| Wed 28 May 2008, 15:00 | | KEH - Keaton Energy - Condensed Audited Group Results For The 13-Month Period |
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KEH
KEH
KEH - Keaton Energy - Condensed Audited Group Results For The 13-Month Period
Ended 31 March 2008
Keaton Energy Holdings Limited
(formerly Tricoal Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2006/011090/06)
JSE code: KEH & ISIN code: ZAE000117420
("Keaton Energy" or "the company" or "the group")
CONDENSED AUDITED GROUP RESULTS FOR THE 13-MONTH PERIOD ENDED 31 MARCH 2008
Condensed Consolidated Income Statement
Note 1 March 2007 10 April 2006
to to
31 March 2008 28 February
R`000 2007
R`000
Other income 3 915 -
Administrative and other 4 (14 272) (380)
operating expenses
Operating loss before net (13 357) (380)
finance income
Net finance income 5 11 222 (6)
Net loss before taxation (2 135) (386)
Income taxation expense 6 (2 523) 62
Loss for the period (4 658) (324)
Attributable to:
Equity holders of the parent (4 658) (324)
Minority shareholders - -
Loss for the period (4 658) (324)
Number of shares (`000)
Weighted average (basic) 50 902 70
Weighted average (diluted) 51 002 70
Loss per share (cents) 7
Basic 9.2 463.3
Diluted 9.2 463.3
Condensed Consolidated Balance Sheet
Not 31 March 28 February
e 2008 2007
R`000 R`000
Assets
Non-current assets 8 40 556 141
Current assets 9 313 349 1
Total assets 353 905 142
Equity and liabilities
Capital and reserves 10 336 738 (324)
Non-current liabilities 10 - 297
Current liabilities 11 17 167 169
Total equity and liabilities 353 905 142
Condensed Consolidated Statement of Changes in Equity
Share Share- Accumu- Total Minority Total
capital based lated loss attribu- share- R`000
and payment R`000 table to holders`
premium transac- equity interest
R`000 tions holders of R`000
R`000 the
company
R`000
Ordinary - - - - - -
shares
issued
Minority - - - - - -
shareholders
` interest
Total - - (324) (324) - (324)
recognised
income and
expense for
the period
(Loss for
the period)
Balance at - - (324) (324) - (324)
28 February
2007
Ordinary 332 474 - - 332 474 - 332 474
shares
issued for
cash
Share-based 14 860 424 - 15 284 - 15 284
payments
Shares issue (6 038) - - (6 038) - (6 038)
expenses
Minority - - - - - -
shareholders
`
interest
Total - - (4 658) (4 658) - (4 658)
recognised
income and
expense for
the period
(Loss for
the period)
Balance at 341 296 424 (4 982) 336 738 - 336 738
31 March
2008
Condensed Consolidated Cash Flow Statement
1 March 10 April
2007 to 2006 to
31 March 28 February
2008 R`000 2007
R`000
Cash flows from operating 1 537 (297)
activities
Cash flows from investing (20 441) -
activities
Cash flows from financing 326 139 298
activities
Net increase in cash and cash 307 235 1
equivalents
Cash and cash equivalents at the 1 -
beginning of the period
Cash and cash equivalents at the 307 236 1
end of the period
Notes
The financial results in this statement are presented for the 13-month period
ended 31 March 2008. Prior period figures represent the period from
incorporation, 10 April 2006, to 28 February 2007. The overall results for the
period are characteristic of an exploration company in the process of
financing its exploration and evaluation activities.
The condensed consolidated results for the 13-month period ended 31 March 2008
incorporate extracts of the group`s unqualified audited financial statements,
and are prepared in accordance with International Financial Reporting
Standards (IFRS), the Listings Requirements for the JSE Limited (JSE) and the
South African Companies Act, 61 of 1973 (as amended). These condensed
consolidated financial statements are prepared in accordance with IAS 34:
Interim Financial Reporting. The accounting policies applied are consistent
with those applied in the annual financial statements for the period ended 28
February 2007. For a better understanding of the group`s financial position
and results of operations, these condensed consolidated results are to be read
in conjunction with the group`s audited annual financial statements for the 13-
month period ended 31 March 2008, which include all disclosures required by
IFRS, and which are expected to be released on or about 17 June 2008.
The group did not generate any mining revenue during the period. Other income
includes sublease income and consulting fees.
