Wrap Text
Reviewed provisional condensed consolidated results for the year ended 31 March 2016
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 2016
Preparation of provisional condensed consolidated financial statements
The provisional condensed consolidated financial statements for the year ended 31 March 2016 have been reviewed in
terms of the Companies Act of South Africa. Their preparation was supervised by the Chief Financial Officer, Jacques
Rossouw, a Chartered Accountant (SA). The directors of the company take responsibility for these results. The provisional
condensed consolidated financial statements were published on 27 June 2016 and can be found on the company’s website.
Commentary
Dear shareholder
The year ended 31 March 2016 proved to be another year of mixed results. There was continued excellent performance at
one asset, Vanggatfontein, and a disappointing performance at the other, Vaalkrantz. Keaton (KEH), however, successfully
concluded a transaction to dispose of Vaalkrantz and its other KwaZulu-Natal anthracite assets during February 2016,
which awaits only the Minister’s consent under section 11 of the MPRDA. In addition, KEH concluded the acquisition of the
minority interests in all but one subsidiary. Subsequent to year-end, the long-standing dispute with Megacube Mining
Proprietary Limited (Megacube) relating to several breaches of the contract mining agreement at Vanggatfontein was resolved
in KEH’s favour at arbitration.
Safety
Zero harm remains a key focus for the group and safety is of paramount importance. The lost-time injury frequency rate
(per 200 000 hours worked) was 0.14 at Vanggatfontein (FY15: 0.10) and 0.06 at Vaalkrantz (FY15: 0.22). Management
commends all for this achievement and their adherence to safety standards and protocols.
Operational review
Vanggatfontein
KEH’s prime asset continued to perform superbly. Vanggatfontein sold 2 237 595t of washed 2 and 4-seam thermal coal to
Eskom, only 2% down on last year’s record sales of 2 278 761t. Sales of 5-seam metallurgical coal was 98 252t
(FY15: 126 107t) in line with the geological model. Discard, slurry and B-grade sales were negligible.
Vaalkrantz
As was previously announced, Vaalkrantz operation was classified as a disposal group “held-for-sale” during the year
and a sale process was initiated. In February 2016, KEH concluded an agreement with Bayete Energy Resources Proprietary
Limited (BER) to dispose of its wholly owned subsidiaries Leeuw Mining and Exploration Proprietary Limited (LME) and
Amalahle Exploration Proprietary Limited thereby exiting the group’s exposure to anthracite operations and projects
entirely. The Braakfontein thermal coal project, held by Leeuw Braakfontein Colliery Proprietary Limited (LBC), a wholly owned
subsidiary of LME, was specifically excluded from the transaction. LBC, which will be unbundled from LME, will become a
direct wholly owned subsidiary of KEH. Post-year-end, Vaalkrantz Colliery was placed on care and maintenance
notwithstanding continuous efforts by both LME and BER to minimise the losses exacerbated by the ongoing global decline in coal
prices, force majeure declared on LME by its biggest customer and the unavailability of water due to the continued drought
in the region. LME and BER’s associated operating company Witbank Mineral Resources Proprietary Limited jointly decided
to place Vaalkrantz Colliery on care and maintenance with effect from 1 May 2016. LME embarked on a section 189A process
for the retrenchment of all employees during April 2016 which was finalised and became effective on 31 May 2016. Coal
sales for the year were 45 556t domestic (FY15: 142 176t), 70 600t export (FY15:138 300t) and 185 799t high ash
(FY15: 114 974t).
Group financial performance
Group revenue from continuing operations decreased by 13%, from R1 181.1 million in FY15 to R1 032.1 million in FY16.
The decrease was mainly as a result of a 36% decrease in transport revenue as a result of reduced transport rates from
Eskom and shorter delivery distances. This, however, resulted in a decrease of 36% in transport costs paid to suppliers
referred to below. In addition, coal sales at Vanggatfontein decreased overall by 4%.
Cost of sales decreased by 10% from R968.9 million in FY15 to R868.8 million in FY16. The decrease is mainly
attributable to a decrease in transport costs of R103.2 million and a decrease in waste volumes mined at Vanggatfontein of 7%.
Pleasingly the strip ratio achieved at Vanggatfontein, excluding rehandle of waste dumps and spoils, decreased to 2.8 from
2.9 in FY15. Fuel costs of R89.5 million were substantially lower when compared to the prior year of R122.7 million,
due to lower volumes mined as well as a decrease in diesel prices. The remaining cash cost components included in cost of
sales were in line with budget and that of the prior year as detailed in note 3 to the provisional condensed
consolidated financial statements and again reflects the group’s continued focus in keeping costs under control.
The gross profit of R163.3 million or 16% of revenue decreased slightly year-on-year mainly as a result of the
decrease in sales at Vanggatfontein. In addition, management took the decision in the second half of the financial year to
accelerate mining of Pit 2 in order to minimise re-handling of future life-of-mine overburden and consequently reduce future
cash outflow. Unfortunately coal qualities and planned yield in the last remaining cuts decreased significantly to that
experienced previously in Pit 2. This not only resulted in a decrease in the expected cash generated from these last
cuts but also resulted in accelerated depreciation.
Included in other income for FY16 is a credit of R37.5 million relating to the reversal of the Megacube liability
previously included under trade and other payables. Refer to note 19 to the provisional condensed consolidated financial
statements for additional disclosure regarding this matter.
The increase in mining and related expenses relates to a once-off impairment charge of R159.2 million recorded for the
LBC project as disclosed in notes 5 and 10 to the provisional condensed consolidated financial statements. To date the
LBC project was evaluated on the basis of both an export and domestic thermal coal operation. Continued depressed export
coal pricing and a bleak medium-term outlook on the Richards Bay API4 Index has had a material impact on the economics
of the project. We continue to evaluate alternative feasible options around an exclusive domestic supply project.
The remaining mining and related expenses were in line with budget and that of the prior year.
The increase in administrative expenses relates to the once-off initial recognition of a financial liability at fair
value of R66.9 million and the derecognition of the deferred income liability of R5.4 million as reported in FY15. During
FY14, the group entered into a pre-offtake finance arrangement with Gunvor SA, a fellow subsidiary of the group’s
largest shareholder Plusbay Limited, a wholly owned subsidiary of Gunvor Group Limited, for the supply of 600 000 tonnes of
coal to be delivered from the group’s Moabsvelden Project over a 22-month period from 1 January 2015 to 31 October 2016
in return for a prepayment of USD4 million. In terms of the agreement the group had to deliver the first coal volumes to
Gunvor by 31 December 2015 from Moabsvelden. The group was unable to achieve this target as the development of
Moabsvelden is still being delayed by the award of an integrated water use licence (IWUL) by the Department of Water and
Sanitation despite every effort by the group to obtain same. The group applied for the IWUL in 2014 when it acquired the project
through the acquisition of Xceed Resources Limited. As a result of not being able to supply first coal by 31 December
2015 to Gunvor, this breach resulted in the derecognition of the deferred income liability and the recognition of the
financial liability. For more detailed disclosure refer to notes 5 and 13 to the provisional condensed consolidated
financial statements.
Other than the above, administrative expenses were in line with budget and that of the prior year.
The group net loss for the year was R297.3 million compared to a net loss of R71.9 million in FY15, mainly as a result
of the once-off charges referred to above. Consequently, group headline earnings per share declined to a loss of 26.9 cents
per share from 0.4 cents per share in FY15.
Operations generated net cash of R470.2 million in FY16 compared to R536.9 million in FY15 after taking working
capital outflow of R33.3 million (FY15: R34.1 million) and net finance cost of R19.4 million (FY15: R18.4 million) into
account. The decrease in operational cash was as a result of the poor operational performance at Vaalkrantz, and the
effect of Pit 2 at Vanggatfontein referred to above.
Cash invested in investing activities decreased from R508.9 million in FY15 to R404.4 million in FY16. The decrease in
investing activities relates mainly to the year-on-year decrease in capital spend at Vanggatfontein of R39.8 million
(FY15 included the construction of the Vanggatfontein filter press plant of R34.8 million) and R10.9 million at the
Vaalkrantz operation. Group capital spend on intangible assets also decreased year-on-year by R11.5 million, mainly relating
to the implementation of the Enterprise Resource Planning (ERP) system of R5.9 million in FY15. The group further
liquidated R20.8 million of its restricted investments during the year as a result of an overfunded position.
Financing activities utilised cash of R89.5 million in FY16 compared to R25 million in FY15. This is mainly due to
borrowings repaid of R80.4 million (FY15: R59.8 million), dividends paid to minority shareholders at subsidiary level of
R7.5 million (FY15: R13.7 million) and the acquisition of the 26% minority shareholding in certain subsidiaries for
R18.6 million. These were offset by an additional drawdown of R20 million on the Investec Bank Limited term facility.
