| Wed 25 Nov 2009, 16:29 | | KEH - Keaton Energy Holdings Limited - Reviewed Interim Condensed Group Results |
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KEH
KEH
KEH - Keaton Energy Holdings Limited - Reviewed Interim Condensed Group Results
for the Six-Month Period Ended 30 September 2009
Keaton Energy Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/011090/06)
JSE code: KEH & ISIN: ZAE000117420
("Keaton Energy" or "the Company" or "the Group")
Key features
- First major project, Vanggatfontein, gets go-ahead
- 30 000 tpm of premium-priced 5 Seam metallurgical coal for domestic market
- Strong cash position - R366 million
- R8 million Klip Colliery stockpiles sold after reporting period
- Sterkfontein Project drilling continues
- successful completion of acquisition of contiguous prospecting right
- well timed to benefit from improving market conditions
REVIEWED INTERIM CONDENSED GROUP RESULTS for the six-month period ended
30 September 2009
Condensed Consolidated Statement of Comprehensive Income
6 months to 6 months to Year to
30 Sep 2009 30 Sep 2008 31 Mar 2009
R`000 Note (Reviewed) (Reviewed) (Audited)
Revenue 9 853 - 5 424
Cost of sales (9 413) - (1 874)
Gross profit 440 - 3 550
Other income 3 1 779 458 677
Administrative and
other operating expenses 4 (7 744) (7 527) (13 623)
Mining and related
expenses 4 (5 671) (4 809) (10 078)
Share appreciation
rights
income/(expense) 5 4 521 (2 003) (4 126)
Impairment and net
realisable value losses 6 (5 926) - (4 214)
Operating loss before
net finance income (12 601) (13 881) (27 814)
Net finance income 15 493 22 406 44 509
Net profit before taxation 2 892 8 525 16 695
Income taxation expense 7 (3 891) (6 617) (11 853)
(Loss)/Profit for the
period (999) 1 908 4 842
Total comprehensive
(expense)/
income for the period (999) 1 908 4 842
(Loss)/Profit and Total
comprehensive
(expense)/ income for
the period
attributable to:
Owners of the Company 3 883 1 908 4 842
Non-controlling interest (4 882) - -
(999) 1 908 4 842
Number of shares (`000)
Weighted average (basic) 143 552 141 658 142 248
Weighted average (diluted) 143 587 145 158 145 783
Earnings per share (cents)
Basic 8 2.7 1.4 3.4
Headline 8 3.4 1.4 6.4
Basic diluted 8 2.7 1.3 3.3
Headline diluted 8 3.4 1.3 6.2
Condensed Consolidated Statement of Financial Position
30 Sep 2009 31 Mar 2009
R`000 Note (Reviewed) (Audited)
Assets
Non-current assets 9 87 338 59 112
Current assets 10 382 650 386 237
Total assets 469 988 445 349
Equity and liabilities
Shareholder`s equity 453 851 437 189
Non-controlling interest 2 845 -
Total equity 456 696 437 189
Current liabilities 11 13 292 8 160
Total equity and liabilities 469 988 445 349
Condensed Consolidated Statement of Cash Flows
6 months to 6 months to Year to
30 Sep 2009 30 Sep 2008 31 Mar 2009
R`000 (Reviewed) (Reviewed) (Audited)
Cash flows from
operating activities 2 973 (254) 7 390
Cash flows from
investing activities (11 055) (19 828) (31 411)
Cash flows from
financing activities - 91 571 90 483
Net (decrease)/increase in
cash and cash equivalents (8 082) 71 489 66 462
Cash and cash equivalents
at the beginning of the period 373 698 307 236 307 236
Cash and cash equivalents
at the end of the period 365 616 378 725 373 698
Condensed Consolidated Statement of Changes in Equity
Share- Retained
Share based earnings/
capital and payment (Accumu-
R`000 premium reserve lated loss)
Balance at 1 April 2008 (Audited) 341 296 424 (4 982)
Total comprehensive income
for the period - - 1 908
Issue of ordinary shares 100 000 - -
Share-based payment transactions 1 000 2 003 -
Share issue expenses (9 429) - -
Balance at 30 September 2008
(Reviewed) 432 867 2 427 (3 074)
Total comprehensive income
for the period - - 2 933
Share-based payment transactions - 2 123 -
Share issue expenses (87) - -
Balance at 31 March 2009 (Audited) 432 780 4 550 (141)
Total comprehensive
income/(expense) for the period - - 3 883
Share-based payment transactions 17 300 (4 521) -
Non-controlling interest resulting
from acquisition of a subsidiary - - -
Balance at 30 September 2009
(Reviewed) 450 080 29 3 742
Non-
controlling Total
R`000 Total interest equity
Balance at 1 April 2008 (Audited) 336 738 - 336 738
Total comprehensive income for the
period 1 908 - 1 908
Issue of ordinary shares 100 000 - 100 000
Share-based payment transactions 3 003 - 3 003
Share issue expenses (9 429) - (9 429)
Balance at 30 September 2008 (Reviewed) 432 220 - 432 220
Total comprehensive income
for the period 2 933 - 2 933
Share-based payment transactions 2 123 - 2 123
Share issue expenses (87) - (87)
Balance at 31 March 2009 (Audited) 437 189 - 437 189
