| Thu 28 May 2009, 15:16 | | KEH - Keaton Energy Holdings Limited - Preliminary summarised audited group |
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KEH
KEH
KEH - Keaton Energy Holdings Limited - Preliminary summarised audited group
results
for the year ended 31 March 2009
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")
PRELIMINARY SUMMARISED AUDITED GROUP RESULTS
For the year ended 31 March 2009
Summarised Consolidated Income Statement
Note 1 April 1 March 2007
2008 to 31 to 31 March
March 2009 2008 R`000
R`000
Revenue 5 424 -
Cost of sales (1 874) -
Gross profit 3 550 -
Other income 677 915
Administrative and other 4 (13 623) (8 945)
operating expenses
Mining and related expenses 4 (10 078) (4 904)
Share appreciation rights (4 126) (424)
expense
Impairment losses (4 214) -
Operating loss before net 3 (27 814) (13 358)
finance income
Net finance income 44 509 11 223
Net profit / (loss) before 16 695 (2 135)
taxation
Income taxation expense 5 (11 853) (2 523)
Profit / (Loss) for the year 4 842 (4 658)
Number of shares (`000)
Weighted average (basic) 142 248 50 902
Weighted average (diluted) 145 783 52 902
Earnings / (Loss) per share
(cents)
Basic 6 3.4 (9.2)
Headline 6 6.4 (9.2)
Diluted 6 3.3 (9.2)
Headline diluted 6 6.2 (9.2)
Summarised Consolidated Balance Sheet
Note 31 March 31 March
2009 R`000 2008 R`000
Assets
Non-current assets 59 112 40 557
Current assets 7 386 237 313 349
Total assets 445 349 353 905
Equity and liabilities
Capital and reserves 437 189 336 738
Current liabilities 8 8 160 17 167
Total equity and liabilities 445 349 353 905
Summarised Consolidated Cash Flow Statement
1 April 1 March 2007
2008 to 31 to 31 March
March 2009 2008 R`000
R`000
Cash flows from operating 7 390 1 536
activities
Cash flows from investing (31 411) (20 440)
activities
Cash flows from financing 90 483 326 139
activities
Net increase in cash and cash 66 462 307 235
equivalents
Cash and cash equivalents at 307 236 1
the beginning of the year
Cash and cash equivalents at 373 698 307 236
the end of the year
Summarised Consolidated Statement of Changes in Equity
Share Share-based Accumulated Total Minority Total
capital payment loss R`000 attributable shareholders` R`000
and transactions to equity interest
premium R`000 holders of R`000
R`000 the company
R`000
Balance at -* - (324) (324) -* (324)
28
February
2007
Ordinary 332 474 - - 332 474 - 332
shares 474
issued for
cash
Share- 14 861 424 - 15 285 - 15
based 285
payments
Share (6 038) - - (6 038) - (6
issue 038)
expenses
Total - - (4 658) (4 658) -* (4
recognised 658)
income and
expense
for the
period
(Loss for
the
period)
Balance at 341 297 424 (4 982) 336 739 - 336
31 March 739
2008
Ordinary 100 000 - - 100 000 - 100
shares 000
issued for
cash
Share- 1 000 4 126 - 5 126 - 5 126
based
payments
Share (9 517) - - (9 517) - (9
issue 517)
expenses
Total - - 4 841 4 841 - 4 841
recognised
income and
expense
for the
year
(Profit
for the
year)
Balance at 432 780 4 550 (141) 437 189 - 437
31 March 189
2009
* Nominal amounts
Notes
The financial results are presented for the year ended 31 March 2009. Prior
period figures represent the 13-month period from 1 March 2007 to 31 March 2008.
During the year the group`s Klip Colliery (previously the Klipfontein Project)
started production. The overall results for the year, however, are
characteristic of an exploration company in the process of financing its
exploration and evaluation activities, with the return on its invested funds
resulting in a small profit for the year.
The preliminary summarised consolidated results for the year ended 31 March 2009
incorporate extracts of the group`s unqualified audited financial statements,
and are prepared in accordance with International Financial Reporting Standards
(IFRS), the Listings Requirements of the JSE Limited (JSE) and the South African
Companies Act, 61 of 1973 (as amended). These summarised consolidated financial
statements are presented and disclosures included in accordance with IAS 34:
Interim Financial Reporting. The accounting policies applied are consistent with
those applied in the annual financial statements for the 13-month period ended
31 March 2008. For a better understanding of the group`s financial position and
results of operations, these summarised consolidated results are to be read in
conjunction with the group`s audited annual financial statements for the year
ended 31 March 2009, which include all disclosures required by IFRS, and which
are expected to be posted on or about 19 June 2009.
