CIRCULAR TO KEATON ENERGY SHAREHOLDERS • the

Transcription

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
The definitions and interpretations commencing on page 4 of this Circular apply, mutatis mutandis, throughout this Circular including this cover page.
If you are in any doubt as to what action you should take arising from this Circular, please consult your CSDP, broker, banker, attorney, accountant or
other professional adviser immediately.
If you have disposed of all of your Keaton Energy Shares, please forward this Circular to the purchaser of such Keaton Energy Shares or to the
broker, CSDP, banker, attorney, or other agent through whom the disposal was effected.
Action required
Keaton Energy Shareholders are referred to on page 2 of this Circular, which sets out the action required by them.
(Incorporated in the Republic of South Africa)
(Registration number 2006/011090/06)
Share code: KEH
ISIN: ZAE000117420
CIRCULAR TO KEATON ENERGY SHAREHOLDERS
regarding:
• the exchange of a 26% interest in Keaton Mining held by Rutendo Mining, a Related Party, for a 21.83%
interest in Keaton Energy and a cash payment of R6 million; and
• the granting of an option to Moneybox to acquire the Labohlano Sale Equity held by Keaton Energy, the KM
Prospecting Rights and KM Reports held by Keaton Mining;
and incorporating:
• a notice convening a General Meeting of Keaton Energy Shareholders; and
• a form of proxy (blue) for use by Certificated and own-name Dematerialised Keaton Energy Shareholders in
respect of the General Meeting of Keaton Energy Shareholders.
Investment bank and sponsor
Legal adviser
Independent expert
Independent Reporting Accountant
Legal adviser
Joint Competent Person
Graham Stacey
D P Cohen
Consulting
Date of issue: 1 October 2015
CORPORATE INFORMATION AND ADVISERS
Registered address
The definitions commencing on page 4 of this Circular apply, mutatis mutandis, to this corporate information and advisers section:
Company secretary and Registered Office
Anelia Schutte-Bouwer
Ground Floor
Eland House, The Braes
3 Eaton Avenue, Bryanston, 2191
(Postnet Suite 464, Private Bag X51, Bryanston, 2021)
Transfer secretaries
Computershare Investor Services Proprietary Limited
Ground Floor
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Independent expert
BDO Corporate Finance
22 Wellington Road
Parktown, 2193
(Private Bag X60500, Houghton, 2041)
Legal adviser
Cliffe Dekker Hofmeyr
1 Protea Place (C/O Fredman and Protea Place)
Sandton, 2196
(Private Bag X40, Benmore, 2010)
Independent Reporting Accountants
KPMG Incorporated
KPMG Forum
1226 Francis Baard Street, Hatfield
Pretoria, 0083
(PO Box 11265, Hatfield, 0028)
Legal adviser
Malan Scholes Attorneys
East Building
85 Central Street
Houghton, Johannesburg
(Postnet Suite 324, Private Bag X1, Melrose Arch, 2076)
Joint competent person
Venmyn Deloitte Proprietary Limited
Deloitte Place, The Woodlands Office Park
20 Woodlands Drive, Woodmead
Sandton, 2191
(Docex 10, Johannesburg)
CCIC Coal
Geological Consultants and Project Management Proprietary Limited
30 7th Avenue
Parktown North
Johannesburg, 2193
(PO Box 9062, Devon Valley, Weltevredenpark, 1715)
Miptech Proprietary Limited
19 Jan Fredirik Street
Regno Rif, Witbank, 1035
(PO Box 40084, Reyno Ridge, 1049)
GD Stacey
146 Kyalami Glen Estate
Kyalami Gardens, Ext 1
Johannesburg, 1684
(PO Box 30057, Kyalami, 1684)
Investment bank and sponsor
Investec Bank Limited
100 Grayston Drive
Sandown
Sandton 2196
(PO Box 785700, Sandton, 2146)
Keaton Energy
Date of incorporation:
10 April 2006
Place of incorporation:
Johannesburg
DP Cohen Consulting Proprietary Limited
Ground Floor
FedGroup House
89 Bute Lane
Sandown, 2196
(Postnet Suite 109, Private Bag X9
Benmore, 2010)
Rutendo Holdings
401 Main Avenue
Ferndale
Randburg
(PO Box 6758, Weltevredenpark, 1715)
TABLE OF CONTENTS
The definitions and interpretations commencing on page 4 of this Circular apply, mutatis mutandis, to the following table of contents
Page
ACTION REQUIRED BY KEATON ENERGY SHAREHOLDERS
2
SALIENT DATES AND TIMES
3
DEFINITIONS AND INTERPRETATIONS
4
8
1.
INTRODUCTION
8
2.
THE TRANSACTIONS
8
3.
PRO FORMA FINANCIAL INFORMATION AND EFFECTS
12
4.
INFORMATION RELATING TO LABOHLANO
15
5.
INFORMATION RELATING TO KEATON MINING
15
6.
INFORMATION RELATING TO KEATON ENERGY
15
7.
LITIGATION
22
8.
MATERIAL LOANS
22
9.
MATERIAL CHANGES
23
10. MATERIAL CONTRACTS
23
11. STATEMENT AS TO WORKING CAPITAL
23
12. EXPENSES
24
13. OPINION AND RECOMMENDATIONS
24
14. IRREVOCABLE UNDERTAKINGS
24
15. RESPONSIBILITY STATEMENT
24
16. CONSENTS
24
17. GENERAL MEETING
24
18. DOCUMENTS AVAILABLE FOR INSPECTION
25
19. INCORPORATION BY REFERENCE
25
ANNEXURE 1
PRO FORMA FINANCIAL INFORMATION
26
ANNEXURE 2
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE PRO FORMA FINANCIAL
INFORMATION
34
ANNEXURE 3
HISTORICAL FINANCIAL INFORMATION OF LABOHLANO
36
ANNEXURE 4
HISTORICAL FINANCIAL INFORMATION OF KEATON MINING
115
ANNEXURE 5
INDEPENDENT REPORTING ACCOUNTANTS’ REPORTS ON THE HISTORICAL FINANCIAL
INFORMATION OF LABOHLANO
255
INDEPENDENT REPORTING ACCOUNTANTS’ REPORTS ON THE HISTORICAL FINANCIAL
INFORMATION OF KEATON MINING
256
OPINION LETTER OF THE INDEPENDENT EXPERT
257
ANNEXURE 6
ANNEXURE 7
NOTICE OF GENERAL MEETING OF KEATON ENERGY SHAREHOLDERS
265
FORM OF PROXY (blue)
267
1
ACTION REQUIRED BY KEATON ENERGY SHAREHOLDERS
The definitions and interpretations commencing on page 4 of this Circular apply, mutatis mutandis, to this action required by Keaton Energy
Shareholders section.
Please take careful note of the following provisions regarding the actions required by Keaton Energy Shareholders:
•This Circular contains information relating to the Transactions. You should read this Circular carefully and decide how you wish to vote on the
Resolutions to be proposed at the General Meeting.
•The General Meeting, convened in terms of the notice incorporated in this Circular, will be held at Indigo 2, Ground Floor, The Forum,
Wanderers Building, The Campus (Dimension Data), 57 Sloane Street (corner Main Street), Bryanston, 2191 on Friday, 30 October 2015
commencing at 11:00.
•If you are in any doubt as to what action to take, please consult your broker, CSDP, banker, attorney, accountant, or other professional advisor
immediately.
1. IF YOU HAVE DISPOSED OF ALL OF YOUR KEATON ENERGY SHARES
You should forward this Circular to the purchaser of such Keaton Energy Shares or to the broker, CSDP, banker, attorney, or other agent
through whom the disposal was effected.
2. IF YOU HOLD CERTIFICATED KEATON ENERGY SHARES
You are entitled to attend in person, or be represented by proxy, at the General Meeting.
If you are unable to attend the General Meeting, but wish to be represented thereat, you must complete and return the attached form of proxy
(blue), in accordance with the instructions contained therein, to be received by the Transfer Secretaries by no later than 11:00 on Wednesday,
28 October 2015.
3. IF YOU HOLD DEMATERIALISED KEATON ENERGY SHARES
3.1
Own-name registration
You are entitled to attend in person, or be represented by proxy, at the General Meeting.
If you are unable to attend the General Meeting, but wish to be represented thereat, you must complete and return the attached form of
proxy (blue), in accordance with the instructions contained therein, to be received by the Transfer Secretaries by no later than 11:00 on
Wednesday, 28 October 2015.
3.2 Other than own-name registration
Your CSDP or broker should contact you to ascertain how you wish to cast your vote at the General Meeting, and thereafter cast your
vote in accordance with your instructions. You should communicate such instructions to your CSDP or broker timeously, as your CSDP
or broker has to communicate these instructions to the Transfer Secretaries by no later than 11:00 on Wednesday, 28 October 2015.
If your CSDP or broker does not contact you, you are advised to contact your CSDP or broker and furnish them with your voting
instructions. If your CSDP or broker does not obtain instructions from you, they will be obliged to act in terms of your mandate
furnished to them.
You are entitled to attend in person, or be represented by proxy, at the General Meeting. If you wish to attend or be represented at the
General Meeting, you must obtain the necessary letter of representation from your CSDP or broker to enable you to attend or to be
represented at the General Meeting, in which event you must not complete the attached form of proxy (blue).
Keaton Energy does not accept responsibility and will not be held liable for any failure on the part of the CSDP of a
Dematerialised Keaton Energy Shareholder to notify such Keaton Energy Shareholder of the General Meeting or any business
to be conducted at the General Meeting.
2
SALIENT DATES AND TIMES
The definitions and interpretations commencing on page 4 of this Circular apply, mutatis mutandis, to this salient dates and times section:
2015
Record date for determining which shareholders are entitled to receive the Circular
Summary Circular and notice of General Meeting posted to Keaton Energy Shareholders on
Friday, 25 September
Thursday, 1 October
Last day to trade in order to be eligible to vote at the General Meeting
Friday, 16 October
Record date for voting at the General Meeting
Friday, 23 October
Forms of proxy for the General Meeting to be received by 11:00 on
Wednesday, 28 October
General Meeting to be held at 11:00 on
Friday, 30 October
Release of results of the General Meeting on SENS on
Friday, 30 October
Listing of the New Keaton Energy Shares expected on
Friday, 13 November
Notes:
1. All dates and times are South African dates and times.
2.The above dates and times are subject to amendment. Any such amendment will be released on SENS and, if required by the Listings
Requirements, published in the South African press.
3.This Circular is available in English only and will be available on the Company’s website: www.keatonenergy.co.za from Thursday, 1 October
2015.
3
DEFINITIONS AND INTERPRETATIONS
In this Circular, unless otherwise stated or the context otherwise indicates, the words in the first column below shall have the meaning stated
opposite them in the second column, reference to the singular shall include the plural and vice versa, words denoting one gender shall include the
other genders, and an expression denoting natural persons shall include juristic persons and associations of persons. Unless otherwise specified all
referenced legislation, governmental bodies and regulators refer to South African legislation, governmental bodies and regulators:
“Associates”
an Associate as defined in the Listings Requirements;
“BDO” or “Independent Expert”
BDO Corporate Finance Proprietary Limited (registration number 1983/002903/07), a private company
incorporated and registered in South Africa and the Independent Expert to Keaton Energy;
“BEE”
Broad-Based Black Economic Empowerment in South Africa pursuant to the provisions of the South
African Broad-Based Black Economic Empowerment Act, 2003, and the Codes of Good Practice on
Black Economic Empowerment published under such Act, any sector specific empowerment initiative
or the MPRDA;
“Board of Directors”, or “Board” or
“Directors”
the Board of Directors of Keaton Energy whose names are reflected on page 17 of this Circular;
“Business Day”
business day as defined in the Listings Requirements;
“Capex”
capital expenditure;
“Category 1 Transaction”
a transaction categorised as a category one transaction in terms of section 9 of the Listings
Requirements;
“Certificated Keaton Energy Shareholders”
Keaton Energy Shareholder(s) who hold Certificated Keaton Energy Shares;
“Certificated Keaton Energy Shares”
Keaton Energy Shares, represented by a share certificate which are not Dematerialised;
“Circular”
this circular, dated 1 October 2015, including all annexures, the notice of General Meeting and the form
of proxy (blue) attached hereto;
“Company Shareholders Agreement”
the written shareholders agreement entered into between Keaton Energy and Rutendo Mining on
3 August 2007 for the purpose of regulating the rights of Keaton Energy and Rutendo Mining as
shareholders in Keaton Mining;
“Computershare” or “Transfer Secretaries”
Computershare Investor Services Proprietary Limited (registration number 2004/003647/07), a private
company incorporated and registered in South Africa and the Transfer Secretaries to Keaton Energy;
“Competent Persons’ Report” or “CPR”
independent Competent Persons’ Reports compiled in accordance with the Listings Requirements,
dated 25 August 2015;
“CSDP”
a central securities depository participant, appointed by individual Keaton Energy Shareholder(s) for the
purpose of, and in regard to, Dematerialisation in terms of the Financial Markets Act;
“Dematerialised”
the process whereby physical share certificates are replaced with electronic records evidencing
ownership of shares for the purpose of the Strate system, being “uncertificated securities” as defined in
the Companies Act;
“Dematerialised Keaton Energy Shares”
Keaton Energy Shares that have been Dematerialised through a CSDP or broker and are held on a
sub-register of shareholders administered by CSDPs in electronic form;
“Dematerialised Keaton Energy
Shareholders”
Keaton Energy Shareholder(s) who have replaced paper share certificates with electronic records for
purposes of Strate;
“EBITDA”
earnings before interest, taxes, depreciation and amortisation;
“Exchange Agreement”
the agreement entered into between Keaton Energy, Labohlano and Moneybox on 15 July 2015
resulting in the sale of 4 ordinary shares in Labohlano held by Moneybox to Keaton Energy for
consideration of R1.5 million in cash and the exchange of 22 ordinary shares in Labohlano held by
Moneybox for 3.8 million Keaton Energy Shares at R2.3687 per share as calculated in accordance with
the agreement with a fair market value of R9 million;
“Financial Markets Act”
the Financial Markets Act, No 19 of 2012, as amended;
4
“General Meeting”
the General Meeting of Keaton Energy Shareholders to be held at the Indigo 2, Ground Floor, The
Forum, Wanderers Building, The Campus (Dimension Data), 57 Sloane Street (corner Main Street),
Bryanston, 2191, on Friday, 30 October 2015, commencing at 11:00, to consider and, if deemed
appropriate, pass the Resolutions;
“Government”
the Government of South Africa;
“IDC”
Industrial Development Corporation of South Africa Limited (registration number 1940/004201/06), a
national development finance institution incorporated and registered in South Africa;
“IFRS”
International Financial Reporting Standards;
“IT”
information technology;
“Investec Bank Limited”
Investec Bank Limited (registration number 1969/004763/06), a public company incorporated and
registered in South Africa;
“JIBAR”
Johannesburg interbank agreed rate;
“JSE”
JSE Limited (registration number 2005/022939/06), a public company incorporated and registered in
South Africa and licensed as an exchange under the Financial Markets Act;
“KATS”
Keaton Administrative and Technical Services Proprietary Limited (registration number
2007/004778/07), a private company incorporated and registered in South Africa and a wholly-owned
subsidiary of Keaton Energy;
“Keaton Energy” or “Company”
Keaton Energy Holdings Limited (registration 2006/011090/06), a public company incorporated and
registered in South Africa whose Shares are listed on the JSE;
“Keaton Mining”
Keaton Mining Proprietary Limited (registration number 2006/017998/07), a private company
incorporated and registered in South Africa and a 74% owned subsidiary of Keaton Energy;
“Keaton Energy Shareholder(s)”
Certificated Keaton Energy Shareholders and Dematerialised Keaton Energy Shareholders;
“Keaton Energy Share(s)” or “Share(s)”
ordinary shares in the Company, listed on the JSE;
“km”
kilometre;
“KM Prospecting Rights”
the prospecting rights held by Keaton Mining in relation to the Sterkfontein Project Portion 1, being the
prospecting rights with reference numbers: MP 30/5/1/1/2/443 PR, MP 30/5/1/1/2/444 PR, MP
30/5/1/1/2/1827 PR and MP 30/5/1/1/2/2053 PR;
“KM Reports”
all geological, legal, environmental and other reports and data produced in relation to or in pursuance
of the KM Prospecting Rights and/or Sterkfontein Project Portion 1;
“KPMG” or “Independent Reporting
Accountants to Keaton Energy”
KPMG Incorporated (registration number 1999/021543/21), a private company incorporated and
registered in South Africa and the Independent Reporting Accountants to Keaton Energy in relation to
the Pro Forma Financial Information;
“Labohlano”
Labohlano Trading 46 Proprietary Limited (registration number 2008/013314/07), a private company
incorporated and registered in South Africa and a wholly owned subsidiary of Keaton Energy;
“Labohlano Sale Equity”
all of the ordinary shares, preference shares and associated preference dividends rights held by Keaton
Energy in Labohlano;
“Last Practicable Date”
the Last Practicable Date prior to the finalisation of this Circular, being, 17 September 2015;
“LBC”
Leeuw Braakfontein Colliery Proprietary Limited (registration number 2003/003619/07), a private
company incorporated and registered in South Africa and a 100% owned subsidiary of LME;
“LME”
Leeuw Mining and Exploration Proprietary Limited (registration number 2002/000483/07), a private
company incorporated and registered in South Africa and a subsidiary of Keaton Energy;
“Listings Requirements”
the Listings Requirements of the JSE;
“LOM”
life of mine;
“Minister”
the Minister of Mineral Resources;
5
“Moneybox”
Moneybox Investments 156 Proprietary Limited (registration number 2008/013320/07), a private
company incorporated and registered in South Africa;
“Moneybox Option Transaction”
grant of call options by Keaton Energy and Keaton Mining to Moneybox to acquire – all of the
Labohlano Sale Equity, which is held by Keaton Energy in Labohlano, a wholly owned subsidiary of
Keaton Energy; and the KM Prospecting Rights and KM Reports held by Keaton Mining;
“Moneybox Option Transaction Conditions
Precedent”
the conditions precedent to the Moneybox Option Transaction as summarised in paragraph 2.4 of this
Circular;
“MPRDA”
the Mineral and Petroleum Resources Development Act, 28 of 2002;
“New Keaton Energy Shares”
63 731 714 Keaton Energy Shares to be issued pursuant to the Rutendo Flip Transaction;
“Plusbay”
Plusbay Limited (registration number 274836), a private company incorporated in accordance with the
laws of Cyprus and wholly owned by Gunvor Group Limited;
“Prime”
the publicly quoted prime bank overdraft rate as charged and calculated by Investec Bank Limited to
its customers in respect of overdraft facilities from time to time, compounded quarterly in arrears, as
certified by any manager of such bank, whose appointment and authority it shall not be necessary to
prove;
“Related Party”
a Related Party as defined in section 10 of the Listings Requirements;
“Registered Office”
Keaton Energy’s Registered Office, Ground Floor, Eland House, The Braes, 3 Eaton Avenue,
Bryanston, 2191;
“Resolution(s)”
the special Resolution and ordinary Resolutions to be passed by the requisite majority of Keaton
Energy Shareholders at the General Meeting to authorise, approve and implement the Transactions and
the Rutendo Issue, as more fully set out in the notice of General Meeting attached to this Circular;
“ROM”
run of mine;
“Rutendo Exchange Agreement”
the Exchange Agreement which came into force on 16 May 2014 when the Rutendo Exchange Option
was duly exercised by Rutendo Mining;
“Rutendo Exchange Option”
the option granted to Rutendo Mining by Keaton Energy in terms of the Company Shareholders
Agreement, to exchange all the ordinary shares, held by Rutendo Mining in Keaton Mining , for the
issue by Keaton Energy of a certain number of ordinary shares in the share capital of Keaton Energy to
Rutendo Mining as fully paid up;
“Rutendo Flip Transaction”
the exchange by Rutendo Mining of its 26% shareholding in Keaton Mining for 21.83% of the issued
shares of Keaton Energy and a cash payment of R6 million in terms of the Company Shareholder
Agreement as amended by the Second Addendum to the Shareholders Agreement;
“Rutendo Flip Transaction Conditions
Precedent”
the conditions precedent to the Rutendo Flip Transaction as summarised in paragraph 2.8 of this
Circular;
“Rutendo Holdings”
Rutendo Holdings Proprietary Limited (registration number 2004/028081/07), a private company
incorporated and registered in South Africa;
“Rutendo Issue”
the issue of the New Keaton Energy Shares to Rutendo Mining pursuant to the Rutendo Flip
Transaction;
“Rutendo Mining”
Rutendo Mining Proprietary Limited (registration number 1995/007727/07), a private company
incorporated and registered in South Africa, a Related Party to Keaton Energy;
“Rutendo Option Shares”
the ordinary shares held by Rutendo Mining in Keaton Mining which amounts to 26% of all issued
ordinary shares in Keaton Mining;
“SAMREC”
South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves,
2007 Edition;
“SAMVAL”
South African Code for the Reporting of Mineral Asset valuation as amended in July 2009;
6
“Second Addendum to the Shareholders
Agreement”
the agreement headed “Second Addendum to Shareholders Agreement” entered into between Keaton
Energy, Rutendo Mining, Rutendo Holdings and Keaton Mining on 4 September 2015 in terms of which
the parties will amend the terms and conditions of the Rutendo Exchange Agreement to allow for
Rutendo to exchange its 26% holding in Keaton Mining for 21.83% of the issued shares of Keaton
Energy and a cash payment of R6 million and to incorporate required conditions precedent;
“SENS”
the Stock Exchange News Service of the JSE;
“South Africa”
the Republic of South Africa;
“South African Companies Act” or
“Companies Act”
the Companies Act, 2008 (Act 71 of 2008), as amended and substituted from time to time;
“Rand” or “R”
South African Rand, the official currency of South Africa;
“Sterkfontein Project”
collectively, Sterkfontein Project Portion 1 and Sterkfontein Project Portion 2;
“Sterkfontein Project Portion 1”
the 5082 hectare coal exploration project in the Bethal district, Mpumalanga, comprised of the KM
Prospecting Rights and KM Reports;
“Sterkfontein Project Portion 2”
the 2844 hectare coal exploration project in the Bethal district, Mpumalanga, comprised of the
prospecting right which Labohlano holds;
“Strate”
Strate Proprietary Limited (registration number 1998/022242/06), a private company incorporated and
registered in South Africa and which provides the electronic settlement system for transactions that
take place on the JSE and off-market trades;
“the Transactions”
collectively, the Moneybox Option Transaction and Rutendo Flip Transaction combined;
“Vaalkrantz”
the Vaalkrantz Anthracite Colliery, located 14km east of the town of Vryheid, in the KwaZulu-Natal
Province of South Africa;
“Vanggatfontein”
the Vanggatfontein Colliery, located 16km south-east of the town Delmas, in the Mpumalanga Province
of South Africa; and
“VAT”
Value Added Tax as levied from time to time in terms of the Value-Added Tax Act, 89 of 1991.