Total comprehensive income/(expense)
for the period 3 883 (4 882) (999)
Share-based payment transactions 12 779 - 12 779
Non-controlling interest resulting from
acquisition of a subsidiary - 7 727 7 727
Balance at 30 September 2009 (Reviewed) 453 851 2 845 456 696
Notes:
1. During the six-month period ended 30 September 2009 the Group`s Klip
Colliery continued its operations and is nearing the end of its life. The Group
finalised a successful acquisition (contiguous to its existing Sterkfontein
Project), whilst the return on its externally invested funds contributed R15.5
million during the period. Accounting adjustments (including the share
appreciation rights income, impairment and net realisable value losses, and the
allocation of losses to non-controlling interests) had a net positive impact of
R3.5 million on the results and basic earnings per share. The overall results
for the period remain characteristic of a company in the process of financing
its exploration and evaluation activities and developing its first major
project, Vanggatfontein, previously known as the Delmas Project.
2. The financial results are presented for the six-month period ended
30 September 2009. Comparable period figures represent the six-month period
ended 30 September 2008. Although not required in terms of IAS 34: Interim
Financial Reporting, the comparative statement of comprehensive income,
statement of changes in equity and cash flow statement for the year ended 31
March 2009 have also been included.
The condensed consolidated results for the six-month period ended 30 September
2009 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 condensed
consolidated financial statements are measured and presented and disclosures
included, in accordance with IAS 34: Interim Financial Reporting. The
accounting policies applied are, except for recognition of non- controlling
interests in losses (early adoption of IAS 27: Consolidated and Separate
Financial Statements (revised) and applying IAS 1: Presentation of Financial
Statements (revised)), consistent with those applied in the annual financial
statements for the year ended 31 March 2009.
3. Other income includes an amount of R1.6 million representing a damages
claim in terms of the default by the original coal buyer at Klip Colliery.
4. Administration, other operational, mining and related expenses include:
- employee benefit costs (excluding the share appreciation rights income) of
R5.6 million;
- consulting, legal, audit and professional fees of R2.5 million;
- non-executive directors` fees of R1.0 million;
- listing and investor relations costs of R1.0 million;
- head office lease costs of R0.4 million; and
- depreciation charges not included in cost of sales of R0.4 million.
Note: Mining and related expenses mainly include that portion of management and
employees` time spent directly on exploration and production subsidiaries,
direct consulting fees by mining and exploration contractors and compensation
paid to surface right holders. Administration and other operating expenses
mainly include the remainder of the employee benefit costs, non-executive
directors` fees, listing and investor relation costs.
5. Share appreciation rights income
One of the main participants of the share incentive scheme resigned. The net
positive adjustment of R4.5 million is as a result of the reversal of the share
appreciation right expenses recognised in previous periods.
6. Impairment and net realisable value losses
Operations at Klip Colliery have been downscaled during the period (refer to
Commentary) resulting in a sharp decrease in the remaining life of mine
tonnages. This decrease resulted in the weighted average cost per ton
increasing significantly, and low quality stockpiles having to be written down
by R4.9 million to their net realisable value. An additional impairment of
R1.1 million resulted from capitalised mine development cost at Klip Colliery.
Other smaller impairment adjustments (net income of R0.04 million) have also
been recognised.
7. Income taxation expense mainly comprises current taxation expense of
R3.2 million and a Secondary Tax on Companies of R0.7 million.
8. Earnings per share:
The calculation of basic earnings per share is based on the profit for the
period (attributable to owners of the Company) of R3.9 million and a weighted
average of 143 551 676 ordinary shares in issue during the period. The net
impairment losses of R1.0 million (refer note 6 above) were added back as a
reconciling adjustment between the basic and headline earnings per share for
the current period, resulting in headline earnings of R4.9 million.