As mentioned above, mining revenue of R5.4 million resulted in a gross profit of
R3.6 million during the year. After accounting for other income of R0.7 million,
administration and other operating expenses of R13.6 million, mining and related
costs of R10.1 million (refer note below note 4), a share appreciation rights
expense of R4.1 million, impairment losses of R4.2 million, net finance income
of R44.5 million and a taxation charge of R11.9 million, the profit for the year
was R4.8 million (basic and headline earnings per share of 3.4 and 6.4 cents
respectively). Other income includes sublease income and consulting fees.
Administration, other operation, mining and related expenses include (prior
period figures included in brackets):
employee benefit costs (excluding the share appreciation rights expense) of R9.0
million (R4.8 million). As at 31 March 2009, the group had ten (nine) permanent
employees / contractors;
consulting, legal, audit and professional fees of R5.6 million (R4.1 million).
Fees relating to the listing have been netted against share premium;
non-executive directors` fees of R2.2 million (R0.2 million), of which R0.7
million was paid to directors of subsidiary companies;
listing and investor relations costs of R2.0 million (R0.6 million);
head office lease costs of R0.7 million (R0.5 million); and
depreciation charges not included in cost of sales of R0.7 million (R0.4
million).
Note: Mining and related costs mainly include costs recovered from exploration
subsidiaries in terms of their management agreements with Keaton Administrative
and Technical Services (Pty) Limited, direct consulting fees by mining and
exploration contractors and compensation paid to surface right holders.
Administration and other operating expenses mainly include costs not recovered
from exploration subsidiaries i.e. certain employee benefit costs, non-executive
directors` fees, listing and investor relation costs.
Income taxation expense comprises current taxation expense of R10.2 million,
deferred taxation expense of R0.5 million and a secondary tax on companies of
R1.1 million. The company has paid R10.1 million in tax during the year.
Earnings/ (Loss) per share:
The calculation of basic earnings / (loss) per share is based on the profit /
(loss) for the period (attributable to equity holders of the parent) of R4 841
349 (2008 - loss of R4 657 882) and a weighted average of 142 248 143 (2008 - 50
902 474) ordinary shares in issue during the period. As the group was in a loss
position at 31 March 2008, the dilutive ordinary shares had no dilutive impact
on the basic loss per share for 31 March 2008. An impairment loss of R4.2
million was added back as a reconciling adjustment between the basic and
headline earnings per share for the current year.
Current assets include:
cash of R373.7million (2008 : R307.2 million);
coal stockpiled of R7.0 million (2008 : Rnil);
interest receivable of R3.6 million (2008 : R2.2 million); and
value-added tax recoverable of R1.7 million (2008 : R3.6 million).
Current liabilities include:
amounts payable to exploration service vendors of R1.2 million (2008 : R5.7
million);
amounts received in advance from coal buyers of R1.8 million (2008 : Rnil);
other trade payables of R0.9 million (2008 : R9.5 million);
environmental rehabilitation provisions of R0.6 million (2008 : Rnil); and
taxation of R2.2 million (2008 : R0.9 million).
Issuances of equity during the year:
31 March 31 March
2009 2008
Number of shares (000)
Issued share capital
At beginning of period 132 741 70
Issued for cash during the year (refer 10 000 129 811
commentary)
Share-based payments 100 2 860
At end of period 142 841 132 741
No dividends have been declared nor are any proposed for the period under
review.
The net asset value per share at 31 March 2009 is 306 cents (2008: 254 cents).
Segment information:
Refer to the commentary below for a description of the projects (segments) of
the group. The group can be segmented as follows (R`000):
31 March 31 March
2009 2008
Total assets
Keaton Mining (Pty) Limited - 23 288 22 107
Sterkfontein Project
Keaton Mining (Pty) Limited - Delmas 22 672 8 079
Project
Keaton Mining (Pty) Limited - Klip 16 653 7 340
Colliery
Amalahle Exploration (Pty) Limited - 1 379 -
Projects
Keaton Energy Holdings Limited - Cash 375 819 307 236
resources
Total operating segments` assets 439 811 344 762
Assets not allocated to segments 5 538 9 143
445 349 353 905
1 April 1 March 2007
2008 to to 31 March
31 March 2008
2009
Segment revenue
Keaton Mining (Pty) Limited - Klip 5 424 -
Colliery
Keaton Administrative and Technical 10 033 -
Services (Pty) Limited
Total operating segments` revenue 15 457 -
Consolidation adjustments (10 033) -
5 424 -
Segment results
Keaton Energy Holdings Limited * / ** (26 005) (4 870)
Keaton Administrative and Technical (6 452) (5 002)
Services (Pty) Limited *
Keaton Mining (Pty) Limited * (4 859) (3 249)
Amalahle Exploration (Pty) Limited * (4 217) (414)
Other exploration subsidiaries * (3 946) (2 093)
Total operating segments` results * (45 479) (15 628)
Consolidation adjustments (impairment 17 665 2 271
of investments in subsidiaries)
(27 814) (13 357)
* Operating loss before net finance
income and taxation
** Excludes finance income of R44.7
million
The group`s capital commitments are:
31 March 31 March
2009 2008
Environmental rehabilitation guarantees 1 260 -
issued
Exploration expenditure authorised but 38 155 36 782
not contracted
Exploration expenditure authorised and 2 263 5 176
contracted
There was no change to the group`s contingent liabilities during the year.
