keatonenergy proof 10 – 26 july 2013 logo and logotype ... · how the elements of the logo work...

Corporate Identity Brief

What is Corporate Identity (CI)?A companys CI is the look and feel that is associated with and attributedto that company. It is more than just the logo; rather, it is the way we, as a company,portray ourselves through a range of media to the outside world.

TYPE

Primary typeface

45 Helvetica LightABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz1234567890123456789-=,./[]\

Secondary typeface

66 Helvetica Medium ItalicABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz1234567890123456789-=,./[]\

Electronic typeface (to be used in DTP software)

The graphic typeface (Arial) is to be used on printapplications produced in DTP software.

The PANTONE Matching System (PMS) is preferred inprint for its colour accuracy. Where it is not possibleto use PANTONE colours, the CMYK process equivalentsmay be substituted.

The RGB (monitor colour) equivalents are only forelectronic use, for example in television, websites andaudio-visual presentations.

All colours must always be solid.

The logo and typeface may only be used in the primarycolour palette shown above or in white, reversed out ofthese colours.

The logo may not be used as a background element.

BLACK

C 0M 0Y 0K 100R 24G 21B 18

COLOURS

The positioning guide above and below showshow the elements of the logo work together,and how much clear space must be left aroundthe identity when using copy or other graphicelements. This space is a function of X whichis the height of the entire logo.

The identity may only be used in full colour,on a white or a black background.

Core logo colours

PANTONEPMS 186 CC 0M 100Y 81K 4R 231G 10B 39

COLOUR USAGELOGO AND LOGOTYPE

1/2X 1/2X

1/2X

X

1/2X

ww

w.k

eato

nene

rgy.

co.z

a

Questions relating to corporate identity

Please contactName SurnameKeaton Energy Holdings LimitedEmail: [email protected]

Keaton Energy Holdings LimitedTel: +27 (11) 317 1700 ¥ Fax: +27 (11) 463 4759Ground Floor, Eland House, The Braes, 3 Eaton RoadBryanston, Sandton

Primary colours

Secondary colours

P A N T O N EPMS 5473 CC 82M 0Y 28K 52R 0G 73B 80


Integrated Annual Report 2013

KeatonEnergy_PROOF 10 – 26 JULY 2013

WWW.KEATONENERGY.CO.ZA

Welcome to Keaton EnergyIn a mere six years Keaton Energy Holdings Limited (JSE: KEH) has displayed remarkable growth in

transitioning from a junior explorer to a mid-tier coal producer.

Our two current operations are the Vanggatfontein Colliery (Delmas, Mpumalanga) and the Vaalkrantz

Colliery (Vryheid, KwaZulu-Natal). Vanggatfontein produces thermal coal for Eskom and metallurgical

coal for domestic industrial consumers, while Vaalkrantz produces anthracite for domestic consumption

and export to Brazil.

Two new projects are being progressed with production planned to commence within 18 to 36 months,

namely Koudelager and Braakfontein. An options analysis is being undertaken on our Sterkfontein

project and, in addition, three further prospecting rights have been secured, two prospecting right

applications made and other potential acquisitions and coal resources are being evaluated.

We operate within a framework of good governance and genuine respect for the environment. This

ethos filters throughout the company and lends itself to our overall standing as a sustainable, committed,

concerned and responsible player in one of South Africa’s toughest industries: coal mining.

KeatonEnergy_PROOF 10 – 26 JULY 2013KeatonEnergy_PROOF 10 – 26 JULY 2013

About this Integrated Annual Report 2 – 3

GROUP OVERVIEW 4 – 21Corporate profile and geographical footprint 6 – 7Highlights of the year 8 – 9Development timeline 10 – 11Corporate structure 12 – 13Corporate strategy 14 – 15Business model 16 – 20Business operations 21

ANNUAL REVIEWS 22 – 35Chairman’s review 24 – 27Chief executive officer’s review 28 – 31Chief financial officer’s review 32 – 35

OPERATIONAL REVIEW 36 – 55Safety and health 38 – 39Vanggatfontein Colliery 40 – 41Vaalkranz Colliery 42 – 43Koudelager Project 44Braakfontein Project 46Sterkfontein Project 48Coal resource and reserve statement 50 – 55

OPERATING CONTEXT 56 – 65Market review 58 – 61Interaction and engagement with stakeholders 62 – 63Risks 64Materiality 65

FINANCIAL PERFORMANCE REVIEW 66 – 73Financial performance and value creation 68 – 71Five-year financial review 72Value added statement 73

ENVIRONMENTAL, LAbOUR ANd SOCIAL REVIEW 74 – 85Environmental impact 76 – 81Social and labour impact 82 – 85

GOVERNANCE 86 – 99Board of directors 88 – 89Corporate governance statement 90 – 93Social and ethics committee report 94Remuneration committee report 95 – 99

ANNUAL FINANCIAL STATEMENTS 100 – 187Directors’ responsibility for the annual financial statements 102

Declaration by the company secretary 102

Directors’ report 103 – 105

Audit committee report 106

Independent auditor’s report 107

Statements of comprehensive income 108

Statements of financial position 109

Statements of changes in equity 110 – 111

Statements of cash flows 112

Significant accounting policies 113 – 131

Notes to the audited financial statements 132 – 187

Analysis of shareholders 190Glossary of terms 191 – 193Notice of annual general meeting 194 – 201Form of proxy 207 – 208Administration and contact details 209

SHAREHOLdERS’ INFORMATION, GLOSSARY OF TERMS ANd SECRETARIAL MATTERS 188 – 206

young energy

KEATON ENERGY

1Keaton Energy Integrated Annual Report 2013


Operational activities are commented on in the broader context of the coal mining sector and the macro-economic climate. The report further discusses Keaton Energy’s risks, as well as forward planning for sustainable growth.

ABOuT THIS INTEGRATED ANNuAl REPORT

ScopE and boundariESThe Keaton Energy Holdings limited (Keaton Energy) 2013 Integrated Annual Report presents a holistic review of the company’s financial and non-financial performance for the financial year 1 April 2012 to 31 March 2013. It follows on the 2012 annual report, which reported on the preceding financial year. In this report, we provide a concise outline of the material activities of the holding company and its subsidiaries. Our intention in this report is to provide information that will enable all stakeholders to make accurate and informed decisions on the value creation offered by Keaton Energy, as well as providing valuable data on our social and environmental impacts.

Operational activities are commented on in the broader context of the coal mining sector and the macro-economic climate. The report further discusses Keaton Energy’s risks and opportunities, as well as forward planning for sustainable growth. It is structured as a further milestone along the road to the fully integrated and targeted reporting that current stakeholders and potential investors require to reach well-informed opinions on Keaton Energy.

This report (excluding the financial statements) was prepared in compliance with the South African Companies Act No 71 of 2008; the listings Requirements of the JSE SAMREC Code; and best practice guidelines as recommended by the King Report on Corporate Governance in South Africa (King III).

The Keaton Energy board of directors (the board) and executive management also took into account the Consultation Draft Framework on integrated reporting published by the International Integrated Reporting Council.

The source data for this report are gathered at our mines and head office, before being integrated to provide comparable performance data. Where possible, given the new integrated reporting format, the information provided is directly comparable to previous financial years.

The content of this report was informed by the board’s engagement with stakeholders, in particular the providers of capital and its desire to demonstrate high levels of corporate governance and social responsibility. Non-financial performance indicators were identified from indicators included in the group’s Social and labour Plans, its Environmental Management Plans and a review of the voluntary GRI 3.1 guidelines, including its Mining and Metals Sector Supplement.

Keaton Energy’s financial statements were prepared in accordance with IFRS and in the manner required by the Companies Act. This Integrated Annual Report was submitted to the JSE in terms of its listings Requirements.

A glossary of terms and abbreviations used throughout this report appears on pages 191 to 193.

The following frameworks have been applied in the preparation of this report:

Framework disclosures

The South African Companies Act No 71 of 2008

Throughout the report

The JSE limited (JSE) listings Requirements


The King Report on Governance for South Africa 2009 (King III)

Corporate governance

The South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (SAMREC Code)

Coal Resource and Reserve Statement

International Financial Reporting Standards (IFRS)

Financial statements

The Consultation Draft of the International Integrated Reporting Framework issued by the International Integrated Reporting Council


The Global Reporting Initiative (GRI) Sustainability Reporting Guidelines G3.1, including the Mining and Metals Sector Supplement

Non-financial performance review.The GRI grid and disclosures on management’s approach are provided at www.keatonenergy.co.za

2 Keaton Energy Integrated Report 2013


ForWard LooKinG STaTEMEnTSCertain statements in this Integrated Annual Report include, without limitation, those concerning the economic outlook for the coal industry, expectations regarding commodity prices, production, cash costs, other operating results, while drawing attention to possible growth prospects and the outlook for Keaton Energy’s operations, including the completion and initiation of commercial operations of certain Keaton Energy exploration and production projects, its liquidity and capital resources and expenditure, contain a measure of forward looking statements regarding Keaton Energy’s operations, economic performance and financial condition.

Although Keaton Energy believes that the expectations and the outcome reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will in fact be realised. Accordingly, results could differ materially from those set out in the forward looking statements if differentiating factors change, such as changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government action. Other factors that could influence the forward looking statements are fluctuations in commodity prices and exchange rates as well as business and operational risk management. For a discussion of such factors, refer to the risk factors as detailed in the operating context and corporate governance sections of this Integrated Annual Report.

aSSurancEKeaton Energy’s financial statements for the period were independently audited by KPMG Inc. As this is Keaton Energy’s

Chairman’s review

David SalterMining can be a dangerous business, yet the board and management are delighted to report another fatality-free year of operation and an exemplary safety record, which stems from Keaton Energy’s unswerving commitment to safe operations.

Mandi GladOur relationship with Eskom, our biggest customer by volume, has continued to strengthen through the delivery of a consistent quality product to a number of their power stations.

CEO’s review

FEEdbacK on rEporTWe welcome your feedback on this Integrated Annual Report. Please email your comments to [email protected].

Getting your Keaton Energy reportDownload it in PDF format from www.keatonenergy.co.za, or request your printed copies from:Keaton Energy Holdings limited, Ground Floor, Eland HouseThe Braes, 3 Eaton Road, Bryanston, 2191, South AfricaTel: +27 (0) 11 317 1700 Fax: +27 (0) 11 463 4759 Website: www.keatonenergy.co.za

first Integrated Annual Report containing disclosure of significant non-financial performance indicators, the board is of the opinion that it is too early in the process to obtain independent assurance on this additional information.

rESTaTEMEnTS or chanGES FroM ThE prior yEarAs a result of the early adoption of IFRIC 20 – “Stripping costs in the production phase of a surface mine”, the comparative financial information has been restated to comply with the transitional provisions. Details of the impact this early adoption has had appear in note 4 of the significant accounting policies to the financial statements on pages 130 and 131.

board rESponSibiLiTy STaTEMEnTThe board acknowledges its responsibility to ensure the accuracy of this 2013 Integrated Annual Report. The board has applied its collective expertise to this report and, in its opinion, this report addresses all material issues and presents an integrated and accurate view of Keaton Energy’s performance in the year under review. The board approved this report for issue on 26 July 2013.

david Salter Mandi GladChairman CEO


KEATON ENERGY


GROuP OVERVIEW

Our intention in this report is to provide information that will enable all stakeholders to make accurate and informed decisions on the value creation offered by Keaton Energy, as well as providing valuable input on our social and environmental impacts.

Corporate profile and geographical footprint 6 – 7

Highlights of the year 8 – 9

Development timeline 10 – 11

Corporate structure 12 – 13

Corporate strategy 14 – 15

Business model 16 – 20

Business operations 21

4 Keaton Energy Integrated Annual Report 2013

Vaalkrantz sidingKEATON ENERGY


5

KEATON ENERGY

Keaton Energy Integrated Annual Report 2013 5


CORPORATE PROFIlE

Keaton Energy is a South African-based coal mining company with its ordinary shares listed for trading on the main board of the JSE under the share code KEH.

