| Wed 26 Nov 2008, 14:00 | | KEH - Keaton Energy - Condensed Reviewed Group Results For The Six-Month Period |
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KEH
KEH
KEH - Keaton Energy - Condensed Reviewed Group Results For The Six-Month Period
Ended 30 September 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 REVIEWED GROUP RESULTS
for the six-month period ended 30 September 2008
Condensed Consolidated Income Statement
Note 6 months to 7 months to 13 months
30 September 30 to
2008 September 31 March
R`000 2007 2008
(Reviewed) R`000 R`000
(Unaudited) (Audited)
Other income 3 458 134 915
Administrative and other 4 (14 339) (2 225) (14 272)
operating expenses
Operating loss before net finance (13 881) (2 091) (13 357)
income / (costs)
Net finance income / (costs) 5 22 406 (15) 11 222
Net profit / (loss) before 8 525 (2 106) (2 135)
taxation
Income taxation (expense) / 6 (6 617) 373 (2 523)
benefit
Profit / (Loss) for the period 1 908 (1 733) (4 658)
Attributable to:
Equity holders of the parent 1 908 (1 733) (4 658)
Minority shareholders - - -
Profit / (Loss) for the period 1 908 (1 733) (4 658)
Number of shares (`000)
Weighted average (basic) 141 658 70 50 902
Weighted average (diluted) 145 158 70 52 902
Earnings / (Loss) per share 7
(cents)
Basic / Headline 1.35 (2 475.71) (9.15)
Diluted / Headline diluted 1.31 (2 475.71) (9.15)
Condensed Consolidated Balance Sheet
Not 30 September 31 March 2008
e 2008
R`000
R`000 (Audited)
(Reviewed)
Assets
Non-current assets 8 55 461 40 556
Current assets 9 381 950 313 349
Total assets 437 411 353 905
Equity and liabilities
Capital and reserves 10 432 220 336 738
Current liabilities 11 5 191 17 167
Total equity and 437 411 353 905
liabilities
Condensed Consolidated Statement of Changes in Equity
Share Share- Accumu- Total attribu- Minority Total
capital based lated table to share- R`000
and payment loss equity holders holders`
premium transac- R`000 of the Company interest
R`000 tions R`000 R`000
R`000
Balance at - - (324) (324) - (324)
28
February
2007
(Audited)
Ordinary - - - - - -
shares
issued
Minority - - - - - -
shareholde
rs`
interest
Total - - (1 733) (1 733) - (1
recognised 733)
income and
expense
for the
period -
Loss for
the period
Balance at - - (2 057) (2 057) - (2
30 057)
September
2007
(Unaudited
)
Ordinary 332 474 - - 332 474 - 332
shares 474
issued for
cash
Share- 14 860 424 - 15 284 - 15 284
based
payments
Share (6 038) - - (6 038) - (6
issue 038)
expenses
Minority - - - - - -
shareholde
rs`
interest
Total - - (2 925) (2 925) - (2
recognised 925)
income and
expense
for the
period -
Loss for
the period
Balance at 341 296 424 (4 982) 336 738 - 336
31 March 738
2008
(Audited)
Ordinary 100 000 - - 100 000 - 100
shares 000
issued for
cash
Share- 1 000* 2 003 - 3 003 - 3 003
based
payments
Share (9 429)* - - (9 429) - (9
issue 429)
expenses
Minority - - - - - -
shareholde
rs`
interest
Total - - 1 908 1 908 - 1 908
recognised
income and
expense
for the
period -
Profit for
the period
Balance at 432 867 2 427 (3 074) 432 220 - 432
30 220
September
2008
(Reviewed)
* Included in the share issue expenses are R1 million worth of legal fees
settled with the issue of 100 000 shares at R10 each in the Company.
Condensed Consolidated Cash Flow Statement
6 months to 7 months to 13 months to 31
30 September 30 September March 2008
2008 2007 R`000
R`000 R`000 (Audited)
(Reviewed) (Unaudited)
Cash flows from operating (254) (3 472) 1 537
activities
Cash flows from investing (19 828) (11 496) (20 441)
activities
Cash flows from financing 91 571 15 231 326 139
activities
Net increase in cash and 71 489 263 307 235
cash equivalents
Cash and cash equivalents 307 236 510 1
at the beginning of the
period
Cash and cash equivalents 378 725 773 307 236
at the end of the period
Notes
1. The financial results in this statement are presented for the six-month
period ended 30 September 2008. Comparable period figures represent the
seven-month period ended 30 September 2007. During 2007 the Company changed
its year-end from 28 February to 31 March. Although not required in terms
of IAS 34: Interim Financial Reporting, the income statement, statement of
changes and equity and cash flow statement for the 13-month period from 1
March 2007 to 31 March 2008 have also been included. The overall results
for the period are characteristic of an exploration company in the process
of financing its exploration and evaluation activities. This also results
in the prior periods not being comparable.