Projects
Moabsvelden remains our short-term growth priority. The initiation of construction of this expansion to Vanggatfontein
awaits the grant of its IWUL and the conclusion of a Coal Supply Agreement (CSA) with Eskom. Moabsvelden will
essentially be operated as a satellite pit to Vanggatfontein with similar ROM stripping ratios to Vanggatfontein. ROM will be
transported to the Vanggatfontein Colliery site where a new CHPP is planned to process the Moabsvelden feed. Once the IWUL
and CSA processes are concluded, mine construction will take approximately 12 months to complete.
Coal Resource and Coal Reserve statement
Other than normal coal depletion as a result of mining activities during the 12 months to 31 March 2016, Coal Reserves
at Vanggatfontein Colliery reduced by an additional 2.2% and Coal Resources by 4.7% due to slightly lower recovery,
fringe peripherals near wetlands not mined as well as pillars left for safety reasons. Vaalkrantz Colliery was placed on
care and maintenance during 2016 and as a result the previously reported Coal Reserve estimate was withdrawn. The
previously reported ROM Coal Reserve estimate reported for Vaalkrantz accounted for only 2.2% of the total group ROM Coal
Reserve. An updated Resource and Reserve Statement for the group is expected to be released in August 2016 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. Jeroen Schurink resigned
with effect from 30 June 2015 and Gia Mai, Gunvor SA Chief Investment Officer, was appointed as a Non-Executive Director
effective 1 July 2015. The Board thanks Mr Schurink for his contribution to the company.
Changes to roles and responsibilities
During FY16, the Board approved a reduction of five members to the Social and Ethics Committee. The Committee now
consists of APE Sedibe (chairman), LX Mtumtum, Dr JD Salter, J Rossouw and AB Glad.
Looking ahead
In the short term our focus will be on the continued excellent operations at Vanggatfontein. With the company
refocused on a single, profitable mine with a pending attractive expansion and with a simplified corporate structure it
is well placed for the future.
On behalf of the Board
David Salter Mandi Glad
Non-Executive Chairman Chief Executive Officer
Bryanston
24 June 2016
Provisional condensed consolidated statement of profit or loss and other comprehensive income
for the year ended 31 March 2016
Notes Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Restated)*
R R
CONTINUING OPERATIONS
Revenue 2 1 032 079 534 1 181 054 551
Cost of sales 3 (868 776 745) (968 938 863)
Gross profit 163 302 789 212 115 688
Other income 4 41 192 246 11 335 914
Mining and related expenses 5 (181 966 055) (21 140 910)
Administrative expenses 5 (139 036 414) (75 002 334)
Operating (loss)/profit before net finance cost (116 507 434) 127 308 358
Net finance cost (54 159 822) (48 103 717)
Finance income 4 045 902 5 277 590
Finance cost 13 and 14 (58 205 724) (53 381 307)
Net (loss)/profit before taxation (170 667 256) 79 204 641
Income taxation credit/(expense) 6 2 167 629 (42 188 623)
Net (loss)/profit from continuing operations (168 499 627) 37 016 018
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of taxation 7 (128 776 357) (108 870 925)
Net loss for the year (297 275 984) (71 854 907)
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation differences 1 840 820 (130 247)
Total comprehensive income (295 435 164) (71 985 154)
Net loss attributable to:
Owners of the company (250 587 708) (31 028 870)
Non-controlling interest (46 688 276) (40 826 037)
(297 275 984) (71 854 907)
Total comprehensive income attributable to:
Owners of the company (248 746 888) (31 159 117)
Non-controlling interest (46 688 276) (40 826 037)
(295 435 164) (71 985 154)
Earnings per share
Basic earnings per share (cents) 8 (99.7) (13.8)
Diluted earnings per share (cents) 8 (99.7) (13.8)
Earnings per share - continuing operations
Basic earnings per share (cents) 8 (62.2) 12.6
Diluted earnings per share (cents) 8 (62.2) 12.4
The accompanying notes are an integral part of these provisional condensed consolidated financial statements.
* The audited 31 March 2015 group results have been restated for the effects of the application of IFRS 5 Non-current
Assets Held-for-sale and Discontinued Operations following management’s decision to dispose of certain operations
within the group (refer to note 7). The provisional condensed consolidated statement of financial position and the
provisional condensed consolidated statement of changes in equity for this period is not required to be restated.
Provisional condensed consolidated statement of financial position at 31 March 2016
Notes At At
31 March 31 March
2016 2015
(Reviewed) (Audited)
R R
ASSETS
Property, plant and equipment 9 668 297 215 768 617 910
Intangible assets 10 504 568 494 716 434 140
Investments and loans 5 221 048 5 216 499
Restricted cash 7 423 204 10 780 613
Restricted investments 35 225 869 68 305 506
Total non-current assets 1 220 735 830 1 569 354 668
Restricted cash 4 167 503 -
Inventory 36 650 671 54 110 477
Trade and other receivables 105 148 757 179 455 807
Taxation 916 892 1 901 772
Cash and cash equivalents 43 379 396 72 546 393
Assets held-for-sale 11 83 812 338 -
Total current assets 274 075 557 308 014 449
Total assets 1 494 811 387 1 877 369 117
EQUITY
Stated capital 12 850 050 607 692 928 553
Share-based payment reserve 33 664 877 26 546 123
Other reserves 20 925 337 19 084 517
(Accumulated loss)/retained earnings (465 810 406) 103 072 976
Total equity attributable to owners of the company 438 830 415 841 632 169
Non-controlling interest 54 012 482 (3 374 543)
Total equity 492 842 897 838 257 626
LIABILITIES
Borrowings 13 189 605 397 251 740 913
Mine closure and environmental rehabilitation provision 14 263 471 962 270 058 375
Vendor liability 30 225 541 31 768 646
Deferred taxation 124 275 448 129 179 335
Deferred income - 5 417 691
Total non-current liabilities 607 578 348 688 164 960
Borrowings 13 201 682 303 109 375 308
Financial liabilities - 67 816
Trade and other payables 106 183 447 216 843 420
Taxation 2 731 642 -
Provisions - 24 659 987
Liabilities held-for-sale 11 83 792 750 -
Total current liabilities 394 390 142 350 946 531
Total equity and liabilities 1 494 811 387 1 877 369 117
The accompanying notes are an integral part of these provisional condensed consolidated financial statements.
Provisional condensed consolidated statement of changes in equity for the year ended 31 March 2016
Stated Share- Other (Accu-
capital based reserves mulated
R payment R loss)/
reserve retained
R earnings
R
Balance at 31 March 2014 692 928 553 18 788 161 19 214 764 134 101 846
Net loss for the year - - - (31 028 870)
Other comprehensive income for the year - - (130 247) -
Dividends(1) - - - -
Transactions with owners of the company
recognised directly in equity
Share-based payments - 7 757 962 - -
Balance at 31 March 2015 692 928 553 26 546 123 19 084 517 103 072 976
Net loss for the year - - - (250 587 708)
Other comprehensive income for the year - - 1 840 820 -
Dividends(1) - - - -
Transactions with owners of the company
recognised directly in equity
Ordinary shares issued (note 12) 159 697 224 - - -
Share issue expenses (2 575 170) - - -
Share-based payments - 7 118 754 - -
Changes in ownership interest in subsidiaries(2) - - - (318 295 674)
Balance at 31 March 2016 850 050 607 33 664 877 20 925 337 (465 810 406)
Provisional condensed consolidated statement of changes in equity for the year ended 31 March 2016 (continued)
Total Non- Total
equity controlling equity
attributable interest R
to owners (NCI)
of the R
company
R
Balance at 31 March 2014 865 033 324 51 183 265 916 216 589
Net loss for the year (31 028 870) (40 826 037) (71 854 907)
Other comprehensive income for the year (130 247) - (130 247)
Dividends(1) - (13 731 771) (13 731 771)
Transactions with owners of the company
recognised directly in equity
Share-based payments 7 757 962 - 7 757 962
Balance at 31 March 2015 841 632 169 (3 374 543) 838 257 626
Net loss for the year (250 587 708) (46 688 276) (297 275 984)
Other comprehensive income for the year 1 840 820 - 1 840 820
Dividends(1) - (7 532 912) (7 532 912)
Transactions with owners of the company
recognised directly in equity
Ordinary shares issued (note 12) 159 697 224 - 159 697 224
Share issue expenses (2 575 170) - (2 575 170)
Share-based payments 7 118 754 - 7 118 754
Changes in ownership interest in subsidiaries(2) (318 295 674) 111 608 213 (206 687 461)
Balance at 31 March 2016 438 830 415 54 012 482 492 842 897
(1) On subsidiary level, Keaton Mining Proprietary Limited (Keaton Mining) declared and paid dividends of R29 million
(FY15: R52.8 million) to its shareholders during the year. The company held a 74% interest in Keaton Mining when
these dividends were declared. On 13 November 2015, the company acquired the remaining 26% interest in Keaton Mining
(refer to note 12).