The company’s assets comprise two operating collieries, Vanggatfontein and Vaalkrantz; three development projects, Koudelager, Braakfontein and Sterkfontein; as well as an exploration pipeline including three prospects that can be developed as expansions to existing collieries and projects, and two prospects that may result in new development projects.

Keaton Energy’s intention, since its founding in 2006, has been to take its South African exploration prospects rapidly up the value curve – through exploration and development to mining – to produce 2 million tonnes per annum (Mtpa) of saleable coal in the short term, and to grow into a mid-tier, 5Mtpa coal producer in the medium term.

As at 31 March 2013, the group employed 1 221 people (328 direct employees and 893 contractors).

Keaton Energy’s corporate office is located in Bryanston, Johannesburg, South Africa.

Vaalkrantz plant

Vaalkrantz siding



SWAZILAND

MOZAMBIQUE

0 50km

Scale

O26

S

O32 EO30 E

O28

S

N4

N1

N3

N17

N11

N2

Pretoria

Johannesburg

Emalahleni

Bethal

Standerton

Newcastle

Vryheid

Richards Bay Coal Terminal

Maputo

Middelburg

Ermelo

Villiers

Carolina

Belfast

Pongola

Dundee

Ladysmith

Harrismith

Volksrust

Piet Retief

Warden

Bethlehem

Utrecht

Grootvlei

Matla Kriel

HendrinaDuvha

Kusile

Kendal

Majuba

Camden

Rooiwal

Kelvin

Secunda

Nigel

^

^

National Road

Secondary Road

City

Town

Power Station

Port

Rail

Richard’s Bay

Coal Line

LEGEND

^

N11

N2

Nongoma

Koudelager Project

Braakfontein Project

Sterkfontein Project

Vaalkrantz Colliery

Balgray Project

Delmas

Vanggatfontein Colliery

GEOGRAPHICAl FOOTPRINT

LEGEnd

^

National RoadSecondary RoadCityTownPower StationPortRailRichard’s BayCoal line

Group overview 4Annual reviews 22Operational review 36Operating context 56Financial performance review 66Environmental, labour and social review 74Governance 86Annual financial statements 100Shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY

7


HIGHlIGHTS OF THE YEAR

Fatality free since inception.

Exemplary safety record at

both operations

94% growth in group revenue

to R919 million

58% increase in Eskom sales

to 1.5 million tonnes

Year of two distinct halves – R11 million

gross profit in the second half following a R38 million gross loss in the first half

HEPS down from 9.5cps to -30.2cps

R42 million of the Nedbank project

finance facility repaid

» Fatality-free production shifts 2 974

» Fatality-free man hours 4 645 394

» Fatality-free shifts 1 627 266

Vanggatfontein LTIFR

1HFY12 2HFY13 1HFY13

0.20

0.00

0.38

0.00

2HFY13

0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00

Vaalkrantz LTIFR

1HFY12 2HFY13 1HFY13

0.45

0.36

0.450.44

2HFY13

0.5

0.4

0.3

0.2

0.1

0.0

» Fatality-free production shifts 5 773

» Fatality-free man hours 63 741 555

» Fatality-free shifts 7 082 395



Pit 3 at Vanggatfontein brought into

production and financed by operational cash

25% reserve increase at

Vanggatfontein to 45 million tonnes

Mining contractor at Vanggatfontein

replaced, followed by significantly

improved production and

increased profitability

Concept studies on development

projects completed

Revenue (Rm)

FY12

918.8

474.4

FY13

1 000

800

600

400

200

0

Eskom sales (Kt)

FY12

1 510

955

FY13

1 600

1 400

1 200

1 000

800

600

400

200

0

Revenue (Rm) and GP (%)

1HFY13

501.5

417.3

2HFY13

550

450

350

250

150

500

15

10

5

0

(5)

(10)

(15)(9%)

2%


9

KEATON ENERGY

Keaton Energy Integrated Annual Report 2013


DEVElOPMENT TIMElINE



TYPE

Primary typeface


Secondary typeface









BLACK

C 0M 0Y 0K 100R 24G 21B 18

COLOURS



Core logo colours



1/2X 1/2X

1/2X

X

1/2X

ww

w.k

eato

nene

rgy.

co.z

a




Primary colours

Secondary colours



April 2006 Keaton Energy established

February 2010

Vanggatfontein earthworks begin

May 2010Vanggatfontein plant construction begins

December 2010 First 5-seam coal delivered

March 2012 1 249% increase in revenue to R474 million

99% increase in production to 560kt at Vaalkrantz



June 2011 First Eskom coal produced

December 2011 LME acquisition concluded

March 2013 Zero lTIFR at Vanggatfontein

94% increase in revenue to R919 million

58% increase in Eskom sales to 1.5Mt

Fatality free since inception

April 2008 listed on the main board of the JSE

May 2009Vanggatfontein 25.9Mt reserve, 163Mt resource declared



KEATON ENERGY

11


corporate structure

Keaton

Energ

y

Holding

s Lim

ited

74%

Ke

at o

n Mi n i n g P r o p r i e t a r y L i m

i t ed

Rutendo Mining

26%

Lee

uw

Mi n

i ng a

n d E x p l o r a t i o n P r o p r i e t a r y Limite

d

JPI Leeuw and Associates

26%

Keaton

Energ

y

Holding

s Lim

ited

74%

Keaton Mining Proprietary LimitedLeeuw Mining & Exploration Proprietary Limited

Labohlano Trading 46 Proprietary Limited

Amalahle Exploration Proprietary Limited

Keaton Administrative and Technical Services Proprietary Limited

Minority shareholder (26%) » rutendo Mining proprietary Limited » JpI Leeuw and associates proprietary Limited

» Moneybox Investments 156 proprietary Limited

» camden Bay Investments 64 proprietary Limited

» n/a

Operation/project » Vanggatfontein » sterkfontein

» Vaalkrantz » Koudelager » Braakfontein » Balgray

» sterkfontein » Leeuwfontein » Group management and administration services

Product » Metallurgical coal » thermal coal

» anthracite » thermal coal

» thermal coal » thermal coal » n/a

Contribution to group revenue (Rm) » 645.9 » 272.9 » n/a » 1.9* » n/a

* Revenue represents royalty income included in other income



Keaton Ad

min

i st r

at i

v e & T e c h n i c a l S e r v i c e s P

r op

rieta

ry Lim

ited

Keaton EnergyHoldings Limited

100%

La

bo

hl a

n o T

r a d i n g 4 6 P r o p r i e t a r y L i mi te

d

Moneybox Investments 156

26%Keaton

Energ

y

Holding

s Lim

ited

74%

Am

al a

hl e

E

x p l o r a t i o n P r o p r i e t a r y L i mite

d

Keaton

Energ

y

Holding

s Lim

ited

74%

Camden Bay Investments 64

26%

Keaton Mining Proprietary LimitedLeeuw Mining & Exploration Proprietary Limited

Labohlano Trading 46 Proprietary Limited

Amalahle Exploration Proprietary Limited

Keaton Administrative and Technical Services Proprietary Limited

Minority shareholder (26%) » rutendo Mining proprietary Limited » JpI Leeuw and associates proprietary Limited

» Moneybox Investments 156 proprietary Limited

» camden Bay Investments 64 proprietary Limited

» n/a

Operation/project » Vanggatfontein » sterkfontein

» Vaalkrantz » Koudelager » Braakfontein » Balgray

» sterkfontein » Leeuwfontein » Group management and administration services

Product » Metallurgical coal » thermal coal

» anthracite » thermal coal

» thermal coal » thermal coal » n/a

Contribution to group revenue (Rm) » 645.9 » 272.9 » n/a » 1.9* » n/a

* Revenue represents royalty income included in other income

Group overview 4annual reviews 22operational review 36operating context 56Financial performance review 66environmental, labour and social review 74Governance 86annual financial statements 100shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


corporate strateGy

Health and safety

MiningProcessing

MarketingExploration

Deve

lopm

ent

5Mtpa

Enviro

nmen

tSocial

Pr o

f it a

b il i

t y

P r o f i t a b i l it y

P r o f i t a b i l i t y

Keaton Energy’s medium-term strategic intent is to grow to a 5Mtpa producer of coal, in a profitable and safe manner, having due consideration for our environment and contributing to the health and well-being of our employees and local communities.

The group produces a range of products, including thermal power station coal and metallurgical coal of varying quality. It will add to this product range as and when acquisition and development opportunities allow, to increase tonnages offered to both the domestic and export markets.



STRATEGIC OBJECTIVES

Optimise current operations our current emphasis is on ensuring that the group’s assets operate optimally with regard to maximising production, minimising

unit costs, increasing profits and cash generation and improving our already exemplary safety record. total current annual saleable production capacity approximates 2.5Mtpa. Where a plant is underutilised, it is made available for other revenue-generating purposes such as ‘toll washing’. additional revenue and cost-saving initiatives are constantly being investigated, such as the pilot slurry briquetting plant to be installed at Vanggatfontein in Fy14. Not only will this initiative increase revenue but will also minimise our environmental liability and footprint.

Develop internal projects Koudelager situated close to Vaalkrantz colliery, the Koudelager project is being developed as a reserve replacement project as production

from Vaalkrantz depletes its current reserves. similar geological conditions and coal qualities are expected meaning that existing Vaalkrantz infrastructure and resources can be utilised. current planning is to truck coal produced from Koudelager to the Vaalkrantz processing plant, with product flowing into existing markets.

During this financial year the geological modelling was completed and an indicated resource drilling programme is planned for completion during the second half of Fy14.

Braakfontein a mining right development project located approximately 10km outside Newcastle in KwaZulu-Natal and approximately 90km

west of Vaalkrantz colliery, Braakfontein is planned to contribute in the order of 1.1Mtpa to Keaton energy’s saleable production. Braakfontein’s primary product will be export thermal quality, with a secondary product to be sold to local power utility eskom.

a concept study has been completed and a final phase of in-fill and box-cut placement drilling is planned for completion during the second half of Fy14. current planning is to commence production at Braakfontein within 24 months.

Sterkfontein this feasibility stage project is located near Bethal in Mpumalanga, adjacent to sasol Mining’s twistdraai east shaft,

approximately 90km south-east of Vanggatfontein colliery. underground mining operations will generate a primary a-grade export thermal product and a secondary eskom product. the group is presently conducting an options analysis to establish the best development strategy for the project.

Drive acquisitions In order to supplement production from our existing operations and development projects we are actively investigating

numerous acquisition targets. In addition to meeting our 5Mtpa target, acquisitions are being driven by our intention to further broaden our product mix to include a and B-grade domestic and export coal and to grow our eskom production. our focus is on long life near term or operating assets. We remain committed not to overpay for assets.

LOnG-TERM GROuP VIABILITy

to ensure Keaton energy’s long-term viability, the board has committed to the following strategic initiatives: » optimising existing operations » reducing unit costs » Developing existing project pipeline » acquiring additional long-life exploration and operating assets » Monitoring key environmental performance indicators » ensuring compliance with sLps and eMps » ensuring regulatory compliance » Building on our current empowerment credentials



KEATON ENERGY


The Keaton Energy business model is based on an experienced board and an expert, hands-on management team utilising the best practices available to the coal mining industry. They are supported by skilled mine management teams and a workforce that is constantly being upskilled and motivated by appropriate incentives in a safe working environment.

The company operates on a ‘lean and mean’ basis, with a minimal head office team, supported by outsourced specialist skills where necessary.