Administrative and other operating expenses include:
employee costs of R5.8 million;
consulting, legal and professional fees of R4.1 million;
mining and exploration costs that were not capitalised of R1.4 million;
investor relations costs of R0.6 million; and
operating lease costs of R0.5 million.
The group has received interest of R11.3 million mainly on R312 million in
seed capital raised during November / December 2007.
Income taxation expense comprises current taxation expense of R3.0 million,
deferred taxation credits of R0.6 million and a secondary tax on companies of
R0.1 million. The company has paid R2.2 million in tax during the period.
Loss per share:
The calculation of basic, diluted and headline loss per share is based on the
loss for the 13- month period of R4.7 million. The weighted average number of
shares in issue is 50 902 474. The diluted weighted average number of shares
in issue is 51 002 474, but as the group is in a loss position, there is no
dilutive impact on the basic loss per share. There are no reconciling
adjustments between the basic and headline loss per share.
Capital exploration expenditure for the 13-month period under review amounted
to R37.5 million. Drilling and related expenses amounted to R23.5 million.
Also included in the R37.5 million is an amount of R14 million as a result of
the exploration right acquisition agreement concluded between the company,
Keaton Mining and Rutendo Mining (the 26% minority shareholder in Keaton
Mining). Consent in terms of section 11 of the Mineral and Petroleum Resources
Development Act (MPRDA) was received on 20 February 2008 for the cession of
four exploration rights to Keaton Mining. In terms of the shareholders`
agreement, the purchase price was settled through the issue of 2 000 000
ordinary shares at R1 each in the share capital of the company on the
registration of notarial deeds of transfer. As no formal valuation could be
performed on the exploration rights acquired at the time of the agreement,
accounting rules require that the share-based payment be accounted for at the
fair value of the shares on the date of the grant, i.e. the date that the
vesting conditions were met (20 February 2008). This resulted in the
exploration rights being acquired at R7 a share (being the value which the
company raised seed capital at during the last two months in 2007), or R14
million in total.
Current assets include:
cash of R307.2 million;
interest receivable of R2.2 million; and
value-added tax recoverable of R3.6 million.
The company initially funded its operations through unsecured founder loans,
which were repaid during January 2008. Further funding of R15 million was
received from the Kleo Trust, a trust associated with the Pouroulis family.
This loan was later converted into ordinary shares in the company. Nedbank
Capital contributed R5 million to share capital (5 million shares at R1 each).
In the period November to December 2007, the company raised R312 million in
seed capital (before share issue expenses of R5.5 million) from selected
investors through the issue of 44.6 million ordinary shares at R7 each.
Current liabilities include:
amounts payable to exploration service vendors of R5.7 million;
other payables of R9.4 million (mainly consulting fees payable to the group`s
advisors in terms of the group`s seed capital raising and structuring); and
taxation of R0.9 million.
No dividends have been declared nor are any proposed for the period under
review.
The net asset value per share at 31 March 2008 is 254 cents.
Segment information:
Refer to the commentary below for a description of the projects (segments) of
the group. The total assets of the group can be segmented as follows (R`000):
31 March 2008 28 February
2007
Sterkfontein Project 22 107 79
Delmas Project 8 079 -
Klipfontein Project 7 340 -
Cash resources 307 236 -
Other 9 143 63
353 905 142
The segment reporting has been prepared in accordance with IFRS 8 - Operating
Segments (IFRS 8) which defines requirements for the disclosure of financial
information of an entity`s operating segments. The standard requires
segmentation based on the group`s internal organisation. The segments did not
commence mining activities and as a result no revenue nor any segment results
were generated.
The group discloses its operating segments according to the entity components
regularly reviewed by the chief operating decision makers. Segment information
is prepared in conformity with the measure that is reported to the chief
operating decision makers.
Post-balance sheet events:
On 18 April 2008, Dr S.M. Rupprecht, one of the executive directors, was
granted a conditional bonus award of 1 500 000 share appreciation rights
(offer price of R10) in terms of the company`s long-term share incentive
scheme. These rights were awarded and accepted in terms of the Keaton Energy
Long-Term Performance Incentive Scheme and are subject to specific performance
criteria.
Also refer to information regarding the Amalahle Prospect and the company`s
listing on the JSE disclosed under the commentary below.