7
Share code: KEH
ISIN: ZAE000117420
Directors
JD Salter (Non-executive Chairman)#
AB Glad (Chief Executive Officer)
J Rossouw (Chief Financial Officer)
LX Mtumtum‡ (Lead independent Non-Executive Director)
GH Kemp‡
P Pouroulis#
OP Sadler‡
HG Mai#
APE Sedibe#
MT Witteveen#
#
‡
Non-executive
Independent, non-executive
This Circular should be read in its entirety for a complete understanding of the Transactions. This Circular is issued in compliance with the Listings
Requirements for the purposes of furnishing Keaton Energy Shareholders with information relating to the Transactions, and convening the General
Meeting for the purpose of considering, and if deemed appropriate, passing the requisite Resolutions.
1.INTRODUCTION
Keaton Energy is a leading junior South African coal miner, with a total coal resource of 390.1Mt and ROM Coal Reserve of 90.9Mt under
management.
Shareholders are referred to the announcements released on SENS dated 17 July 2015 and 4 September 2015 relating to the undermentioned
Transactions:
Moneybox Option Transaction
Keaton Energy and its subsidiary Keaton Mining have concluded an agreement with Moneybox (a 1.67% shareholder in Keaton Energy)
regarding the grant of call options by Keaton Energy and Keaton Mining to Moneybox to acquire the Labohlano Sale Equity in Labohlano, a
wholly owned subsidiary of Keaton Energy and the KM Prospecting Rights and KM Reports owned by Keaton Mining relating to the
Sterkfontein Project, as an indivisible transaction. The purpose of the Moneybox Option Transaction is to provide Keaton Energy with the
possibility of disposing of the Sterkfontein Project to Moneybox.
Rutendo Flip Transaction
Keaton Energy has concluded the Second Addendum to the Shareholders Agreement with Rutendo Mining, a Related Party, in order to
implement the Rutendo Flip Transaction, in terms of which, Rutendo Mining will exchange its 26% shareholding in Keaton Mining for 21.83% of
the issued shares of Keaton Energy and a cash payment of R6 million, payable in six equal monthly instalments commencing on 29 January
2016, which instalments will not be subject to the accrual of interest. The purpose of the Rutendo Flip Transaction is to give effect to the
Rutendo Exchange Agreement which arose on the exercise of the Rutendo Exchange Option by Rutendo Mining and which will ensure that a
certain number of Keaton Energy Shares remains in the hands of BEE shareholders.
2. THE TRANSACTIONS
2.1 Overview
Moneybox wishes to pursue certain exploratory studies with regard to the Sterkfontein Project with a view to acquiring 100% of the
interests of Keaton Mining in the Sterkfontein Project Portion 1 and 100% of the Labohlano Sale Equity which relates to the Sterkfontein
Project Portion 2.
8
Accordingly Keaton Mining has agreed to grant Moneybox:
• an option to purchase the KM Prospecting Rights and KM Reports relating to the Sterkfontein Project Portion 1; and
•an exclusive right to pursue exploratory studies in respect of Sterkfontein Project Portion 1; and
Keaton Energy has agreed to:
• grant Moneybox an option to purchase the Labohlano Sale Equity; and
•grant and to procure that Labohlano grants Moneybox an exclusive right to pursue exploratory studies in respect of Sterkfontein
Project Portion 2.
Furthermore, should Moneybox, within 12 months of the date of fulfilment of the last of the conditions precedent relating to the sale of
the KM Prospecting Rights, KM Reports and the Labohlano Sale Equity, dispose of all or a portion of the Sterkfontein Project at a
premium to the option price, then 25% of the premium in respect of the KM Prospecting Rights and the KM Reports will be due and
payable to Keaton Mining and 25% of the premium in respect of the Labohlano Sale Equity will be due and payable to Keaton Energy.
The Moneybox Option Transaction shall only become effective on the fulfilment of the last of the conditions precedent as set out below.
2.2Rationale
Keaton Mining and Labohlano, as subsidiaries of Keaton Energy, have undertaken the Sterkfontein Project and are the holders of the
prospecting rights comprising the Sterkfontein Project. During 2014, Keaton Energy took the decision to cease all exploration activities/
expenditure on the Sterkfontein Project due to the softening in global coal prices and the general economic climate. Following this
decision Moneybox approached Keaton Energy requesting an option to acquire the project in its entirety in the event that Moneybox
was able to raise the necessary funding to develop the project.
On the basis of the historical relationship between Keaton Energy and Moneybox, Keaton Energy agreed to grant Moneybox the
exclusive right to acquire the Sterkfontein Project. Should Moneybox be unsuccessful in raising the required funding and global coal
prices strengthen, it is likely that Keaton Energy would re-look at feasibility of the project.
Keaton Energy and Keaton Mining recognise that such an acquisition cannot take place without further exploratory studies being
completed to support a fundraising and therefore agreed to grant Moneybox an exclusive right to pursue exploratory studies in respect
of the Sterkfontein Project in terms of the Moneybox Option Transaction.
2.3 Purchase Consideration
Moneybox will be entitled (but not obliged) to exercise the options in terms of the Moneybox Option Transaction from the date of
fulfilment of the last of the conditions precedent until 23:59 on 31 January 2017.
The price payable for the sale of the Labohlano Sale Equity will be an aggregate amount of R49 309 823. The portion of this amount
allocated to the dividends accruing and due to Keaton Energy in respect of the preference shares held by Keaton Energy in Labohlano
will, with effect from the signature date of the Moneybox Option Transaction until the date the sale is effective, escalate in accordance,
mutatis mutandis, with the coupon payable in terms of the preference shares held by Keaton Energy in Labohlano and will be subject to
an expert’s certification.
A portion of the purchase price payable by Moneybox to both Keaton Mining and Keaton Energy once the option is exercised and
funding is secured, consists of preference dividends that continue to accrue monthly on the outstanding preference share capital
balance in terms of the existing preference share agreements. The value of the preference shares and accrued dividends on signature
of the option agreement would therefore be different to the value at the date the option is exercised. Therefore, Moneybox requires an
independent expert to certify that the outstanding balance on option exercise date has been correctly calculated.
The price payable for the sale of the KM Prospecting Rights and KM Reports, will be an aggregate amount of R102 682 956. The price
payable for the sale of the KM Prospecting Rights will be R74 840 036 and comprise of:
• Keaton Mining’s capital contribution to Sterkfontein Project Portion 1, being an amount equal to R7 000 000; and
•the amount of accrued and unpaid dividends due to Keaton Energy in respect of the Keaton Energy preference shares in Keaton
Mining of R67 840 036.
The price payable for the sale of the KM Reports will be approximately R27 842 920. The portion of the aggregate amount allocated to
Keaton Energy’s preference shares in Keaton Mining will, with effect from the signature date of the Moneybox Option Transaction until
the date the sale is effective, escalate in accordance, mutatis mutandis, with the coupon payable in terms of the preference shares in
Keaton Mining held by Keaton Energy and will be subject to an expert’s certification.
Therefore, the total approximate purchase price for the sale of the Labohlano Sale Equity and KM Prospecting Rights and KM Reports
will be R151 992 779.
9
2.4 Moneybox Option Transaction Conditions Precedent
The Moneybox Option Transaction will be subject to the fulfilment of, inter alia, the following condition precedent and as the contracting
parties may agree in writing:
•the shareholders of Keaton Energy have passed all Resolutions as may be necessary in terms of the Listings Requirements for
Keaton Energy to enter into the Moneybox Option Transaction.
Unless the condition precedent has been fulfilled or waived, as the case may be, the call options may not be exercised and the
provisions of the Moneybox Option Transaction will never become of any force or effect and the status quo ante will be restored as near
as may be possible and none of the parties to the Moneybox Option Transaction will have any claim against the others in terms thereof
or arising from the failure of the conditions precedent.
Once the above condition precedent is fulfilled and should Moneybox deliver a written notice to Keaton Energy and Keaton Mining
exercising its options in terms of the Moneybox Option Transaction (“Option Exercise Date”), a sale agreement will be deemed to have
been entered into between Keaton Mining, Keaton Energy and Moneybox, which sale shall be subject to the following suspensive
conditions:
•within 90 days of the Option Exercise Date, Moneybox enters into funding agreements with its funder to enable it to pay for the
Labohlano Sale Equity, the KM Prospecting Rights and the KM Reports in full;
•within 30 days of the Option Exercise Date, all of the requisite resolutions, documents and powers of attorney and such other
documents are signed and steps are taken by the directors of Labohlano appointed by Moneybox in connection with the finalisation
of all outstanding accounting, statutory and company secretarial matters in respect of Labohlano;
•by no later than the first anniversary of the Option Exercise Date, the requisite written consent of the Minister in terms of section 11
of the MPRDA must have been granted for the transfer of the KM Prospecting Rights from Keaton Mining to Moneybox and for the
sale of the entire issued share capital of Labohlano by Keaton Energy to Moneybox.
Should Moneybox fail to exercise the options in terms of the Moneybox Option Transaction before 23:59 on 31 January 2017, all rights
and entitlement of Moneybox to do so shall terminate fully and finally and Moneybox shall have no further right or entitlement in
connection therewith.
With effect from the date of signature of the Moneybox Option Transaction until the earlier of the fulfilment of the condition precedent or
31 January 2017, as the case may be, Keaton Energy and Keaton Mining have granted Moneybox the exclusive right to undertake, at
its own cost and expense, exploration and feasibility studies in connection with the Sterkfontein Project, subject to the provisions and
indemnities provided by Moneybox in terms of the Moneybox Option Transaction and in accordance with all relevant environmental
authorisations, prospecting work programmes and regulatory and/or governmental approvals applicable to the KM Prospecting Rights
and the prospecting right held by Labohlano.
2.5 Overview
On 3 August 2007 Keaton Energy and Rutendo Mining entered into the Company Shareholders Agreement for the purpose of
regulating the rights of Keaton Energy and Rutendo Mining as shareholders in Keaton Mining, which was amended on 7 April 2008.
At all material times and as far as the Company Shareholders Agreement is concerned:
• Keaton Energy held 74% of all the issued ordinary shares in Keaton Mining; and
• Rutendo Mining held 26% of all the issued ordinary shares in Keaton Mining.
In terms of the Company Shareholders Agreement, Rutendo Mining was granted the Rutendo Exchange Option. The Rutendo
Exchange Option was duly exercised and the Rutendo Exchange Agreement came into existence accordingly.
In terms of the Second Addendum to the Shareholders Agreement, the parties amended the terms and conditions of the Rutendo
Exchange Agreement to allow for Rutendo Mining to exchange its 26% holding in Keaton Mining for 21.83% of the issued shares of
Keaton Energy and a cash payment of R6 million (“Cash Portion”) and to incorporate certain required conditions precedent. The
amended Rutendo Exchange Agreement will be referred to as the Rutendo Flip Transaction.
In terms of the Rutendo Flip Transaction, Rutendo Mining will be restricted from trading in or disposing of any of its New Keaton Energy
Shares for a period of 3 (three) years immediately after the implementation of the Rutendo Flip Transaction to any person other than to a
Black Person (as contemplated in the Codes of Good Practice on Broad-Based Black Economic Empowerment as amended by the
revised Codes published in Government Gazette number 36928 on 11 October 2013 (“Codes”)) (“BEE Restriction”), provided that in
the event that the Codes or any BEE regulations are amended, a law is promulgated or a court ruling is made so as to allow for
companies to permanently retain their BEE status once they have achieved such status despite a subsequent reduction in BEE score
(known as the “once empowered always empowered” principle), the BEE Restriction will be lifted, provided that in the reasonable
discretion of Keaton Energy, Keaton Energy will not suffer any material prejudice or material adverse effects whatsoever in respect of its
BEE status, as a result of such disposal or trade. Rutendo shall furthermore not be entitled to dispose of the New Keaton Energy
Shares to a Black Person unless such Black Person agrees, prior to such disposal, to be bound by, mutatis mutandis, the provisions of
the BEE Restriction.
To further ensure that Keaton Energy maintains its BEE credentials on a group level Rutendo Holdings has agreed, in terms of the
Second Addendum to the Shareholders Agreement, that in the event that Rutendo Holdings wishes to dispose of any of the Keaton
10
Energy Shares that it holds, it will first notify Keaton Energy thereof (“Sale Notice”) and will allow Keaton Energy the option to either
place such Keaton Energy Shares with a third party of Keaton Energy’s choice or to repurchase such Keaton Energy Shares.
In order to secure this right which allows Keaton Energy to protect its BEE score, Keaton Energy has agreed that in the event of a
repurchase, Rutendo Holdings will receive a price per Keaton Energy Share of the higher of the spot price of the Keaton Energy Shares
at the time of repurchase of the Keaton Energy Shares, or the spot price at the time of delivering the Sale Notice less 5%. In the event
of a placement, Keaton Energy will pay to Rutendo Holdings any shortfall between the spot price of the Keaton Energy Shares as at
time of transfer of the Keaton Energy Shares to the relevant third party and the spot price at the time of delivering the Sale Notice
less 5%.
The Cash Portion is interest free and will be payable in six equal monthly instalments commencing on 29 January 2016.
Rutendo Mining is classified as a Related Party in terms of paragraph 10.1(b)(ii) of the Listings Requirements as:
• AB Glad and APE Sedibe are directors of Rutendo Mining and Keaton Energy; and
• AB Glad and APE Sedibe are the sole shareholders of Rutendo Mining, indirectly owning 49% and 51% respectively.
2.6 Rationale
To give effect to the contractually agreed Rutendo Exchange Option which resulted in the Rutendo Exchange Agreement. Keaton
Energy, through the implementation of the Rutendo Flip Transaction, retains and secures its BEE credentials on a group level whilst
providing Rutendo Mining access to a more liquid shareholding within the limits of the contractually agreed share restriction provisions.
2.7 2.8 Purchase Consideration
Rutendo Mining will receive a consideration of R156 649 026 which will be settled as follows:
•the issue of 63 731 714 Keaton Energy shares at R2.3638 per share totalling R150 649 026 representing 21.83% of Keaton
Energy’s issued share capital; and
•a cash payment of R6 million payable in six equal monthly instalments commencing 29 January 2016 and will not be subject to the
accrual of interest.
Rutendo Flip Conditions Precedent
The Rutendo Flip Transaction is subject to the following conditions precedent:
• Keaton Energy Shareholders passing the necessary Resolutions to approve the Rutendo Flip Transaction at a General Meeting;
•Directors of Rutendo Mining having passed all such resolutions required to approve and implement the agreements pertaining to the
Rutendo Flip Transaction;
•The shareholders of Rutendo Mining have passed all such resolutions as may be required to approve the agreements pertaining to
the Rutendo Flip Transaction; and
•Keaton Mining has obtained Investec Bank Limited’s approval in accordance with the facility agreement in place between Keaton
Mining and Investec Bank Limited.
11
3. PRO FORMA FINANCIAL INFORMATION AND EFFECTS
The pro forma financial effects set out in the Circular have been prepared for illustrative purposes only in order to provide information about the
impact of the Moneybox Option Transaction on Keaton Energy had the Moneybox Option Transaction occurred on 1 April 2014 for purposes of
the statement of profit or loss and on 31 March 2015 for statement of financial position purposes.
The pro forma financial effects are presented in accordance with the JSE Listings Requirements, the Guide on Pro Forma Financial Information
issued by SAICA, ISAE 3420 and the measurement and recognition requirements of IFRS.
The Pro Forma Financial Information is the responsibility of the Directors. Due to the nature of the Pro Forma Financial Information, it may not
give a fair reflection of Keaton Energy’s financial position, changes in equity and results of operations or cash flows after the Moneybox Option
Transaction.