BusINess MoDeL

Inputs

natural capitalcoal, water, land

Manufactured capitalMine infrastructureplant and equipmentexplosives, fuel, electricity

Human capitalemployees, contractorsManagement Worker representativesMan-hours worked, shifts

Financial capitalshareholder fundsDebtcash-flow

Intellectual capitalMining and management skillsoutsourced expertiseMining rights and compliancesInnovative technology

Social and Relationship capitalcustomer and supplierscommunitiesshareholders and stakeholdersregulatorspartnersInvestorsanalysts and media

Environment and society

Value Creation Process

Secure MineFind

resource allocation Management and operations people development transformation

s

takeholder engagemen

t

s

afet

y an

d he

althBus

ines

s st

rate

gy

risk

s and opportunities

corporate governance Mission and values

Medium and long term outlook environment



The schematic below and brief commentary show why Keaton Energy’s business model works and why the group will continue to grow. It shows how the group blends its various inputs in its own unique process to produce the outputs and outcomes that secure its viability and satisfy its shareholders and broader stakeholder community.

Outputs Thermal coal

Export and

domestic

metallurgical coal

Revenue

Profit

Payroll

CSI

Taxes

Debt repayment

Dividends

Outcomes Intellectual capital

Sustainable business

Jobs

Skills development

Community upliftment

Social and

relationship capital

Energy feedstock

Waste/Emissions

Land degradation and

rehabilitation

Environment and society

Value Creation Process

Sell Distribute

resource allocation Management and operations people development transformation

s

takeholder engagemen

t

s

afet

y an

d he

althBus

ines

s st

rate

gy

risk

s and opportunities

corporate governance Mission and values

Medium and long term outlook environment



KEATON ENERGY


BusINess MoDeL COnTInuED

BuSInESS ACTIVITIES THAT TRAnSFORM InPuTS InTO VALuE

Core leadership skills and experience

» the chairman and board are well versed in the macro-economic and mining ‘big picture’, while offering a well-balanced mix of mining, broader business and financial insight. the ceo is a hands-on operational leader who helped found the company and the cFo is well qualified to instil the necessary financial controls and discipline.

Operational leadership

» the mine management teams are experienced and well respected for their competence. the zero LtIFr at year-end and improved production are testimony to this.

Financial management

» Keaton energy’s financial function optimally deploys shareholder funding, debt capital and operational cash flow to support growth and accumulate resources.

Investor, regulator and stakeholder communications

» regular two-way communication with all stakeholders and the market ensures proactive and informed working relationships and enables the company to respond to developing trends and investor expectations.

Finding opportunities and feeding the development pipeline

» the company actively seeks acquisition opportunities and is skilled in seeking out the ‘right fit’ operating mines and development opportunities for the Keaton energy growth model.

Coal Resources and Reserves

» Keaton energy has sizeable coal resources and reserves, and is continually seeking new prospects.

A skilled and motivated workforce

» our Vaalkrantz employees are adept at the challenging narrow seam mining techniques. the new contractor at Vanggatfontein has to date proved its skills by reaching and exceeding production targets.

Harmonious community relations

» the majority of our employees are recruited from local communities. the group actively engages local communities in all aspects that may influence them while delivering on its sLp commitments. regular interactions mean all issues are addressed as they arise.

Innovative technology

» New techniques, such as producing coal briquettes from slurry, have the potential to improve productivity and output, while also mitigating environmental impacts.



Environmental awareness

» Negative impacts on the environment are mitigated by introducing measures to curb GHG emissions, selling or processing discard and slurry, while also lining dirty water channels and dams.

BuSInESS MODEL CORE ACTIVITIES

Mining management and controls » proven mining methods, sound management and controls ensure a safe and productive environment.

Beneficiation » ensures higher value and consistent quality products.

Logistics » the group continually seeks ways of reducing costs and environmental impacts in the transportation of coal.

Human capital management » proactive and empathetic management of the workforce delivers consistent performance. safety, health and wellness programmes improve employee health and other indicators.

Exploration and acquisitions » continual forward planning to ensure the long term sustainability of the group.

Marketing » targeted marketing to domestic and export markets ensures that our production is always fully taken up.

Development planning » optimise current operations and bring new operations on stream in the most cost-efficient manner.

Relationships with authorities and regulators » We remain in constant communication so that potential conflicts and/or non-compliance are prevented.

Corporate governance » Good corporate governance and citizenship is strictly enforced.

KEy OuTPuTS

Fy13 Fy12

thermal coal – eskom (Mt) 1.5 0.96export and domestic metallurgical coal (Mt) 0.39 0.49

Rm rmrevenue 918.8 474.4(Losses)/profits* (139.4) 4.9payroll 77.2 35.6taxes 2.1 1.6Debt repayment 24.4 0.31Dividends – –

*Results from operating activities.



KEATON ENERGY


BusINess MoDeL COnTInuED

OuTCOMES

Financial capital

» Sustainable growth: the company is well on track to meet its current growth targets. » Profitability: revenue and margins that will support sustainable growth and meet shareholders’ expectations.

Human capital

» Jobs: Hundreds of jobs have been created and sustained. » An upskilled and representative workforce: the continual training of our workforce increases the representation of previously disadvantaged employees at operational and management levels, and contributes to a transformed economy and society.

» Community development: the constant inflow of employee earnings into the community and company investment into schools, health facilities and other programmes, supports social upliftment in the region.

Intellectual capital

» Keaton energy’s management and staff has vast collective experience in coal mining, which was challenged and sharpened by the operational obstacles overcome at both mines in this financial year. When skills do not exist within the group they are outsourced to applicable specialists.

Social and relationship capital

» the group maintains healthy and proactive relationships with customers, regulators, suppliers, investors, communities and all other significant stakeholders. these interactions are integral to ongoing sustainability, particularly when facing challenges.

Environmental capital

» Energy feedstock: coal is a primary feedstock for base load electricity generation and for other industrial and heat generation needs.

» Discard: Is sold to reduce environmental liabilities and add to revenue. » Slurry: Is sold to reduce environmental liabilities. a test programme is underway to convert slurry into saleable coal briquettes, which will add to revenue and further reduce environmental impacts.

» Waste water: an increasing percentage of waste water is recycled for further use. » Ground contamination: Is limited where possible and will be treated as part of the rehabilitation plan. » Emissions into atmosphere: Being monitored. emanate primarily from diesel fuel, electricity consumption and explosives.



BusINess operatIoNs

Vanggatfontein Colliery Vaalkrantz Colliery

FY13 highlights » Record safety performance ending the year on a zero LtIFr

» new mining contractor appointed July 2012

» 58% increase in eskom sales» 25% increase in reserve» new TSF completed» Pit 3 developed from operational cash» First 5-seam from pit 3 in october 2012» R42 million paid down on Nedbank

project Finance facility

» Improved safety performance» Decrease in production due to poor roof

conditions in West alfred» reduction in export revenue due to

softening of coal prices globally

Location » 14km south east of Delmas in Mpumalanga

» 20km east of Vryheid in KwaZulu-Natal

Washing capacity » 600tph » 2-stage 110tph

Infrastructure » a 100tph 5-seam coal washing plant, producing duff, peas and nuts

» a 500tph coal washing plant producing domestic thermal coal

» changehouses, pollution control structures, sewage treatment plant

» twin-lined slimes facilities and a coarse discard facility with related water dams and drainage system

» related water and power reticulation, stockpile areas, weighbridge facilities and access roads

» extensive power, water and road infrastructure

» 110tph 2-stage coal washing plant producing duff, peas and nuts across both the Gus and alfred seams

» an extensive fleet of underground mining equipment

» rail siding for shipment of anthracite products both domestically and for export

Product » 2 and 4-seam washed thermal coal supplied to eskom

» 5-seam low contaminant, vitrinite dominant, bituminous coal supplied into the domestic metallurgical market

» primary product sold into the domestic metallurgical market

» secondary product sold into the Brazilian iron ore pelletising market

Resource (Mt) » * 70.3 » 17.8

Reserve (Mt) » * 45.2 » 2.2

LOM (yrs) » * 13+ » 3.6

* East Resource Block only.

refer to pages 40 to 49 for the operational review of Keaton energy’s business operations and projects.



KEATON ENERGY


AnnuAl reviews

“The key factor that underpins Keaton energy as a sound investment is the coal itself. As the market review later in this integrated Annual report explains in more detail, south Africa and much of the world will require growing quantities of coal for at least the next 20 years. Keaton energy will be an enthusiastic and innovative participant in growing south Africa’s coal business.”

David Salter Chairman

Chairman’s review 24 – 27

CeO’s review 28 – 31

CFO’s review 32 – 35

Vanggatfontein discard bin



KEATON ENERGY

23Keaton Energy integrated Annual report 2013


In this year – particularly its first half – group management had to deal with a number of significant challenges, but its decisive and accurate responses augur well for Keaton Energy’s future. By the end of the year we had returned to profits and the group’s prospects are brighter than ever.

ChAirmAn’s review

Despite the obstacles, i am pleased to report that in this sixth

year of Keaton energy’s Jse listing we improved our coal

production substantially. we remain on track to reach our

medium-term goal of growing into a 5 mtpa producer.

mining can be a dangerous business, yet the board and

management are delighted to report another fatality-free year of

operation and an exemplary safety record, which stems from

Keaton energy’s unswerving commitment to safe operations.

with the local demand for coal at historic highs and likely

to remain so, coal mining in south Africa is probably the best

mining sector to be in at this time. with six years of getting into

shape now behind us, the Keaton energy business model is

gearing up for sustainable growth in well-chosen markets.

Operationally, this year again brought its own set of challenges in

geological difficulties, a substandard mining contractor that had

to be replaced, the transport strike, electricity supply and

equipment failures, but the Keaton energy team was up to the

task. On behalf of the board, i congratulate the executive

management and the miners, literally at the coalface, who made

this possible.

Summary of financial pErformancE revenue increased by 94% from r474.4 million in FY12 to

r918.8 million in FY13 from improved thermal coal deliveries to

eskom and the inclusion of 12 months of vaalkrantz sales

compared to only three and a half months in FY12. These eskom

sales were, however, lower than planned due to poor plant

throughput at vanggatfontein, while vaalkrantz revenue was also

impacted by lower export prices and reduced sales tonnages

because of challenging mining conditions.

The group recorded a gross loss of r27.3 million for FY13

compared to a gross profit of r14.6 million in FY12, resulting from

the insufficient sales and a depreciation and amortisation charge

of r227.1 million partly due to the early adoption of iFriC 20.

highlights

– record safety performances at both vanggatfontein and vaalkrantz

– 94% increase in group revenue to r919 million

– r11 million gross profit for the second half of FY13, compared with a gross loss of r38 million for the first half



This was a year of two halves, with a gross loss of r37,9 million

over the first two quarters being partially offset by a gross profit

of r10.6 million for the second two quarters. most importantly,

the technical difficulties of the early part of the year had been

overcome, with sales tonnages and cash generation setting,

month after month, group records as we proceed into the new

financial year.

opErating EnvironmEntThe mining business in south Africa has got tougher in recent

years, and at the present time it is in a particularly volatile state.

The debates over possible nationalisation and more onerous

conditions for mining rights have thankfully ended for the

moment, but the damage was done and investor confidence

shaken. As these issues subsided, the marikana tragedy

exposed the serious problems of inter-union rivalry, worker-

management miscommunication, unrealistic expectations and

the exploitation of financially unskilled miners by loan sharks.

labour relations in certain mining sectors have become

adversarial, with newer unions squaring up to the older,

established ones. unprotected strikes and intimidation are

reducing productivity. it is not surprising that many mining

houses are actively seeking and developing opportunities

outside south Africa’s borders, and overseas investors are

recommending that mining groups split their south African mines

from their international operations.

in this reporting period there was no industrial action at the

Keaton energy operations and employee relations were cordial,

although production and delivery of product was affected by the

national transport strike. The relative labour peace that prevailed

at our mines – in contrast to all around us – was no doubt due to

our understanding workforce and competent management, our

excellent safety record and genuine efforts to support local

communities. That is why it is disappointing to note that the post

year-end wage negotiations at vaalkrantz now underway are

being hampered by unrealistic wage demands far beyond what

the mine can afford. if a realistic settlement is not reached, we

will have no choice but to consider placing the mine on care and

maintenance or, worse, closing it, with over 700 direct jobs – and

all the indirect jobs and dependants these support – in the

balance and jeopardising potential future investment in our new

mine projects in the area.

south African mining is well into its mature phase and all the

known easy-to-reach, high-yield deposits are already mined out.

