares. By order of the Board Bryanston 15 February 2016 Sponsor Investec Bank Limited Date: 15/02/2016 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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