The accounting policies applied in quantifying pro forma adjustments are consistent with Keaton Energy’s accounting policies as at 31 March
2015. The Pro Forma Financial Information incorporates the audited results of Keaton Energy for the year ended 31 March 2015.
The table below sets out the pro forma financial effects of the Exchange Agreement and the Moneybox Option Transaction for the following key
metrics in respect of Keaton Energy’s financial year ended 31 March 2015:
As
Reported1
Headline earnings per share (cents)5
Fully diluted headline earnings per share (cents)5
Basic earnings per share (cents)4
Diluted earnings per share (cents)4
Net asset value per share (cents)6
Tangible net asset value per share (cents)7
Number of shares in issue (million)3
Weighted average number of shares in issue (million)3
Fully diluted weighted average number of shares in issue (million)3
The value of the net assets as it relates to the Moneybox Option Transaction (million)6
Pro Forma
After
Moneybox
Option
Transaction2
0.4
0.4
(13.8)
(13.8)
373.5
54.3
224.4
224.4
228.0
838.3
3.2
3.2
11.8
11.6
395.2
110.2
228.2
228.2
231.8
902.2
Change
(%)
700.0
700.0
185.5
184.1
5.8
103.0
1.7
1.7
1.7
7.6
Notes and assumptions:
The application of the sale proceeds attributable to Keaton Mining will be applied towards the payment of accrued dividends in respect of the
preference shares held by Keaton Energy in Keaton Mining and the redemption of such preference shares, subject to the terms and conditions
of the loan facility agreements in place amongst Keaton Energy and Keaton Mining and their bankers.
1
2
The “As Reported” column represents Keaton Energy’s audited results for the year ended 31 March 2015.
Adjusted firstly for the effects of the Exchange Agreement whereby Keaton Energy acquired the minorities interests in Labohlano from
Moneybox (refer to (3) below) and thereafter for the effects of the Moneybox Option Transaction. In terms of the Moneybox Option
Transaction Keaton Energy and Keaton Mining granted Moneybox the right to acquire the Labohlano Sale Equity, the KM Prospecting
Rights and KM Reports. The total purchase consideration of R147 987 929 receivable in cash is allocated as follows:
• Labohlano Sale Equity R47 924 393; and
• KM Prospecting Rights and KM Reports R100 063 536.
For purposes of the pro forma financial effects the accrued preference dividends used to determine the purchase price as per the
Moneybox Option Transaction (i.e. accrued preference dividends up to 30 June 2015) were adjusted to the accrued preference dividends
as at 31 March 2015.
3
Adjusted for the effects of the Exchange Agreement entered into between Keaton Energy, Labohlano and Moneybox resulting in the sale of
four ordinary shares in Labohlano held by Moneybox to Keaton Energy for consideration of R1 500 000 in cash and the exchange of
22 ordinary shares in Labohlano held by Moneybox for 3 819 900 Keaton Energy shares with a value of R9 048 198.
12
4
Basic earnings per share and diluted earnings per share adjusted for:
• profit on the sale of the Labohlano Sale Equity of R10 460 149 and profit on sale of the KM Prospecting rights and KM Reports of
R71 574 289 as well as the taxation paid on the profits of R15 436 742;
• deconsolidation of Labohlano’s net loss of R384 627 for the year ended 31 March 2015 from the consolidated results;
• Interest received of R10 248 164 relating to the purchase consideration received in (2) above, as well as the taxation expense of
R2 869 486 on the interest received;
• estimated transaction costs of R1 638 817 incurred by Keaton Energy, and the related taxation effect of R458 869;
• non-controlling interest adjusted for:
–minority interest portion on the profit associated with the sale of the KM Prospecting rights and KM Reports of R15 135 611;
–26% share in Labohlano’s loss for the year ended 31 March 2015 transferred to owners of the Company after giving effect to the
Exchange Agreement referred to in (3) above of R1 238 527.
5
Headline earnings per share and fully diluted headline earnings per share adjusted for:
• the items listed in (4) above;
•the profit on the sale of the Labohlano Sale Equity of R10 460 149 and profit on sale of the KM Prospecting rights and KM Reports of
R71 574 289 as well as the taxation paid on the profits of R15 436 742 and the non-controlling interest portion of the profit of
R15 135 611 was removed for HEPS purposes.
6
Net asset value adjusted for:
• Stated capital recognised due to Exchange Agreement R9 048 198 (refer to (3) above);
• Retained earnings adjusted for:
– the effect of the loss on the Exchange Agreement related to Labohlano of R7 594 536. Refer to (3) above;
–gain on sale (after taxation and non-controlling interest) of the Labohlano Sale Equity and sale of the KM Prospecting Rights and
KM Reports of R51 462 084. Refer to (2) above; and
– estimated transaction cost of R1 638 817 and the related taxation effect of R458 869.
• Non-controlling interest has been adjusted for:
– decrease due to derecognition of non-controlling interest relating to Labohlano of R2 953 662 (refer to (3) above); and
–increase due to non-controlling interest share of profit realised on sale of the KM Prospecting Rights and KM Reports
R15 135 611 (refer to (2) above).
7
Keaton Energy realised intangible assets of R65 767 704 on the Moneybox Option Transaction (refer to (2) above)
The pro forma financial effects set out in the Circular have been prepared for illustrative purposes only in order to provide information about the
impact of the Rutendo Flip Transaction on the Keaton Energy group had the Rutendo Flip Transaction occurred on 1 April 2014 for purposes of
the statement of profit or loss and on 31 March 2015 for statement of financial position purposes.
The pro forma financial effects are presented in accordance with the JSE Listings Requirements, the Guide on Pro Forma Financial Information
issued by SAICA, ISAE 3420 and the measurement and recognition requirements of IFRS.
The Pro Forma Financial Information is the responsibility of the Directors. Due to the nature of the Pro Forma Financial Information, it may not
give a fair reflection of the Keaton Energy group financial position, changes in equity and results of operations or cash flows after the Rutendo
Flip Transaction.
The accounting policies applied in quantifying pro forma adjustments are consistent with the Keaton Energy group accounting policies as at
31 March 2015. The Pro Forma Financial Information incorporates the audited results of Keaton Energy for the year ended 31 March 2015.
13
The table below sets out the pro forma financial effects of the Rutendo Flip Transaction for the following key metrics in respect of the
Keaton Energy Group financial year ended 31 March 2015:
As
Reported1
Headline earnings per share (cents)3
Fully diluted headline earnings per share (cents)3
Basic earnings per share (cents)3
Diluted earnings per share (cents)3
Net asset value per share (cents)4, 5
Tangible net asset value per share (cents)4, 5
Number of shares in issue (million)6
Weighted average number of shares in issue (million)6
Fully diluted weighted average number of shares in issue (million)6
The value of the net assets as it relates to the Rutendo Flip Transaction (million)4, 5
Additional shares issue attributable to the Rutendo Flip Transaction (million)4
Pro Forma
After
Rutendo Flip2
0.4
0.4
(13.8)
(13.8)
373.5
54.3
224.4
224.4
228.0
838.3
5.3
5.2
(5.9)
(5.9)
288.0
40.0
288.2
288.2
291.8
831.0
63.7
Change
(%)
1225.0
1200.0
57.3
57.3
(22.9)
(26.3)
28.4
28.4
28.0
(0.9)
Notes and assumptions:
1 The “As Reported” column represents Keaton Energy’s audited results for the year ended 31 March 2015.
2Assumed that Keaton Energy acquires the 26% non-controlling interest in Keaton Mining, and as a result owns 100% of Keaton Mining.
The share of profits for the year ended 31 March 2015 related to the 26% interest was R13 952 425.
3 Earnings per share and headline earnings per share adjusted for:
•the inclusion of the 26% earnings of R13 952 425 relating to Keaton Mining for the year ended 31 March 2015 as noted in (2)
above;
•estimated transaction cost of R274 683 incurred by Keaton Energy in acquiring the 26% non-controlling interest in Keaton Mining.
The cost reflects the portion of total estimated transaction cost accounted for in the statement of comprehensive income; and
• Taxation deduction of R482 669 on the total transaction costs of R1 723 817 incurred.
4 Net asset value adjusted for:
•the agreement entered into between Keaton Energy and Rutendo Mining resulted in the disposal of 26% interest in Keaton Mining
held by Rutendo Mining to Keaton Energy:
(i) against payment of R6 000 000 in cash; and
(ii)in exchange for the issue of 63 731 714 Keaton Energy shares at R2.3638 per share totalling R150 649 026 recorded in stated
capital;
• the non-controlling interest balance related to Keaton Mining of R72 171 782 was derecognised; and
•estimated transaction cost of R1 449 134 incurred by Keaton Energy that has been capitalised in terms of IAS 32 (Financial
Instruments). The cost reflects the portion of total estimated transaction cost associated with the issue of Keaton Energy shares
and thus accounted for against stated capital.
5 Retained earnings adjusted for:
• the effect of the loss on the acquisition of the 26% interest in Keaton Mining of R228 820 741 (refer to (4) above);
•transaction cost of R274 683 incurred by Keaton Energy in acquiring the 26% non-controlling interest in Keaton Mining. The cost
reflects the portion of total estimated transaction cost accounted for in the statement of comprehensive income; and
• the taxation deduction of R482 669 on the total transaction costs of R1 723 817 incurred.
6
Number of shares in issue and weighted number of shares in issue has been adjusted with 63 731 714 as referred to in note (4) above.
14
4. INFORMATION RELATING TO LABOHLANO
4.1 Prospects
Labohlano is currently 100% owned by Keaton Energy and is the holder of one of the five Sterkfontein Prospecting Rights, held within
the Keaton Energy Group. Sterkfontein is situated 10 km south west of Bethal, Mpumalanga and has a SAMREC declared resource of
90.9 MTIS.
Planned supply from Sterkfontein includes a primary product for supply into the A-grade export market and a secondary product for
supply to Eskom. Sterkfontein will be an underground mine.
4.2
Historical Financial Information
The audited Historical Financial Information of Labohlano for the financial years ended 31 March 2015, 31 March 2014 and 31 March
2013 is set out in Annexure 3 to this Circular. The Labohlano directors and Keaton Energy Directors are responsible for the accuracy of
the relevant Financial Information extracted from the year-end statements of Labohlano. The Independent Reporting Accountant in
relation to Labohlano’s report on the Historical Financial Information of Labohlano is set out in Annexure 5 to this Circular.
5. INFORMATION RELATING TO KEATON MINING
5.1Prospects
Keaton Mining is the holder of the Vanggatfontein Mining Right. Vanggatfontein is an opencast mine and produces thermal coal for
Eskom and metallurgical coal for the domestic industrial market. Infrastructure at Vanggatfontein consists of:
• A 100tph 5-seam coal washing plant producing duff, peas and nuts;
• A 500tph coal washing plant producing domestic thermal coal for Eskom;
• Change houses, offices, workshops, laboratory and clinic;
• Pollution control facilities, twin-lined co-disposal facilities with related dirty water management systems; and
• Bulk water and power reticulation, extensive road infrastructure, stockpile areas, weighbridge facilities and access roads.
5.2
The audited Historical Financial Information of Keaton Mining for the financial years ended 31 March 2015, 31 March 2014 and
31 March 2013 is set out in Annexure 4 to this Circular. The Keaton Mining directors and Keaton Energy Directors are responsible for
the accuracy of the relevant Financial Information extracted from the year-end statements of Keaton Mining. The Independent
Reporting Accountant in relation to Keaton Mining’s report on the Historical Financial Information of Keaton Mining is set out in
Annexure 6 to this Circular.
6. INFORMATION RELATING TO KEATON ENERGY
6.1Prospects
Keaton Energy is focused on the exploration for coal resources and the subsequent development of greenfields mines. Keaton Energy’s
strategy is to identify and acquire attractive coal projects within the well known coal producing areas of South Africa. Keaton Energy
has the technical and financial resources necessary to implement rapid, focused exploration programmes; to evaluate the exploration
results; and to bring proven projects into production.
Keaton Energy has two operating collieries and five projects. Vanggatfontein produces coal for supply to Eskom and metallurgical coal
for domestic industrial consumers. Vaalkrantz produces anthracite for domestic and export customers. Keaton Energy employs a
forward-thinking approach to ensure sustainability, continually seeking new revenue streams, development projects and means to
further increase LOM at existing operations. Keaton Energy also looks to capitalise on high growth opportunities, to continue
diversifying and mitigating its risk.
The Directors of Keaton Energy are of the opinion that Keaton Energy is well-positioned to continue on its steady growth path to
becoming a 5Mtpa producer of various coal products. Key to Keaton Energy’s strategy is the identification and acquisition of various
pipelines of projects and the steady growth of coal reserves within its portfolio. Keaton Energy intends on leveraging off its existing
mining and coal processing infrastructure while expanding prudently within cash generation and investment constraints in the
development of this strategy. These types of acquisitions will allow Keaton Energy to steadily grow to a 5Mtpa producer of coal and are
considered to be value accretive.
15
6.2
The audited consolidated Historical Financial Information of Keaton Energy for the financial years ended 31 March 2015, 31 March
2014 and 31 March 2013 is set out on Keaton Energy’s website: 2015: http://www.keatonenergy.co.za/index.php; 2014: http://www.
keatonenergy.co.za/investor-media-financials-2014.php; 2013: http://www.keatonenergy.co.za/investor-media-financials-2013.php.
The Keaton Energy Directors are responsible for the accuracy of the relevant Financial Information extracted from the year-end
statements of Keaton Energy.
6.3
Share Capital
As at the Last Practicable Date, the authorised and issued share capital of Keaton Energy, before and after the Rutendo Issue, was as
follows:
Before the Rutendo Issue
Authorised share capital
750 000 000 ordinary shares with no par value
Issued share capital
Stated share capital
701 976 751
After the Rutendo Issue
Authorised share capital
Issued share capital
Stated share capital
852 625 777
Keaton Energy has no treasury shares as at the Last Practicable Date.
6.4 Major Shareholders
Insofar as is known to Keaton Energy, the major Keaton Energy Shareholders who beneficially hold 5% or more of the issued Keaton
Energy Shares as at the Last Practicable Date are set out below:
Number of
shares held
Shareholder name
Plusbay
Langa Trust
The Axel Trust
Mrs A Pouroulis
Direct
Direct
Direct
Direct
Total
Percentage
held1
78 476 411
19 208 428
18 480 000
14 898 714
34.38
8.42
8.10
6.53
228 262 542
57.43
Notes:
1
Based on 228 262 542 Keaton Energy shares in issue of which 224 442 642 was in issue as at 31 March 2015.
Insofar as is known to Keaton Energy, the major Keaton Energy Shareholders who will beneficially hold 5% or more of the issued
Keaton Energy Shares following the Rutendo Issue are set out below:
Number of
shares held
Shareholder name
Plusbay
Langa Trust
The Axel Trust
Mrs A Pouroulis
Rutendo Mining
Total
Percentage
held1
78 476 411
19 208 428
18 480 000
14 898 714
63731714
26.88
6.58
6.33
5.10
21.83
291 994 256
66.72
Notes:
1
Based on 291 994 256 Keaton Energy shares which will be in issue pursuant to the implementation of the Rutendo Flip transaction.
16
6.5 Changes in Controlling Shareholding
Keaton Energy’s major shareholder is Plusbay. Subsequent to the implementation of the Rutendo Flip Transaction Plusbay will remain
the major shareholder however its shareholding will be diluted from a 34% shareholding to a 26% shareholding.
6.6
Directors’ Details
The name, age, qualification, nationality, business address and function of each Director of Keaton Energy as at the Last Practicable
Date, are set out below:
Name, age, qualification and nationality
Address
Title
David Salter (56)
BSc (Hons), PhD, FSAIMM
British
First floor Eland House
The Braes
3 Eaton Avenue
Bryanston
Johannesburg
Non-Executive Chairman
Amanda B Glad (44)
South African
Eland House
South African
Ground floor
The Braes
3 Eaton Avenue
Bryanston
Johannesburg
Chief Executive Officer
Jacques Rossouw (39)
BCom (Hons), CA(SA)
Eland House
South African
Ground floor
The Braes
3 Eaton Avenue
Bryanston
Johannesburg
Chief Financial Officer
Lizwi Mtumtum (44)
BA (Economics/Accounting)
South African
Building 2
Country Club Estate
21 Woodlands Drive
Woodmead
Johannesburg
Lead Independent Non-Executive Director
Paul Sadler (77)
Retired Chartered Accountant
South African
Ground floor Eland House
The Braes
3 Eaton Avenue
Bryanston
Johannesburg
Non-Executive Director
Gerard Kemp (61)
MSc (Mining Engineering)
South African
Ground floor Eland House
The Braes
3 Eaton Avenue
Bryanston
Johannesburg
Phoevos Pouroulis (41)
BSc (Business Science)
South African/Cypriot
First Floor
Eland House
The Braes
3 Eaton Avenue
Bryanston
Johannesburg
Antoinette PE Sedibe (50)
BA (Admin)
South African
Ground Floor
7 St Davids Place
Parktown
Johannesburg
Gia Mai (35)
MA (Lausanne), CPA CFA (Switzerland)
Swiss
Gunvor SA
80-84 Rue du Rhône
1204 Geneva
Switzerland
Meindert Witteveen (47)
MSc (Business)
Dutch
Gunvor SA
80-84 Rue du Rhône
1204 Geneva
Switzerland
17
The abridged curricula vitae of the Keaton Energy Directors are set out below:
Amanda B Glad (44)
CEO
Appointed May 2009
Member of the SHE, Risk and Social and Ethics Committees
Mandi is the only female CEO of a JSE-listed mining company and played an integral role in the establishment of Keaton Energy. She
held the positions of Marketing and Business Development Director and Operations Director before being appointed as CEO in
September 2012. Mandi is an entrepreneur with more than 20 years’ experience owning and operating a wide range of businesses.
She has extensive strategic industrial relations skills and a detailed knowledge and experience of implementing the MPRDA and related
regulatory processes, gained through her involvement with HDSAs and women-led coal mining initiatives. She co-owns Rutendo
Holdings and Rutendo Mining.
Jacques Rossouw (39)
CFO
BCom (Hons) Accounting, CA(SA)
Appointed November 2011
Member of the Risk and Social and Ethics Committees
Jacques has extensive experience in the mining industry. Before joining Keaton Energy, he worked as a manager in both corporate
reporting and in operational finance at Harmony Gold Mining Company Limited for three years. Prior to this he was with PwC for six
years where he completed his articles, completed a three month working secondment to the USA and was appointed National Middle
Market Manager where he focused on risk management, audit methodology and best practice, learning and education, annual and
financial reporting and budgeting for all middle market offices in South Africa.
Non-Executive Directors
David Salter (56)
Chairman
BSc (Hons), PhD, FSAIMM
Appointed January 2008
Chairman of the SHE and Nomination Committees, member of the Risk, Remuneration and Social and Ethics Committees
David has 35 years’ experience in international mineral technology, project development and mining executive management, and has
previously served as the managing director of the Salene Group, JSE-listed Barplats Investments Limited and Eland Platinum Holdings
Limited. David currently serves on the boards of TransAfrika Resources Limited and Tharisa plc.