Keaton energy’s financial returns are published for all to see and

the fact is that last year the group recorded a loss, profit margins

are relatively thin and we simply cannot support large increases

to the wage bill.

i empathise with the miners: i was brought up in a south wales

mining valley community during the unrest that led to the eventual

closure of every local coal mine. i believe that the miners are part

of a wider socio-economic protest against the structural

inequality of south Africa’s society, which is made more painful

as basic living costs such as electricity, transport and food

become more expensive. nevertheless, as proactive as we as a

junior mining group may want to be, this issue is beyond our

ability to influence and falls into the realm of government. we can

only do what we are equipped for, which is running safe and

profitable mines that support hundreds of jobs and thousands of

dependants and contribute taxes to the fiscus and coal

to eskom.

The key factor that underpins Keaton energy as a sound

investment is the coal itself. As the market review later in this

integrated Annual report explains in more detail, south Africa

and much of the world will require growing quantities of coal for

at least the next 20 years. To meet the shortfall, it is estimated

that south Africa alone needs r100 billion of investment into

new coal mines over the next few years. Keaton energy will be

an enthusiastic and innovative participant in growing south

Africa’s coal business and we believe that, with our proven

business model and new developments underway, becoming a

long-term mid-tier producer is well within our reach.

David SalterChairman

Group overview 4 Annual reviews 22Operational review 36Operating context 56Financial performance review 66environmental, labour and social review 74Governance 86Annual financial statements 100shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


ChAirmAn’s review continuED

opportunitiES anD challEngESmining in south Africa is not a straightforward business, and

making progress presents both opportunities and challenges.

An opportunity that we engaged at vanggatfontein this year was

to provide ‘toll washing’ for nearby coal mines, to get their coal

up to the standards required by eskom. This offers an additional

income stream from plant equipment that is underutilised from

time to time.

Another opportunity is the processing of coal slurry into coal

briquettes that can be used by industry and eskom. Our pilot

project at vanggatfontein will commence production in Q2 FY14

and, if proven viable, could generate additional income while

also rehabilitating the slurry dams ahead of mine closure. we

would consider rolling out slurry processing at vaalkrantz and

new projects for the same financial and environmental purpose.

A major challenge is diminishing investor interest in south African

mining in favour of other African or global prospects that are less

burdened by government intervention and labour discord. until

government, trade union leaders and large mining house

executives show the vision to stabilise our mining sector, this

vital generator of wealth for the country will continue to decline.

events at both our mines in this year showed that mine geology

can be a significant risk. Pit 1 at vanggatfontein became unviable

leading to a r51.2 million loss on the derecognition of the asset.

At vaalkrantz poor roof conditions slowed output and pushed up

the cost of production through having to bring in specialist teams

to support the roof and restore the safety of mining operations.

This also resulted in roof material diluting the washing plant feed,

again impacting the cost per tonne of final product.

Of course at this time labour issues are a deep concern across

the industry, which i have already commented on. An additional

risk at vaalkrantz is the health of our skilled but ageing workforce.

legacy problems associated with hiv/AiDs and tuberculosis

lead to high absenteeism rates. The on-site medical clinic

monitors and supports worker health and also distributes the

Arv medication supplied by government for those that are hiv-

positive. nevertheless, worker productivity at vaalkrantz is

impacted negatively.

matErial iSSuESin compiling this integrated Annual report the board has

considered how ‘material’ the information is to be published in

this document. This integrated report is concise, yet contains all

the information needed for shareholders and stakeholders to

make informed decisions regarding Keaton energy. supporting

information that is relevant, but will distract from the flow of this

report, is published on our website, www.keatonenergy.co.za.

high-lEvEl StratEgynew acquisitions aside, Keaton energy already has the project

pipeline and reserves in place to grow steadily into a 4 mpta coal

producer. with these projects sited in the vicinity of our existing

mines, we intend leveraging on existing infrastructure and plant

while expanding prudently within cash-generation and

investment constraints. Acquisitions to take us to our 5 mpta

target are only being considered where these are demonstrably

value accretive.

govErnancEin this financial year we implemented a new memorandum of

incorporation and implemented other corporate governance

amendments required by King iii and the new Companies Act. in

the corporate governance section we show where Keaton

energy has complied with these requirements.

As i have commented previously, the increased reporting

requirements imposed in the last few years on listed companies

come at a high price in terms of cost and management time.

i still see very little value being created for shareholders in small

companies such as ours by these requirements and still contend

that it is only the auditing and consulting professions that derive

any benefit from them. with only a handful of people reading

these reports, it really begs the question of appropriateness

yet again.



last year i commented that a renewed engagement with the

investor community would see a rerating of our share price. my

optimism was negated by the global commodity downturn. we

continue with our engagements, however, energised by our

improved production performance and growth outlook. You will

recall that during the year we had two changes of CeO, one

planned, one not. i was asked by the board to assume the role

of executive chairman as an interim measure and, in terms of

good corporate governance, lizwi mtumtum was appointed

lead independent director to deal with those issues where i have

to recuse myself. i will, of course, step back from this executive

role as soon as the board decides it is appropriate.

SuStainability anD StaKEholDEr EngagEmEntwe take stakeholder engagement seriously, as it is a key factor

in ensuring the long-term sustainability of the company. listening

carefully to our shareholders and other stakeholders alerts us to

trends, helps improve our offering, promotes sound relations

with employees and communities, while forewarning against

impending problems. much of the recent unrest in the mining

community was caused by poor communications at various

levels and Keaton energy has taken due heed of that lesson.

DirEctoratE anD boarD movEmEntSin this year Paul miller stood down as CeO after five years at the

helm. rowan Karstel took over briefly before founder and COO,

mandi Glad, was appointed as CeO. On behalf of the board,

i thank Paul for his untiring efforts, through difficult times, in

leading and developing the group from an unlisted exploration

company to a fully fledged mining group. As mandi has been

hands-on in Keaton energy since its founding, we have full

confidence that she can drive the group to our 5 mpta goal.

in addition, the board was strengthened during the year by the

appointment of Gerard Kemp as an independent, non-executive

director. Gerard, a well-known mining industry leader and former

investment banker, brings key skills and experience to bear on

our growth programme.

DiviDEnDFor this financial year the group has decided not to pay a

dividend and rather keep cash for further optimisation and

expansion of mining operations. we look forward to being in a

position to make dividend distributions as our operations

continue to generate profits.

David Salter

Chairman

26 July 2013



KEATON ENERGY


The year under review was a challenging one for the company characterised by a series of difficulties in the first half of the year while the second half saw steadily improving performance that has continued strongly into the first few months of the current year. With a robust pipeline of development projects, a number of acquisitions currently being evaluated and a strong end to FY13 Keaton Energy’s prospects for FY14 have never looked better.

ChieF eXeCuTive OFFiCer’s review

SafEtyi am delighted to report that the Keaton energy group remains

fatality free since inception. in addition, vanggatfontein ended

the year with a zero lTiFr and vaalkrantz with a much improved

0.36 lTiFr. safety is of paramount importance to the Keaton

energy group. Our focus on safety, coupled with intensive

safety training initiatives and rigorous management, will

continue in FY14. i congratulate all involved in keeping our

workplaces safe.

opErational pErformancE vanggatfonteinvanggatfontein delivered 1.51mt of washed 2 and 4-seam

thermal coal to eskom during FY13, an increase of 58% from the

previous year’s 0.96mt. As expected, 5-seam metallurgical coal

sales declined to 0.07mt from 0.14mt, as a result of Pit 1 5-seam

coal being depleted in line with the mine plan. The spare capacity

of the 5-seam plant was utilised for the toll washing of 0.11mt of

third-party coal.

The development of Pit 3, from internally generated cash, during

the second half of the year, however, provides renewed and

consistent 5-seam supply as well as better yielding 2 and

4-seam coal.

record safety and production performances were achieved at

the colliery despite significant challenges in terms of the poor

performance of the mining contractor, the continuity of local

electricity supply, the continued poor performance of the front

end of the 2 and 4-seam plant and, of course, the transport

workers’ strike action during the middle of the year. Decisive

action was taken in July 2012 resulting in the termination of

highlights

– Pit 3 at vanggatfontein developed from operational cash flows

– studies on development projects advanced

– 25% reserve increase at vanggatfontein to 45 million tonnes



megacube’s mining contract and the lodgement of a r119 million

damages claim shortly thereafter. it is pleasing to note that

mining operations improved significantly from August with the

change in mining contractor. eskom has also worked diligently to

resolve the power supply issues, including a five-day supply

change-out in December – we have already started to see

benefits in this regard. work still remains to be done to reach

acceptable performance levels at the front-end of the plant.

in the latter part of FY13 the decision was taken to close Pit 1 at

vanggatfontein as it was no longer economic, largely due

to reducing wash yields and thinning coal seams. This decision

resulted in a loss on the derecognition of the asset of r51.2 million.

Future coal production will now come from Pit 2 and the newly

developed Pit 3.

Discard and slurry sales generated r4.7 million of additional

revenue during FY13.

vaalkrantzvaalkrantz dispatched 0.33mt of anthracite to domestic and

international metallurgical markets, a 7% decrease over the

previous year’s 0.35mt.

in contrast to vanggatfontein, vaalkrantz recorded its best

performance in the first half of the year. During the second half of

the year the operation suffered from extremely difficult mining

conditions in the west Alfred section of the mine which limited

production. however, an additional skilled team was brought in

to support the roof and install cable anchors in many of the

intersections which saw mining conditions improve late in

the year.

nevertheless, we are pleased that, notwithstanding these

difficulties and the inherent risks in narrow-seam anthracite

mining, the colliery’s safety performance improved.

During the year under review numerous life extension

opportunities were evaluated by our technical team giving rise

to the development of an exploratory drill programme

scheduled to commence in Q2 FY14 and the submission of two

further prospecting right applications. vaalkrantz currently has

three and a half years of life remaining but the planned

development of Koudelager in Q4 FY14 will see the life of

vaalkrantz significantly increased.

As the acquisition of vaalkrantz was only concluded towards the

end of FY12, a full 12 months’ operational and financial results

are included in this integrated Annual report for the first time.

marKEtSOur coal is sold into three distinct markets:

1. Domestic thermal coal contracted to eskom.

2. 5-seam coal and premium anthracite to domestic metallurgical

customers.

3. Anthracite exported to Brazil, through our off-take partner

Gunvor sA.

Our relationship with eskom, our biggest customer by

volume, has continued to strengthen through the delivery

of a consistent quality product to a number of their power

Mandi GladCEO



KEATON ENERGY


ChieF eXeCuTive OFFiCer’s review continuED

stations. with eskom’s coal demand set to increase dramatically over the next few years we are continually evaluating additional

assets to realise our intention of becoming a more meaningful eskom supplier.

Our entire 5-seam and premium anthracite production remains

in great demand locally and all product is sold as it is produced.

Domestic metallurgical coal prices remained buoyant during the

period despite furnace operators cutting back on electricity

consumption. in contrast, our single export market for anthracite,

the Brazilian iron ore pelletising industry, saw prices decline in

line with the softening of coal prices globally.

acquiSitionSTo continue moving towards our 5mtpa target, we are

aggressively pursuing acquisitions. in this financial year we

identified 16 potential acquisitions, screened 13 of these and

examined 10 in detail. Five foundered on price and/or technical

issues, four are ongoing and one was successfully concluded

subsequent to year-end. The mooiklip anthracite project is

located some 30km north-east of vaalkrantz and offers a

potential 4.5mt anthracite resource of similar quality to

vaalkrantz’s current production. exploration drilling is planned

to commence in August 2013. The mooiklip Project furthers the

group’s ambition to consolidate its position as a leading

anthracite producer in the KwaZulu-natal region.

minimiSing our EnvironmEntal impactDuring the year the group continued its programme of lining our

dams, constructing silt traps and implementing measures for the

more efficient use and recycling of water.