(2) The premium paid for the non-controlling interests in Keaton Mining, Leeuw Mining and Exploration Proprietary
Limited (LME), Amalahle Exploration Proprietary Limited (Amalahle) and Labohlano Trading 46 Proprietary Limited
(Labohlano) was recorded as an adjustment against retained earnings in terms of IFRS 10 Consolidated Financial
Statements, due to the controlling interests of 74% held in these subsidiaries by the group prior to these
transactions. Had the group not held a controlling interest in these subsidiaries, this premium would have been
allocated to the relevant assets and liabilities, based on fair value, with the residual being allocated to
goodwill. Refer to note 12 for additional information.
Provisional condensed consolidated statement of cash flows for the year ended 31 March 2016
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Audited)
R R
Cash flows from operating activities(1) 470 183 922 536 917 578
Cash flows from investing activities(2) (404 355 752) (508 882 899)
Cash flows from financing activities(3) (89 489 251) (25 044 330)
Net (decrease)/increase in cash and cash equivalents (23 661 081) 2 990 349
Cash and cash equivalents at the beginning of the year 72 546 393 69 556 044
Cash and cash equivalents at the end of the year 48 885 312 72 546 393
(1) Operations generated net cash of R470.2 million in FY16 compared to R536.9 million in FY15 after taking working
capital outflow of R33.3 million (FY15: R34.1 million) and net finance cost of R19.4 million (FY15: R18.4 million)
into account. The decrease in operational cash was as a result of the poor operational performance at Vaalkrantz.
(2) Cash invested in investing activities decreased from R508.9 million in FY15 to R404.4 million in FY16. The
decrease in investing activities relates mainly to the year-on-year decrease in capital spend at Vanggatfontein of
R39.8 million (FY15 included the construction of the Vanggatfontein filter press plant of R34.8 million) and
R10.9 million at the Vaalkrantz operation. Group capital spend on intangible assets also decreased year-on-year by
R11.5 million, mainly relating to the implementation of the Enterprise Resource Planning (ERP) system of R5.9 million
in FY15. The group further liquidated R20.8 million of its restricted investments during the year as a result of an
overfunded position.
(3) Financing activities utilised cash of R89.5 million in FY16 compared to R25 million in FY15. This is mainly due
to borrowings repaid of R80.4 million (FY15: R59.8 million), dividends paid to minority shareholders at subsidiary
level of R7.5 million (FY15: R13.7 million) and the acquisition of the 26% minority shareholding in certain
subsidiaries for R18.6 million. These were offset by an additional drawdown of R20 million on the Investec Bank
Limited term facility.
Segment report for the year ended 31 March 2016
Revenue Operating profit/(loss) before Depreciation/amortisation
depreciation/amortisation
Year ended Year ended Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March 31 March 31 March
2016 2015 2016 2015 2016 2015
R R R R R R
Vanggatfontein Colliery(1)(4) 1 032 079 534 1 181 054 551 620 227 785 626 861 710 (442 377 223) (423 026 499)
Vaalkrantz Colliery(1)(5)(7)(9) 176 821 851 266 646 732 (138 869 519) (88 810 932) (3 992 228) (18 327 526)
Sterkfontein Project - - - - - -
Keaton Energy Holdings Limited(2)(10) 130 081 591 144 701 219 (169 248 281) (26 702 168) - -
Keaton Administrative and Technical Services
Proprietary Limited(2) 35 621 484 38 137 163 (9 377 923) 5 261 187 (3 267 157) (899 670)
Leeuw Braakfontein Project(11) - - (174 517 839) (8 643 883) - -
Koudelager Project(7)(9) - - - - - -
Moabsvelden Project(2) - 87 500 (59 428 359) 635 262 - -
Other segments(2)(3)(8)(9) - 225 000 (18 540) (3 454 020) (397) (17 524)
Total segments 1 374 604 460 1 630 852 165 68 767 324 505 147 156 (449 637 005) (442 271 219)
Reconciliation to statements of profit or loss
and other comprehensive income and financial
position
Intersegment, deferred taxation assets and
liabilities and other consolidation adjustments (165 703 075) (183 150 882) 134 723 377 (27 661 283) 862 513 -
1 208 901 385 1 447 701 283 203 490 701 477 485 873 (448 774 492) (442 271 219)
Net finance cost(6)
Elimination of discontinued operations
Net (loss)/profit before taxation
Total assets and liabilities
Segment report for the year ended 31 March 2016 (continued)
Operating profit/(loss) after Segment assets Segment liabilities
depreciation/amortisation
Year ended Year ended At At At At
31 March 31 March 31 March 31 March 31 March 31 March
2016 2015 2016 2015 2016 2015
R R R R R R
Vanggatfontein Colliery(1)(4) 177 850 562 203 835 211 881 546 501 937 240 995 1 051 402 348 1 150 738 857
Vaalkrantz Colliery(1)(5)(7)(9) (142 861 747) (107 138 458) 137 062 919 137 443 556 469 253 210 357 638 745
Sterkfontein Project - - 66 042 942 66 014 112 74 971 455 72 702 768
Keaton Energy Holdings Limited(2)(10) (169 248 281) (26 702 168) 954 510 501 961 940 903 24 009 463 23 966 952
Keaton Administrative and Technical Services
Proprietary Limited(2) (12 645 080) 4 361 517 11 623 121 17 254 237 56 443 669 47 865 641
Leeuw Braakfontein Project(11) (174 517 839) (8 643 883) 153 526 867 305 464 569 124 128 641 98 613 931
Koudelager Project(7)(9) - - 3 729 601 26 140 496 - -
Moabsvelden Project(2) (59 428 359) 635 262 342 107 050 339 984 582 134 367 095 72 453 903
Other segments(2)(3)(8)(9) (18 937) (3 471 544) 334 043 081 333 232 451 129 484 659 113 421 178
Total segments (380 869 681) 62 875 937 2 884 192 583 3 124 715 901 2 064 060 540 1 937 401 975
Reconciliation to statements of profit or loss
and other comprehensive income and financial
position
Intersegment, deferred taxation assets and
liabilities and other consolidation adjustments 135 585 890 (27 661 283) (1 389 381 196) (1 247 346 784) (1 062 092 050) (898 290 484)
(245 283 791) 35 214 654 1 494 811 387 1 877 369 117 1 001 968 490 1 039 111 491
Net finance cost(6) (54 159 822) (48 103 717)
Elimination of discontinued operations 128 776 357 92 093 704
Net (loss)/profit before taxation (170 667 256) 79 204 641
Total assets and liabilities 1 494 811 387 1 877 369 117 1 001 968 490 1 039 111 491
(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 92% (31 March 2015: 90%).
(5) Coal sales to three major customers as a percentage of revenue amounted to 73%, 14% and 10% (two major customers
31 March 2015: 39% 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.
(7) Classified as a discontinued operation. Refer to note 7.
(8) Amalahle Exploration Proprietary Limited and the Balgray Prospecting Rights included in other segments are
classified as discontinued operation. Refer to note 7.
(9) Includes impairment charge of R85.9 million (2015: R56.5 million relating to Vaalkrantz), allocated as follows:
Vaalkrantz R53.4 million, Koudelager R27 million and other segment R5.5 million (Amalahle R0.5 million and Balgray
R5 million).
(10)Includes impairment charge of R260.5 million (2015: R126.6 million).
(11)Includes impairment charge of R159.2 million (2015: Rnil), as disclosed in note 5.
Notes to the provisional condensed consolidated financial statements
for the year ended 31 March 2016
1 Basis of preparation and accounting policies
The 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 the 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
condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in
the previous consolidated financial statements.
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Restated)*
R R
2 Revenue
Coal sales 829 945 776 865 723 757
Transportation income 202 133 758 315 330 794
1 032 079 534 1 181 054 551
* The audited 31 March 2015 group results have been restated for the effects of the application of IFRS 5 Non-current
Assets Held-for-sale and Discontinued Operations following management’s decision to dispose of certain operations
within the group (refer to note 7). The provisional condensed consolidated statement of financial position and the
provisional condensed consolidated statement of changes in equity for this period is not required to be restated.