Antoinette PE Sedibe (50)
BA (Admin)
Appointed April 2006
Chair of the Social and Ethics Committee, member of the Risk Committee
Antoinette is managing director of Andisa Capital and a co-founder of Rutendo Mining. After starting her career with Nedbank’s
graduate programme, she moved to AECI where she was a foreign exchange and money market dealer in the treasury department
before moving to the internal audit department. She assisted in setting up Polifin Treasury (a Sasol and AECI joint venture), and also
gained extensive management, financial markets and treasury operations experience as a treasurer at Standard Bank’s treasury
outsourcing operation, where she was later appointed a director. Antoinette was appointed as an Executive Director of Andisa Capital
in 2003.
Phoevos Pouroulis (41)
BSc (Business Science)
Appointed March 2007
Member of the Risk Committee
Phoevos is CEO of JSE-listed Tharisa plc, a chrome and platinum producer. He is a co-founder of Keaton Energy, which is one of a
number of businesses locally and throughout Africa which he founded. He was instrumental in advising Chromex Mining plc on its
establishment and was later appointed commercial director.
18
Meindert Witteveen (47)
MSc (Business)
Appointed 5 September 2014
Meindert is head of Coal and Iron Ore at Gunvor SA. He has 19 years’ experience in dry bulk commodity markets, combining an
understanding of physical coal, freight, metals and energy markets with knowledge of derivative trading. Before joining Gunvor in
January 2013, Meindert was managing director at Black River, a Cargill subsidiary in commodity trading. He has previously also worked
at Barclays Capital and Credit Suisse.
Gia Mai (35)
MA (Lousanne) CPA CFA (Switzerland)
Appointed July 2015
Gia joined Gunvor to develop and head the corporate finance and investments team in 2008 and was later appointed Chief Investment
Officer in 2015. He was previously with PwC for six years in auditing and transaction services.
Jeroen Schurink* (45)
Masters in International Management
Appointed in March 2014
Member of the Risk and Social and Ethics Committees
Jeroen Schurink completed his master’s degree in International Management at the Lausanne School of Business in 1992. He has
21 years’ experience in finance having served as an associate director for Procter and Gamble and as the Chief Financial Officer for the
Gunvor Group. In 2013 Jeroen was appointed as Chief Investment and Operating Officer at Gunvor.
*Mr Schurink resigned with effect from 30 June 2015.
Independent Non-Executive Directors
Lizwi Mtumtum (44)
Lead Independent Director
BA (Economics/Accounting)
Appointed March 2008
Chairman of the Audit and Remuneration Committees, member of the Risk, Nomination and Social and Ethics Committees
Lizwi is Executive Chairman of Emangweni Investments Proprietary Limited, an investment holding company, and Emangweni
Properties Proprietary Limited, a black-owned and managed property investment company. He previously held positions at
Pangbourne Properties, Yard Capital (a BEE investment holding company), Nedbank and Nedcor. He serves as an Independent NonExecutive Director of Synergy Income Fund Limited, where he is also chairman of the Audit and Risk Committee.
Gerard Kemp (61)
MSc Mining Engineering
Appointed November 2012
Member of the Audit, Risk, Nomination, Remuneration and SHE Committees
Gerard is currently the Managing Director of KCS Resources Limited. He was previously the CEO of Kaouat Iron Limited, a division of
TransAfrika Resources. During his career he has spearheaded several large, successful BEE transactions and brings significant
experience in corporate finance and executive mine management to the Board. He has completed development programmes in labour
relations and management at the University of South Africa’s School of Leadership.
Paul Sadler (77)
CA(SA)
Appointed October 2010
Chairman of the Risk Committee, member of the Audit and Nomination Committees
Paul has extensive auditing experience, much of which was in the mining sector, bringing valuable expertise to the Board. During his
career he was involved with various mining companies including De Beers Group, Aquarius Platinum Limited and Barplats Mines
Limited, at the latter serving as a member of the Audit Committee for two years. He was a partner at KPMG from 1980 until his
retirement in 2003, after which he joined the Salene Group as a financial consultant.
19
6.6 Directors’ remuneration and benefits
Directors’ remuneration for the year ended 31 March 2015 was as follows:
Basic
salary
Rand
Travel
allowance
Medical
aid
Group
benefits
Leave
pay
Performance
bonus
Board Committee
fees
fees
Total
Executive
AB Glad
3 201 668
J Rossouw
2 303 077
Non-Executive
JD Salter
–
–
JHM Schurink#
GH Kemp
–
LX Mtumtum
–
P Pouroulis
–
–
MT Witteveen##
P Sadler
–
D Jonker**
–
APE Sedibe
–
–
–
91 467
88 449
182 019
426 166
962 848
283 572
3 484 615
2 730 769
–
–
–
–
7 922 617
5 832 033
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
327 887
303 113
303 113
303 113
303 113
183 616
303 113
72 864
303 113
241 250
74 406
256 720
286 717
74 539
43 250
180 627
13 662
201 917
569 137
377 519
559 833
589 830
377 652
226 866
483 740
86 526
505 030
5 504 745
–
179 916
608 185
1 246 420
6 215 384
2 403 045
Total
#
##
**
1 373 088 17 530 783
Appointed 7 March 2014 and resigned on 30 June 2015.
Appointed 5 September 2014.
Mr D Jonker resigned with effect from 1 July 2014.
Notes:
The estimated remuneration receivable by Directors will not be varied as a result of the Transactions.
The remuneration of the Non-Executive Directors will be limited to the reimbursement of the reasonable expenses incurred by such
Directors for the purposes of attending Board meetings and market-related Directors’ fees.
Details of Directors’ interests in share options for the year ended 31 March 2015 are set out in the table below:
Executive Director
Share
Share
options
options
exercised/
Opening
awarded
lapsed
balance during the year during the year
Closing
balance
Vesting
date
Offer
price
(Rand)
AB Glad
AB Glad
AB Glad
AB Glad
AB Glad
AB Glad
J Rossouw
J Rossouw
J Rossouw
J Rossouw
569 727
1 134 989
1 017 855
1 284 431
3 150 000
–
355 872
1 616 766
2 087 250
–
–
–
–
–
–
750 389
–
–
–
568 740
–
–
–
–
–
–
–
–
–
–
569 727
1 134 989
1 017 855
1 284 431
3 150 000
750 389
355 872
1 616 766
2 087 250
568 740
30 Jun 13
31 Mar 14
30 Nov 14
31 Mar 15
31 Mar 16
25 Jun 17
30 Nov 14
31 Mar 15
31 Mar 16
25 Jun 17
4.67
2.52
2.81
3.34
1.44
N/A
2.81
3.34
1.44
N/A
JD Salter*
2 000 000
–
–
2 000 000
31 Mar 16
1.44
13 216 890
1 319 129
–
14 536 019
–
–
Total
* Allocated to Dr Salter during his appointment as Executive Chairman during the 2013 financial year.
20
6.7 Directors’ interests in securities
Directors’ interests in securities as at the Last Practicable Date, before and after the implementation of the Rutendo Flip Transaction,
are set out below. Both AB Glad and J Rossouw bought Keaton Energy Shares subsequent to 31 March 2015 on 29 June 2015 of
68 000 and 50 000 respectively.
These interests include Associates of Directors.
Before the issue
Director
Nature of interest
Number of
shares held
Percentage
held1
P Pouroulis
JD Salter
AB Glad
AB Glad
APE Sedibe
J Rossouw
P Sadler
Indirect, beneficial
Direct, beneficial
Direct, beneficial
Direct, beneficial
43 738 428
2 450 000
3 042 537
68 000
3 166 723
50 000
114 285
19.49%
1.09%
1.36%
0.03%
1.41%
0.02%
0.05%
52 629 973
23.45 %
Total
Notes:
1
Based on 224 442 642 Keaton Energy Shares.
Director
Nature of interest
Number of
shares held
Percentage
held1
P Pouroulis
JD Salter
AB Glad
AB Glad
APE Sedibe
J Rossouw
P Sadler
Direct, beneficial
Direct, beneficial
Direct, beneficial
43 738 428
2 450 000
68 000
34 271 077
35 669 897
50 000
114 285
14.98%
0.84%
0.02%
11.74%
12.22%
0.02%
0.04%
116 361 687
39.86%
Total
Notes:
1
Based on 291 994 256 Keaton Energy Shares. This includes the 3 819 900 Keaton Energy Shares issued to Moneybox in
accordance with the Exchange Agreement.
6.8 Directors’ interests in transactions
AB Glad and APE Sedibe, who are Directors of both Keaton Energy and Keaton Mining, hold an indirect 26% interest in Keaton Mining
through Rutendo Mining, prior to the Rutendo Flip Transaction.
Excluding the above mentioned, the Directors, including any director who has resigned from Keaton Energy in the last 18 months, had
no material beneficial interest, whether direct or indirect, in any transaction effected by Keaton Energy during the current or immediately
preceding financial year, or in an earlier year, and which remains in any respect outstanding or unperformed.
6.9 Directors’ service contracts
Executive director’s service contracts
The terms and conditions regulating the provision of services by the Executive Directors to the Company are regulated by employment
contracts with the Company or its subsidiaries. All Executive Directors have identical rolling service contracts containing a six-month
notice period. Where appropriate and applicable to the position, a restraint of trade agreement will be entered into. The terms and
conditions contained in the agreements entered into with the Executive Directors are normal for agreements of this nature. Unless
termination of employment occurs as a result of the misconduct or poor performances of the Executive Director or his resignation or
retirement (other than under circumstances of constructive dismissal), upon termination of employment the Executive Director shall be
entitled to a severance payment equal to six months’ remuneration, less any other payments made or becoming due to the Executive
Director as a result of the termination of employment.
The service contracts of Executive Directors are available for inspection in terms of paragraph 18 below.
21
Non-Executive Director’s service contracts
The terms and conditions regulating the provision of services by the Non-Executive Directors to the Company are regulated by service
contracts with the Company or its subsidiaries. All Non-Executive Directors have identical rolling service contracts. Save for restrictions
concerning the non-solicitation of staff for a period of 12 months after termination of service, the service contracts do not contain any
restraint of trade provisions. The terms and conditions contained in the agreements entered into with the Non-Executive Directors are
normal for agreements of this nature.
7.LITIGATION
Save as disclosed below, there are no material legal or arbitration proceedings pending or threatened against Keaton Energy and its
subsidiaries, which may have, or in the past year have had, a material effect on the financial position of Keaton Energy.
Keaton Mining versus Megacube Mining Proprietary Limited (“Megacube”)
Contract mining services were rendered by Megacube to Keaton Mining. As a result of several alleged breaches of the contract mining
agreement, Keaton Mining disputes that the amount of R42.5 million 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 litigation is ongoing.
The Directors of Keaton Energy are not aware of any legal proceedings which may influence Keaton Energy’s rights to explore or mine. Keaton
Energy is in possession of the necessary legal title or ownership rights to explore and mine its projects.
8. MATERIAL LOANS
Details of material borrowings advanced to Keaton Energy, Keaton Mining and Labohlano respectively, if any, as at the Last Practicable Date,
are set out below.
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 Resources Limited (“Xceed”). The loan facility comprises a term facility of R300 million and a working capital facility of
R50 million.
As at 31 March 2015 R300 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, 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 up to 31 March 2015 amounted to
R28.2 million (2014: R4.2 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 earnings before interest, tax, depreciation and amortisation (“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.
As at 31 March 2015 R5.5 million (2014: Rnil) of the working capital facility had been drawn. The facility bears interest at the one-month JIBAR
plus a margin of 3.75% and the interest will be due and payable monthly. Commitment fees of 0.75% annually of undrawn facilities applies,
which is payable to the lender. The working capital facility is renewable annually.
Various guarantees, representations, warranties, undertakings, cessions, indemnities and pledges, normal to these financing arrangements,
have been given by the borrower, KATS (guarantor) and Keaton Energy (guarantor) to the lender. These include:
•the guarantors’ guarantees, the full, due, proper and timeous performance of all the guaranteed financial obligations of the borrower; and
•the guarantors have also subordinated any claims they have against the borrower in favour of the lender until such time as all obligations of
the borrower in terms of the financing facility have been discharged finally and in full.
As continuing covering security for the due compliance by the borrower with all obligations the following securities exist:
• registration of general and special notarial bonds over all moveable assets owned by the borrower;
• registration of mortgage bonds over all immovable properties owned by the borrower, to the extent legally possible;
• registration of mortgage bonds over all Mining Rights and Prospecting Rights to the extent possible;
• cession of all bank accounts and investments of the borrower;
• cession in securitatem debiti of all existing and future debtors; and
• cession of all insurance policies and insurance proceeds of the borrower.
The debt covenant tests for the group are as follows:
Maximum total debt to equity
Loan life cover ratio (minimum)
Reserve tail ratio (minimum)
Debt service cover ratio (minimum)
Current assets to current liabilities (minimum)
Maximum total debt to EBITDA
1:1
1.5:1
25%
1.3:1
1.2:1
4:1
The debt covenant tests are performed bi-annually. During the financial year ending 2015 and 2014 there were no breaches of the covenants.
22
Industrial Development Corporation (“IDC”) loan agreement
LME entered into a loan agreement with the IDC during 2004 for further development of its Vaalkrantz Mine. LME defaulted on the loan when it
failed to make payment to the IDC in terms of the loan agreement prior to the 2011 financial year. During the 2011 financial year Keaton Energy
refinanced LME and concluded an agreement with the IDC whereby the IDC agreed to reschedule repayment terms on the loan.
In terms of the revised loan agreement, the loan was repayable in seven equal six-monthly instalments of R935 817 and a final instalment of
R435 795 which commenced on 1 December 2012. The loan attracted interest at prime plus 2.5% which was payable monthly in arrears. The
loan was secured by a cession and pledge by the Company of so many ordinary shares in LME constituting 20% of the issued share capital.
The loan was further secured by a first mortgage bond over the surface rights, a general notarial bond over all moveable assets, excluding the
coal washing plant, and a special notarial bond over other moveable assets.
The loan was settled in full on 1 July 2014.
Industrial Development Corporation (“IDC”) – LME preference shares
During November 2004, the IDC subscribed to 60 cumulative redeemable preference shares with a par value of R1 and a premium of
R127 082 in LME. In terms of the agreement LME had to pay on each dividend date the relevant preference dividend and start to redeem the
preference shares in equal instalments in the 2008 financial year. LME defaulted when it failed to make payment to the IDC in terms of the
preference share agreement.
During the 2011 financial year the IDC, similarly to the loan agreement above, agreed to reschedule repayment terms on the preference shares
when Keaton Energy refinanced LME, and an addendum to the preference shares agreement was concluded. In terms of the addendum these
shares are entitled to a preference dividend at a coupon rate of 14%, so as to provide the IDC with a real internal rate of return of 8% over the
term of the agreement, with the understanding that any shortfall or excess be corrected on the “terminal redemption date” being
31 October 2015.
Dividends are compounded and payable quarterly. Payment of dividends is, however, dependent on LME’s operational cash flow requirements,
but in any event is payable no later than the terminal redemption date together with the redemption of the cumulative preference shares. The
preference shares and accumulated dividends are secured by a cession and pledge by the Company of so many ordinary shares in LME
constituting 20% of the issued share capital. In addition to the redemption of the preference shares and accumulated dividends, LME will also
pay the IDC an amount linked to the share price of Keaton Energy.
Vitol SA – US dollar loan
During July 2008, LME entered into a coal sale agreement with Vitol SA for the supply of 500 000 tonnes of coal at a rate of 22 400 tonnes per
month. This agreement has a pre finance loan clause where Vitol SA paid an amount of USD5.5 million to LME to assist with the development
of the Braakfontein Mine within LBC and to enable LME to meet its obligations to supply coal under the agreement.
This loan bears Interest at the one-year USD LIBOR rate plus a margin of 3% prior to the commencement of coal supply, with an alternate
margin of 2% once coal supply has commenced. The loan is repayable by reducing the sales price with USD12 per tonne of coal supplied to
Vitol SA.
The loan is secured by a pledge of all interest (shares and claims on loan account) held by LME in LBC, as well as security cession of current
and future right, title and interest in receivables and cash generated by sale of coal from LBC, as well as all surface rights relating to the LBC.
Total repayments of R5.7 million relating to accrued interest were made during the current financial year (2014: R9 million).
9. MATERIAL CHANGES
Save for the Transactions there have been no material changes in the financial or trading position of Keaton Energy between 31 March 2015
and the Last Practicable Date.
10. MATERIAL CONTRACTS
Keaton Energy, Keaton Mining and Labohlano have neither entered into any material contracts, verbally or in writing, being restrictive funding
arrangements and/or contracts entered into within the two years preceding the date of this Circular, or at any time which contains an obligation
for settlement that is material to Keaton Energy, Keaton Mining or Labohlano at the date of this Circular.
11. STATEMENT AS TO WORKING CAPITAL
The Board of Directors is of the opinion that the working capital available to Keaton Energy and its subsidiaries is adequate for its requirements
for a period of at least 12 months from the date of issue of this Circular.
The Board of Directors is of the opinion that:
(a)Keaton Energy and its subsidiaries will be able, in the ordinary course of business, to pay their debts for a period of 12 months from the
date of the issue of this Circular;
(b)the assets of Keaton Energy and its subsidiaries will be in excess of their liabilities for a period of 12 months after the date of the issue of
this Circular;
(c)the share capital and reserves of Keaton Energy and its subsidiaries will be adequate for ordinary business purposes for a period of 12
months after the date of the issue of this Circular; and
(d)the working capital of Keaton Energy and its subsidiaries will be adequate for ordinary business purposes for a period of 12 months after
date of the issue of this Circular.
23
12. EXPENSES
The expenses, excluding VAT, relating to the Transactions are set out below:
Description
ZAR
Legal fees
Malan Scholes
Cliffe Dekker Hofmeyer
Competent Person and Valuators
Venmyn
G Stacey
CCIC
Miptech
KPMG
Sponsors
Independent fair and reasonable opinion
BDO
Printing and publication costs
JSE costs
Contingency provision
Total
Moneybox
Option
Transaction
Rutendo Flip
Transaction
Total
R400 000
–
–
R240 000
R400 000
R240 000
R454 000
R21 500
R42 500
R12 500
R107 500
R454 000
R21 500
R42 500
R12 500
R77 500
R908 000
R43 000
R85 000
R25 000
R185 000
R275 000
R275 000
R550 000
–
R125 817
R100 000
R100 000
R275 000
R125 817
R100 000
R100 000
R275 000
R251 634
R200 000
R200 000
R 1 638 817
R 1 723 817
R 3 362 634
13. OPINION AND RECOMMENDATIONS
The Independent Expert has considered the terms and conditions of the Rutendo Flip Transaction and, based on and subject to the conditions
set out in their opinion letter, is of the opinion that the terms and conditions of the Transaction, based on quantitative considerations, are not fair
to Keaton Energy Shareholders. The assessment of fairness is restricted to comparing the 21.83% Keaton Energy Shares together with the
cash payment of R6 million (“Rutendo Flip Consideration”) to the fair value of the Rutendo Option Shares. However, on the basis considered
and under the prevailing market conditions and pricing at the time of valuation, it is nevertheless considered reasonable based on the rationale
and implications of the Rutendo Flip Transaction. The opinion letter of the Independent Expert is set out in Annexure 7 to this Circular.