These initiatives were supported by the sale of course discard

and slurry and the joint development of a process to dry and

briquette slurry, both of which go a long way in reducing our

environmental impact and footprint.

The rehabilitation of our Klip Colliery, as shown in a case study

on page 78, demonstrates how seriously Keaton energy takes

its environmental responsibilities.

170

160

150

140

130

120

110

100

90

80

70

60

50

40

30

20

10

02013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2049 2050 2051

mtpa

Based on a 50-yearoperational lifespan.Only five stations still in operation after 2040:

Contracted

Waterberg Un-contracted Juniors miners contracted Contracted

Waterberg

Un-contracted

Eskom coal demand (Mtpa)



our EmployEES anD thEir communitiESA large percentage of our workforce is drawn from local

communities ensuring that they remain connected to their

homes and families and that their earnings flow into development

of the local economy. Our harmonious relationship with our

workforce is reflected in the fact that our unionised vaalkrantz

Colliery was unaffected by the labour strife that battered virtually

all other mines in the vicinity of our operation in the year under

review. sadly, it appears that the mood of wildly unrealistic

expectations has now reached our vaalkrantz workplace, which

is hampering the current FY14 wage negotiations and threatening

the future of the entire operation.

As discussed in more detail in the stakeholder relations section

of this report, Keaton energy maintains regular communication

with local community leaders and municipalities.

outlooKAlthough our operations this year were set back by a series of

unforeseen events, the fact that we ended the year on a high

note and are currently producing record tonnages, profits and

cash proves the viability of the Keaton energy business model.

From an exploration company just four years ago, Keaton energy

has the skills, the shareholder support and the project pipeline to

rapidly push onto its goal of becoming a 5mtpa producer. Both

domestically and internationally coal demand is set to increase

significantly, i am therefore confident that coal will remain a

commodity in demand for years to come.

mandi glad

CEO

26 July 2013



KEATON ENERGY


The appointment of a new mining contractor, optimising plant throughout, and the opening up of Pit 3 at Vanggatfontein, propelled the group back to profitability in the second half of FY13 as it generated gross profits of R11 million.

ChieF FinAnCiAl OFFiCer’s review

rEflEction on thE 2013 financial yEarDespite challenges such as underperformance by the mining

contractor in the first half of the year at vanggatfontein, as well

as extremely difficult mining conditions in the largest production

section at vaalkrantz, we remained focused in working through

the challenges presented and saw a distinct turnaround in

performance in the second half of the year. Group net losses for

the year undermined our goal of growing cash reserves, however,

the group still achieved its project finance debt repayment

obligations and invested further in expanding operations mainly

at vanggatfontein.

GROUP HEADLINE EARNINGS PER SHARE (CPS)

FY08 FY10FY09 FY12 FY13

20

10

0

(10)

(20)

(30)

(40)

FY11

(9.2)

6.4 5.610.3

(30.2)

9.5

highlights

– 58% increase in eskom sales to 1.5 million tonnes

– r42 million project finance facility repayment

headline earnings per share decreased from the prior

year’s restated earnings of 9.5 cents per share to a loss of

30.2 cents per share. This decrease was influenced by:

» a decrease in margins at vanggatfontein, despite significantly

increasing its thermal coal deliveries at vanggatfontein

by 58%;

» an expected decline in metallurgical coal sales at

vanggatfontein as a result of Pit 1’s 5-seam coal being

depleted in line with the mine plan;

» depreciation and amortisation charges of r227.1 million

compared to r123.2 million in FY12 as a result of an increase

in operations and the effect of the early adoption of iFriC 20;

and



» a decrease in sales tonnes and export prices at vaalkrantz.

The group recorded a gross loss of r37.9 million (equivalent to

9% of revenue) in the first half of FY13. in July 2012 the contract

with the previous mining contractor at vanggatfontein was

terminated. The appointment of a new mining contractor,

optimising plant performance, and the opening up of Pit 3 at

vanggatfontein, propelled the group back to profitability in the

second half of FY13 as it generated gross profits of r10.6 million

(2% of revenue). we see this trend continuing into the new

financial year, with production on track to surpass those at the end

of FY13. Production costs were tightly controlled throughout the

year and cost reduction remains a key focus at both operations.

The comparative information has been restated as a result of the

early adoption of iFriC 20 – “stripping cost in the production

phase of a surface mine”. refer to the significant accounting

policies, note 4.

During the 2013 financial year, a decision was taken to close

Pit 1 at vanggatfontein as it was no longer economic. This

resulted in a loss on derecognition of assets of r51.2 million

recorded in mining and related expenses in the statement of

comprehensive income with a corresponding decrease in mine

development assets.

mine operations generated cash of r191.8 million for the year

compared to r129.5 million in FY12. Capital spend totalled

r210.5 million compared to r248.4 million in FY12 (excluding

the acquisition of lme in FY12), the majority of which was for

establishing the box-cut in Pit 3 and continuous development

(stripping cost) to expose coal in all three pits at vanggatfontein.

The group repaid debt of r47.9 million in FY13, r42.1 million of

which represented project finance debt related to the

development of vanggatfontein.

For a detailed analysis of the group’s financial performance refer

to pages 66 to 73 of this integrated Annual report

Significant accounting mattErSThe results for FY12 have been restated due to the early adoption

of iFriC 20 – “Stripping costs in the production phase of a

surface mine”. The interpretation would have become

mandatorily effective for financial years commencing on or after

1 January 2013. The adoption was treated as a change in

accounting policy and resulted in the restatement of the prior

year results as follows:

financial year ended 31 march 2012 and as at 31 march 2012 » Gross (loss)/profit in the statement of comprehensive income

decreased by r51.7 million with a corresponding decrease in

property, plant and equipment.

» income taxation credit in the statement of comprehensive

income increased by r14.5 million with a corresponding

increase in the deferred tax asset.

» Cash flows from operating activities decreased by r13.2 million

and reduced the investment in cash flows from investment

activities in the statement of cash flows.

» Basic and diluted earnings per share decreased from

90.9 cents to 75.2 cents.

» headline and diluted headline earnings per share decreased

from 25.2 cents to 9.5 cents.

financial riSK managEmEntThe group is exposed to a variety of financial risk which includes

credit risk, liquidity risk and market risks such as currency risk,

fair value interest rate risk, cash flow interest rate risk and other

price risks. The group’s approach in dealing with these risks is

outlined in note 29 to the group financial statements, in which a

sensitivity analysis is presented.

Jacques rossouwCFO



KEATON ENERGY


ChieF FinAnCiAl OFFiCer’s review continuED

Group net debt increased from r236.8 million in FY12 to

r265.2 million in FY13 as a result of a decrease in cash and

bank balances year on year. Gearing increased from 37% to

41.5% in FY13. while no formal policy on targeted gearing

exists, the group retains the support of principal shareholders in

the form of either equity or debt funding for future expansion,

subject to its ability to meet debt service covenants.

Group liquidity remained under pressure as a result of a decrease

in cash and bank balances year on year. This position improved

significantly in the first three months of the new financial year.

The group’s only significant long term debt at year-end was the

nedbank project finance facility of r194.2 million (FY12:

r216.9 million) and a us Dollar loan from vitol sA of r59.0 million

(FY12: r48.9 million) taken on with the acquisition of lme in

FY12. refer to note 21 in the group financial statements for the

repayment profiles of these loans. repayment of the nedbank

project finance commenced in June 2012, with a further payment

made in september 2012. During november 2012, payment

terms were renegotiated in line with forecasted cash flows from

operations. The group met all its debt covenants throughout

the year.

The group’s capital commitments for FY14 are r70.7 million

(2012: r69.6 million), designated mainly for vanggatfontein and

projects under consideration. All contracted amounts will be

funded through existing funding mechanisms within the group

and cash generated from operations.

The group, through its subsidiary Keaton mining Proprietary

limited, is currently party to two litigation claims. Full provision

has been made for these claims, as disclosed in note 27 in the

group financial statements. Keaton mining has lodged

counterclaims in excess of the third party claims for damages

and losses sustained as a result of the breach of the respective

agreements. Both matters are expected to be resolved in FY15.

DiviDEnDSno dividends have been declared nor are any proposed for the

year ended 31 march 2013 (31 march 2012: rnil) as the group

continues to invest in its capital commitments, project

development and reducing its debt.

looKing ahEaDThe group is now in a period of further optimisation of operations.

Although FY13 presented the group with some challenges, we

believe that these have been or are being overcome and we

remain confident that the current financial year will be a year of

profit and growth for the group. Our confidence is supported by

vanggatfontein’s performance in April, may and June 2013 in

delivering record production, cash generation and profits.

Jacques rossouw

CFO

26 July 2013



Vaalkrantz Siding



KEATON ENERGY


operational review

Management teams at each mine are held accountable and responsible for meeting production targets and for ensuring that the contractors perform and conform to agreed working standards. Furthermore, management accepts responsibility for ensuring compliance with all legislative, social, labour and environmental requirements.

Safety and Health 38 – 39

vanggatfontein Colliery 40 – 41

vaalkrantz Colliery 42 – 43

Koudelager project 44 – 45

Braakfontein project 46 – 47

Sterkfontein project 48 – 49

Coal resource and reserve statement 50 – 55

Vaalkrantz West Alfred



KEATON ENERGY

37Keaton Energy integrated annual report 2013


Proudly the Keaton Energy group remains fatality free since inception. Safety performance at both operations improved during the year with a total of 3 LTI’s recorded (FY12: 8).

SaFety and HealtH

the key bodies of legislation requiring compliance are the

MHSa and the oHSa.

at board level, the company’s legislative compliance in

respect of safety and health is monitored, its targets set and

performance assessed by the SHe committee. this

committee is chaired by dr david Salter and its members

include Gerhard Kemp and Mandi Glad. it meets at least

quarterly.

at each operation, overall accountability for safety and health

rests with management. Besides accountability, requirements

of management are:

» ensuring workforce competence through selection,

retention, education, training and awareness;

» identifying risks and hazards, and implementing control

measures;

» setting safety and health targets, and evaluating

performance through internal and external auditing;

» promoting and maintaining open and constructive dialogue

in matters of safety and health with all stakeholders; and

» encouraging a culture of continuous safety and health

improvement.

each operation has a SHe manager, a safety and health

committee and full-time safety and health representatives.

Fatality free since inception

Zero ltiFr at vanggatfontein Colliery

Improvement of ltiFr to 0.36 at vaalkrantz Colliery

workplace Hiv/aids and wellness programmes

access to counselling and social support

SAFETY And hEAlThthe company has established and maintains a safety and

health management structure that:

» is in compliance with legislated requirements;

» is in accordance with accepted industry practice; and

» seeks to extend beyond employees to include contractors,

communities, customers and visitors in terms of its positive

influence and impacts.