Post-balance sheet events:
On 7 April 2009 Keaton Energy announced that it had reached agreement on a
transaction which, on conclusion, will add 2 844 hectares of prospecting rights
to its 4 009 hectare Sterkfontein Project (the acquisition). The acquisition -
referred to as the Sterkfontein Extension Prospecting Right - `fills out` the
areas between Sterkfontein`s North 2 and South Blocks. The acquisition, which is
subject to Ministerial Consent in terms of Section 11 of the MPRDA (The South
African Mineral and Petroleum Resources Development Act No. 28 of 2002, as
amended), involves Keaton Energy acquiring a 74% interest in Labohlano Trading
46 (Pty) Limited, proposed holder of the Sterkfontein Extension Prospecting
Right, from Money Box Investments 156 (Pty) Limited.
KPMG Inc`s unqualified auditors` reports included in the annual financial
statements and in the summarised financial statements contained in this
summarised report are available for inspection at the company`s registered
office.
Coal Reserve and Resource Statements
The group has released new and updated Coal Reserve and Resource Statements for
its Delmas and Leeuwfontein Projects during the month of May 2009. These are
available for inspection on the group`s website www.keatonenergy.co.za. There
was no change to the Coal Resource Statement at the group`s Sterkfontein Project
(released May 2008).
COMMENTARY
Much progress has been made in the period under review. Of the three founding
projects, the Klip Colliery (previously the Klipfontein Project) is now in
production, the Delmas Project`s feasibility study is complete with a Coal
Resource and Reserve Statement having been issued, and the Sterkfontein Project
has been significantly expanded through corporate action. Progress has also been
made on the exploration pipeline, with two prospects being elevated to project
status, whilst a number of other prospects are to be relinquished.
Listing and cash position
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 million ordinary
shares of the company coincided with the listing. These shares were placed at
R10 per share - or R100 million in total (before listing expenses of R9.5
million).
The group`s total cash position as at 31 March 2009 amounted to R373.7 million.
Given the current global economic turmoil, access to both equity and debt
markets is becoming increasingly difficult. The Board is therefore applying a
conservative approach in the employment of the group`s cash resources towards
its operations. Cash is also conservatively invested across most of South
Africa`s highest rated financial institutions.
Safety, health and the environment
The safety and health performance of the group in the period under review has
been acceptable with 54 226 hours worked on-site with no lost time injuries
recorded. Extensive effort has been made to establish safety monitoring
processes and procedures and these are working satisfactorily. The Safety,
Health and Environment Committee of the Board has approved a Safety and Health
Statement and Policy and its implementation has progressed well.
Corporate governance
The Board was strengthened significantly by the appointment of two additional
independent non-executive directors, Ms Zelda Mostert, who brings extensive
mining finance skills and experience to the Audit Committee and the Board, and
Mr John Wallington, a 27-year veteran mining engineer who was previously CEO of
Anglo Coal. Subsequent to the end of the period under review, Ms Mandi Glad was
appointed to the Board as the executive director responsible for marketing and
business development.
Activities during the year
During the year the group`s activities have been focused on the following:
Delmas Project (Delmas): During the year R14.6 million was capitalised on
exploration, feasibility and related costs (R22.7 million to date). A Coal
Reserve of 25.9 million tonnes was declared on this project. A decision to
develop the mine remains dependent on a number of factors including regulatory
approvals and commercial contract negotiations.
Klip Colliery (Balmoral/Ogies): Apart from acquisition and exploration costs of
R7.7 million, a further R3.6 million was capitalised on boxcuts and
infrastructure costs, and R1.7 million on deferred stripping costs. The value of
the stockpile as at 31 March 2009 was R7.0 million as a result of the coal buyer
defaulting on buying commitments. Alternatives buyers were found and coal sales
resumed subsequent to year end. To December 2008 turnover amounted to R5.4
million with a gross profit of R3.6 million.