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Restated)*
R R
3 Cost of sales
Mining contractors 504 839 492 490 410 175
Depreciation 428 054 868 430 131 768
Fuel 89 531 394 122 702 113
Labour 11 277 393 11 755 624
Other direct mining costs 10 916 214 9 503 369
Transport costs 181 954 225 285 193 420
Inventory movement 13 532 521 3 705 610
Deferred stripping capitalised(1) (375 488 648) (388 801 090)
Royalty taxation 4 159 286 4 337 874
868 776 745 968 938 863
(1) The deferred stripping credit relates to costs incurred, in an opencast operation, in advance to pre-strip
an area of waste in order to expose the Coal Reserve. The costs are capitalised to mine development costs in
property, plant and equipment until such time as the coal exposed is subsequently mined. The stripping activity
asset is depreciated on the units-of-production method, over the expected production life of the identified
component of the Coal Reserve.
* The audited 31 March 2015 group results have been restated for the effects of the application of IFRS 5 Non-current
Assets Held-for-sale and Discontinued Operations following management’s decision to dispose of certain operations
within the group (refer to note 7). The provisional condensed consolidated statement of financial position and the
provisional condensed consolidated statement of changes in equity for this period is not required to be restated.
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Restated)*
R R
4 Other income
Discard sales 987 796 1 423 839
Sundry income(1) 40 204 450 9 912 075
41 192 246 11 335 914
(1) Included in sundry income for the current financial year is a credit of R37.5 million relating to the reversal
of the Megacube liability previously included under trade and other payables. Refer to notes 15 and 19 for additional
information.
* The audited 31 March 2015 group results have been restated for the effects of the application of IFRS 5 Non-current
Assets Held-for-sale and Discontinued Operations following management’s decision to dispose of certain operations
within the group (refer to note 7). The provisional condensed consolidated statement of financial position and the
provisional condensed consolidated statement of changes in equity for this period is not required to be restated.
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Restated)*
R R
5 Operating (loss)/profit before net finance cost
Operating (loss)/profit before net finance cost are stated after:
Impairment of intangible assets(1) 159 161 739 -
Loss on initial recognition of a financial liability(2) 61 525 698 -
(1) Impairment recognised on intangible assets of the Leeuw Braakfontein Project, refer to note 10 for additional
disclosure. This impairment charge, included in mining and related expenses, is the main reason for the increase in
mining and related expenses year-on-year.
(2) The loss on initial recognition of the Gunvor SA loan as disclosed in note 13, is the main reason for the increase
in administrative expenses year-on-year.
* The audited 31 March 2015 group results have been restated for the effects of the application of IFRS 5 Non-current
Assets Held-for-sale and Discontinued Operations following management’s decision to dispose of certain operations
within the group (refer to note 7). The provisional condensed consolidated statement of financial position and the
provisional condensed consolidated statement of changes in equity for this period is not required to be restated.
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Restated)*
R R
6 Income taxation (credit)/expense
Current taxation expense
Current year 2 736 258 -
Deferred taxation
Origination and reversal of temporary differences (4 903 887) 42 188 623
(2 167 629) 42 188 623
The income taxation credit of R2.2 million for the year ended 31 March 2016 is mainly attributable to:
- Keaton Mining’s deferred taxation expense of R38.7 million, in line with that of FY15, as a result of the continued
profitable performance at Vanggatfontein. The deferred taxation liability in the statement of financial position accordingly
increased by the same amount.
- Keaton Energy Holdings Limited’s taxation expense of R3.7 million of which R2.7 million relates to current taxation.
- LBC’s deferred taxation credit of R44.6 million after the reversal of the previously recognised deferred taxation
liability. The reversal is as a result of the impairment loss recognised on intangible assets of R159.2 million
(refer to notes 5 and 10). The deferred taxation liability in the statement of financial position accordingly decreased
by the same amount.
* The audited 31 March 2015 group results have been restated for the effects of the application of IFRS 5 Non-current
Assets Held-for-sale and Discontinued Operations following management’s decision to dispose of certain operations
within the group (refer to note 7). The provisional condensed consolidated statement of financial position and the
provisional condensed consolidated statement of changes in equity for this period is not required to be restated.
7 Discontinued operations
The Vaalkrantz operation (part of LME) continued experiencing challenging geological conditions during the current financial
year. This, coupled with the closure of two production sections as a result of safety and difficult mining conditions, continued
depressed coal prices, increased costs and lower than expected yields resulted in the Board of Directors committing to a plan
to dispose of the Vaalkrantz operation in September 2015. In addition, a decision was taken to dispose of the Balgray Project
and the Koudelager Project (both part of LME) as they are seen as life extensions to the Vaalkrantz operation, as well as the
Mooiklip Coal project (part of Amalahle). This disposal group is classified as a discontinued operation as this sale is part
of a single co-ordinated plan to dispose of the group’s anthracite assets (separate major line of business) which are all
situated in KwaZulu-Natal (geographic area of operations).
The Braakfontein Thermal Coal Project, held by 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 the company.
The company entered into a Sale of Shares and Claims Agreement with Bayete Energy Resources Proprietary Limited (BER) on or
about 11 February 2016 as announced on 15 February 2016. There are still a number of suspensive conditions which have to be
met for the sale to become effective, including section 11 consent from the Minister of Mineral Resources in terms of the
Mineral Petroleum and Resources Development Act, 28 of 2002 (MPRDA). The company also simultaneously entered into a management
agreement with Witbank Mineral Resources Proprietary Limited (WMR), a related party to BER for the management of LME up to and
until the Sale of Shares and Claims Agreement with BER becomes unconditional.
As a consequence of the occurrence of a force majeure event, namely the drought which has resulted in Vaalkrantz Colliery
having no water within which to conduct its operations, management decided to place Vaalkrantz Colliery on care and maintenance
with effect from 1 May 2016 (refer to note 19 for additional information). The Sale of Shares and Claims Agreement as well as
the Management Agreement are still effective with some of the clauses of the Management Agreement being temporarily suspended.
Management expects that the sale with BER will be completed within the next 12 months.
These segments were not previously classified as held-for-sale or as discontinued operations. The comparative statements of
profit or loss and other comprehensive income have been restated to show the discontinued operations separately from continuing
operations.
Results of discontinued operations
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Reviewed)
R R
DISCONTINUED OPERATIONS
Revenue 176 821 851 266 646 732
Cost of sales (209 022 228) (275 243 408)
Gross loss (32 200 377) (8 596 676)
Other income 4 715 000 8 595 246
Operating expenses (99 650 936) (90 453 422)
Operating loss before net finance cost (127 136 313) (90 454 852)
Net finance cost (1 640 044) (1 638 852)
Finance income 1 101 540 872 881
Finance cost (2 741 584) (2 511 733)
Net loss before taxation (128 776 357) (92 093 704)
Income taxation expense - (16 777 221)
Net loss from discontinued operations (128 776 357) (108 870 925)
Net loss attributable to:
Owners of the company (94 325 973) (59 193 962)
Non-controlling interest (34 450 384) (49 676 963)
(128 776 357) (108 870 925)
Cash flows from discontinued operations
Cash flows from operating activities (36 920 578) 20 784 986
Cash flows from investing activities (13 700 452) (28 265 695)
Cash flows from financing activities (73 764) (3 641 176)
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Audited)
8 Earnings and net asset value per share
The calculation of basic earnings per share is based on
net (loss)/profit for the year, attributable to owners
of the company, divided by the weighted average number
of ordinary shares in issue during the year.
Net (loss)/profit attributable to owners of the company (rand) (250 587 708) (31 028 870)
Continuing operations (156 261 735) 28 165 092
Discontinued operations (94 325 973) (59 193 962)
Weighted average number of ordinary shares in issue 251 263 124 224 354 265
Basic earnings per share (cents) (99.7) (13.8)
Continuing operations (62.2) 12.6
Discontinued operations (37.5) (26.4)
Diluted earnings per share
The calculation of diluted earnings per share is based on net
(loss)/profit for the year attributable to owners of the
company. The weighted average number of shares in issue is
adjusted to assume conversion of all potential dilutive shares
as a result of share options granted under the share option
schemes in issue. A calculation is performed to determine the
number of shares that could have been acquired at fair value,
determined as the average annual market share price of the
company’s shares, based on the monetary value of the
subscription rights attached to the outstanding share options.
The number of shares calculated as above is compared with
the number of shares that would have been issued assuming
the exercise of the share options.
Weighted average number of ordinary shares in issue 251 263 124 224 354 265
Potential shares - 3 673 899
Weighted average number of shares for diluted earnings per share 251 263 124 228 028 164
Diluted earnings per share (cents)(1) (99.7) (13.8)
Continuing operations(2) (62.2) 12.4
Discontinued operations(1) (37.5) (26.4)
(1) Anti-dilutive.