SAFETY PERFORMAnCE

FY13 Fy12 FY13 Fy12

ltis 0 4 3 4

ltiFr per 200 000 man hours worked 0.00 0.38 0. 36 0.45

Fatality-free man hours 4 645 394 not available 63 741 555 59 396 751

Vanggatfontein Vaalkrantz



hEAlTh PERFORMAnCEthe year under review has been spent ensuring that pre-

existing occupational diseases have been properly reported.

a focus of the health services provision has been to ensure

correct placement of employees and the provision of holistic

managed healthcare.

noise and dust pose the greatest work-related health risk to

employees in the group’s workplaces, the former in terms of

niHl and the latter in terms of various respiratory diseases

specified by statute – both reportable and compensable. the

provision of on-site health services has, along with the rest of

the mining sector, focused on the integration of health

services with the government’s national strategic plan for the

management of Hiv/aidS, tuberculosis and sexually

transmitted infections. the focus has not only been on these

well-known problems, but the management of non-

communicable diseases such as hypertension and diabetes

in order to retain skills and improve health levels.

in respect of both niHl and respiratory diseases arising from

exposure to dust, management focuses on prevention, risk-

based medical surveillance, early intervention on identified

trends, access to treatment, and compliance in terms of

reporting and compensation.

in line with the dMr Milestones for the elimination of niHl

and occupational lung diseases in the workplace the keys to

prevention are technical engineering programmes to

suppress noise and dust in the workplace, employee

education and involvement, and lastly provision of protective

equipment. Surveillance, a requirement of the MHSa, is

currently outsourced to third parties. in respect of tB,

Keaton’s policy – applicable to all full-time employees and

contractors – provides guidelines for management of:

» employee awareness of the disease, its causes and

treatment; and

» employees who have contracted the disease or who are

suspected of having contracted the disease.

employees who are diagnosed with tB are managed

according to the national Health Guidelines and may continue

to work in their normal positions once they are non-infectious.

treatment regimes are monitored on site and every effort is

made to accommodate infected employees until they are

able to resume normal duties.

in respect of Hiv/aidS, the group applies the national

Strategic and dMr guidelines:

» education, training and counselling

» Confidentiality

» promotion of a safe working place

» Sick leave

» recruitment

» testing

» incapacity and dismissal

» discrimination

» Compensation

» employee benefits

» Grievance procedures

Company policy requires that workplace Hiv/aidS

programmes are implemented to:

» promote awareness;

» encourage voluntary testing;

» provide for education and training;

» promote condom distribution and use;

» encourage behaviour conducive to the prevention of

sexually transmitted diseases;

» enforce the use of universal infection control measures;

» create a staff environment conducive to openness,

disclosure and acceptance;

» establish wellness programmes for employees affected by

Hiv/aidS; and

» provide access to counselling and other forms of social

support.

of these, a vCt programme has been prioritised and piloted

at the company’s vaalkrantz Colliery and is being rolled out to

other operations and projects. infected employees are

provided with treatment for opportunistic infections,

immunisations (flu vaccinations) and nutritional support.

Group overview 4annual reviews 22 Operational review 36operating context 56Financial performance review 66environmental, labour and social review 74Governance 86annual financial statements 100Shareholders’ information, glossary of terms and secretarial matters 187


KEATON ENERGY


Key facts

ownership Keaton Mining proprietary limited (74% Keaton energy, 26% rutendo Mining proprietary limited)

location 80km east of Johannesburg on the edge of the Central witbank Coalfield in Mpumalanga

infrastructure » a 100tph 5-seam coal washing plant, producing duff, peas and nuts » a 500tph coal washing plant producing domestic thermal coal » twin-lined slimes facilities and a coarse discard facility with related water dams and drainage system

» related water and power reticulation, stockpile areas and access roads » tailings facilities

Mining method opencast: 5, 4 and 2 seams

washing capacity 600tph

products produced » 2- and 4-seam washed thermal coal supplied to eskom

» 5-seam low contaminant, vitrinite dominant, bituminous coal for supply to the domestic metallurgical industry

reserves 45.2Mt (2012: 35.9Mt)

resources 70.3Mt (2012: 58.4Mt)

loM erB 13+ years

property, plant and equipment carrying value at 31 March 2013 (rm)

630.1

permitting new order mining right


Vanggatfontein Pit 2

vanGGatFontein Colliery



OVERViEwthe business model employed by Keaton energy at

vanggatfontein is the on-site management, by a qualified team

of experts, of specialist core contractors to whom all the core

operational functions have been outsourced. the aim of this

business model is to ensure that the management of the

operation is conducted by experienced and reputable

personnel in a cost-effective and sustainable manner.

the core functions currently consist of opencast mining and

the operation and maintenance of a washing plant and

tailings facilities. Keaton has also appointed technical and

environmental contractors to provide services in these

specific fields.

the management team at the mine is held accountable and

responsible for meeting production targets and for ensuring

that the contractors perform and conform to agreed working

standards. Furthermore, the mine’s management accepts

responsibility for ensuring compliance with all legislative, social,

labour and environmental requirements.

Value drivers FY13 Fy12 % change

ProductionSales (Mt) 1.5 1.1 36

roM (Mt) produced 2.8 2.1 33

waste (Mm3) moved 9.7 7.3 33

Strip ratio achieved 3.2 3.4 (6)

FinancialCapex (rm) 210.5 248.4 (15)

SafetyltiFr 0.00 0.38 (100)

Fatality-free man hours 4 645 394 1 996 945 >100

Peoplenumber of employees (including contractors) 416 692 (40)

Financial performance

revenue (rm) 645.9 381.8 69

Gross profit (%) (5) 13 (>100)

eBitda (rm) 107.6 101.4 6

depreciation/amortisation (rm) 184.6 108.0 71

operating loss (rm) (86.5) (14.8) (>100)

lOOKing FORwARdHaving reached steady-state, vanggatfontein with its 13+ year life, is set to deliver consistent production, profits and cash over

the long term. Management will continue to seek cost reduction and optimisation opportunities where possible. as a primarily

eskom producer, and with eskom’s demand expected to continue increasing, vanggatfontein’s future looks bright.



KEATON ENERGY


Vaalkrantz Colliery

Vaalkrantz siding crushing plant

vaalKrantz Colliery

Key facts

ownership leeuw Mining and exploration proprietary limited (74% Keaton energy, 26% Jpi leeuw & associates proprietary limited)

location 20km east of vryheid in Kwazulu-natal

infrastructure » a 110tph 2-stage anthracite washing plant producing duff, peas and nuts » extensive power, water and road infrastructure » a fleet of underground mining equipment » railway siding

Mining method Underground: alfred and Gus seams

washing capacity 110tph 2-stage

products produced » primary product sold into the domestic metallurgical market » Secondary product sold into the Brazilian iron ore pelletising market

reserves 2.2Mt

resources 17.8Mt

loM 3.6 years

property, plant and equipment carrying value at 31 March 2013 (rm) 150.3




OVERViEwthe vaalkrantz operation has two shaft complexes. one is

mined by Keaton employees and the other mined by a

contractor. this mine produces among the highest quality of

anthracite in South africa. the coal seams are narrow and

mining conditions are therefore challenging, which requires

skilled and experienced miners to mine safely. the operation

managed to achieve excellent safety records despite

challenging conditions.

the current life of mine (loM) is three to four years and

strategically vaalkrantz is viewed as the base point for new

anthracite mining operations being explored in the

vryheid area.

Value drivers FY13 Fy12* % change

ProductionSales (Mt) 0.32 0.35 (9)

roM (Mt) produced 0.55 0.56 (2)

FinancialCapex (rm) 6.3 16.6 (62)

SafetyltiFr 0.36 0.45 (20)

Fatality-free man hours 63 741 555 59 396 751 7

People number of employees (including contractors) 778 723 8

Financial performance

revenue (rm) 272.9 92.5 >100

Gross profit (%) 2 27 (93)

eBitda (rm) 30.8 36.8 (16)

depreciation/amortisation (rm) 42.3 14.9 >100

operating loss (rm) (11.4) 21.9 (>100)

* Includes 3.5 months’ financial performance only.

lOOKing FORwARdalthough the vaalkrantz Colliery has a current loM of just three to four years, several options are being examined to extend its

life. Keaton energy intends bringing two nearby projects into production in the near future that will utilise vaalkrantz’s skilled

workforce, underground mining fleet and washing plant.

Keaton energy will continue exploration in the region, while working to reduce the unit cost of production at vaalkrantz.

vaalkrantz is an underground mine with its production fed

through a 110tph 2-stage coal wash plant.

the vaalkrantz management team is held accountable for

meeting production targets and accepts responsibility for

ensuring compliance with all legislative, social, labour and

environmental requirements.



KEATON ENERGY


KoUdelaGer proJeCt

Koudelager Project

Vanggatfontein 2 and 4-seam washing plant

Key facts


location 40km east of vryheid in Kwazulu-natal

Highlights Fy13 » Geological model completed » indicated resource and main development feasibility drilling planned for Fy14

planned infrastructure Minimal infrastructure associated with a satellite shaft including: » road access » water and power reticulation » Modular offices, change houses, pollution control dams, sewage treatment plant

» Underground access portals and conveyor belts » roM stockpile facilities » Security and weighbridge facilities

Mining method Underground

planned washing capacity to be washed at vaalkrantz

planned products » primary product for supply into the domestic metallurgical market » Secondary product for supply into the Brazilian iron ore pelletising market

resources 11.8Mt

loM 20+ years

intangible asset carrying value at 31 March 2013 (rm) 23.6




Blasting preparation at Vanggatfontein Pit 3



KEATON ENERGY


Key facts


location 10km south-east of newcastle in Kwazulu-natal

Highlights Fy13 » Concept study completed » in-fill and box-cut placement drilling planned for Fy14

planned infrastructure » national road access and site roads » water and power reticulation » offices, change houses, pollution control structures, sewage treatment plant » 250tph washing plant with related workshops, laboratory, product stockpile and dry discard facilities

» all underground-related mining infrastructure including roM buffer stockpile, stonedust supply, ventilation fans and explosives magazine

» all opencast-related mining infrastructure including haul roads, workshops and tip area

Mining method opencast and underground

planned washing capacity 220tph

planned products » primary product for supply into the a-grade export market » Secondary product for supply to eskom

reserves 24.9Mt

resources 60.7Mt

loM 12 years




Drilling at Braakfontein

BraaKFontein proJeCt



Vanggatfontein 5-seam peas



KEATON ENERGY


Key facts

ownership Keaton Mining proprietary limited (74% Keaton energy, 26% rutendo Mining proprietary limited) and labohlano trading proprietary limited (74% Keaton energy, 26% Moneybox investments proprietary limited)

location 10km south-west of Bethal in Mpumalanga

Highlights Fy13 » executed two further prospecting rights covering adjoining properties » Concept study completed » SaMreC-compliant roM coal reserve declared » options analysis under way

planned infrastructure » national road access and site roads » water and power reticulation » offices, change houses, pollution control dams, sewage treatment plant » 250tph processing plant with related workshops, laboratory, product stockpile and dry discard facilities

» all underground mining-related infrastructure including roM buffer stockpile, stonedust supply, ventilation fans and explosives magazine

Mining method Underground

planned washing capacity 220tph

planned products » primary product for supply into the a-grade export market » Secondary product for supply to eskom

reserves 23.6Mt

resources 90.8Mt

loM 15 years


permitting new order prospecting right


Drilling at Sterkfontein

SterKFontein proJeCt



Vaalkrantz West Gus



KEATON ENERGY


Classification of the coal resources and reserves for the Keaton Energy Group is based on the South African Code for Reporting of Mineral Resources and Mineral Reserves (“the SAMREC Code”) as prepared by the South African Mineral Resource Committee (“SAMREC”) under the auspices of The South African Institute of Mining and Metallurgy (2007). Under the SAMREC Code particular reference is made to the South African National Standard (SANS 10320:2004), being the South African guide to the systematic evaluation of coal resources.

Coal resourCe and reserve statement

Inferredmt

Indicatedmt

measuredmt

Total coal resource

MtProbable

mtProved

mt

Total RoMcoal

reserveMt

Vanggatfontein Colliery5 seam – 0.2 2.3 2.5 0.1 1.8 1.9

4 seam – 1.5 34.5 36.0 0.5 22.7 23.2

2 seam – 1.1 30.7 31.8 0.4 19.7 20.1

Subtotal – 2.8 67.5 70.3 1.0 44.2 45.2

Sterkfontein Project4 seam 40.6 50.2 – 90.8 23.6 – 23.6

Vaalkrantz Collieryalfred seam – 14.2 – 14.2 – 1.8 1.8

Gus seam – 3.6 – 3.6 – 0.4 0.4

Subtotal – 17.8 – 17.8 – 2.2 2.2

Braakfontein Projecttop seam – 36.6 – 36.6 24.9 – 24.9

Bottom seam – 24.1 – 24.1 – – –

Subtotal – 60.7 – 60.7 24.9 – 24.9

Koudelager Projectupper alfred seam 1.8 – – 1.8 – – –

lower alfred seam 0.2 – – 0.2 – – –

Gus seam 3.3 – – 3.3 – – –

upper dundas seam 1.0 – – 1.0 – – –

lower dundas seam 5.5 – – 5.5 – – –

Subtotal 11.8 – – 11.8 – – –

Total 52.4 131.5 67.5 251.4 49.5 46.4 95.9

the Competent Persons involved in these reports are dr Phillip John Hancox of Caracle Creek International Consulting Coal Proprietary limited, Wynand marais of mindset mining Consultants Proprietary limited, leonard raaths of miptec Proprietary limited and andy Johnson of rsv enco Consulting Proprietary limited.