The Board has considered the terms and conditions of the Transactions and recommends that Keaton Energy Shareholders vote in favour of
the Resolutions to be proposed at the General Meeting. The Directors intend to vote, in respect of any Keaton Energy Shares held by them, in
favour of the requisite Resolutions. AB Glad and APE Sedibe, and their Associates, will be excluded from voting on Ordinary Resolution 2 and
Special Resolution 1.
14. IRREVOCABLE UNDERTAKING
The agreement entered into between Moneybox and Keaton Energy required that the majority of Keaton Energy shareholders provide
irrevocable undertakings to vote in favour of the Moneybox Option Transaction. These irrevocable undertakings were signed by Plusbay, Axel
Trust, Langa Trust and Mrs A Pouroulis, all major shareholders of Keaton Energy referenced in paragraph 6.4, with a cumulative vote of 57.43%.
15. RESPONSIBILITY STATEMENT
The Directors collectively and individually, accept full responsibility for the accuracy of information given and certify that, to the best of their
knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable
enquiries to ascertain such facts have been made and that this Circular contains all information required by law and the Listings Requirements.
16. CONSENTS
Each of the advisers has consented in writing to act in the capacities stated, to their names being stated in this Circular, and had not withdrawn
such consent prior to the publication of this Circular.
KPMG and the Joint Competent Persons have consented to the inclusion of their respective reports in the form and context in which they are
included in this Circular and had not withdrawn such consents prior to the publication of this Circular.
17. GENERAL MEETING
17.1 Notice of General Meeting
A notice convening the General Meeting is attached to the Circular. The General Meeting will be held at the Indigo 2, Ground Floor, The
Forum, Wanderers Building, The Campus (Dimension Data), 57 Sloane Street (corner Main Street), Bryanston, 2191, on Friday,
30 October 2015 commencing at 11:00.
17.2 Dematerialised Keaton Energy Shareholders, other than own-name Dematerialised Keaton Energy Shareholders
If you have not been contacted by your CSDP or broker, it is advisable for you to contact your CSDP or broker and furnish them with
your instructions. If your CSDP or broker does not obtain instructions from you, they will be obligated to act in terms of your mandate
furnished to them. Such holders of Dematerialised Keaton Energy Shares, other than own-name Dematerialised Keaton Energy
Shareholders, must not complete the attached form of proxy (blue), unless you advise your CSDP or broker in the manner and cut-off
24
time stipulated by your CSDP or broker, that you wish to attend the General Meeting or send a proxy. If you wish to attend the General
Meeting, you must request your CSDP or broker to issue the necessary letter of representation to you, to enable you to attend or be
represented at the General Meeting.
17.3 Own-name Dematerialised Keaton Energy Shareholders and Certificated Keaton Energy Shareholders
If your Keaton Energy Shares have been Dematerialised but are recorded in the register of Keaton Energy in your own name or if your
Keaton Energy Shares have not been Dematerialised you can attend and vote at the General Meeting. If you are unable to attend the
General Meeting and wish to be represented thereat, you must complete the attached form of proxy (blue) in accordance with the
instructions therein and lodge it with or post it to the Transfer Secretaries, to be received by no later than 11:00 on Wednesday,
28 October 2015 (or 24 hours before the adjourned General Meeting which date, if necessary, will be released on SENS and published
in the South African press). A form of proxy for use by own name Dematerialised Keaton Energy Shareholders and Certificated Keaton
Energy Shareholders only, at the General Meeting is included in the Circular. Instructions for its completion and lodging with the Transfer
Secretaries are contained on the form.
17.4 Keaton Energy Shareholder approval
The Transactions are subject to the approval of Keaton Energy Shareholders present or represented by proxy at the General Meeting
and entitled to vote, as set out in the notice of General Meeting.
17.5 Voting rights
All issued Keaton Energy Shares rank pari passu with each other.
At the General Meeting, every Keaton Energy Shareholder present or represented by proxy shall have one vote on a show of hands,
and on a poll, one vote for every Keaton Energy Share held in relation to the Moneybox Option.
Both AB Glad and APE Sedibe, and their Associates, will be excluded from voting on any of the Resolutions pertaining to the Rutendo
Flip Transaction due to them being Related Parties.
18. DOCUMENTS AVAILABLE FOR INSPECTION
The following documents, or copies thereof, will be available for inspection, during normal business hours at the Registered Office, from the
date of this Circular until Friday, 30 October 2015:
• the memoranda of incorporation of Keaton Energy and each of the relevant subsidiaries;
• the annual financial statements of Keaton Energy for the three financial years ended 31 March 2015, 2014 and 2013;
• the consent letters of the appointed advisors as set out in paragraph 16 above;
• the signed report in respect of the CPR, which is set out on Keaton Energy’s website;
•the signed Independent Reporting Accountants’ Report to Keaton Energy’s Directors on the Pro Forma Financial Information as set out in
Annexure 2 to this Circular;
• the signed opinion letter of the Independent Expert as set out in Annexure 7 to this Circular;
• Directors’ service contracts; and
• a signed copy of this Circular.
19. INCORPORATION BY REFERENCE
The information below is the most recent available to Keaton Energy and is available on Keaton Energy’s website www.keatonenergy.co.za. The
documents are also available for inspection at our Registered Office or from the offices of our sponsor, Investec Bank Limited, 100 Grayston
Drive, Sandown, during business hours at no charge for 14 days after the Last Day Practicable.
Competent Persons Report
King III Code Corporate Governance
Keaton Energy Historical Information
2013
2014
2015
www.keatonenergy.co.za/downloads/2015/independent-competentpersons-report.pdf
www.keatonenergy.co.za/downloads/2015/KingIIIApplication.pdf
http://www.keatonenergy.co.za/investor-media-financials-2013.php
http://www.keatonenergy.co.za/investor-media-financials-2014.php
http://www.keatonenergy.co.za/index.php
The Circular was signed at Johannesburg by Mr J Rossouw on behalf of all Directors in terms of a power of attorney
Jacques Rossouw
23 September 2015
Registered Office
Ground Floor, Eland House
The Braes
3 Eaton Avenue
Bryanston, 2191
(Postnet Suite 464, Private Bag X51, Bryanston, 2021)
Transfer Secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
25
ANNEXURE 1
PRO FORMA FINANCIAL INFORMATION
The Pro Forma Financial Information and effects are calculated for the year ended 31 March 2015 for the statement of comprehensive income
purposes and as at 31 March 2015 for the statement of financial position purposes. The Pro Forma Financial Information and effects are prepared
for illustrative purposes only, to provide information about how the Transactions might have affected the Financial Information presented by Keaton
Energy and, because of their pro forma nature, may not give a fair reflection of Keaton Energy’s financial position, changes in equity and the results
of its operations or cash flows. The Pro Forma Financial Information and effects have been prepared in accordance with the accounting policies of
Keaton Energy used in the preparation of the audited results for the year ended 31 March 2015. There are no post-balance sheet events, which
require adjustments to the Pro Forma Financial Information and effects. The Pro Forma Financial Information and effects are the responsibility of the
Directors and have been reported on by KPMG. Their report is included in Annexure 2.
PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – MONEYBOX OPTION TRANSACTION
1 April 2014 –
31 March
20151
R
Pro forma
adjustments2
R
Pro Forma
31 March 2015
Notes
R
1 447 701 283
(1 244 182 271)
–
–
1 447 701 283
(1 244 182 271)
203 519 012
19 931 160
(126 390 102)
(60 206 564)
–
82 034 438
11 000
(1 259 030)
Operating profit/(loss) before net finance (cost)/income
Net finance (cost)/income
Finance income
Finance costs
36 853 506
(49 742 569)
6 150 471
(55 893 040)
80 786 407
10 242 005
10 242 005
–
Net (loss)/ profit before taxation
Income taxation (expense)/credit
(12 889 063)
(58 965 844)
91 028 413
(17 847 360)
Net (loss)/profit for the year
(71 854 907)
73 181 053
1 326 146
(130 247)
–
(130 247)
Total comprehensive income
(71 985 154)
73 181 053
1 195 899
Net (loss)/profit attributable to:
Owners of the Company
Non-controlling interest
(31 028 870)
(40 826 037)
57 874 757
18 175 782
(71 854 907)
76 050 539
4 195 632
Total comprehensive income attributable to:
(31 159 117)
(40 826 037)
57 874 757
18 175 782
26 715 640
(22 650 255)
Total comprehensive income for the year
(71 985 154)
76 050 539
4 065 385
Basic earnings per share (cents)
(13.8)
1515.1
(11)
11.8
Diluted earnings per share (cents)
(13.8)
1515.1
(11)
11.6
Headline earnings per share (cents)
0.4
168
(11)
3.2
Fully diluted headline earnings per share (cents)
0.4
168
(11)
3.2
Weighted average number of shares
224 354 265
3 819 900
(12)
228 174 165
Weighted average number of shares for diluted earnings per share
228 028 164
3 819 900
(12)
231 848 064
(31 028 870)
57 874 757
26 845 887
1 919 708
30 120 273
(37 296)
–
–
–
–
(51 462 084)
1 919 708
30 120 273
(37 296)
(51 462 084)
973 815
6 412 673
7 386 488
Revenue
Cost of sales
Gross profit
Other income
Mining and related expenses
Administrative expenses
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation differences
Headline earnings per share calculation
Total comprehensive income attributable to owners of the Company
Adjusted for:
Loss on disposal of property, plant and equipment
Impairment of assets
Profit on disposal of property, plant and equipment
Remuneration for Call options issued (net of tax and non-controlling interest)
Total headline earnings
26
(5)
(6)
(6) and (7)
(6) and (8)
(9)
(10)
203 519 012
101 965 598
(126 379 102)
(61 465 594)
117 639 913
(39 500 564)
16 392 476
(55 893 040)
78 139 350
(76 813 203)
26 845 887
(22 650 255)
Notes
1. Keaton Energy’s audited statement of comprehensive income for the year ended 31 March 2015.
2.Adjusted firstly for the effects of the Exchange Agreement whereby Keaton Energy acquired the minorities interests in Labohlano from
Moneybox (refer to (3) below) and thereafter for the effects of Moneybox Option Transaction. In terms of the Moneybox Option Transaction
Keaton Energy and Keaton Mining granted Moneybox the right to acquire the Labohlano Sale Equity, the KM Prospecting Rights and
KM Reports. The total purchase consideration of R147 987 929 receivable in cash is allocated as follows:
– Labohlano Sale Equity R47 924 393; and
– KM Prospecting Rights and KM Reports R100 063 536.
For purposes of the pro forma financial effects the accrued preference dividends used to determine the purchase price as per the Moneybox
Option Transaction (i.e. accrued preference dividends up to 30 June 2015) were adjusted to the accrued preference dividends as at 31 March
2015.
3.Adjusted for the effects of the Exchange Agreement entered into between Keaton Energy, Labohlano and Moneybox resulting in the exchange
of 4 ordinary shares in Labohlano held by Moneybox to Keaton Energy for consideration of R1 500 000 in cash and the exchange of
22 ordinary shares in Labohlano held by Moneybox to Keaton Energy for 3 819 900 Keaton Energy shares with a value of R9 048 198.
4.
Assumed effective date of the Transaction was 1 April 2014 for purposes of the statement of comprehensive income.
5.Profit on the sale of the Labohlano Sale Equity of R10 460 149 and profit on sale of the KM Prospecting rights and KM Reports of
R71 574 289.
6.
Adjusted for the deconsolidation of Labohlano’s net loss of R384 627 from the consolidated results:
– Mining and related expenses R11 000
– Administrative expenses R379 787
– Finance income R6 159
7.
Estimated transaction cost of R1 638 817 incurred by Keaton Energy relating to this transaction.
8.
Interest received of R10 248 164 relating to the purchase consideration received in (2) above.
9.Taxation expense of R15 436 742 on the realised profit referred to in (5) above and taxation expense of R2 869 486 on interest received referred
to in (8) above. This was offset by the taxation deduction of R458 869 on transaction costs incurred.
10. The non-controlling interest was adjusted for:
(a) minority interest portion on the profit associated with the sale of the KM Prospecting rights and KM Reports of R15 135 611;
(b)26% share in Labohlano’s loss for the year ended 31 March 2015 transferred to owners of the company after giving effect to the Exchange
Agreement referred to in (3) above of R1 238 527; and
(c) minority interest portion on the interest received by Keaton Mining referred to in (8) above of R1 801 644.
11. The earnings per share and headline earnings per share were adjusted for:
(a)profit on the sale of the Labohlano Sale Equity of R10 460 149 and profit on sale of the KM Prospecting rights and KM Reports of
R71 574 289 referred to in (5) above as well as the taxation paid on the profits of R15 436 742 referred to in (9) above;
(b) estimated transaction cost of R1 638 817 incurred by Keaton Energy. Refer to (7) above; and
(c) non-controlling interest impact as referred to in (10) above.
12. Shares in issue and the weighted average number of shares in issue were adjusted for the issue of 3 819 900 shares referred to in (3) above.
13. All of the above adjustments with the exception of transaction costs are expected to have a continuing effect on Keaton Energy.
27
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION – MONEYBOX OPTION TRANSACTION
At 31 March
20151
R
Pro forma
adjustments2
R
768 617 910
716 434 140
–
5 216 499
10 780 613
68 305 506
–
(65 767 704)
–
–
–
–
1 569 354 668
(65 767 704)
Inventory
Trade and other receivables
Taxation
Cash and cash equivalents
54 110 477
179 455 807
1 901 772
72 546 393
–
(20 970)
–
144 671 546
Total current assets
308 014 449
144 650 576
452 665 025
1 877 369 117
78 882 872
1 956 251 989
Equity
Stated capital
Share-based payment reserve
Other reserves
Retained earnings
Total equity attributable to owners of the Company
692 928 553
26 546 123
19 084 517
103 072 976
841 632 169
(3 374 543)
9 048 198
–
–
42 687 600
51 735 798
12 181 949
Total equity
838 257 626
63 917 747
902 175 373
Liabilities
Borrowings
Mine closure and environmental rehabilitation provision
Provisions
Deferred taxation
Deferred income
251 740 913
270 058 375
31 768 646
129 179 335
5 417 691
–
–
–
–
–
251 740 913
270 058 375
31 768 646
129 179 335
5 417 691
Total non-current liabilities
688 164 960
–
688 164 960
Borrowings
Financial liabilities
Trade and other payables
Provisions
109 375 308
67 816
216 843 420
24 659 987
–
–
14 965 124
–
109 375 308
67 816
231 808 544
24 659 987
Total current liabilities
350 946 531
14 965 124
365 911 655
1 877 369 117
78 882 872
1 956 251 989
838 257 626
121 823 486
224 442 642
373
54.3
63 917 747
129 685 451
3 819 900
1 673
3 395
902 175 373
251 508 937
228 262 542
395.2
110.2
Assets
Property, plant and equipment
Intangible assets
Deferred taxation
Investments and loans
Restricted cash
Restricted investments
Total non-current assets
Total assets
Total equity and liabilities
Net Asset Value (NAV)
Tangible Net Asset Value (TNAV)
Shares in issue
NAV per share (cents)
TNAV per share (cents)
28
Pro Forma
31 March 2015
Notes
R
(5)
768 617 910
650 666 436
–
5 216 499
10 780 613
68 305 506
1 503 586 964
(5)
(5) and (6)
(3)
(4)
(7)
(5) and (8)
54 110 477
179 434 837
1 901 772
217 217 939
701 976 751
26 546 123
19 084 517
145 760 576
893 367 967
8 807 406
Notes
1.
Keaton Energy’s audited statement of financial position as at 31 March 2015.
2.Adjusted firstly for the effects of the Exchange Agreement whereby Keaton Energy acquires the minorities interests in Labohlano from
Moneybox (refer to (3) below) and thereafter for the effects of the Moneybox Option Transaction. In terms of the Moneybox Option Transaction
Keaton Energy and Keaton Mining granted Moneybox the right to acquire the Labohlano Sale Equity, the KM Prospecting Rights and
KM Reports. The total purchase consideration of R147 987 929 receivable in cash is allocated as follows:
(a) Labohlano Sale Equity R47 924 393; and
(b) KM Prospecting Rights and KM Reports R100 063 536.
For purposes of the pro forma financial effects the accrued preference dividends used to determine the purchase price as per the Moneybox
Option Transaction (i.e. accrued preference dividends up to 30 June 2015) were adjusted to the accrued preference dividends as at 31 March
2015.
Keaton Energy realised a profit before taxation on the sale of the Labohlano Sale Equity of R10 460 149 and profit on sale of the
KM Prospecting rights and KM Reports of R71 574 289.
3.Adjusted for the effects of the Exchange Agreement entered into between Keaton Energy, Labohlano and Moneybox resulting in the exchange
of 4 ordinary shares in Labohlano held by Moneybox to Keaton Energy for consideration of R1 500 000 in cash and the exchange of
22 ordinary shares in Labohlano held by Moneybox to Keaton Energy for 3 819 900 Keaton Energy shares with a value of R9 048 198
recognised in stated capital.
4.
Retained earnings adjusted for:
(a) the effect of the loss on the Exchange Agreement related to Labohlano of R7 594 536. Refer to (3) above;
(b)gain on sale (net of taxation and non-controlling interest) of the Labohlano Sale Equity and sale of the KM Prospecting Rights and
KM Reports of R51 462 085. Refer to (2) above; and
(c) estimated transaction cost of R1 638 817 and the related taxation effect of R458 869.
5.Keaton Energy Holdings realised net assets of R65 966 791 as a result of the Moneybox Option Transaction (refer to (2) above) which was
included under the following line items:
(a) intangible assets R65 767 704;
(b) cash and cash equivalents R177 566;
(c) trade and other receivables R20 970; and
(d) trade and other payables R12 749.
6.
Cash and cash equivalents has been adjusted for:
Cash outflow:
(a) payment of cash consideration of R1 500 000 to Moneybox for shares held in Labohlano (refer to (3) above);
(b) total transaction costs paid of R1 638 817; and
(c) deconsolidation of Labohlano’s cash and cash equivalents of R177 566 (refer to (5) above);
Cash inflow:
(d) Cash received of R147 987 929 from Moneybox. Refer to (2) above.
7.
Non-controlling interest has been adjusted for:
(a) decrease due to derecognition of non-controlling interest relating to Labohlano of R2 953 662 (refer to (3) above); and
(b)increase due to non-controlling interest share of profit realised on sale of the KM Prospecting Rights and KM Reports R15 135 611 (refer
to (2) above).
8.
Trade and other payables has been adjusted for:
a)taxation payable of R15 436 742 on the profit on sale of the Labohlano Sale Equity and sale of the KM Prospecting Rights and
KM Reports (refer to (2) above);
(b) taxation deduction of R458 869 relating to transaction costs of R1 638 817 incurred; and
(c) deconsolidation of Labohlano’s trade and other payables of R12 749 (refer to (5) above).