(2) Anti-dilutive in the current year.
Headline earnings per share
The calculation of headline earnings, net of taxation and NCI, per share is based on the basic earnings
per share calculation adjusted for the following items:
Year ended Year ended Year ended Year ended
31 March 2016 31 March 2016 31 March 2015 31 March 2015
Gross Net Gross Net
(Reviewed) (Reviewed) (Audited) (Audited)
R R R R
Continuing operations
Net (loss)/profit for the year attributable to owners
of the company (156 261 735) 28 165 092
Adjusted for:
Loss/(profit) on disposal of property, plant and equipment 166 124 135 425 (67 738) (35 668)
Impairment of intangible assets 159 161 739 114 596 453 - -
Headline earnings - continuing operations (41 529 857) 28 129 424
Discontinued operations
Net loss for the year attributable to owners of the company (94 325 973) (59 193 962)
Adjusted for:
Loss on disposal of property, plant and equipment - - 3 600 000 1 918 080
Impairment of assets 85 938 540 68 307 641 56 532 043 30 120 273
Headline earnings - discontinued operations (26 018 332) (27 155 609)
Total headline earnings (67 548 189) 973 815
Cents Cents
Headline earnings per share (26.9) 0.4
Continuing operations (16.5) 12.5
Discontinued operations (10.4) (12.1)
Diluted headline earnings per share(2) (26.9) 0.4
Continuing operations(2) (16.5) 12.3
Discontinued operations(1) (10.4) (12.1)
(1) Anti-dilutive.
(2) Anti-dilutive in the current year.
Year ended Year ended
31 March 31 March
2016 2015
(Reviewed) (Audited)
Net asset value per share
Number of shares in issue 291 994 256 224 442 642
Net asset value per share (cents) 169 373
Number of Number of
shares shares
2016 2015
(Reviewed) (Audited)
Weighted/weighted diluted average number of ordinary shares:
Shares in issue at 1 April 2015 (1 April 2014) 224 442 642 224 310 979
Effect of shares issued 2 December 2014 - 43 286
Effect of shares issued 11 August 2015 2 442 231 -
Effect of shares issued 13 November 2015 24 378 251 -
Weighted number of ordinary shares at reporting date 251 263 124 224 354 265
Potential diluted shares - 3 673 899
Diluted number of ordinary shares in issue at reporting date 251 263 124 228 028 164
Land, Mine Assets Plant and
buildings development under equipment
and leasehold R construction R
improvements R
R
9 Property, plant and equipment
Cost
31 March 2016
Opening balance 35 243 620 1 618 181 752 34 829 528 239 736 649
Reclassification to assets held-for-sale (refer to note 11) (12 120 000) (200 406 749) - (85 675 108)
Additions(1) 72 360 379 877 839 6 392 910 3 898 036
Change in estimates - environmental rehabilitation assets - 11 690 416 - (101 000)
Reclassification(2) - - (41 222 438) 41 222 438
Disposals - - - -
Closing balance 23 195 980 1 809 343 258 - 199 081 015
31 March 2015
Opening balance 38 818 599 1 167 097 812 - 234 979 584
Additions 25 021 408 959 920 34 829 528 4 489 999
Change in estimates - environmental rehabilitation assets - 42 124 020 - 267 066
Disposals (3 600 000) - - -
Closing balance 35 243 620 1 618 181 752 34 829 528 239 736 649
Accumulated depreciation and impairment losses
31 March 2016
Opening balance (10 344 242) (1 144 563 243) - (83 744 609)
Reclassification to assets held-for-sale (refer to note 11) 6 045 862 166 889 286 - 70 974 438
Depreciation expense (507 642) (425 644 604) - (11 403 986)
Disposals - - - -
Closing balance (4 806 022) (1 403 318 561) - (24 174 157)
31 March 2015
Opening balance (3 440 152) (668 685 871) - (60 553 729)
Depreciation expense (858 228) (434 285 950) - (18 167 598)
Impairment loss (6 045 862) (41 591 422) - (5 023 282)
Disposals - - - -
Closing balance (10 344 242) (1 144 563 243) - (83 744 609)
Carrying amount
31 March 2016 18 389 958 406 024 697 - 174 906 858
31 March 2015 24 899 378 473 618 509 34 829 528 155 992 040
All plant and equipment, except leasehold improvements, are owned.
Mine Furniture and Other Total
infrastructure equipment R R
R R
9 Property, plant and equipment (continued)
Cost
31 March 2016
Opening balance 109 221 019 4 310 325 7 252 026 2 048 774 919
Reclassification to assets held-for-sale (refer to note 11) (13 461 262) (1 933 736) (2 183 486) (315 780 341)
Additions(1) 44 000 339 913 594 647 391 219 705
Change in estimates - environmental rehabilitation assets (2 242 757) - - 9 346 659
Reclassification(2) - - - -
Disposals - (133 260) (929 892) (1 063 152)
Closing balance 93 561 000 2 583 242 4 733 295 2 132 497 790
31 March 2015
Opening balance 109 024 051 3 708 461 5 169 055 1 558 797 562
Additions 730 412 659 776 2 622 843 452 317 499
Change in estimates - environmental rehabilitation assets (533 444) - - 41 857 642
Disposals - (57 912) (539 872) (4 197 784)
Closing balance 109 221 019 4 310 325 7 252 026 2 048 774 919
Accumulated depreciation and impairment losses
31 March 2016
Opening balance (36 068 745) (2 353 208) (3 082 962) (1 280 157 009)
Reclassification to assets held-for-sale (refer to note 11) 11 245 557 1 817 348 1 879 918 258 852 409
Depreciation expense (4 329 576) (507 356) (831 920) (443 225 084)
Disposals - 77 969 251 140 329 109
Closing balance (29 152 764) (965 247) (1 783 824) (1 464 200 575)
31 March 2015
Opening balance (24 871 878) (1 677 011) (2 413 841) (761 642 482)
Depreciation expense (7 414 681) (707 678) (831 877) (462 266 012)
Impairment loss (3 782 186) (24 828) (64 463) (56 532 043)
Disposals - 56 309 227 219 283 528
Closing balance (36 068 745) (2 353 208) (3 082 962) (1 280 157 009)
Carrying amount
31 March 2016 64 408 236 1 617 995 2 949 471 668 297 215
31 March 2015 73 152 274 1 957 117 4 169 064 768 617 910
All plant and equipment, except leasehold improvements, are owned.
(1) Deferred stripping additions of R375.5 million (2015: R388.8 million) are included in mine development.
The deferred stripping additions relate to costs incurred, in an opencast operation, in advance to pre-strip an
area of waste in order to expose the Coal Reserve. The costs are capitalised to mine development costs in property,
plant and equipment until such time as the coal exposed is subsequently mined. The stripping activity asset is
depreciated on the units-of-production method, over the expected production life of the identified component of
the Coal Reserve.
(2) The reclassification from assets under construction to plant and equipment relates to the commissioning
of the filter press plant at the Vanggatfontein operation during the current year.
Exploration and evaluation assets Other
Mineral and Drilling Other Richards Bay Computer Total
Prospecting expenses evaluation Coal Terminal software R
Rights R expenses Quattro R
acquired R Scheme
R participation
R
10 Intangible assets
Cost
31 March 2016
Opening balance 611 145 957 20 141 021 61 403 891 22 717 726 5 947 720 721 356 315
Reclassification to assets held-for-sale (refer to (24 772 826) (207 120) (12 750 069) (22 717 726) - (60 447 741)
note 11)
Additions - 250 777 4 172 320 - 571 800 4 994 897
Closing balance 586 373 131 20 184 678 52 826 142 - 6 519 520 665 903 471
31 March 2015
Opening balance 611 145 957 18 573 644 51 658 576 22 717 726 - 704 095 903
Additions - 1 567 377 9 745 315 - 5 947 720 17 260 412
Closing balance 611 145 957 20 141 021 61 403 891 22 717 726 5 947 720 721 356 315
Accumulated amortisation and impairment losses
31 March 2016
Opening balance - - - (4 922 175) - (4 922 175)
Reclassification to assets held-for-sale (refer to - - - 4 922 175 - 4 922 175
note 11)
Amortisation - - - - (2 173 238) (2 173 238)
Impairment loss(1) (145 530 060) - (13 631 679) - - (159 161 739)
Closing balance (145 530 060) - (13 631 679) - (2 173 238) (161 334 977)
31 March 2015
Opening balance - - - (3 407 661) - (3 407 661)
Amortisation - - - (1 514 514) - (1 514 514)
Closing balance - - - (4 922 175) - (4 922 175)
Carrying amount
31 March 2016 440 843 071 20 184 678 39 194 463 - 4 346 282 504 568 494
31 March 2015 611 145 957 20 141 021 61 403 891 17 795 551 5 947 720 716 434 140
(1) To date, the Leeuw Braakfontein Project (reported as a separate segment) has been evaluated on the basis
of both an export and domestic thermal coal operation. Continued depressed export coal pricing and a bleak
medium-term view on the Richards Bay API4 index has had a material impact on the economics of Braakfontein.