2. The condensed consolidated results for the six-month period ended 30
September 2008 are prepared in accordance with IAS 34: Interim Financial
Reporting, the Listings Requirements for the JSE Limited (JSE) and the
South African Companies Act, 61 of 1973 (as amended). The accounting
policies applied are consistent with those applied in the annual financial
statements for the period ended 31 March 2008.
3. The Group did not generate any mining revenue during the period. It was
only subsequent to 30 September 2008 that the first coal at the Group`s
Klip Colliery was sold (refer to commentary below). Other income includes
sublease income and consulting fees.
4. Administrative and other operating expenses include:
- employee costs of R8.1 million;
- audit, consulting, legal and professional fees of R2.6 million;
- investor relations costs of R1.1 million;
- mining and exploration costs that were not capitalised of R0.4 -
million; and
- operating lease costs of R0.3 million.
5. The Group has received interest of R22.4 million mainly from term deposits
at all the major banks of South Africa.
6. Income taxation expense comprises current taxation expense of R5.6 million,
deferred taxation debits of R0.6 million and a secondary tax on companies
of R0.4 million. The Company has paid R6.3 million in tax during the
period, mainly as a result of interest earned in the Company. Deferred tax
assets in terms of the losses incurred by subsidiary companies are not yet
recognised.
7. Earnings per share:
The calculation of basic, headline, diluted and headline diluted earnings
per share is based on the profit for the six-month period of R1.9 million.
The weighted average number of shares in issue is 141 658 233. The diluted
weighted average number of shares in issue is 145 158 233. The Company was
in a loss position for the 13 months ended 31 March 2008, therefore there
was no dilutive impact on the basic loss per share. There are no
reconciling adjustments between the basic and headline earnings / (loss)
per share for all periods presented.
8. Capital expenditure for the six-month period under review amounted to R15.8
million. Drilling, exploration and feasibility study expenses amounted to
R14.6 million, whilst R1.0 million has been spent on infrastructure
development at the Klip Colliery. The rest of the capital expenditure
relates to head office assets.
9. Current assets include:
- cash of R378.7 million; and
- value-added tax recoverable of R2.5 million.
10. The Company listed on the main board of the JSE on 22 April 2008 by way of
an introduction of its ordinary shares. A private placement of 10 000 000
ordinary shares of the Company coincided with the listing. These shares
were placed at R10 each resulting in a total of R100 million capital being
raised.
11. Current liabilities include:
- amounts payable to exploration service vendors of R1.7 million;
- employee benefit accruals of R1.5 million;
- other payables of R1.1 million; and
- taxes payable of R0.6 million.
12. No dividends have been declared nor are any proposed for the period under
review.
13. The net asset value per share at 30 September 2008 is 303 cents.
14. 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):
30 September 31 March
2008 2008
Sterkfontein Project (Bethal) 23 260 22 107
Delmas Project 18 336 8 079
Klip Colliery (Ogies) 8 800 7 340
Amalahle Exploration Prospect 2 339 -
(Ermelo)
Cash resources 378 725 307 236
Total operating segment assets 431 460 344 762
Assets not allocated to segments 5 951 9 143
437 411 353 905
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 production 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.
15. KPMG Inc., the Company`s independent auditors, have reviewed the condensed
interim financial information contained in this condensed interim report
and have expressed an unmodified conclusion on the condensed interim
financial information. Their review report is available for inspection at
the Company`s registered office.
Commentary
The six months to 30 September 2008 have seen the Group build on the momentum
created during the previous reporting period. Much has been achieved since
March 2008, with the most significant corporate event being the listing of
Keaton Energy`s shares on the JSE`s main board on 22 April 2008. The listing
had been preceded by a private placing of 10 000 000 shares at R10 per share.
The R100 million raised in the private placing supplemented the R312 million
seed capital raised six months earlier, late in 2007. The Group is thus well
capitalised and in a good position to comfortably weather the current period of
global market instability.
Progress made
The most important operational event of the six-month period under review was
the start of mine development at the Group`s 74%-held Klip Colliery, previously
known as the Klipfontein Project, subsequent to the granting by the Department
of Minerals and Energy (DME) of a mining permit. The Klip Colliery will provide
cash flow to the Group for a period of about 10 months in anticipation of the
development of the much larger Delmas Project. Coaling began in earnest soon
after the end of the reporting period under review, with the first run-of-mine
coal from the project sold locally during October 2008 and dispatched in
November 2008. The resulting cash flow is thus not reflected in the reporting
period under review.
A priority of the board is to advance the Delmas Project. A 200-hole drilling
programme was completed on the project in June 2008, providing sufficient data
to develop a thorough geological model, a mine plan and to complete process
plant designs. This work will all be incorporated in a feasibility study to be
completed in the next six-month period. The regulatory work relating to this
project is also significantly advanced and subsequent to the submission of the
mining right application in March 2008 a detailed environmental management plan
(EMP) was submitted to the DME in October 2008, keeping the project on schedule
for regulatory approval early in 2009.