For full details on all resource and reserve estimates, the basis on which these were prepared and details of Competent Persons, refer to the group’s website www.keatonenergy.co.za

Coal resource (MTIS) (AD) RoM coal reserve (Mt) (AR)

Project BoundaryInferred Coal ResourceIndicated Coal ResourceMeasured Coal Resource

Interpreted FaultBoreholeMined out AreasWetland

PipelineN National RouteR Arterial Route555 Main Road

Secondary RoadRail

Key for maps



2899000S

2898000S

2897000S

32896000S

2895000S

2894000S

13000E 12000E14000E15000E16000E17000E18000E

0 1000m

N

555

R

f f

Delmas

15km

Leandra

20km

N12

R50

R42

Phola

Ogies

Delmas

R545

R555

Kendal Power Station


R960


Inferredmt

Indicatedmt

measuredmt

Total coal resource

MtProbable

mtProved

mt

Total RoMcoal

reserveMt

5 seam – 0.2 2.3 2.5 0.1 1.8 1.9

4 seam – 1.5 34.5 36.0 0.5 22.7 23.2

2 seam – 1.1 30.7 31.8 0.4 19.7 20.1

Total – 2.8 67.5 70.3 1.0 44.2 45.2


28

99

00

0S

28

98

00

0S

28

97

00

0S

32

89

60

00

S2

89

50

00

S2

89

40

00

S

13000E 12000E14000E15000E16000E17000E18000E

0 1000m

N

555

R

f f

Delmas

15km

Leandra

20km

N12

R50

R42

Phola

Ogies

Delmas

R545

R555

Kendal Power Station


R960

Group overview 4annual reviews 22 Operational review 36operating context 56Financial performance review 66environmental, labour and social review 74Governance 86annual financial statements 100shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


Coal resourCe and reserve statement CoNTINueD

19000E 20000E 21000E 22000E 23000E

3078000S

3077000S

3076000S

3075000S

3074000S

3079000S

0 1000m

R618

Dundas SeamSub-outcrop

Alfred SeamSub-outcrop

Portion 1:Koudelager

115HU

Vryheid

40km

f

f

f

f

f

fN

555

R

f f

Koudelager Project

Vaalkrantz Colliery

R69

N

555

R

f f

R34

R618

Vryheid

Vaalkrantz Colliery

Inferredmt

Indicatedmt

measuredmt

Total coal resource

MtProbable

mtProved

mt

Total RoMcoal

reserveMt

alfred seam – 14.2 – 14.2 – 1.8 1.8

Gus seam – 3.6 – 3.6 – 0.4 0.4

Total – 17.8 – 17.8 – 2.2 2.2


0 2000m

2000E 4000E 6000E 8000E0E2000W

3082000S

3078000S

3076000S

3074000S

3072000S

3080000S

West Adit Workings

Enyati Adit Workings

Block 1

Block 2

Block 3

Block 4

Block 5

Alfred Seam Sub-outcrop

f

f

ff

f

f

N

555

R

f f

Vryheid25km

19000E 20000E 21000E 22000E 23000E

3078000S

3077000S

3076000S

3075000S

3074000S

3079000S

0 1000m

R618




115HU

Vryheid

40km

f

f

f

f

f

fN

555

R

f f

Koudelager Project

Vaalkrantz Colliery

R69

N

555

R

f f

R34

R618

Vryheid



Koudelager Project

Inferredmt

Indicatedmt

measuredmt

Total coal resource

MtProbable

mtProved

mt

Total RoMcoal

reserveMt

upper alfred seam 1.8 – – 1.8 – – –

lower alfred seam 0.2 – – 0.2 – – –

Gus seam 3.3 – – 3.3 – – –

upper dundas seam 1.0 – – 1.0 – – –

lower dundas seam 5.5 – – 5.5 – – –

Total 11.8 – – 11.8 – – –


19000E 20000E 21000E 22000E 23000E

30

78

00

0S

30

77

00

0S

30

76

00

0S

30

75

00

0S

30

74

00

0S

30

79

00

0S

0 1000m

R618




115HU

Vryheid

40km

f

f

f

f

f

fN

555

R

f f

Koudelager Project

Vaalkrantz Colliery

R69

N

555

R

f f

R34

R618

Vryheid

19000E 20000E 21000E 22000E 23000E

3078000S

3077000S

3076000S

3075000S

3074000S

3079000S

0 1000m

R618




115HU

Vryheid

40km

f

f

f

f

f

fN

555

R

f f

Koudelager Project

Vaalkrantz Colliery

R69

N

555

R

f f

R34

R618

Vryheid

19000E 20000E 21000E 22000E 23000E

3078000S

3077000S

3076000S

3075000S

3074000S

3079000S

0 1000m

R618




115HU

Vryheid

40km

f

f

f

f

f

fN

555

R

f f

Koudelager Project

Vaalkrantz Colliery

R69

N

555

R

f f

R34

R618

Vryheid

19000E 20000E 21000E 22000E 23000E

3078000S

3077000S

3076000S

3075000S

3074000S

3079000S

0 1000m

R618




115HU

Vryheid

40km

f

f

f

f

f

fN

555

R

f f

Koudelager Project

Vaalkrantz Colliery

R69

N

555

R

f f

R34

R618

Vryheid

19000E 20000E 21000E 22000E 23000E

3078000S

3077000S

3076000S

3075000S

3074000S

3079000S

0 1000m

R618




115HU

Vryheid

40km

f

f

f

f

f

fN

555

R

f f

Koudelager Project

Vaalkrantz Colliery

R69

N

555

R

f f

R34

R618

Vryheid



KEATON ENERGY


Coal resourCe and reserve statement CoNTINueD


Inferredmt

Indicatedmt

measuredmt

Total coal resource

MtProbable

mtProved

mt

Total RoMcoal

reserveMt

top seam – 36.6 – 36.6 24.9 – 24.9

Bottom seam – 24.1 – 24.1 – – –

Total – 60.7 – 60.7 24.9 – 24.9


3078000S

3077000S

3076000S

3075000S

3074000S

3073000S

3072000S

96000W 95000W 94000W 93000W 92000W 91000W97000W

0 1000m

RailwayPortion 1

Remainder ofMadadeni15961HT

Remainder ofBraakfontein

4278HT

Remainder ofDrycut

8198HT

Newca

stle

10km

N

555

R

f f

N11

R34


Balgray Project

Newcastle

Utrecht

MadadeniR34

30

78

00

0S

30

77

00

0S

30

76

00

0S

30

75

00

0S

30

74

00

0S

30

73

00

0S

30

72

00

0S

96000W 95000W 94000W 93000W 92000W 91000W97000W

0 1000m

RailwayPortion 1

Remainder ofMadadeni15961HT

Remainder ofBraakfontein

4278HT

Remainder ofDrycut

8198HT

Newca

stle

10km

N

555

R

f f

N11

R34


Balgray Project

Newcastle

Utrecht

MadadeniR34




Inferredmt

Indicatedmt

measuredmt

Total coal resource

MtProbable

mtProved

mt

Total RoMcoal

reserveMt

4 seam 40.6 50.2 – 90.8 23.6 – 23.6


Resource Block 1

Resource Block 2a

Resource Block 2b

29

42

00

0S

29

38

00

0S

29

34

00

0S

29

30

00

0S

0 2000m

36000E 40000E 44000E 48000E

N17

Resource Block 3

R35

R38

Bethal

f

f

f

fN

555

R

f f

Bethal

Ermelo

N17

R35

R38

R39


Resource Block 1

Resource Block 2a

Resource Block 2b

2942000S

2938000S

2934000S

2930000S

0 2000m

36000E 40000E 44000E 48000E

N17

Resource Block 3

R35

R38

Bethal

f

f

f

fN

555

R

f f

Bethal

Ermelo

N17

R35

R38

R39


Resource Block 1

Resource Block 2a

Resource Block 2b

2942000S

2938000S

2934000S

2930000S

0 2000m

36000E 40000E 44000E 48000E

N17

Resource Block 3

R35

R38

Bethal

f

f

f

fN

555

R

f f

Bethal

Ermelo

N17

R35

R38

R39




KEATON ENERGY


operating context

as developing economies around the world urbanise and the middle classes in africa and asia expand rapidly, global demand for electricity will rise inexorably. While recognising that current climate change thinking requires a worldwide shift to minimal carbon-producing energy sources, this switchover will be too massive and costly to significantly dent the need for ever-increasing quantities of coal over the next 20 years.

Market review 58 – 61

interaction and engagement with stakeholders 62 – 63

risks 64

Materiality 65




KEATON ENERGY



Internationally, coal is the base fuel for 45% of the world’s energy supply and equals the combined output of oil, gas and renewables. It is likely to remain the planet’s primary source of electricity generation well into the 2030s.

Market revieW

coal is currently South africa’s biggest

export commodity by sales value

although 75% of coal produced is used

domestically. the industry currently

employs approximately 78 000 people

and paid r16.1 billion in wages in

2011.

coal mining in South africa is currently

in a growth phase that is forecast to

continue for at least the next 20 years.

current national production falls well

short of supplying eskom’s future coal

requirements and the growing export

market. one estimate states that nearly

r100 billion of investment in new coal

mines is required over the next few

years.

eskom, which supplies 95% of South

africa’s electricity, estimates an annual

shortfall from 2018 of up to 40 million

tonnes of coal for its expanding need

to supply the mammoth Medupi and

kusile coal-burning power stations as

these come on stream. the company

has so far only secured 80% of its total

requirement until that date. at the May

2013 coaltrans coal conference at Sun

city, ian Hall of anglo american

thermal coal stated that eskom needs

60 million tonnes of coal per annum to

become available from new mines in

the next few years and 120 million

tonnes per annum before 2020.

COAL WILL REMAIN THE LARGEST SOURCE OF ELECTRICITY GENERATION

14 000

12 000

10 000

8 000

6 000

4 000

2 000

01990

TWh

1995 2000 2005 2010 2015 2020 2025 2030 2035Coal Renewables Gas Nuclear Oil

EXPORT PARITY VS DOMESTIC A-GRADE PEA PRICE

700

650

600

550

500

450

400Oct-11

ZAR

/t

Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13Export parity (0 x 50mm) Domestic industrial (A-grade Peas)

FORWARD CURVES FOR API 4

130

120

110

100

90

80

70Apr-13

US

$/t

May-13 Q2-13 Q3-13 Q4-13 Q1-14 CAL-14 CAL-15 CAL-16Bull/Bear range API 4

Source: London Commodity Brokers



renewable energy sources such as solar or wind are still too

inefficient and expensive to have more than a negligible

impact on the power grid over the next 15 years. a big

question mark hangs over nuclear power since the Japanese

tsunami disaster, with Japan itself announcing that it intends

shutting down nuclear plants and building 20 new coal-fired

plants.

another potential power-generation source, the shale gas

deposits discovered in the karoo, would be extracted

through the controversial ‘fracking’ technology and would

take at least 10 to 15 years to come on line, if at all.

internationally, coal is the base fuel for 45% of the world’s

energy supply and equals the combined output of oil, gas

and renewables. it is likely to remain the planet’s primary

source of electricity generation well into the 2030s.

although the manufactured output of asian giants such as

china and india may be slowing, their programmes of

building new coal-fired power stations remain on track and

their demand for imported coal continues to grow.