We continue to evaluate feasibility options around exclusive domestic supply. However, until the pricing and
delivery schedule for such supply are firmed up, the economics of Braakfontein remain depressed in line with
global seaborne coal prices. Taking into account the aforementioned information, using the updated life-of-mine
plan of 17 years, market-related coal prices and a real discount rate of 13%, the group calculated the recoverable
amount for LBC (using a value-in-use model) of R115.3 million, which resulted in an impairment charge of
R159.2 million recorded in mining and related expenses in the statement of profit or loss.
11 Disposal group held-for-sale
As disclosed in note 7, the Board committed to a plan to sell the Vaalkrantz operation, the Balgray Coal Project, the
Koudelager Coal Project and the Mooiklip Coal Project (disposal group). The disposal group is accordingly presented
as held-for-sale. At 31 March 2016, the disposal group comprised the following assets and liabilities:
Notes At
31 March
2016
(Reviewed)
R
Assets
Property, plant and equipment 11.1 26 578 141
Intangible assets 11.2 5 961 689
Restricted investments 29 650 899
Inventory 4 633 734
Trade and other receivables 11 481 959
Cash and cash equivalents 5 505 916
83 812 338
Liabilities
Borrowings 72 234
Mine closure and environmental rehabilitation provision 34 648 900
Trade and other payables 28 786 616
Provisions 20 285 000
83 792 750
An impairment loss of R22 million was recognised on property, plant and equipment (refer to note 11.1) and an impairment
loss of R47.8 million was recognised on intangible assets (refer to note 11.2) in terms of IAS 36 immediately before the
assets were classified as held-for-sale in terms of IFRS 5 in September 2015. The recoverable amount of R4.2 million was
determined using fair value less costs to sell based on the offer received at arm’s length from an unrelated party for
the discontinued operations. The impairment losses were recognised in operating expenses (refer to note 7).
On 31 March 2016, an additional impairment loss of R16.1 million was recognised on remeasurement of the disposal group
to fair value less costs to sell in terms of IFRS 5. The fair value less costs to sell was determined based on the Sale
of Shares and Claims Agreement concluded at arm’s length with an unrelated party, BER (refer to notes 7 and 19), as well
as taking into account the fact that the Vaalkrantz operation has been placed on care and maintenance. The fair value less
costs to sell of the disposal group was determined by management to be Rnil.
There are no cumulative income or expenses included in OCI relating to the disposal group.
Land, buildings Mine Assets under Plant and
and leasehold development construction equipment
improvements R R R
R
11.1 Property, plant and equipment
Cost
31 March 2016
Opening balance - reclassified as assets held-for-sale 12 120 000 200 406 749 - 85 675 108
Additions - 5 372 558 411 548 1 302 000
Change in estimates - environmental rehabilitation assets - (308 916) - -
Disposals - - - -
Closing balance 12 120 000 205 470 391 411 548 86 977 108
Accumulated depreciation and impairment losses
31 March 2016
Opening balance - reclassified as assets held-for-sale (6 045 862) (166 889 286) - (70 974 438)
Depreciation expense(1) - (1 302 731) - (767 434)
Impairment loss(2) (5 781 505) (19 584 328) (144 492) (8 965 107)
Disposals - - - -
Closing balance (11 827 367) (187 776 345) (144 492) (80 706 979)
Carrying amount
31 March 2016 292 633 17 694 046 267 056 6 270 129
Mine Furniture and Other Total
infrastructure equipment R R
R R
11.1 Property, plant and equipment (continued)
Cost
31 March 2016
Opening balance - reclassified as assets held-for-sale 13 461 262 1 933 736 2 183 486 315 780 341
Additions 1 276 591 15 978 244 242 8 622 917
Change in estimates - environmental rehabilitation assets - - - (308 916)
Disposals - (19 806) - (19 806)
Closing balance 14 737 853 1 929 908 2 427 728 324 074 536
Accumulated depreciation and impairment losses
31 March 2016
Opening balance - reclassified as assets held-for-sale (11 245 557) (1 817 348) (1 879 918) (258 852 409)
Depreciation expense(1) (119 861) (44 619) (82 258) (2 316 903)
Impairment loss(2) (1 733 216) (26 365) (99 222) (36 334 235)
Disposals - 7 152 - 7 152
Closing balance (13 098 634) (1 881 180) (2 061 398) (297 496 395)
Carrying amount
31 March 2016 1 639 219 48 728 366 330 26 578 141
(1) Includes depreciation up to date of classification as assets held-for-sale on 30 September 2015.
(2) Includes impairment loss of R22 million recognised on 30 September 2015 in terms of IAS 36 and
impairment loss of R14.3 million recognised on 31 March 2016 for remeasurement of the disposal group
to fair value less costs to sell.
Exploration and evaluation assets Other
Mineral Drilling Other Richards Bay Computer Total
and expenses evaluation Coal Terminal software R
Prospecting R expenses Quattro R
Rights R Scheme
acquired participation
R R
11.2 Intangible assets
Cost
31 March 2016
Opening balance - reclassified as assets held-for-sale 24 772 826 207 120 12 750 069 22 717 726 - 60 447 741
Additions - - 797 686 - - 797 686
Closing balance 24 772 826 207 120 13 547 755 22 717 726 - 61 245 427
Accumulated amortisation and impairment losses
31 March 2016
Opening balance - reclassified as assets held-for-sale - - - (4 922 175) - (4 922 175)
Amortisation(1) - - - (757 258) - (757 258)
Impairment loss(2) (24 772 826) (207 120) (7 586 066) (17 038 293) - (49 604 305)
Closing balance (24 772 826) (207 120) (7 586 066) (22 717 726) - (55 283 738)
Carrying amount
31 March 2016 - - 5 961 689 - - 5 961 689
(1) Includes amortisation up to date of classification as assets held-for-sale on 30 September 2015.
(2) Includes impairment loss of R47.8 million recognised on 30 September 2015 in terms of IAS 36 and
impairment loss of R1.8 million recognised on 31 March 2016 for remeasurement of the disposal group to
fair value less costs to sell.
12 Change in interests in subsidiaries
During the year, the company acquired the following additional interests in subsidiaries:
Leeuw Mining Amalahle Labohlano Keaton Mining Total
and Exploration Exploration Trading 46 Proprietary
Proprietary Proprietary Proprietary Limited*
Limited Limited Limited
Additional % interest acquired 26% 26% 26% 26%
Effective date 30 September 7 August 11 August 13 November
2015 2015 2015 2015
Consideration paid to NCI 38 490 237 1 000 000 10 548 198 156 649 026 206 687 461
Cash 38 490 237 1 000 000 1 500 000 6 000 000 46 990 237
Shares issued(1) - - 9 048 198 150 649 026 159 697 224
Carrying amount of NCI acquired (40 588 803) (3 536 563) 2 440 078 (69 922 925) (111 608 213)
Decrease in equity attributable to owners of the group (79 079 040) (4 536 563) (8 108 120) (226 571 951) (318 295 674)
(1) 63 731 714 ordinary no par value shares were issued to Rutendo Mining Proprietary Limited
(Rutendo Mining), in exchange for Rutendo Mining’s 26% shareholding in Keaton Mining, at an issue
price of R2.3638 per share totalling R150.6 million, net of transaction costs of R2.6 million. Rutendo
Mining is a related party to the group, as APE Sedibe and AB Glad are directors and shareholders of
Rutendo Mining. In addition 3 819 900 ordinary no par value shares were issued to Moneybox Investments
156 Proprietary Limited (Moneybox), in exchange for Moneybox’s 26% shareholding in Labohlano, at an
issue price of R2.3687 per share totalling R9 million.
* As at 31 March 2016, R3 million of the cash purchase consideration was paid with the remaining
R3 million repayable in monthly instalments of R1 million in terms of the agreement with the non-controlling
shareholders.
13 Borrowings
Investec Bank Limited - loan
On 17 January 2014, Keaton Mining (cedent or borrower) concluded a facility agreement with Investec Bank Limited
acting through its corporate and institutional banking division (lender or arranger) to settle the project finance
facility with Nedbank Limited and to partially fund the acquisition of Xceed. The original loan facility comprised
a term facility of R300 million and a working capital facility of R50 million.
During February 2016, Keaton Mining and Investec Bank Limited amended some of the terms of the existing facility
agreement:
- The term facility was increased from R300 million to R320 million.