Limited work was conducted on the Sterkfontein Project during the period as the
management team has been focusing on advancing the Delmas Project.
The Group was awarded two additional sets of prospecting rights during the
period. On the six properties making up the four Amalahle prospecting rights in
the Ermelo coal field, a preliminary exploration drilling programme has already
been completed and a detailed assessment of the potential of the properties is
being prepared for consideration by the board. On the Group`s two Mafla
prospecting rights in the Klip River coal field, a drilling programme has been
initiated. The Mafla prospects total 5 166 hectares in what was historically
KwaZulu Natal`s most productive coal field.
Safety, health and environment
The Group has made safety, health and environmental management central to its
culture and ethos. The Group reported 30 043 injury-free hours worked on its
project sites in the period under review. Suitable health monitoring processes
have been implemented at the Klip Colliery and an independent environmental
consultant has been appointed to provide environmental management monitoring
services.
Corporate governance
Two new independent non-executive directors were appointed during the period.
Ms Zelda Mostert, a chartered accountant and previously Group Treasurer of
Harmony Gold and later Chief Financial Officer of Great Basin Gold, will further
strengthen the board`s financial oversight and has agreed to serve on the
Group`s audit committee. Mr John Wallington, a mining engineer with 27 years`
coal industry experience and previously Chief Executive Officer of Anglo Coal,
will provide considerable industry experience and strategic guidance to the
Group.
Market
The six-month period has seen profound volatility in the price of export quality
coal. The spot price of coal exported via the Richards Bay Coal Terminal (RBCT)
increased dramatically from US$60 per tonne in late 2007 to a high of close to
US$180 per tonne in July 2008. Subsequently, prices fell to between US$95 and
US$100 per tonne by early November 2008. It must be noted, however, that this
level is still significantly above the longer term average price for export
coal, which was as low as US$50 per tonne as recently as May 2007.
The domestic market for coal has somewhat different dynamics to the
international markets, with South Africa`s energy crisis remaining as real as
ever. Eskom itself is very concerned about the fact that, between 1999 and
2007, the rate of increase in consumption of coal domestically significantly
exceeded the rate at which coal production increased. This is in part what led
to Eskom depleting its power station stockpiles earlier this year and then being
forced to acquire greater amounts of discard coal to correct the situation as
part of the emergency coal purchasing programme. Eskom`s coal burn is likely to
continue to increase at existing power stations and as previously mothballed
power stations are returned to service. Interestingly, slower economic growth
in South Africa is more likely to reduce the severity of future load shedding
than materially reduce Eskom`s demand for coal. This demand for coal should
continue to have a knock-on effect on other domestic coal buyers and, as a
consequence, the medium-term outlook for domestic coal appears reasonably
positive.
Although significant volatility has been apparent in international coal markets,
the current level of prices for export coal remain reasonable, while the
domestic coal market has an uniquely South African dynamic shaped by the local
energy crisis and remains positive.
Looking ahead
The focus of the Group remains advancing the Delmas Project to production. We
have no reason to doubt that the levels of commitment, passion and ability
demonstrated thus far will contribute in large measure to achieving these
objectives. Importantly, the Group has sufficient capital to achieve targeted
production volumes of the order of 2 million tonnes per annum in the medium
term.
May 2008 Resource Update
Keaton Energy announced on 28 May 2008 and published in June 2008 a SAMREC
compliant Coal Resource statement (refer to the Annual Financial Statements for
the period ended 31 March 2008). There has been no change to this Coal Resource
Statement at the date of this announcement.
The Delmas Project area`s total mineable in situ Coal Resource is estimated to
be 178.4 million tonnes, all in the indicated and measured categories. This has
seen the No. 5 Seam Coal Resource at 4.8 million tonnes, the No. 4 Seam Coal
Resource at 90.6 million tonnes and the No. 2 Seam Coal Resource at 83.1 million
tonnes. The amount of mineable in situ coal defined in the measured category is
97.0 million tonnes, with the remaining mineable in situ coal in the indicated
category totalling 81.4 million tonnes. The estimated total mineable in situ
Coal Resource classified as pseudo-anthracite (lean-, or de-volatilised coal) is
41.6 million tonnes, while the estimated total mineable in situ Coal Resource
classified as bituminous coal (including the 5 Seam Coal Resource) is 136.8
million tonnes.
The Sterkfontein Project area`s total mineable in situ Coal Resource is
estimated to be 34.8 million tonnes of 4 Seam Coal Resource. The amount of
mineable in situ coal defined in the measured category is 17.3 million tonnes,
with the remaining mineable in situ coal in the indicated category totalling
17.5 million tonnes.
On behalf of the board
David Salter Paul Miller
(Chairman) (Managing Director)
26 November 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) Limited
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), Z Mostert++, LX
Mtumtum++, P Pouroulis**+, Dr SM Rupprecht ***, JG Schonfeldt, APE Sedibe+, JN
Wallington++
*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
Date: 26/11/2008 14:00:01 Produced by the JSE SENS Department.
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