KPMG Inc`s unmodified auditors` reports included in the annual financial
statements and on the condensed financial statements contained in this
condensed report are available for inspection at the company`s registered
office.
COMMENTARY
We are pleased to present to you your company`s audited condensed annual
results for the 13-month period ended 31 March 2008.
This period has been significant in the establishment of Keaton Energy,
culminating in the listing of the company`s ordinary shares on the main board
of the JSE soon after the close of the reporting period. It was in this
reporting period that Keaton Energy`s 74% held subsidiary, Keaton Mining,
concluded an agreement with Rutendo Mining to acquire the Sterkfontein and
Klipfontein Projects and was awarded the exploration right to the Delmas
Project. These three projects formed the basis for the establishment of the
company.
Structure finalised
The group`s structure was finalised during 2007 and was designed from
inception to comply with the requirements of the MPRDA and the Mining Charter.
All of the group`s projects and exploration right applications are held in
newly-established subsidiaries, each of which has a different Historically
Disadvantaged South African (HDSA) partner. All services are provided to the
subsidiaries by Keaton Energy`s 100%-held subsidiary, Keaton Administrative
and Technical Services (KATS), in terms of standard management agreements,
whilst staff numbers grew during the period from just one to nine, supported
through relationships established with a significant number of consultants and
contractors.
Progress made
Sterkfontein Project
Drilling began on the Sterkfontein Project in February 2007, once suitable
contractors and consultants had been appointed. At the end of the initial
drilling programme in December 2007, 25 000 metres of drilling had been
completed, and an in situ mineable resource of 34 million tonnes in the
indicated and measured categories was declared in March 2008.
Delmas Project
Keaton Mining was awarded the exploration right to the Delmas Project in
October 2007 and drilling began in the same month. By December 2007, 6 000
metres of drilling had been completed and an in situ mineable resource of 171
million tonnes, principally in the indicated and measured categories, had been
declared by March 2008. A second phase of drilling was initiated in early 2008
and was completed by the end of April 2008. This additional data were used in
the May 2008 updated resource statement which is discussed in more detail
below. The full mining right application was submitted for the Delmas Project
on 31 March 2008. It remains the board`s priority to advance the Delmas
Project into production as soon as possible, with the first quarter of 2009
targeted for mining to begin, subject to regulatory approvals. Early
indications are that the Delmas Project will produce mainly steam coal for the
local market, with secondary products consisting of a small portion of export
steam coal, a No. 5 Seam product for the metallurgical industry, and a lean
coal product for blending with other coals, also for the metallurgical
industry.
Klipfontein Project
This was the first project explored by the group. 34 holes were initially
drilled and coal was intersected in a localised area of 4.5 hectares.
Management conducted a review of options available to extract value from this
project and it was determined that a mining permit application should be
prepared and submitted to the regional office of the Department of Minerals
and Energy (DME). A mining permit is a limited form of mining right that
permits an area of only 1.5 hectares to be disturbed at any one time, to a
maximum of 4.5 hectares. The Klipfontein Project, although small, should
provide cash flows to the company for a period of about 10 months while the
Delmas Project is brought into production.
Amalahle Prospect
On the 15 April 2008, Amalahle Exploration, a 74%-held subsidiary of Keaton
Energy was granted four separate exploration rights by the DME. These rights
cover six discrete properties totalling 1 597 hectares in the Ermelo coal
field. Exploration is expected to commence in June 2008.
Listing
During April 2008 irrevocable undertakings were obtained from investors to
subscribe for 10 000 000 shares at R10 each in the company in advance of the
listing of the shares on the JSE. The listing took place on 22 April 2008, and
was the culmination of several months of intensive effort on the part of the
company`s executives and advisors. The shareholder register at listing
consisted of 584 shareholders, with 82% of the shares held by South African
residents. Since being placed prior to listing at R10 per share, the Keaton
Energy share has traded between R11.55 and R15.50. The successful private
placing and listing was a vote of confidence both in the new mineral rights
dispensation and in the new company.