29
PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – RUTENDO FLIP TRANSACTION
1 April 2014 –
31 March
20151
R
Pro forma
adjustments2
R
Pro Forma
31 March 2015
Notes
R
1 447 701 283
(1 244 182 271)
–
–
1 447 701 283
(1 244 182 271)
203 519 012
19 931 160
(126 390 102)
(60 206 564)
–
–
–
(274 683)
203 519 012
19 931 160
(126 390 102)
(60 481 247)
Operating profit/(loss) before net finance (cost)/income
Net finance (cost)/income
Finance income
Finance costs
36 853 506
(49 742 569)
6 150 471
(55 893 040)
(274 683)
–
–
–
Net (loss)/ profit before taxation
Income taxation (expense)/credit
(12 889 063)
(58 965 844)
(274 683)
482 669
Net (loss)/profit for the year
(71 854 907)
207 986
(71 646 921)
(130 247)
–
(130 247)
Total comprehensive income
(71 985 154)
207 986
(71 777 168)
Net (loss)/profit attributable to:
(31 028 870)
(40 826 037)
14 160 411
(13 952 425)
(71 854 907)
207 986
Total comprehensive income attributable to:
(31 159 117)
(40 826 037)
14 160 411
(13 952 425)
Total comprehensive income for the year
(71 985 154)
207 986
Basic earnings per share (cents)
(13.8)
22.2
(6)
(5.9)
Diluted earnings per share (cents) – Anti-dilutive
(13.8)
22.2
(6)
(5.9)
Headline earnings per share (cents)
0.4
22.2
(6)
5.3
Fully diluted headline earnings per share (cents)
0.4
22.2
(6)
5.2
Weighted average number of shares
224 354 265
63 731 714
(7)
288 085 979
Weighted average number of shares for diluted earnings per share
228 028 164
63 731 714
(7)
291 759 878
(31 028 870)
14 160 411
(16 868 459)
1 919 708
30 120 273
(37 296)
–
–
–
1 919 708
30 120 273
(37 296)
973 815
14 160 411
15 134 226
Revenue
Cost of sales
Gross profit
Other income
Mining and related expenses
Administrative expenses
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation difference
Headline earnings per share calculation
Total comprehensive income attributable to owners of the Company
Adjusted for:
Loss on disposal of property, plant and equipment
Impairment of assets
Profit on disposal of property, plant and equipment
Total headline earnings
30
(4)
36 578 823
(49 742 569)
6 150 471
(55 893 040)
(5)
(3),(4) and (5)
(3)
(13 163 746)
(58 483 175)
(16 868 459)
(54 778 462)
(71 646 921)
(3),(4) and (5)
(3)
(16 998 706)
(54 778 462)
(71 777 168)
Notes
1. Keaton Energy’s audited statement of comprehensive income for the year ended 31 March 2015.
2.
Assumed effective date of the Transaction was 1 April 2014 for purposes of the statement of comprehensive income.
3.Assumed that Keaton Energy acquires the 26% non-controlling interest in Keaton Mining, and as a result owns 100% of Keaton Mining. The
share of profits for the year ended 31 March 2015 related to the 26% interest was R13 952 425.
4.Estimated transaction cost of R274 683 incurred by Keaton Energy in acquiring 26% of Keaton Mining. The cost reflects the portion of total
estimated transaction cost accounted for in the statement of comprehensive Income.
5.
Taxation deduction of R482 669 on the total transaction costs of R1 723 817 incurred.
6.
The earnings per share and headline earning per share were adjusted for:
(a) the inclusion of the 26% earnings of R13 952 425 relating to Keaton Mining for the year ended 31 March 2015 as noted in (3) above;
(b)estimated transaction cost of R274 683 incurred by Keaton Energy in acquiring the 26% non-controlling interest in Keaton Mining. The
cost reflects the portion of total estimated transaction cost accounted for in the statement of comprehensive income; and
(c) Taxation deduction of R482 669 on the total transaction costs of R1 723 817 incurred.
7.
Shares in issue and the weighted average number of shares in issue were adjusted for the issue of 63 731 714 shares.
8.
All of the above adjustments with the exception of transaction costs are expected to have a continuing effect on Keaton.
31
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION – RUTENDO FLIP TRANSACTION
At 31 March
20151
R
Assets
Property, plant and equipment
Intangible assets
Deferred taxation
Investments and loans
Restricted cash
Restricted investments
Pro forma
adjustments2
R
Pro Forma
31 March 2015
Notes
R
768 617 910
716 434 140
–
5 216 499
10 780 613
68 305 506
–
–
–
–
–
–
768 617 910
716 434 140
–
5 216 499
10 780 613
68 305 506
1 569 354 668
–
1 569 354 668
Inventory
Trade and other receivables
Taxation
Cash and cash equivalents
54 110 477
179 455 807
1 901 772
72 546 393
–
–
–
(7 723 817)
54 110 477
179 455 807
1 901 772
64 822 576
Total current assets
308 014 449
(7 723 817)
300 290 632
1 877 369 117
(7 723 817)
1 869 645 300
Equity
Stated capital
Share-based payment reserve
Other reserves
Retained earnings
Total equity attributable to owners of the Company
692 928 553
26 546 123
19 084 517
103 072 976
841 632 169
(3 374 543)
149 199 825
–
–
(228 612 755)
(79 412 930)
72 171 782
Total equity
838 257 626
(7 241 148)
831 016 478
Liabilities
Borrowings
Mine closure and environmental rehabilitation provision
Provisions
Deferred taxation
Deferred income
251 740 913
270 058 375
31 768 646
129 179 335
5 417 691
–
–
–
–
–
251 740 913
270 058 375
31 768 646
129 179 335
5 417 691
Total non-current liabilities
688 164 960
–
688 164 960
Borrowings
Financial liabilities
Trade and other payables
Provisions
109 375 308
67 816
216 843 420
24 659 987
–
–
(482 669)
–
109 375 308
67 816
216 360 751
24 659 987
Total current liabilities
350 946 531
(482 669)
350 463 862
1 877 369 117
(7 723 817)
1 869 645 300
838 257 626
121 823 486
224 442 642
373
54
(7 241 148)
(7 241 148)
63 731 714
(85)
(14)
831 016 478
114 582 338
288 174 356
288.0
40.0
Total non-current assets
Total assets
Total equity and liabilities
Net Asset Value (NAV)
Tangible Net Asset Value (TNAV)
Shares in issue
NAV per share (cents)
TNAV per share (cents)
32
(6)
(3) and (4)
(5)
(3)
(7)
842 128 378
26 546 123
19 084 517
(125 539 779)
762 219 239
68 797 239
Notes
1.
Keaton Energy’s audited statement of financial position as at 31 March 2015.
2.
Assumed that Keaton Energy acquires the 26% non-controlling interest in Keaton Mining, and as a result owns 100% of Keaton Mining.
3.The agreement entered into between Keaton Energy and Rutendo Mining resulted in the sale of 26% interest in Keaton Mining held by Rutendo
to Keaton Energy for a consideration of R156 649,026. The purchase consideration was settled as follows:
(a) R6 000 000 in cash; and
(b) the issue of 63 731 714 Keaton Energy shares at R2.3638 per share totalling R150 649 026 recorded in stated capital
The non-controlling interest balance related to Keaton Mining of R72 171 782 was derecognised.
4.Estimated transaction cost of R1 449 134 incurred by Keaton Energy that have been capitalised in terms of IAS 32 (Financial Instruments). The
cost reflects the portion of total estimated transaction cost associated with the issue of Keaton Energy shares and thus accounted for against
stated capital.
5.
Retained earnings adjusted for:
(a) the effect of the loss on the purchase of the 26% interest in Keaton Mining of R228 820 741 (refer to (3) above);
(b)transaction cost of R274 683 incurred by Keaton Energy in acquiring the 26% non-controlling interest in Keaton Mining. The cost reflects
the portion of total estimated transaction cost accounted for in the statement of comprehensive income; and
(c) Taxation deduction of R482 669 on the total transaction costs of R1 723 817 incurred.
6.
Cash and cash equivalents has been adjusted for:
Cash outflow:
(a) total transaction costs paid of R1 723 817; and
(b) payment of cash consideration of R6 000 000 to Rutendo for shares held in Keaton Mining (refer to (3) above).
7.
Total taxation receivable as a result of taxation deduction of R482 669 on transaction costs incurred.
33
ANNEXURE 2
INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE PRO FORMA FINANCIAL INFORMATION
The Directors
Keaton Energy Holdings Limited
Postnet Suite 464
Private Bag X51
Bryanston
2021
16 September 2015
REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION
We have completed our assurance engagement to report (“Report”) on the compilation of pro forma earnings and diluted earnings, headline and
diluted headline earnings, net asset value and net tangible asset value per share of Keaton Energy Holdings Limited (“KEH” or “the Company”), pro
forma statement of financial position of KEH, the pro forma statement comprehensive income of KEH and the related notes, including a reconciliation
showing all of the pro forma adjustments to the share capital, reserves and other equity items relating to KEH, (collectively “Pro Forma Financial
Information”). The Pro Forma Financial Information is set out in the Salient Features, paragraph 3 and Appendix 1 of the Circular to be issued by the
Company on or about 1 October 2015 (“Circular”).
The Pro Forma Financial Information has been compiled by the Directors of KEH to illustrate the impact of the call option granted to Moneybox
Investments 156 Proprietary Limited and the purchase of the non-controlling shareholders’ interest Rutendo Mining Proprietary Limited share of
Keaton Mining (Proprietary Limited) (“Transactions”) as detailed in the Circular on the Company’s financial position and changes in equity as at
31 March 2015 and the Company’s financial performance for the period ended 31 March 2015.
As part of this process, the Company’s earnings, diluted earnings, headline earnings and diluted headline earnings per share, statement of
comprehensive income and statement of financial position have been extracted by the Directors from the Company’s published annual report for the
period ended 31 March 2015 (“Published Financial Information”), on which an audit report has been published. In addition, the Directors have
calculated the net asset value and net tangible asset value per share as at 31 March 2015 based on Financial Information extracted from the
Published Financial Information.
DIRECTORS’ RESPONSIBILITY FOR THE PRO FORMA FINANCIAL INFORMATION
The Directors of KEH are responsible for compiling the Pro Forma Financial Information on the basis of the applicable criteria as detailed in
paragraphs 8.15 to 8.33 of the Listings Requirements of the JSE Limited and the SAICA Guide on Pro Forma Financial Information, revised and
issued in September 2012 (“Applicable Criteria”).
REPORTING ACCOUNTANTS’ RESPONSIBILITY
Our responsibility is to express an opinion about whether the Pro Forma Financial Information has been compiled, in all material respects, by the
Directors on the basis of the Applicable Criteria, based on our procedures performed.
We conducted our engagement in accordance with International Standard on Assurance Engagements (“ISAE”) 3420, Assurance Engagements to
Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued by the International Auditing and Assurance
Standards Board. This standard requires that the reporting accountants’ comply with ethical requirements and plan and perform procedures to
obtain reasonable assurance about whether the Directors have compiled, in all material respects, the Pro Forma Financial Information on the basis of
the Applicable Criteria.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any Published Financial Information
used in compiling the Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the Published
Financial Information used in compiling the Pro Forma Financial Information.
The purpose of Pro Forma Financial Information included in the Circular is solely to illustrate the impact of the Transactions on the unadjusted
Published Financial Information as if the Transactions had been undertaken on 1 April 2014 for purposes of the pro forma earnings, diluted earnings,
headline and diluted headline earnings per share and the pro forma statement of comprehensive income and on 31 March 2015 for purposes of the
net asset value and net tangible asset value per share and statement of financial position. Accordingly, we do not provide any assurance that the
actual outcome of the Transactions, subsequent to its implementation, will be as presented in the Pro Forma Financial Information.
34
A reasonable assurance engagement to report on whether the Pro Forma Financial Information has been properly compiled, in all material respects,
on the basis of the Applicable Criteria involves performing procedures to assess whether the Applicable Criteria used by the Directors in the
compilation of the Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the
Transactions and to obtain sufficient appropriate evidence about whether:
• the related pro forma adjustments give appropriate effect to the Applicable Criteria; and
• the Pro Forma Financial Information reflects the proper application of those pro forma adjustments to the unadjusted Published Financial
Information.
The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of
the Company, the Transactions in respect of which the Pro Forma Financial Information has been compiled and other relevant engagement
circumstances.
The engagement also involves evaluating the overall presentation of the Pro Forma Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
OPINION
In our opinion, the Pro Forma Financial Information has been compiled, in all material respects, on the basis of the Applicable Criteria.
Yours faithfully
KPMG Inc.
Per Willem Pretorius
Chartered Accountants (SA)
Director
35
ANNEXURE 3
HISTORICAL FINANCIAL INFORMATION OF LABOHLANO
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
ANNEXURE 4
HISTORICAL FINANCIAL INFORMATION OF KEATON MINING
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
ANNEXURE 5
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION
OF LABOHLANO
The Directors
Postnet Suite 464
Private Bag X51
Bryanston
2021
16 September 2015
Dear Sirs
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF LABOHLANO TRADING 46
PROPRIETARY LIMITED
Introduction
At your request and for the purposes of the circular to be dated on or about 1 October 2015, we have audited the Historical Financial Information of
Labohlano Trading 46 Proprietary Limited presented in the Report of Historical Financial Information which comprises the statements of financial
position, and the statements of comprehensive income, statements of changes in equity and cash flows for the three years then ended 2013, 2014
and 2015 and a summary of significant accounting policies and other explanatory notes (“the Financial Information”), as presented in Annexure 3 of
the circular, in compliance with the JSE Listings Requirements.
Responsibility of the Directors
The Directors of Keaton Energy Holdings are responsible for the compilation, contents and preparation of the circular including the Financial
Information, in accordance with the JSE Listings Requirements and the Companies Act of South Africa.
The Directors are also responsible for the fair presentation in accordance with International Financial Reporting Standards and for such internal
control as the Directors determine is necessary to enable the preparation of the Historical Financial Information are free from material misstatement,
whether due to fraud or error.
Responsibility of the Independent Reporting Accountants
Our responsibility is to express an audit opinion on the Historical Financial Information based on our audit, for the three years ended 31 March 2015
included in Annexure 3 to the circular in accordance with International Standards on Auditing. No adjustments have been made to the previously
reported Historical Financial Information of Labohlano Trading 46 Proprietary Limited and its subsidiaries when compiling the three years Historical
Information.
HISTORICAL FINANCIAL INFORMATION
Introduction
We have audited the Historical Financial Information attached as Annexure 3 to the circular prepared in accordance with the International Financial
Reporting Standards and in the manner required by the Companies Act of South Africa.
Responsibility of the Independent Reporting Accountants on the Historical Financial Information
Our responsibility is to express an opinion on the Historical Financial Information based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Financial Information of Labohlano Trading 46 Proprietary Limited as set out in Annexure 3 to the circular, presents fairly, in all
material respects, for the purposes of the circular, the financial position of Labohlano Trading 46 Proprietary Limited at 31 March 2013 and 31 March
2014 and 31 March 2015 and the financial performance and cash flows for the years then ended in accordance with International Financial
Reporting Standards and in the manner required by the Companies Act of South Africa and the JSE Listings Requirements.
Yours faithfully
KPMG Inc.
Registered Auditor
Director
255
ANNEXURE 6
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION
OF KEATON MINING
The Directors
Postnet Suite 464
Private Bag X51
Bryanston
2021
16 September 2015
Dear Sirs
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF KEATON MINING
PROPRIETARY LIMITED
Introduction
At your request and for the purposes of the circular to be dated on or about 1 October 2015, we have audited the Historical Financial Information of
Keaton Mining Proprietary Limited presented in the Report of Historical Financial Information which comprises the statements of financial position,
and the statements of comprehensive income, statements of changes in equity and cash flows for the three years then ended 2013, 2014 and 2015
and a summary of significant accounting policies and other explanatory notes (“the Financial Information”), as presented in Annexure 4 of the circular,
in compliance with the JSE Listings Requirements.
Responsibility of the Directors
The Directors of Keaton Energy Holdings are responsible for the compilation, contents and preparation of the circular including the Financial
Information, in accordance with the JSE Listings Requirements and the Companies Act of South Africa.
The Directors are also responsible for the fair presentation in accordance with International Financial Reporting Standards and for such internal
control as the Directors determine is necessary to enable the preparation of the Historical Financial Information are free from material misstatement,
whether due to fraud or error.
Responsibility of the Independent Reporting Accountants
Our responsibility is to express an audit opinion on the Historical Financial Information based on our audit, for the three years ended 31 March 2015
included in Annexure 4 to the circular in accordance with International Standards on Auditing. No adjustments have been made to the previously
reported Historical Financial Information of Keaton Mining Proprietary Limited and its subsidiaries when compiling the three years Historical
Information.
HISTORICAL FINANCIAL INFORMATION
Introduction
We have audited the Historical Financial Information attached as Annexure 4 to the circular prepared in accordance with the International Financial
Reporting Standards and in the manner required by the Companies Act of South Africa.
Responsibility of the Independent Reporting Accountants on the Historical Financial Information
Our responsibility is to express an opinion on the Historical Financial Information based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Financial Information of Keaton Mining Proprietary Limited as set out in Annexure 4 to the circular, presents fairly, in all material
respects, for the purposes of the circular, the financial position of Keaton Mining Proprietary Limited at 31 March 2013 and 31 March 2014 and
31 March 2015 and the financial performance and cash flows for the years then ended in accordance with International Financial Reporting
Standards and in the manner required by the Companies Act of South Africa and the JSE Listings Requirements.
Yours faithfully
KPMG Inc.
Registered Auditor
Director
256
ANNEXURE 7
OPINION LETTER OF INDEPENDENT EXPERT
The Directors
Eland House, The Braes
3 Eaton Avenue
Bryanston, 2194
South Africa
11 September 2015
Dear Sirs
REPORT OF THE INDEPENDENT PROFESSIONAL EXPERT TO KEATON ENERGY HOLDINGS LIMITED REGARDING THE EXCHANGE OF
A 26% INTEREST IN KEATON MINING PROPRIETARY LIMITED HELD BY RUTENDO MINING PROPRIETARY LIMITED FOR A 21.83%
INTEREST IN KEATON ENERGY HOLDINGS LIMITED AND A CASH AMOUNT OF R6 MILLION
Introduction
BDO Corporate Finance has been appointed by the board of directors (“Directors”) of Keaton Energy Holdings Limited (“Keaton Energy” or
“Company” or “Group”) to provide an independent fairness opinion to the shareholders of Keaton Energy with regard to the exchange of a 26%
interest in Keaton Mining Proprietary Limited (“Keaton Mining”) held by Rutendo Mining Proprietary Limited (“Rutendo Mining”) for a 21.83% interest
in Keaton Energy and a cash amount of R6 million (“Rutendo Flip Transaction”).
Keaton Energy has concluded the “Second Addendum to Shareholders Agreement” entered into between Keaton Energy, Rutendo Mining and
Keaton Mining in terms of which the parties will amend the terms and conditions of the exchange agreement (“Rutendo Exchange Agreement”)
which came into force when the option granted to Rutendo Mining by Keaton Energy was duly exercised by Rutendo Mining (“Rutendo Exchange
Option”). The Rutendo Exchange Option was granted in terms of the written shareholders agreement entered into by Keaton Energy and Rutendo
Mining on 3 August 2007 for the purpose of regulating the rights of Keaton Energy and Rutendo Mining as shareholders in Keaton Mining
(“Company Shareholders Agreement”), to exchange all the ordinary shares, held by Rutendo Mining in Keaton Mining , for the issue by Keaton
Energy of a certain number of ordinary shares in the share capital of Keaton Energy (“Keaton Energy Shares”) to Rutendo Mining as fully paid up.