- The working capital facility was reduced from R50 million to R20 million.
- Compliance to debt covenants are to be performed quarterly (previously bi-annually).
- The debt to EBITDA ratio was reduced to a maximum of 2.5 (previously 4).
- Current assets to current liabilities ratio was removed.
- A minimum cash balance of R20 million is to be maintained per quarter.
- Distributions to companies within the Keaton group have been limited to R18 million per quarter.
At reporting date, R320 million of the term facility had been drawn. The loan bears interest at the three-month
JIBAR plus a margin of 4% (interest rate). Commitment fees of 1% annually of undrawn facilities applies relating
to the first R300 million and 1.2% annually to the remaining R20 million, which is payable to the lender. The
facility is repayable in quarterly payments which commenced on 31 July 2014 and end on 31 October 2018. Total
interest accrued for the year ended 31 March 2016 amounted to R22.9 million (2015: R28.2 million). In the event
that the borrower defaults, interest will be levied at a margin of 2% above the interest rate. In the event that
the group’s EBITDA on a six-monthly basis does not exceed R200 million, the interest rate will be increased by a
margin of 0.5% until such time that the group again achieves the targeted EBITDA.
At reporting date, R5.5 million (2015: R5.5 million) of the working capital facility had been drawn. The
facility bears interest at the one-month JIBAR plus a margin of 3.75%. Total interest accrued for the year
ended 31 March 2016 amounted to R0.6 million (2015: R0.04 million). Commitment fees of 0.75% annually of
undrawn facilities applies, which is payable to the lender. The working capital facility is renewable annually.
The debt covenant tests for the group are as follows:
Maximum total debt to equity 1:1
Loan life cover ratio (minimum) 1.5:1
Reserve tail ratio (minimum) 25%
Debt service cover ratio (minimum) 1.3:1
Maximum total debt to EBITDA 2.5:1
Minimum cash balance (quarterly basis) R20 million
Maximum distributions to the group (per quarter) R18 million
The debt covenant tests were performed bi-annually during the year and will be performed quarterly from March 2016.
At 31 March 2016 and 2015, there were no breaches of the covenants.
Gunvor SA - US dollar loan
During the 2014 financial year, the company entered into a coal sale agreement with Gunvor SA for the supply of
600 000 tonnes of coal to be delivered from the group’s Moabsvelden Project over a 22-month period from 1 January
2015 to 31 October 2016. This agreement had a prefinance loan clause where Gunvor SA paid an amount of USD4 million
to the company to assist with the development of the Moabsvelden Project within Neosho Trading 86 Proprietary
Limited (Neosho) and to enable the company to meet its obligations to supply coal under the agreement.
As at 31 March 2014, the group recognised a receivable of R37.6 million which represented the discount to the fair
value of its shares issued to Plusbay Limited, a wholly owned subsidiary of Gunvor Group Limited (as part of the
acquisition of Xceed Resources Limited which included Neosho) 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 the
USD4 million prepayment for coal.
During the 2015 financial year, the prepayment of USD4 million (R43 million) was received by Neosho from Gunvor SA,
with the difference of R5.4 million recognised as deferred income on group level, relating to the coal to be
delivered to Gunvor SA, once production at the Moabsvelden Project commenced.
In terms of the coal sale agreement the prepayment of USD4 million is immediately repayable to Gunvor SA, should
Moabsvelden fail to commence with production and subsequently fail to deliver coal to Gunvor SA by 31 December 2015.
Due to delays beyond the control of the group, being the granting of an Integrated Water Use Licence and the
conclusion of a coal supply agreement with Eskom, production could not commence by 31 December 2015 as required.
A financial liability therefore had to be recognised at 31 December 2015 at fair value of R66.9 million resulting
in a loss on initial recognition of R61.5 million recorded in administrative expenses in profit or loss. The
prepayment is repayable plus interest at a nominal rate of 5.31% compounded monthly in arrears. Total interest
accrued for the year ended 31 March 2016 amounted to R0.9 million.
At At
31 March 31 March
2016 2015
(Reviewed) (Audited)
R R
Interest-bearing borrowings
Non-current borrowings
Investec Bank Limited - Loan 130 247 791 184 803 934
Balance at the beginning of the year 184 803 934 249 731 047
Drawdown 20 000 000 -
Interest 22 885 531 28 220 365
Repayments (interest and capital) (91 490 316) (72 743 239)
Issue costs (350 000) -
Amortisation of issue costs 999 877 1 329 429
Net adjustments to current portion (6 601 235) (21 733 668)
Investec Bank Limited - Working capital facility (WCF) - -
Balance at the beginning of the year - -
Drawdown - 5 500 000
Interest 564 103 38 378
Net adjustments to current portion (564 103) (5 538 378)
Gunvor SA - Loan - -
Balance at the beginning of the year - -
Initial recognition of financial liability 66 943 389 -
Interest 913 399 -
Foreign exchange gain (2 569 112) -
Net adjustments to current portion (65 287 676) -
Industrial Development Corporation - Loan - -
Balance at the beginning of the year - 2 338 168
Interest - 121 198
Repayments (interest and capital) - (4 331 000)
Net adjustments to current portion - 1 871 634
Industrial Development Corporation - LME preference shares - -
Balance at the beginning of the year - 27 989 417
Dividends accrued 4 978 146 4 183 696
Net adjustments to current portion (4 978 146) (32 173 113)
Vitol SA - Loan 59 207 937 66 665 511
Balance at the beginning of the year 66 665 511 61 556 110
Interest 2 937 858 2 235 181
Repayments (interest and capital) (10 775 786) (5 696 384)
Foreign exchange loss 15 323 399 8 570 604
Net adjustments to current portion (14 943 045) -
Other borrowings 149 669 271 468
Balance at the beginning of the year 271 468 223 029
Reclassification to assets held-for-sale (124 802) -
Lease agreements concluded 233 118 382 940
Interest 21 999 24 124
Repayments (319 324) (269 694)
Net adjustments to current portion 67 210 (88 931)
Total non-current borrowings 189 605 397 251 740 913
Current borrowings
Investec Bank Limited - Loan 77 984 594 71 383 359
Investec Bank Limited - WCF 6 102 481 5 538 378
Gunvor SA - Loan 65 287 676 -
Vitol SA - Loan 14 943 045 -
Industrial Development Corporation - LME preference shares 37 151 259 32 173 113
Instalment sale agreements with other borrowers 213 248 280 458
Total current borrowings 201 682 303 109 375 308
Total interest-bearing borrowings 391 287 700 361 116 221
At At
31 March 31 March
2016 2015
(Reviewed) (Audited)
R R
14 Mine closure and environmental rehabilitation provision
Balance at the beginning of the year 270 058 375 215 181 397
Reclassification to assets held-for-sale (32 273 256) -
Increase in provision 25 686 843 54 876 978
Additional provision due to new disturbances allocated
to property, plant and equipment 9 346 659 41 857 642
Change in estimate recognised in profit or loss (4 557 835) (4 669 408)
Unwinding of discount (included in finance cost) 20 898 019 17 688 744
Balance at the end of the year 263 471 962 270 058 375
15 Contingencies, commitments and legal disputes
The group has the following contingencies, commitments and legal disputes:
(i) During July 2015, the company and its subsidiary, Keaton Mining concluded an agreement with Moneybox regarding
the grant of call options by the company and Keaton Mining to Moneybox to acquire all of the ordinary shares,
preference shares and associated preference dividends rights held by the company in Labohlano, and the Prospecting
Rights and related geological and technical reports owned by Keaton Mining relating to the Sterkfontein Project.
The total purchase price for the sale will be R152 million plus accrued preference dividends to the effective date.
The options shall only become effective on the fulfilment of the last condition precedent (including, inter alia,
approval being obtained from the Board of Directors of the various parties, shareholders’ approval, compliance with
the JSE Listings Requirements and the relevant provisions of the Companies Act, 2008, and approval being obtained
from Investec Bank Limited in accordance with Keaton Mining’s facility agreement). The option is exercisable by
Moneybox until 31 January 2017.
(ii) Keaton Mining vs Megacube
The legal dispute between Keaton Mining and Megacube was settled subsequent to year-end (refer to note 19). The
following award was made in favour of Keaton Mining on 28 April 2016 regarding the merits of the dispute. The more
substantial claims awarded in favour of Keaton Mining are listed below:
- Megacube’s claim of R42.5 million is dismissed with cost.
- Megacube is liable to compensate Keaton Mining for the damages which flow from its failure to mine and deliver
300 000 tonnes of run-of-mine (ROM) coal per month.