The calculation of diluted earnings per share is based on the same profit of
R3.9 million and headline earnings of R4.9 million, with the weighted average
number of ordinary shares being adjusted to 143 586 887 as a result of granted
notional shares.
IAS 27: Consolidated and Separate Financial Statements (revised) prohibit the
retrospective adjustment of losses attributable to non-controlling interests.
However, for comparative purposes, the profit/total comprehensive income
attributable to owners of the Company would have been R4.9 million had IAS 27
revised been applied for the six-month period ended 30 September 2008,
resulting in the basic/headline/diluted/headline diluted earnings per share
being 3.4 cents.
9. The movement in non-current assets includes the fair value of R30.1 million
relating to the acquisition of prospecting rights.
10. Current assets include:
- cash of R365.6 million;
- coal stockpiled of R8.1 million;
- trade and other receivables of R3.3 million;
- interest receivable of R3.8 million; and
- value-added tax recoverable of R1.8 million.
11. Current liabilities include:
- trade and other payables of R6.4 million;
- environmental rehabilitation provisions of R3.3 million; and
- taxation of R3.7 million.
12. Issuances of equity during the period:
Six months to Year to
30 Sep 2009 31 Mar 2009
Number of shares (000) (Reviewed) (Audited)
Issued share capital
At beginning of period 142 841 132 741
Issued for cash during the period - 10 000
Share-based payments 2 000 100
At end of period 144 841 142 841
13. No dividends have been declared nor are any proposed for the period under
review.
14. The net asset value per share at 30 September 2009 is 315 cents (303 cents
as at 30 September 2008).
15. Segment information
Refer to the Commentary below for a description of the projects (segments) of
the Group. The Group can be segmented as follows:
30 Sep 2009 31 Mar 2009
R`000 (Reviewed) (Audited)
Total segment assets
Keaton Mining (Pty) Limited -
Sterkfontein Project 23 382 23 288
Keaton Mining (Pty) Limited -
Vanggatfontein Project 24 287 22 672
Keaton Mining (Pty) Limited -
Klip Colliery 12 795 16 653
Amalahle Exploration (Pty) Limited -
Projects 1 853 1 379
Labohlano Trading 46 (Pty) Limited -
Sterkfontein Project 33 700 -
Keaton Energy Holdings Limited -
Cash resources 365 682 375 819
Total operating segments` assets 461 699 439 811
Assets not allocated to segments 8 289 5 538
469 988 445 349
6 months to 6 months to Year to
30 Sep 2009 30 Sep 2008 31 Mar 2009
R`000 (Reviewed) (Reviewed) (Audited)
Segment revenue
Keaton Mining (Pty) Limited -
Klip Colliery (all external
customers) 11 447 - 5 424
Keaton Administrative and
Technical Services (Pty) Limited
(inter-segment revenues) 5 724 4 999 10 033
Total operating segments` revenue 17 171 4 999 15 457
Klip Colliery - damages claim
disclosed under other income (1 594) - -
Consolidation adjustments (5 724) (4 999) (10 033)
9 853 - 5 424
6 months to 6 months to Year to
30 Sep 2009 30 Sep 2008 31 Mar 2009
R`000 (Reviewed) (Reviewed) (Audited)
Segment profit or loss
Keaton Energy Holdings
Limited */** (4 913) (4 436) (26 005)
Keaton Administrative and
Technical Services
(Pty) Limited * 3 622 (3 256) (6 452)
Keaton Mining (Pty) Limited * (9 514) (3 914) (4 859)
Amalahle Exploration
(Pty) Limited * (1 087) (961) (4 217)
Other exploration subsidiaries * (617) (1 314) (3 946)
Total operating segments`
results * (12 509) (13 881) (45 479)
Consolidation adjustments (92) - 17 665
(12 601) (13 881) (27 814)
* Operating loss before net finance income and taxation.
** Excludes finance income of R15.5 million.
16. The Group`s capital commitments are:
R`000 30 Sep 2009
Environmental rehabilitation guarantees issued 2 592
Exploration and mine development expenditure
authorised, but not contracted 135 214
Exploration and mine development expenditure
authorised and contracted 4 725
There was no change to the Group`s contingent liabilities during the period.
17. KPMG Inc., the Company`s independent auditors, have reviewed the 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.
18. Coal Reserve and Resource Statements
There was no change to the Coal Resource and Reserve Statements at the Group`s
Vanggatfontein, Sterkfontein and Leeuwfontein Projects (as released in May
2009). The Klip Colliery tonnages decreased as discussed in note 6.