In terms of the Rutendo Flip Transaction, Rutendo will exchange its 26% holding in Keaton Mining (“Keaton Mining Swap Shares”) for 21.83% of the
issued shares of Keaton Energy (“Keaton Energy Swap Shares”) and a cash amount of R6 million, payable in six equal monthly instalments
commencing in January 2016, which instalments will not be subject to the accrual of interest (“Cash Consideration”) (Keaton Energy Swap Shares
and Cash Consideration are together “Rutendo Flip Consideration”). The purpose of the Rutendo Flip Transaction is to ensure that a certain number
of Keaton Energy Shares remains in the hands of BEE shareholders.
FAIRNESS OPINION REQUIRED IN TERMS OF THE JSE LISTINGS REQUIREMENTS
Rutendo Mining is classified as a related party in terms of paragraph 10.1(b)(ii) of the JSE Limited (“JSE”) Listings Requirements as:
• Amanda B. Glad (“Glad”) and Antoinette P.E. Sedibe (“Sedibe”) are directors of Rutendo Mining and Keaton Energy; and
• Glad and Sedibe are the sole shareholders of Rutendo Mining, owning 49% and 51% respectively.
In terms of the JSE Listing Requirements, the Rutendo Flip Transaction is a related party transaction and in terms of Section 10 of the Listings
Requirements, the board of directors of Keaton Energy are required to provide the JSE with written confirmation from an independent professional
expert confirming whether the terms and conditions of the Rutendo Flip Transaction are fair insofar as the shareholders of Keaton Energy are
concerned (“Fairness Opinion”), which must be included in a circular to shareholders (“Circular”).
RESPONSIBILITY
Compliance with the JSE Listings Requirements is the responsibility of the Directors. Our responsibility is to report to the Directors and shareholders
of Keaton Energy on the fairness of the terms of the Rutendo Flip Transaction.
EXPLANATION AS TO HOW THE TERMS “FAIR” AND REASONABLE APPLY IN THE CONTEXT OF THE TRANSACTION
Schedule 5.7 of the JSE Listings Requirements states that the “fairness” of a transaction is based on quantitative issues. In the case of the
acquisition of an asset from a related party, a transaction may be said to be fair if the value of the consideration paid is less than or equal to the value
of the asset that is the subject of the transaction.
The Rutendo Flip Transaction would therefore be considered fair to the shareholders of Keaton Energy if the Rutendo Flip Consideration is less than
or equal to the value of the Keaton Mining Swap Shares, or unfair if the Rutendo Flip Consideration is greater than the value of the Keaton Mining
Shares.
The assessment of reasonableness of the Rutendo Flip Transaction is based on qualitative factors.
257
OVERVIEW OF MINERAL ASSETS BELONGING TO KEATON ENERGY
The principal mineral assets of Keaton Energy comprise the two operating collieries, namely Vanggatfontein and Vaalkrantz and a number of
development projects, the main development projects being Moabsvelden, Balgray, Koudelager and Braakfontein. Each mineral assets is briefly
described below:
• Vanggatfontein East
–Located 16 km from Delmas, Mpumalanga
–Numbers 2 and 4 seams are thermal coal, washed and supplied to Eskom (95% of saleable tons) and 5 seam is supplied to the domestic
metallurgical market (5% of saleable tons)
– Opencast mine
–2.45 Mt of saleable product was produced in the year ended 31 March 2015 (“FY2015”) which is the sustainable level for life of mine
(“LOM”)
–The resources and reserve statement included in the reviewed provisional condensed consolidated results for the year ended 31 March
2015 reflected a resource of 119.3 Mt and a reserve of 49.2 Mt. The Resource of 119.3 Mt allocated to Vanggatfontein is split between
Vanggatfontein East 62.0 Mt and Vanggatfontein West 57.3 Mt and the Reserve of 49.2 Mt is split between Vanggatfontein East 39.8 Mt
and Vanggatfontein West 9.4 Mt. The delineation East and West is a road that passes through the property
• Vanggatfontein West
–The designation between Vanggatfontein East and West is merely a road passing through the property. In order to extract coal from the
western portion in the most economical manner the road will need to be diverted
–Vanggatfontein West has a resource of 57.3 Mt compared to Vanggatfontein East of 62.0 Mt but as the resource moves west it deteriorates
and becomes deeper and leaner
–Only 9.4 Mt of this resource has to date been converted to a reserve. The quality of this portion of the reserve is considered to be on par
with Vanggatfontein East
•Moabsvelden
–Moabsvelden is located 13 km from Delmas, Mpumalanga and was acquired by Keaton Energy in February 2014 as the significant
component of the acquisition of 100% of the ordinary issued shares in Xceed Resources Limited (“Xceed”) (“Xceed Acquisition”)
–The mine is located 3 km from Vanggatfontein and will be incorporated into the Vanggatfontein complex. Material will be transported from
Moabsvelden to Vanggatfontein where it will be washed. An additional washing plant line is to be constructed at Vanggatfontein for this
purpose
–The seams, mining and off-take are similar to Vanggatfontein. The mining is similarly opencast and almost the entire production is for the
local market
–The initiation of construction of this expansion to Vanggatfontein awaits the grant of its water use licence and the conclusion of a coal supply
agreement with Eskom
•Vaalkrantz
–Vaalkrantz is located 20 km from Vryheid, Kwa Zulu Natal and anthracite is mined by underground methods. As at 31 March 2015, a
resource of 11.5 Mt and a reserve of 2.0 Mt were disclosed
–Mining at Vaalkrantz has been extremely challenging and as the problems have proved to be more difficult than anticipated a new mining
plan has been developed. The asset was impaired by R56.5 million in FY2015
• Balgray and Koudelager
– These are both underground anthracite mines. Koudelager is located 30 km from Vaalkrantz and Balgray is 97 km away.
–Both these resources are considered supplemental feed to Vaalkrantz and the mined coal will be brought to the Vaalkrantz plant where it will
be washed
•Braakfontein
–Braakfontein is located 10 km from Newcastle, Kwa Zulu Natal. Mining will substantially be underground and revenue is substantially to be
derived from exports

–Given the depressed export markets and the prevailing prices of c.US$53.49 per ton as at 10 September 2015, the project is not feasible. It
is however possible that in different market conditions the project would have significant value to Keaton Energy
•Mooiklip
– Mooiklip is situated 40 km from Vryheid
– The anthracite resource is underground and if developed would be processed through the washing plant at Vaalkrantz
– The prospect is early stage with no SAMREC compliant mineral resource statement
•Sterkfontein
– Sterkfontein is located 10km from Bethal, Mpumalanga and has a resource of 90.9 Mt
– Mining will be underground and revenue is substantially to be derived from exports
–Given the depressed export markets and the prevailing prices of c.US$53.49 per ton as at 10 September 2015, the project is not feasible. It
is however possible that in different market conditions the project would have value to Keaton Energy
258
• Bankfontein and Roodepoort
–Bankfontein is 30 km from Ermelo, Mpumalanga, has a resource of 16.1 Mt and is expected to be mined using both opencast and
underground methods
– Roodepoort is 6 km from Kriel, Mpumalanga, has a resource of 25.1 Mt and is expected to be mined using underground methods
– Both prospects were acquired with the Xceed Acquisition and Keaton Energy has an attributable 15% interest in both these prospects
– These prospects are at early stage with no mining plan or discounted cash flow (“DCF”) models available
For mining companies, the quality and quantity of its underlying mineral resources forms the basis for the company’s intrinsic value. The Group’s
mineral resource statements as at 31 March 2015 is shown below:
Coal Resource mineable tonnes in situ (“MTIS”) (AD)
Project
ROM Coal Reserve (Mt) (AR)
Inferred
Indicated
Vanggatfontein
–
33.0
86.3
119.3
9.4
39.8
49.2
Moabsvelden
–
–
54.7
54.7
3.9
35.9
39.8
Bankfontein
11.0
5.1
–
16.1
–
–
–
Roodepoort
4.7
11.6
8.9
25.1
–
–
–
Sterkfontein
–
40.7
50.2
90.9
–
–
–
Vaalkrantz
–
11.5
–
11.5
2.0
–
2.0
Braakfontein
–
60.1
–
60.1
24.9
–
24.9
0.9
11.4
–
12.3
–
–
16.6
173.4
200.1
390.0
75.7
115.9
Koudelager
TOTAL
Measured Total Resource
Probable
40.2
Proved Total Reserve
The corporate structure containing the above collieries and projects is detailed below:
74%
Keaton Mining Proprietary
Limited (“KM”)
100%
Xceed Resources Limited
(“Xceed”)
100%
92%
100%
Labohlano Trading 46
Proprietary Limited (“LT”)
Leeuw Mining and
Exploration Proprietary
Limited (“LME”)
Amalahle Exploration
Proprietary Limited (“AE”)
Sterkfontein (50%)
Vaalkrantz Balgray
Koudelager
Mooiklip
100%
Vanggatfontein
Sterkfontein (50%)
Focus Coal Investments
Proprietary Limited
74%
100%
Neosho Trading 86
Proprietary Limited
(“Neosho”)
Leeuw Braakfontein
Colliery Proprietary
Limited (“LBC”)
Moabsvelden
Braakfontein Project
Note:
A 15% interest in two further projects are held as follows:
Focus Coal Investments Proprietary Limited owns 15% of Richtrau No. 377 Proprietary Limited which owns the Roodepoort project.
Focus Coal Investments Proprietary Limited owns 15% of Richtrau No. 379 Proprietary Limited which owns the Roodepoort project.
Company
Operations
259
DETAILS AND SOURCES OF INFORMATION
In arriving at our opinion we have relied upon the following principal sources of information:
• The Second Addendum to Shareholders Agreement, Rutendo Exchange Agreement and Company Shareholders Agreement;
• Audited annual financial statement of Keaton Energy for the year ended 2012, 2013 and 2014;
• Reviewed provisional condensed consolidated results of Keaton Energy for the year ended 31 March 2015;
• Unaudited management accounts of Keaton Energy for the period ended 30 June 2015;
• Coal resource and reserve statement, as at 31 March 2015;
• Mine model and cash flow projection for Vanggatfontein East and Vaalkrantz;
•Budgets for Vanggatfontein East and Vaalkrantz for the financial year ending 31 March 2016 (“FY2016”) presented to the Board dated 5 March
2015 (Vaalkrantz Colliery since updated);
• Project feasibility study and cash flow models in respect of Moabsvelden, Koudelager, Braakfontein and Balgray;
•Independent mineral asset valuation report for Vanggatfontein East, Vanggatfontein West, Sterkfontein and Mooiklip prepared by Venmyn
Deloitte Proprietary Limited dated 13 August 2014;
• Cash flow forecast prepared by Keaton Energy for the 13 months ending November 2016;
• Various studies and technical advisors reports relating to the Group’s collieries and projects;
• Discussions with Keaton Energy directors and management regarding the rationale for the Rutendo Flip Transaction;
• Discussions with Keaton Energy directors and management regarding the status of the Group’s collieries and projects;
•Discussions with Keaton Energy directors and management and their advisors on prevailing market, economic, legal and other conditions which
may affect underlying value; and
•Publicly available information relating to the South African and global coal sectors that we deemed to be relevant, including public company
presentations and announcements, proprietary research and media articles.
The information above was secured from:
• Directors and management of Keaton Energy and their advisors; and
•Third party sources, including information related to publicly available economic, market and other data which we considered applicable to, or
potentially influencing Keaton Energy and the South African and global coal sectors.
PROCEDURES
In arriving at our opinion we have undertaken the following procedures and taken into account the following factors in evaluating the fairness of the
Rutendo Flip Transaction:
• Reviewed the Second Addendum to Shareholders Agreement, Rutendo Exchange Agreement and Company Shareholders Agreement;
• Reviewed the terms and conditions of the Rutendo Flip Transaction;
• Reviewed the audited and unaudited financial information related to Keaton Energy and its subsidiaries, as detailed above;
•Reviewed and obtained an understanding from management as to the forecast information in respect of Keaton Energy’s underlying operations/
projects and assessed the achievability thereof by considering historic information as well as macro-economic and sector-specific data;
•Held discussions with directors of Keaton Energy and considered such other matters as we consider necessary, including assessing the
prevailing economic and market conditions and trends;
•Compiled forecast cash flows for Vanggatfontein East, Vaalkrantz, Balgray, Koudelager, Moabsvelden and Braakfontein Project by using available
forecast financial information as contained in the respective cash flow models. Applied BDO’s assumptions of cost of capital to the forecast cash
flows to produce discounted cash flow (“DCF”) valuations of Vanggatfontein East, Vaalkrantz, Balgray, Koudelager, Moabsvelden and
Braakfontein;
•Assessed the market value of Vanggatfontein West, Sterkfontein and Mooiklip in terms of the South African Code for the 2008 edition of the
South African Code for the reporting of Mineral Asset Valuations (the “SAMVAL Code”) by the Cost Approach and Market Approach;
• Determined the net present value (“NPV”) of Keaton Energy’s head office and administration function;
•Aggregated the valuations of Keaton Energy’s mining and mineral assets, as well as adjusting for financial assets and financial liabilities to
determine a sum-of-the-parts (“SOTP”) valuation of Keaton Energy;
•Aggregated the valuations of Keaton Mining’s mining and mineral assets, as well as adjusting for financial assets and financial liabilities to
determine a sum-of-the-parts (“SOTP”) valuation of Keaton Mining;
• Assessed the long-term potential of Keaton Energy, with respect to the company’s operations, mineral resources and development plans;
• Performed a sensitivity analysis on key assumptions included in the discounted cash flow valuations;
• Evaluated the relative risks associated with the Group’s collieries and projects and the South African and global coal sectors;
•Reviewed certain publicly available information relating to Keaton Energy and the South African and global coal sectors that we deemed to be
relevant, including company announcements and media articles;
•Where relevant, representations made by management and/or advisors were corroborated to source documents or independent analytical
procedures were performed by us, to examine and understand the operations and forecasts of Keaton Energy’s underlying operations/ projects,
and to analyse external factors that could influence the business; and
•Held discussions with the directors and management of Keaton Energy and their advisors as to their strategy and the rationale for the Rutendo
Flip Transaction and considered such other matters as we considered necessary, including assessing the prevailing economic and market
conditions and trends.
ASSUMPTIONS
We arrived at our opinion based on the following assumptions:
• That all agreements that are to be entered into in terms of the Rutendo Flip Transaction will be legally enforceable;
260
•That the Rutendo Flip Transaction will have the legal, accounting and taxation consequences described in discussions with, and materials
furnished to us by representatives and advisors of Keaton Energy; and
• That reliance can be placed on the audited and unaudited financial information of Keaton Energy.
APPROPRIATENESS AND REASONABLENESS OF UNDERLYING INFORMATION AND ASSUMPTIONS
We satisfied ourselves as to the appropriateness and reasonableness of the information and assumptions employed in arriving at our opinion by:
• Reliance on audit reports in the financial statements of Keaton Energy;
• Conducting analytical reviews on the historical financial results and forecast financial information, such as key ratio and trend analyses; and
•Determining the extent to which representations from management were confirmed by documentary evidence as well as our understanding of
Keaton Energy and the economic environment in which the company operates.
LIMITING CONDITIONS
This opinion is provided in connection with and for the purposes of the Rutendo Flip Transaction. The opinion does not purport to cater for each
individual shareholder’s perspective, but rather that of the general body of Keaton Energy shareholders.
Individual shareholders’ decisions regarding the Rutendo Flip Transaction may be influenced by such shareholders’ particular circumstances and
accordingly individual shareholders should consult an independent advisor if in any doubt as to the merits or otherwise of the Rutendo Flip
Transaction.
We have relied upon and assumed the accuracy of the information provided to us in deriving our opinion. Where practical, we have corroborated the
reasonableness of the information provided to us for the purpose of our opinion, whether in writing or obtained in discussion with management, by
reference to publicly available or independently obtained information. While our work has involved an analysis of, inter alia, the annual financial
statements, and other information provided to us, our engagement does not constitute an audit conducted in accordance with generally accepted
auditing standards.
Where relevant, forward-looking information of Keaton Energy the Group’s collieries and projects relate to future events and is based on assumptions
that may or may not remain valid for the whole of the forecast period. Consequently, such information cannot be relied upon to the same extent as
that derived from audited financial statements for completed accounting periods. We express no opinion as to how closely the actual future results
of Keaton Energy the Group’s collieries and projects will correspond to those projected. We have however compared the forecast financial
information to past trends as well as discussing the assumptions inherent therein with management.
We have also assumed that the Rutendo Flip Transaction will have the legal consequences described in discussions with, and materials furnished to
us by representatives and advisors of Keaton Energy and we express no opinion on such consequences.
Our opinion is based on current economic, regulatory and market as well as other conditions. Subsequent developments may affect the opinion, and
we are under no obligation to update, review or re-affirm our opinion based on such developments.
INDEPENDENCE
We confirm that we have no direct or indirect interest in Keaton Energy shares or in the Rutendo Flip Transaction. We also confirm that we have the
necessary qualifications and competence to provide the fair and reasonable opinion on the Rutendo Flip Transaction.
Furthermore, we confirm that our professional fees, payable in cash, are not contingent upon the success of the Rutendo Flip Transaction.
VALUATION APPROACH
BDO Corporate Finance performed a valuation of Keaton Energy and Keaton Mining on a sum-of-the-parts basis to determine whether the Rutendo
Flip Transaction represents fair value to the Keaton Energy shareholders. The instalments in respect of the Cash Consideration have been
discounted at a market investment rate, equating to 3-month Johannesburg Interbank Agreed Rate (“JIBAR”) of 6.30% to determine a present value
in respect of these payments in the amount of R5.4 million.
The mineral assets of Keaton Energy and Keaton Mining are the primary value drivers and we conducted a mineral asset valuation for all mineral
assets in accordance with the SAMVAL Code. The valuation of Keaton Energy and Keaton Mining has been based upon an aggregation of the value
of the company’s underlying operations and mineral assets, comprising:
• The value of individual projects and mineral assets derived using appropriate methodologies for production, development and exploration assets;
• Net debt and cash as at 30 June 2015; and
•For Keaton Energy, we have determined the NPV of Keaton Energy’s unallocated head office and administration costs. Unallocated corporate
costs amount to c.R41.2 million per annum. The pre-tax corporate costs were discounted at a real discount rate of Keaton Energy of 12.25% for
the remaining life for Keaton Energy’s current projects.