- Megacube is liable to make payment to Keaton Mining in such an amount equalling the present value of 657 583.8 tonnes
of ROM coal not mined.
- Megacube is directed to pay Keaton Mining’s costs, such costs to include the employment of two counsel and the
qualifying fees of expert witnesses.
The quantum of the claims awarded will be dealt with in the coming months. A reliable estimate of the amount to be
received can only be made once the outcome of the quantification portion of the arbitration has been finalised/settled.
On 10 June 2016, Megacube filed an application in the High Court of Gauteng to have the arbitration award reviewed
and set aside. This application will be opposed. The company’s management and its legal advisors strongly believe
that this application is without merit.
(iii) Neosho Trading 86 Proprietary Limited (Neosho) and Focus Coal Investments Proprietary Limited (FCI) vs Thebe
Mining Resources Proprietary Limited and Main Street 1055 Proprietary Limited (Thebe)
Thebe have commenced arbitration (litigation) against Neosho and FCI in which they are claiming that the transaction
previously entered into with Thebe for the acquisition of 30% of the shareholding in Neosho, becomes unconditional
and therefore effective resulting in Thebe becoming a 30% shareholder of Neosho, failing which they are claiming
alleged damages of R59 million and associated costs in respect of alleged breaches by FCI and Neosho in the
fulfilment of the suspensive conditions to such transaction (the subscription agreement entered into between the
companies). Neosho and FCI are defending the arbitration (litigation) proceedings and believe that there is no
reasonable basis for the claim and believe that a provision for this potential cost is not required at 31 March 2016.
At At
31 March 31 March
2016 2015
(Reviewed) (Audited)
R R
Capital commitments
Authorised but not contracted 22 628 750 44 548 617
Authorised and contracted 5 696 211 16 830 134
All contracted amounts will be funded through existing funding mechanisms within the group and cash generated from operations.
16 Financial risk management activities
The table below presents the group’s fair value measurement 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).
Fair value
Accounting classification Carrying Level 1 Level 2 Level 3
amount R R R
R
At 31 March 2016
Financial assets
Restricted investments At fair value through profit
or loss financial assets (designated) 35 225 869 35 225 869 - -
Restricted investments (held-for-sale) At fair value through profit
or loss financial assets (designated) 29 650 899 29 650 899 - -
Financial liabilities
Borrowings (IDC preference shares) Financial liabilities at amortised cost 37 151 259 - 39 132 476 -
At 31 March 2015
Financial assets
Restricted investments At fair value through profit or loss
financial assets (designated) 68 305 506 68 305 506 - -
Trade and other receivables
(forward exchange contracts) At fair value through profit or loss
financial assets 433 134 - 433 134 -
Financial liabilities
Short-term financial liabilities At fair value through profit or loss
financial liabilities 67 816 - 67 816 -
Borrowings (IDC preference shares) Financial liabilities at amortised cost 32 173 113 - 32 245 303 -
Basis for determining fair values
The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the
significant unobservable inputs used.
Interrelationship between
unobservable inputs and fair
Type Valuation technique Significant unobservable inputs value measurement
Financial assets Valued by an independent financial - Forward looking market rates. The estimated fair value would
Forward exchange institution using forward looking (increase)/decrease pending
contracts (FECs) market rates until the realisation changes to the unobservable inputs.
date of the relevant instruments.
Financial liabilities Discounted cash flows: considers - Risk adjusted rate of 9.25% The estimated fair value would
Borrowings (IDC the present value of the expected (2015: 9.25%). (increase)/decrease pending
preference shares) payments discounted using risk changes to the unobservable inputs.
adjusted discount rates.
The carrying values (less any impairment allowance) of restricted cash, cash and cash equivalents, investments and loans,
trade and other receivables, borrowings, vendor liability and trade and other payables approximate their fair values.
17 Dividends
No dividends have been declared nor are any proposed for the year ended 31 March 2016 (31 March 2015: Rnil).
18 Going concern
At 31 March 2016 the group’s current liabilities exceeded its current assets by R120.3 million (2015: R42.9 million).
This increase in current liabilities in the group is attributable mainly to the initial recognition of a financial
liability of R66.9 million payable to Gunvor SA (Gunvor), as described in more detail in note 13 to the condensed
consolidated financial statements. At 31 March 2016 the entire liability was included in current liabilities as the
group had entered into commercial negotiations with Gunvor to agree revised repayment terms, but was unable to reach
agreement by year end. Subsequent to year end, the group and Gunvor agreed terms that will see a significant portion
of the liability being reclassified to non-current liabilities, thus alleviating the net current liability position
of the group.
The group continues to generate cash in line with budget consistently from its long-life Vanggatfontein colliery
whereby it delivers coal under a long term off-take agreement to Eskom and through sales to its domestic metallurgical
customers. Cash generated from this operation, the disposal of the significant loss making Vaalkrantz colliery, the
directors’ authority to issue further shares for cash and the group’s undrawn overdraft facility will ensure adequate
funding for the group to continue to operate for the foreseeable future.
Accordingly, the condensed consolidated financial statements of the group continue to be prepared on the going
concern basis.
19 Significant events after 31 March 2016 up to the date of this report
(i) Included in trade and other payables for the year ended 31 March 2015 was an amount of R42.5 million for contract
mining services rendered by Megacube to Keaton Mining. As a result of several alleged breaches of the contract mining
agreement, Keaton Mining disputes that this amount is due and owing to Megacube. As a result of Megacube’s breaches
of the contract mining agreement, Keaton Mining has lodged several counterclaims against Megacube for damages and
losses sustained. Keaton Mining delivered a notice of termination of the agreement to Megacube on 16 May 2012 in
accordance with the provisions of the agreement and subsequently terminated the agreement on 5 July 2012. The matter
was referred to arbitration which took place during February 2016 and March 2016. On 9 March 2016, and by agreement
between the parties, an interim award was made in terms whereof the merits of the dispute were separated from the
quantum. Closing arguments regarding the merits were heard in April 2016. On 28 April 2016, an award was made in
favour of Keaton Mining regarding the merits of the dispute. Refer to note 15 for additional disclosure. The quantum
of the claims awarded will be dealt with in the coming months. A reliable estimate of the amount to be received can
only be made once the outcome of the quantification portion of the arbitration has been finalised/settled.
On 10 June 2016, Megacube filed an application in the High Court of Gauteng to have the arbitration award reviewed
and set aside. This application will be opposed. The company’s management and its legal advisors strongly believe
that this application is without merit.
(ii) The company has entered into a Sale of Shares and Claims Agreement with BER on or about 11 February 2016 as announced
on 15 February 2016 to dispose of its wholly owned subsidiary LME and its wholly owned subsidiary Amalahle. There are still
a number of suspensive conditions which have to be met for the sale to become effective, including Section 11 consent from
the Minister of Mineral Resources in terms of the MPRDA.
The company also simultaneously entered into a management Agreement with WMR, a related party to BER for the management of
LME up to and until the Sale of Shares and Claims Agreement with BER becomes unconditional.
Notwithstanding continuous efforts by both LME and WMR to minimise losses exacerbated by the ongoing global decline in coal prices,
force majeure declared on LME by its biggest customer and the unavailability of water due to the continued drought in the region,
management decided to place Vaalkrantz Colliery on care and maintenance with effect from 1 May 2016. LME has embarked on a
Section 189A process for the retrenchment of all employees during April 2016 which was finalised and became effective from
31 May 2016. The Sale of Shares and Claims Agreement as well as the Management Agreement are still effective. As a consequence
of the occurrence of a force majeure event, namely the drought which has resulted in Vaalkrantz Colliery having no water within
which to conduct its operations, some of the clauses of the Management Agreement had been temporarily suspended.
20 Review Report
These provisional condensed consolidated financial statements for the year ended 31 March 2016 have been reviewed by KPMG Inc,
in accordance with ISRE 2410, who expressed an unmodified review conclusion. The auditor’s review does not necessarily report
on all of the information contained in this announcement. Any reference to future financial information included in this
announcement has not been reviewed or reported on by the auditor. Shareholders are advised, that in order to obtain a full
understanding of the nature of the auditor’s engagement they should obtain a copy of that review together with the
accompanying financial information from the company’s registered office.
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
Email: info@keatonenergy.co.za
Directors
Non-Executive
Dr JD Salter (Chairman)*
LX Mtumtum (Lead Independent Director)
P Pouroulis**
OP Sadler (Independent)
APE Sedibe
GH Kemp (Independent)
MT Witteveen***
HG Mai****
Executive
AB Glad (Chief Executive Officer)
J Rossouw (Chief Financial Officer)
*British **South African/Cypriot ***Dutch ****Swiss
Company Secretary
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: 27/06/2016 08:30:00 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
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