COMMENTARY
Indicating continued progress towards its target of producing 2 million tonnes
per annum of saleable coal, the board has authorised development of the first
phase of the Group`s first major project, Vanggatfontein Project (previously
known as the Delmas Project), for which regulatory approvals were received
during the period under review.
Cash position
The Group`s total cash position as at 30 September 2009 amounted to R366
million. A further amount of R8 million was invested in coal stockpiles at the
Klip Colliery, which were sold after the reporting period.
Safety, health and the environment
The safety performance of the Group in the period under review has been
acceptable. Some 25 374 hours were worked on-site with no lost time injuries
recorded. The Group has not had any material health or environmental issues.
Corporate governance
Dr Steven Rupprecht, technical director, resigned during the period.
A senior mining executive with considerable coal experience will join the Group
early in January 2010, when a further announcement will be made.
Activities during the reporting period
During the period under review the Group`s activities have been focused on the
following:
- Vanggatfontein Project (Delmas): The culmination of two and a half years of
exploration and regulatory effort saw a Mining Right granted in June 2009 for
the overall project. The development plan for the project will be phased to
take into account market conditions and commercial negotiations.
- Phase 1: 5 Seam Project: The board has approved the development of the
indicated capital cost of R130 million Vanggatfontein 5 Seam Project as the
first phase of the overall project. This phase, comprising 3.4 million tonnes
of 5 Seam metallurgical coal and a 50 000 tonnes per month processing plant, is
planned to produce 30 000 tonnes per month to take advantage of premium pricing
in the domestic market, a consequence of the recent return to service of
smelters by local ferro-alloy producers in response to an anticipated upturn in
international demand.
- Phase 2: East Pit Project: The second phase of the project will produce
thermal coal and is thus dependent on the receipt of a suitable off-take
agreement from Eskom. The Group responded to Eskom`s recent Request for
Proposals process to supply domestic power station coal and awaits the power
utility`s response.
Further phases may follow, particularly if markets improve for the significant
resource of mid- and low-volatile coal on the property.
- Klip Colliery (Balmoral/Ogies): Operations at the Klip Colliery have been
downscaled and will be curtailed prior to the end of the first quarter, 2010,
when this small mine will be worked out. The mine site will be rehabilitated in
the next reporting period. Subsequent to the default by the life of mine coal
off-taker, it has been difficult to find a buyer for the remaining production
of the mine at the prices contracted originally, against the backdrop of
reduced demand in the domestic market for run-of-mine ("ROM") unwashed coal.
The remaining ROM coal has been sold however.
- Sterkfontein Project (Bethal): The first phase of the Sterkfontein Extension
drilling programme is well-advanced on properties contiguous to the east of the
17.3 million tonne South Block resource.
Coal has been intersected in all 14 holes drilled thus far, and encouragingly
the thickness of the coal has generally exceeded the expected thickness
predicted by the geological model. No coal quality data has yet been received
and a further 17 holes remain to be drilled prior to the completion of an
updated SAMREC compliant resource statement, targeted for release at the end of
the first quarter of 2010.
The Sterkfontein Extension prospecting right, acquired in early in 2009, is
held by Keaton Energy`s 74% held subsidiary Labohlano Trading 46 (Pty) Limited.
- Amalahle Prospects (Middelburg):
- Leeuwfontein Project: All preparatory work has been completed in order to
submit a Mining Right application. Subject to a final review of alternatives
for the project, particularly as they relate to neighbouring properties, the
Mining Right application will be submitted.
- Braamspruit Project: The Braamspruit Project continues to be the subject of a
legal dispute with Anglo Coal, and although some progress was made in the
period, a final settlement has not been agreed.
Looking ahead
The development of the Vanggatfontein 5 Seam Project will be the priority for
the Group in the next six months. During this time it is also expected that a
decision will be made on the development of the Vanggatfontein East Pit
(thermal coal) Project. As indicated, this will be subject to the successful
conclusion of an off-take agreement. In addition, the board is confident that
the Group`s Sterkfontein Project will be developed into a major new mine as
market conditions improve.
On behalf of the board
David Salter Paul Miller
(Chairman) (Managing Director)
25 November 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 (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**+, JG Schonfeldt, APE Sedibe+,
JN Wallington++
*British **South African/Cypriot
+non-executive, ++independent non-executive
telephone: +27 11 317 1700
telefax: +27 11 463 4759
email: info@keatonenergy.co.za
Date: 25/11/2009 16:29:02 Produced by the JSE SENS Department.
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