261
The valuation encompasses the mineral assets detailed below and the applicable valuation methods:
Development
Stage
Attributable
Interest
Preferred
Valuation
Method
Keaton Mining
Vanggatfontein Colliery
Vanggatfontein West Resource Block
Sterkfontein Project (50%)
Operating
Development
Development
74%
74%
74%
DCF
Market
Market
Xceed
Moabsvelden Project
Roodepoort Project
Bankfontein Project
Development
Development
Development
74%
15%
15%
DCF
Cost
Cost
LME
Vaalkrantz Colliery
Braakfontein Project
Koudelager Project
Balgray Project
Operating
Development
Development
Development
92%
92%
92%
92%
DCF
DCF
DCF
DCF
Labohlano
Sterkfontein Project (50%)
Development
100%
Market
Exploration
100%
Cost
Mineral Asset
Amalahle
Mooiklip Project
The valuations of Vanggatfontein East, Vaalkrantz, Balgray, Koudelager, Moabsvelden and Braakfontein have been performed by applying the
Income Approach. The Income Approach is based on NPV that is derived using a DCF technique applied to the post-tax pre-finance cash flows. The
external value driver to the DCF is the price assumption for domestic and export products. Key internal value drivers include discount rates,
production rates and the estimated life of mine (“LoM”), operating costs, royalties and capital expenditure requirements. The key input parameters
used in the DCF valuations are shown in the tables below:
Assumption
Vanggatfontein
Vaalkrantz
Balgray
Koudelager
Moabsvelden
Braakfontein
Description
Opencast - 5, 4
and 2 seams
Eskom (95%)
Domestic
metallurgical
market (5%)
Underground
Anthracite
Local and export
Underground
Anthracite
Underground
Anthracite
Opencast
Eskom (>95%)
Domestic
metallurgical
market (<5%)
Opencast and
underground
Primarily A-grade
export market
Status
Producing
Producing
Section 102
approval to
extend LOM to 5
years
Mining Right
Application
Water use
license pending
Mining Right
Supplementary
to Vaalkrantz
Processing at
Vaalkrantz
Mining Right
Water use
license pending
Surface right
agreement
pending
Eskom contract
pending
Mining Right
Water use
license required
Export permit
required
LOM
September 2025
(10 years)
excluding West
August 2019
(4 years)
17 years
20 years
17 years
17 years
Steady state
production
2.3 Mt pa
0.65 Mt pa
0.36 Mt pa
0.16 Mt pa
1.65 Mt pa
1.6 Mt pa
Yield
5 seam - 50%
4, 2 seams 67%
70%
74%
70%
70%
67%
Capital expenditure
(LOM)
R61.4 m
R28.1 m
R55.2 m
R36.5 m
R357.5 m
R657.6 m
Discount rate - real
12.25%
15%
14%
15%
14%
15%
Note 1: selling prices per ton for local and export product and operating costs per saleable ton not disclosed
262
Vanggatfontein West and Sterkfontein were valued using the Market Approach as the primary valuation methodology and the Cost Approach as a
secondary methodology. The Mooiklip Project has been valued using the Cost Approach. Due to the early stage nature of Bankfontein and
Roodepoort no value has been attributed to these projects.
The Market Approach takes into account comparable transactions relating to the sale, joint venture or farm-in/farm-out of mineral assets. Such
transactions may be used as a guide to, or means of, valuation. For a transaction to be considered comparable it should be similar to the asset
being valued in terms of location, timing and commodity, and the transaction must be regarded as being of “arm’s length”. Key external value drivers
of the Market Approach valuation included the range of values in respect of comparable transactions, which are influenced by:
• location of mineral deposits;
• proposed mining method and stripping ratio, where applicable;
• the quality of the coal deposits;
• the classified coal mineral resources;
• infrastructure and logistics; and
• timing of potential exploitation.
The key input parameters used in the Market valuations are the contained mineable tonnes in situ (“MTIS”) shown in the tables below as well as the
comparable value ranges.
Project
Resource class
Vanggatfontein West
Indicated
Measured
57.3
9.4
Total Coal Resources
66.7
Indicated
Measured
40.7
50.2
Sterkfontein
MTIS (Mt)
90.9
The Cost Approach entails that, where previous exploration expenditures are known, or can be reasonably estimated, the Multiple of Exploration
Expenditures (“MEE”) method can be applied to derive a cost-based technical value. The method requires establishing a relevant Expenditure Base
(“EB”) from past exploration expenditure. A premium or discount is then assigned to the EB through application of a Prospectivity Enhancement
Multiplier (“PEM”), which reflects the success or failure of exploration done to date and the future potential of the asset. The basic tenet of this
approach is that the amount of exploration expenditure justified on a property is related to its intrinsic technical value.
The summary of the valuation of Mooiklip using the Cost Approach is detailed below:
Table 2: Valuation using the Cost Approach
Historical Costs 1
R2.8 million
Lower PEM
Upper PEM
1.0
2.0
Note 1: Actual and estimated
The sensitivity analysis for operating assets involved benchmarking the forecast coal price assumptions in respect of export and domestic product to
consensus forecasts and re-performing the valuations using median and average price forecasts, which were a minimum of 90% and a maximum of
110% of base case assumptions.
For development projects, we performed a specific sensitivity analysis in respect of production rates, operating cost assumptions and capital
expenditure. The sensitivity analysis was performed by assuming production rates at a minimum of 90% of base case assumptions, whereas
operating costs and capital expenditure assumptions were assumed to be a maximum of 110% of base case assumptions.
The risk of each project is expressed in the discount rate applied to the projected future project cash flows. The valuations were reperformed using
base case assumptions and applying a range of discount rates based on different risk scenarios, including market risk, financing risk, mining risk and
operational risk. The sensitivity analysis was performed by increasing and decreasing the base case discount rate by a maximum of 1%.
Balance sheet adjustments for cash and debt were effected at carrying values, after confirming that such carrying values represent fair market value
in terms of International Financial Reporting Standards.
OPINION
BDO Corporate Finance has considered the terms and conditions of the Rutendo Flip Transaction and is of the opinion that the Rutendo Flip
Consideration is greater than the fair value of the Keaton Mining Swap Shares. The terms and conditions of the Rutendo Flip Transaction, based on
quantitative considerations, are therefore not fair to Keaton Energy shareholders. The assessment of fairness is restricted to comparing the Rutendo
Flip Consideration to the fair value of the Keaton Mining Swap Shares.
263
Notwithstanding the above, whilst the Rutendo Flip Transaction is considered not fair to Keaton Energy shareholders on the bases considered and
under the prevailing market conditions and pricing at the time of valuation, it is nevertheless considered reasonable based on the rationale and
implications of the Rutendo Flip Transaction. It is expected that the conclusion of this initial BEE transaction will lead to a number of benefits for
Keaton Energy including but not limited to preferential pricing from customers and advantageous treatment from various other stakeholders for
example Transnet Freight Rail, Transnet National Ports Authority etc. Further the risks associated with Rutendo Mining’s lock-up provision expiring in
May 2014 were deemed to be inestimable by Keaton Energy. The Keaton Energy board, representing 69% of the shareholding in Keaton Energy,
voted unanimously in favour of the Rutendo Flip Transaction
Consequently, based on the considerations set out above, we are of the opinion that the Rutendo Flip Transaction is reasonable from the
perspective of Keaton Energy Shareholders. Our opinion is necessarily based upon the information available to us up to 11 September 2015,
including in respect of the financial information as well as other conditions and circumstances existing and disclosed to us. We have assumed that all
conditions precedent, including any material regulatory and other approvals or consents required in connection with the Rutendo Flip Transaction
have been fulfilled or obtained.
Accordingly, it should be understood that subsequent developments may affect this opinion, which we are under no obligation to update, revise or
re-affirm.
Yours faithfully
BDO Corporate Finance Proprietary Limited
Nick Lazanakis
Director
22 Wellington Road
Parktown
2193
264
Share code: KEH
ISIN: ZAE000117420
NOTICE OF GENERAL MEETING OF KEATON ENERGY SHAREHOLDERS
Unless the contrary appears from the context, the definitions commencing on page 4 of the Circular of which this notice of General Meeting forms
part apply, mutatis mutandis, to this notice of General Meeting.
Notice is hereby given that a General Meeting of Keaton Energy Shareholders will be held at Indigo 2, Ground Floor, The Forum, Wanderers Building,
The Campus (Dimension Data), 57 Sloane Street (corner Main Street), Bryanston on Friday, 30 October 2015, commencing at 11:00 for the purpose
of considering and, if deemed fit, passing with or without modification, the following Resolutions:
ORDINARY RESOLUTION NUMBER 1
Approval of the Moneybox Option Transaction
“RESOLVED that as an ordinary Resolution and in compliance with the Listings Requirements, the entering into by Keaton Energy and Keaton
Mining of the Moneybox Option Transaction and the implementation thereof, in terms of which Keaton Energy and Keaton Mining respectively will
grant call options to Moneybox to:
• purchase all of the Labohlano Sale Equity, which is held by Keaton Energy in Labohlano (a wholly owned subsidiary of Keaton Energy); and
• purchase the KM Prospecting Rights and KM Reports held by Keaton Mining,
which constitutes a Category 1 Transaction in terms of the Listings Requirements, is approved.”
Note to Ordinary Resolution Number 1
In terms of the Listings Requirements, this Ordinary Resolution Number 1 must be supported by at least 50% of the voting rights exercised on this
Ordinary Resolution Number 1 for it to be approved.
Explanatory Note to Ordinary Resolution Number 1
The adoption of Ordinary Resolution Number 1 will authorise Keaton Energy and Keaton Mining to grant the aforementioned call options to
Moneybox.
Approval of the Rutendo Flip Transaction
“RESOLVED that as an Ordinary Resolution and in compliance with the Listings Requirements, the entering into by Keaton Energy of the Rutendo
Flip Transaction and the implementation thereof, in terms of which Rutendo Mining will exchange its 26% holding in Keaton Mining with Keaton
Energy in return for 21.83% of the issued shares of Keaton Energy and a cash payment of R6 million, which constitutes a Related Party and
Category 1 Transaction in terms of the Listings Requirements, is hereby approved.”
In terms of the Listings Requirements, this Ordinary Resolution Number 2 must be supported by more than 50% of the voting rights exercised on
this Ordinary Resolution Number 2, other than the voting rights of any Related Party and its Associates (as defined in the Listings Requirements), for
it to be approved.
The adoption of this Ordinary Resolution Number 2 will authorise Keaton Energy to acquire the 26% of the share capital of Keaton Mining from
Rutendo Mining and to issue the 21.83% of the issued shares of Keaton Energy and make payment of the R6 million to Rutendo Mining.
Directors’ authority to sign and do all such things and take such further steps
“RESOLVED that, subject to the passing of the aforementioned Resolutions, any Director of the Company be and is hereby authorised to take all
steps necessary, to effect Ordinary Resolutions Numbers 1 and 2 (and any such amendments as may be authorised) and to do all things necessary,
perform all acts necessary and sign all documents necessary to implement Ordinary Resolutions Numbers 1 and 2 and, insofar as any actions have
been taken by any person in relation to the above, those actions are ratified.”
In terms of the Listings Requirements and the Companies Act, this Ordinary Resolution Number 3 must be supported by more than 50% of the
voting rights exercised on this Ordinary Resolution Number 3, other than the voting rights of any Related Party and its Associates (as defined in the
Listings Requirements), for it to be approved.
The adoption of this Ordinary Resolution Number 3 will authorise the Directors to sign and do all such things and to sign all documents including
Company forms and take all such actions as they consider necessary to give effect to and implement the aforementioned Ordinary Resolutions
Numbers 1 and 2 and will ratify any actions taken to date.
265
SPECIAL RESOLUTION NUMBER 1
Directors’ authority to issue shares in terms of section 41(1) of the Companies Act
“RESOLVED that, in accordance with section 41(1) of the Companies Act, the Company be and is hereby authorised to issue such number of
Keaton Energy Shares to Rutendo Mining as shall enable Rutendo Mining to hold 21.83% (twenty-one point eight-three percent) of the issued
ordinary share capital of Keaton Energy in terms of the Rutendo Flip Transaction.”
Note to Special Resolution Number 1
In terms of the Companies Act, this Special Resolution Number 1 must be supported by more than 75% of the voting rights exercised on this
Special Resolution Number 1, for it to be approved.
Explanatory Note to Special Resolution Number 1
The adoption of this Special Resolution Number 1 will authorise the Directors to issue such number of Keaton Energy Shares to Rutendo Mining,
which is a Related Party, as shall enable Rutendo Mining to hold 21.83% (twenty-one point eight-three percent) of the issued ordinary share capital
of Keaton Energy.
VOTING AND PROXIES
A Keaton Energy Shareholder entitled to attend and vote at the General Meeting is entitled to appoint one or more proxies to attend, speak, and
vote in his/her stead. A proxy need not be a member of the Company. For the convenience of Certificated Keaton Energy Shareholders or
Dematerialised Keaton Energy Shareholders with own-name registration, a form of proxy (blue) is attached hereto. Duly completed forms of proxy
must be lodged with the Transfer Secretaries, Computershare Investor Services Proprietary Limited, at the address below by no later than 11:00 on
Wednesday, 28 October 2015.
Dematerialised Keaton Energy Shareholders without own-name registration must advise their CSDP or broker of their voting instructions should they
be unable to attend the General Meeting but wish to be represented thereat. Dematerialised Keaton Energy Shareholders without own-name
registration should contact their CSDP or broker with regard to the cut-off time for their voting instructions. If, however, such members wish to attend
the General Meeting in person, then they will need to request their CSDP or broker to provide them with the necessary letter of representation in
terms of the custody agreement entered into between the Dematerialised Keaton Energy Shareholders and their CSDP or broker.
Hand deliveries to:
Ground Floor
70 Marshall Street
Johannesburg, 2001
Postal deliveries to:
PO Box 61051
Marshalltown
2107
The record date for the purpose of determining which Keaton Energy Shareholders are entitled to participate in and vote at the General Meeting shall
be Friday, 23 October 2015.
Forms of proxy are to be received by no later than 11:00 on Wednesday, 28 October 2015 (or 24 hours before any adjourned General Meeting
which date, if necessary, will be released on SENS).
By order of the Board
AC Schutte-Bouwer
23 September 2015
Johannesburg
Registered Office
Ground Floor, Eland House The Braes, 3 Eaton Avenue Bryanston, 2191
(Postnet Suite 464,
Private Bag X51,
Bryanston, 2021)
266
Share code: KEH
ISIN: ZAE000117420
FORM OF PROXY
The definitions commencing on page 4 of the Circular to which this form of proxy is attached apply, mutatis mutandis, to this form of proxy.
This form of proxy is for the use by Certificated Keaton Energy Shareholders or Dematerialised Keaton Energy Shareholders with own-name
registration (“own-name Dematerialised Keaton Energy Shareholders”) only. Dematerialised Keaton Energy Shareholders without own-name
registration are requested to refer to the “Action required by Keaton Energy Shareholders” provided on page 2 of the Circular to which this form of
proxy is attached, for a full understanding of the action required by them.
For use by Certificated Keaton Energy Shareholders and own-name Dematerialised Keaton Energy Shareholders only, at the General
Meeting of the Company to be held at Indigo 2, Ground Floor, The Forum, Wanderers Building, The Campus (Dimension Data), 57 Sloane
Street (corner Main Street), Bryanston, 2191 on Friday, 30 October 2015, commencing at 11:00, or at any adjournment thereof.
Any Keaton Energy Shareholder entitled to vote at the General Meeting may appoint a proxy or proxies to attend, speak and vote in his/her stead.
A proxy need not be a Shareholder of the Company.
I/We (full names)
of (address)
Telephone number
Cellphone number
being the holder(s) of
shares in Keaton Energy
do hereby appoint (see note 2):
1. of
or failing him/her,
2. of
or failing him/her,
3. the Chairperson of the General Meeting,
as my/our proxy to act for me/us and on my/our behalf at the General Meeting which will be held for the purpose of considering and, if deemed fit,
passing, with or without modification, the Resolutions to be proposed at the General Meeting and at any adjournment thereof; and to vote for and/or
against such Resolutions and/or abstain from voting in respect of the Keaton Energy Shares registered in my/our name(s), in accordance with the
following instructions (see note 2):
Number of Keaton Energy Shares
For
Against
Abstain
Ordinary Resolution Number 1 – Moneybox Option Transaction
Ordinary Resolution Number 2 – Rutendo Flip Transaction
Ordinary Resolution Number 3 – Directors’ Authority
Special Resolution Number 1 – Approval under S41(1)
*Note: Please indicate with an “x” or the number of Keaton Energy Shares in the spaces above how you wish your votes to be cast. If no indication
is given, the proxy will vote or abstain in his/her discretion.
Signed at
on
Signature/s
Name in BLOCK LETTERS (full name if signing in a representative capacity)
Assisted by (where applicable)
Please read the notes on the reverse hereof.
267
2015
NOTES TO THE FORM OF PROXY
This form of proxy must only be used by Certificated Keaton Energy Shareholders or own-name Dematerialised Keaton Energy
Shareholders.
1.A Keaton Energy Shareholder entitled to attend and vote may insert the name of a proxy or the names of two alternative proxies of the
Shareholder’s choice in the space provided, with or without deleting “the Chairperson of the General Meeting”. A proxy need not be a
Shareholder of the Company. The person whose name stands first on this form of proxy and who is present at the General Meeting will be
entitled to act as proxy to the exclusion of those whose names follow.
2.A Keaton Energy Shareholder is entitled to one vote on a show of hands, and on a poll, a Keaton Energy Shareholder is entitled to one vote for
each Keaton Energy Share held. A Keaton Energy Shareholder’s instructions to the proxy must be indicated by inserting the relevant number of
votes exercisable by the Keaton Energy Shareholder in the appropriate box. Failure to comply with this will be deemed to authorise the proxy to
vote or to abstain from voting at the General Meeting as he/she deems fit in respect of all the Keaton Energy Shareholder’s votes.
3.A vote given in terms of an instrument of proxy shall be valid in relation to the General Meeting, notwithstanding the death of the person
granting it, or the revocation of the proxy, or the transfer of the Keaton Energy Shares in respect of which the vote is given, unless an intimation
of such death, revocation or transfer is received by the Transfer Secretaries, not less than 24 hours before the commencement of the General
Meeting.
4.If a Keaton Energy Shareholder does not indicate on this form of proxy that his/her proxy is to vote in favour of or against any Resolution or to
abstain from voting, or gives contradictory instructions, or should any further Resolution(s) or any amendment(s) which may properly be put
before the General Meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit.
5.The Chairperson of the General Meeting may reject or accept any form of proxy which is completed and/or received, other than in compliance
with these notes.
6.The completion and lodging of this form of proxy will not preclude the relevant Keaton Energy Shareholder from attending the General Meeting
and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such Keaton Energy Shareholder
wish to do so.
7.Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this
form of proxy, unless previously recorded by the Company or unless this requirement is waived by the Chairperson of the General Meeting.
8.A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant
documents establishing his/her capacity are produced or have been registered by the Company.
9.
Where there are joint holders of Keaton Energy Shares:
• any one holder may sign this form of proxy;
•the vote(s) of the senior Keaton Energy Shareholder (for that purpose seniority will be determined by the order in which the names of
Keaton Energy Shareholders appear in the Company’s register of Keaton Energy Shareholders) who tenders a vote (whether in person or
by proxy) will be accepted to the exclusion of the vote(s) of the other joint Keaton Energy Shareholder(s).
10. Forms of proxy should be lodged with or mailed to the Transfer Secretaries, Computershare Investor Services Proprietary Limited:
Hand deliveries to:
Ground Floor
70 Marshall Street
Johannesburg2001
Postal deliveries to:
PO Box 61051
Marshalltown
2107
to be received by no later than 11:00 on Wednesday, 28 October 2015 (or 24 hours before any adjourned General Meeting which date, if necessary,
will be released on SENS and published in the South African press).
Any alteration or correction made to this form of proxy, other than the deletion of alternatives, must be initialled by the signatory/ies.
bastion graphics
268
bastion graphics