Markets
Developments in both the international and domestic coal markets during the
review period proved very encouraging. The spot price of coal exported via the
Richards Bay Coal Terminal (RBCT) increased dramatically in the fourth quarter
of 2007, driven mostly by Indian sub-continent buyers who had switched from
the Pacific to the Atlantic thermal coal markets. This switch was in part
driven by supply shocks in the tight Pacific market, for example the
logistical problems and floods experienced in Australia and the unusually cold
winter in China. However, it was underlain by the fundamental increase in
demand in China and India. We expect that long-term real export prices will
remain higher than their long-term averages. Meanwhile, the domestic market
has been dramatically affected by South Africa`s current energy crisis. Eskom
has identified low coal stocks, lower quality coal and wet coal as key
constraints impacting negatively on its ability to provide sufficient
electricity to the country, and has had a knock-on effect on other domestic
coal buyers in the market. Domestic coal prices have increased as a
consequence. Eskom`s positive effect on the domestic market is likely to
continue beyond the conclusion of the emergency coal purchasing programme as
its coal burn is increased at its existing power stations, and as previously
mothballed power stations are to be re-commissioned. Management`s initial
discussions with Eskom regarding future coal purchases have been encouraging.
Keaton Energy`s inaugural reporting period has seen an enormous amount
achieved. The company has been firmly established with the following in place:
- a strong management team;
- significant advanced development projects;
- a JSE listing; and
- sufficient available capital to achieve target production volumes of 2
million tonnes per annum in the medium-term.
May 2008 Resource Update
Keaton Energy published a SAMREC compliant Coal Resource statement in March
2008. This Coal Resource statement covered the Sterkfontein and Delmas
projects and was included in the company`s Pre-Listing Statement. The
Sterkfontein Coal Resource has not subsequently been updated, however a
further 33 boreholes totalling 2 400 metres have been drilled, principally for
mine planning purposes, on the Delmas Project. The additional information from
these 33 boreholes has been used to improve the company`s confidence in the
Delmas Project`s Coal Resource estimate.
The Delmas Project area`s total mineable in situ Coal Resource has increased
marginally from 171.5 million tonnes in the March 2008 estimate to 178.4
million tonnes in the May 2008 estimate (a 4% increase), all in the indicated
and measured categories. This has seen the No. 5 Seam Coal Resource increase
from 3.6 million tonnes to 4.8 million tonnes, the No. 4 Seam Coal Resource
increase from 84.5 million tonnes to 90.6 million tonnes and the No. 2 Seam
Coal Resource decrease from 83.4 million tonnes to 83 million tonnes.
The amount of mineable in situ coal defined in the measured category has
increased from 60.1 million tonnes in the March 2008 estimate to 97 million
tonnes in the May 2008 estimate, a 61.4% increase, with the remaining mineable
in situ coal in the indicated category totalling 81.4 million tonnes, down
from 111.1 million tonnes. The estimated total mineable in situ Coal Resource
classified as pseudo-anthracite (lean-, or de-volatilised coal) has decreased
from 45.3 million tonnes to 41.6 million tonnes, while the estimated total
mineable in situ Coal Resource classified as bituminous coal has increased
from 122.6 million tonnes to 132 million tonnes.
Looking ahead
Looking ahead, much remains to be done. The regulatory process must be
navigated to ensure that the Klipfontein and Delmas Projects are turned to
account, surface rights must be acquired, suitable plant delivered and
appropriate mining contractors appointed - all against tight deadlines. We
have every confidence that the same levels of commitment, passion and ability
applied successfully so far, will contribute in large measure to our achieving
the objectives set out above.
On behalf of the board
David Salter Paul Miller
(Chairman) (Managing Director)
27 May 2008
Registered Office:
Ground Floor, Eland House, The Braes, 3 Eaton Avenue, Bryanston, South Africa
(Postnet Suite 464, Private Bag X51, Bryanston 2021)
Transfer Secretaries:
Computershare Investor Services South Africa (Pty) Ltd
Ground Floor, 70 Marshall Street, Johannesburg , South Africa
(PO Box 61051, Marshalltown 2107)
Auditors:
KPMG Inc.
1226 Schoeman Street, Hatfield, Pretoria
Directors:
Dr JD Salter (chairman)*++, PBM Miller (managing director), LX Mtumtum++, P
Pouroulis**+, Dr SM Rupprecht ***, JG Schonfeldt, APE Sedibe+
*British, **South African / Cypriot, ***USA, +non-executive, ++independent non-
executive
telephone: +27 0(11) 317 1700
telefax: +27 0(11) 463 4759
email: info@keatonenergy.co.za
28 May 2008
Date: 28/05/2008 15:00:01 Produced by the JSE SENS Department.
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