Sterkfontein Project (Bethal): Limited work has been done as the group`s focus
was on the consolidation of the project area. These efforts culminated in the
securing of a 74% interest in a 2 844-hectare prospecting right over properties
intermingled with the existing 4 009 hectares of prospecting rights. R23.3
million was capitalised on this project to 31 March 2009.
Amalahle Prospects (Ermelo): R3.9 million was capitalised on drilling and
related costs to 31 March 2009. A Coal Resource of 0.9 million MTIS has been
declared on the Leeuwfontein Project, and preliminary results from the
Braamspruit Project are looking promising. The validity of the Braamspruit
prospecting right has been challenged by a neighbouring mining company, and
further investment in the Braamspruit Project will be dependent on the dispute
being resolved in the group`s favour. Drilling results for some of the prospects
proved neither commercially viable nor technically feasible and an impairment
charge of R2.5 million was raised during the year.
Mafla Prospects (Dundee): The prospects proved to be neither commercially viable
nor technically feasible and a charge of R1.5 million was raised as at 31 March
2009 to fully impair all capitalised exploration and evaluation costs.
The prospecting rights that are expected to be granted to Keaton Energy`s other
subsidiaries, Intshe Coal (Pty) Limited, Rafcoal Mining (Pty) Limited and Izwi
Coal (Pty) Limited, have not yet materialised and these subsidiaries are
currently treated as being dormant. The total investment in these subsidiaries
as at 31 March 2009 amounted to R2.1 million (R1.8 million as at 31 March 2008).
Markets
Keaton Energy has weathered the recent economic storm successfully following its
listing and equity capital raising. The company raised a significant amount of
capital to build its first major project, making it unlikely that it will need
to return to the equity markets or make use of debt markets.
The company`s share price performance has been pleasing under difficult market
circumstances, with the share having traded at or above the pre-listing issue
price for much of the period under review. In contrast, from the date of the
company`s listing to 31 March 2009 the JSE/FTSE All Share Index declined by 36%,
the JSE/FTSE Resources 20 Index by 46% and the Nedsec Junior Mining and
Exploration Index by 68%.
Export coal prices have fallen significantly from their July 2008 highs,
although they have recovered somewhat since the end of the financial year under
review. Domestically, it appears that Eskom`s emergency coal purchase programme
has seen the power generator rebuild its power station stockpiles successfully,
abetted by the reduced demand for power from major industrial consumers as a
direct consequence of the global economic crisis. It is clear, however, that
Eskom remains concerned about the long-term security of coal supply to its
existing power stations in and adjacent to the Witbank and Highveld coal fields,
which bodes well for Keaton Energy`s longer term plans.
Strategy
It is against the background of the market events described above that the
executive management team fine-tuned the group`s strategy. It remains the
intention to produce two million tonnes of saleable coal in the medium term,
growing into a mid-tier coal producer in the longer term - with this production
from greenfields and brownfields projects where Keaton Energy is able to use its
intellectual and financial resources to take projects up the value curve,
through rapid project development to production. This strategy has been refined,
however, and the group will now pursue a two-tiered approach:
a limited number of large, long-life, resource-intensive projects such as the
Delmas and Sterkfontein Projects; and
a portfolio of smaller, quick-to-cash-flow projects such as the Klip Colliery
and the Leeuwfontein Project that will provide the group with operational
flexibility.
Keaton Energy will continue to endeavour to remain lean, with quick decision-
making, keeping overhead and fixed costs to a minimum and making extensive use
of outsourcing and contracting.
Looking ahead
The 2009 calendar year should see the long-life Delmas Project turned to
account, subject to regulatory approvals and commercial contract negotiations.
Bringing the Delmas Project into production remains the focus of the group for
the year. Taking the long-life Sterkfontein Project further up the value curve
will also receive significant attention, particularly since the project area has
now been significantly increased and consolidated.
Operations at the Klip Colliery should cease within the next 12 months with a
view to the Leeuwfontein Project and Braamspruit Project coming on stream in
2010 and 2011 respectively. Much work will need to be done on taking
Leeuwfontein and Braamspruit through the regulatory processes before mining can
be considered. Regulatory work has begun on the Leeuwfontein Project, and will
begin on the Braamspruit Project in the second half of 2009.
The group will continue to make prospecting right applications and will also
look to partner with existing holders of prospecting and mining rights in order
to add further projects to the smaller projects portfolio.
On behalf of the board
David Salter Paul Miller
(Chairman) (Managing Director)
28 May 2009
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),
AB Glad, 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 11 317 1700
telefax: +27 11 463 4759
email: info@keatonenergy.co.za
Date: 28/05/2009 15:16:06 Produced by the JSE SENS Department.
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