World Coal FloWs

South america

north africa

Middle east

indian ocean islands

east asiaindia Sub-cotinent

europe

South africa


group overview 4annual reviews 22operational review 36 Operating context 56Financial performance review 66environmental, labour and social review 74governance 86annual financial statements 100Shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


south african Coal Market Flow

Market revieW ContinuEd

of all the commodities to participate in, coal is by far the best

at this time. gold and platinum mining in South africa are

becoming ever more challenging due to volatile market

prices, chronic labour issues and the complex technology

required to reach ever deeper ore bodies. in South africa the

coal seams are relatively shallow and thick, meaning that the

extraction of coal is not difficult or prohibitively expensive.

nEgativE iMpaCts on thE Coal MarKEtthe coal industry does, however, face its challenges. the

present draft of the Mineral and petroleum resources

Development amendment Bill lists coal as a strategic mineral

that needs a higher level of beneficiation in South africa. this

could impact coal’s pricing and, given that 75% of production

is already used in South africa, further beneficiation makes

little sense. South africa’s international climate change

pledges should also be borne in mind.

coal exports generated r96 billion in revenue during 2012,

making it the country’s biggest commodity by sales value.

Logically, South africa’s vast coal reserves must be tapped

further to supply growing domestic and export demand.

a major challenge is the lack of railroad capacity between the

inland sources and the richards Bay coal terminal (rBct).

in 2012 the rcBt handled 68.3 million tonnes of coal, which

is far less than its 91 million tonnes annual capacity. Lower

volumes increase freight costs, which has a knock-on effect

on selling prices and the international competitiveness of

South african coal. transnet plans to expand capacity on this

line to 95 million tonnes by 2018 and to possibly build a

second coal terminal at richards Bay.

Labour discord is a growing issue throughout South african

industry, with the mining and agricultural sectors being

particularly hard-hit. the Marikana tragedy was a watershed

event that showed up the fault lines between worker

expectations, societal dysfunctions and economic realities.

as the 2013 so-called ‘strike season’ approaches,

negotiations between companies and workers will be fraught

with risk and could further damage the mining industry.

Exports (70Mt)

discard (45Mt)

Washing (182Mt)

screening (125Mt)


Stocks (2Mt)

Washing (182Mt)

Discard (45Mt)

Exports (70Mt)

Screening (125Mt)

Domestic Use (24Mt)

Eskom (42Mt)

Synfuels (4Mt)

Synfuels (40Mt)

Eskom (80Mt)

roM Coal (303Mt)

discard(4Mt)




still, a positivE outlooK For Coalas developing economies around the world urbanise and the

middle classes in africa and asia expand rapidly, global

demand for electricity will rise inexorably. While recognising

that current climate change thinking requires a worldwide

shift to minimal carbon-producing energy sources, this

switchover will be too massive and costly to significantly dent

the need for ever-increasing quantities of coal over the next

20 years.

in southern africa, the railroad and harbour development

component of South africa’s nDp, when constructed, will

enable significantly higher volumes of coal to be transported

around the country and to the ports for export.

another intriguing development is the coal Futures contract

announced by broking house London commodity Brokers

(LcB) and the JSe in cape town in January 2013. this could

be a game changer for the South african coal market and

help the junior mining sector to compete with larger mining

houses.

‘coal futures’ are standardised exchange-traded contracts in

which the contract buyer agrees to take delivery from the

seller of a specific quantity and quality of coal at a

predetermined price on a future delivery date.

the intention is for this open-trade futures market to be

operating by the third quarter of 2013.



KEATON ENERGY


When deciding what information should be included in this report, the board and executive management considered the relative importance of each matter in terms of the known or potential effects of these on Keaton Energy’s ability to continue creating value.

interaction anD engageMent WitH StakeHoLDerS

Stakeholders are groups or individuals impacted by our

various operations, either directly or indirectly, with an interest

in what we do or the ability to influence our activities. keaton

energy communicates regularly with its stakeholders and

aims to engage in a constructive and transparent manner at

all times.

our stakeholders include shareholders, analysts, customers,

suppliers, government, communities, our employees and

special interest groups such as industry associations and

unions. Dependent stakeholders are those that rely on us for

their livelihood, either directly or indirectly, or those whose

health, safety, or well-being could be affected by how we

operate. these include employees, customers, suppliers and

adjacent communities.

keaton energy is committed to long-term stakeholder

engagement, as it:

» gives us a better understanding of local concerns;

» identifies potential problems early;

» proactively identifies and assists in addressing rising

issues;

» makes a positive contribution to local social and economic

development;

» ensures that we play an integral part in shaping our future

operating environment;

» helps to attain and gain acceptance and support for new

projects; and

» builds and protects our brand and reputation.

Mutual trust and understanding is imperative and we use specific means of communication for each stakeholder group. the following table identifies keaton energy’s key stakeholder groups and summarises our level of engagement with them.

identified Engagement purpose Frequency issues raised stakeholder method

registered interested and affected parties

» Both formal and informal

» to identify material issues affecting communities surrounding the keaton energy operations

» vanggatfontein quarterly » vaalkrantz monthly

» employment » environmental impacts

» relocation of farm dwellers

investors » road shows

» Briefings and meetings

» news Service (SenS)

» Financial reporting

» Site visits

» to ensure investors are informed of the group strategy, performance and developments

» Bi-annually

» ad hoc

» ad hoc

» Bi-annually

» ad hoc

» Stabilise current operations

» profitability » value creation » Dividends » Litigation



identified Engagement purpose Frequency issues raised stakeholder method

employees » Both formal and informal

» to update employees on group strategy and developments

» Upskill and develop employees

» at vanggatfontein colliery employee engagement is frequent and informal

» at vaalkrantz colliery a representative from each union is invited to the mine manager’s monthly production meeting

» there are employee-elected safety representatives in each workplace

» regular formal and informal meetings are held with union representatives

» Job security » conditions of employment

» training and development

» Wages

government » Both formal and informal

» to ensure government and keaton energy management are aligned

» to update on group strategy and developments

» ongoing » prospecting rights » Mining rights » neMa approvals » iWULa approvals » environmental impacts

» Socio-economic impacts

» Safety » SLps

customers » Marketing » to enable keaton energy to understand and meet customer specifications and demands

» customers are dealt with on a one-to-one basis primarily by the marketing department. customers are regularly invited to our collieries and are provided with access to management and operational staff where necessary

» Security of supply » price

Suppliers » Both formal and informal

» to ensure compliance with the company’s procurement policy in respect of cost, quality, Bee status, reliability and availability

» as required by supply chain management

» Statement verification

Media and the general public

only authorised spokespersons for the group are permitted to conduct media interviews and to provide public comment

» Site visits » interviews » news releases

» Website » advertising

» to provide information for the media to inform the general public and other stakeholders

» to update on group strategy and developments

» ad hoc » as required by media » ad hoc

» ongoing » ad hoc

» Litigation » growth » environmental impacts

» Financial performance

» Safety



KEATON ENERGY


riSkS

risk Mitigation strategies status

retention of key staff and recruitment of staff with specialised skills

» Market-related remuneration » Short- and long-term incentive scheme » training and development programmes » outsourced mining model at vanggatfontein reduces reliance on individuals

» appropriate policies and procedures govern all aspects of employment

» provision of primary healthcare

» Staff turnover:FY13: 17%FY12: 26%

production interrupted by industrial action

» procedures to be implemented in the event of industrial action are documented and frequently reviewed

» continuous engagement with unions and other worker representatives

» no industrial action occurred during the period

Lost production and increased overtime as a result of sick leave and absenteeism

» primary healthcare is provided to all employees » access to information and training with regard to communicable diseases is provided, specifically Hiv/aiDS and tB

» regular employee engagement on sick leave, absenteeism and overtime

» ongoing monitoring

increase in operating costs

» Supply contracts include price adjustment mechanisms based on a basket of agreed indices and limited where possible to a maximum equal to increases received from customers

» all supply contracts are priced in rands » negotiated wage increases limited by affordability » actively seek economy of scale benefits

» costs are well contained » ongoing effort to reduce costs

availability of electricity » continuous engagement with eskom Distribution » Monitoring electricity usage and investigating energy-saving opportunities

regulatory non-compliance

» regulatory review performed by internal auditors » employees trained on all relevant regulations » group SHe, audit and risk committees in place » Frequent interaction with regulators » SHe manager at each operation » external expert advisers employed » reporting and monitoring framework

» 1 x section 55 issued

Maintain social licence to operate

» act in a responsible manner with regard to social and environmental matters

» Meet and exceed obligations of the group’s SLps and the Mining charter

» governance body is charged with ensuring that the company complies with all legislation, regulations and the Mining charter

» engage regularly with all stakeholders, in particular communities and local and national government

» no fines or sanctions relating to breaches recorded

acid mine drainage » all pollution control dams are lined » Water recycling and reuse » regular monitoring of water supply and groundwater

» no reported seepage from either of the group’s operations

access to capital » Maintain relationships with financial institutions and providers of equity funding including existing shareholders within targeted gearing levels and debt covenants

» grow cash reserves

» global investor view on Sa currently extremely negative

» Little to no appetite from local banks and financial institutions



MateriaLitY

in the board and executive management’s opinion, the

information presented in this integrated annual report is the

most relevant or ‘material’ to the interests of all stakeholders.

the board, executive management and those involved with

keaton energy’s governance evaluated the source

information with two primary questions in mind: “Who is our

reporting aimed at?” and “What decisions will they be able to

make from our reporting?”

paragraph 1.6 of the iirc consultation Framework released

on 16 april 2013 states that: “an integrated report should be

prepared primarily for providers of financial capital in order to

support their financial capital allocation assessments.”

However, in line with the thrust of the iirc’s paragraph 1.7,

we do keep front of mind that this report should also inform

stakeholders with a valid interest, such as employees,

customers, suppliers, business partners, local communities

and policymakers.

When deciding what information should be included in this

integrated annual report, the board and executive

management considered the relative importance of each

matter in terms of the known or potential effects of these on

keaton energy’s ability to continue creating value. these

were then prioritised for relevance to the report users, so that

non-pertinent information could be set aside.

We intend the result to be an accurate and complete

integrated annual report, yet unburdened with the peripheral

data that tends to confuse rather than enlighten.



KEATON ENERGY


financial performance review

of all the commodities to participate in, coal is by far the best at this time. Gold and platinum mining in South africa are becoming ever more challenging due to volatile market prices, chronic labour issues and the complex technology required to reach ever deeper ore bodies. in South africa the coal seams are relatively shallow and thick, meaning that the extraction of coal is not difficult or prohibitively expensive.

financial performance and value creation 68 – 71

five-year financial performance 72

value added statement 73

Vanggatfontein 2 and 4-seam washing plant



KEATON ENERGY



Group revenue increased by 94%, from R474.4 million in FY12 to R918.8 million in FY13. The increase was as a result of improved deliveries of thermal coal to Eskom and the inclusion of 12 months of Vaalkrantz sales, compared to 3.5 months in FY12.

financial performance and value creation

Extracts from the consolidated statement of comprehensive income

r’million FY13 fY12*

revenue 918.8 474.4 94

cost of sales (946.1) (459.8) >100

Gross (loss)/profit (27.3) 14.6 (>100)

mining and related expenses (70.5) (10.4) >100

Results from operations (139.4) 4.9 (>100)

Gain on business combination – 114.4 (100)

net finance costs (32.2) (13.4) >100

income tax 39.3 6.2 >100* The comparative information has been restated as a result of the early

adoption of IFRIC 20 Stripping cost in the production phase of a surface mine.

* Results for the year ended 31 March 2013 includes 12 months of financial performance from Vaalkrantz compared to 3.5 months in 2012. The Vaalkrantz group was acquired in December 2011.

Revenue

CONTRIBUTION TO REVENUE (Rm)

FY13 FY12

303.9

92.578.0

433.7

196.6

272.9

16.01 000

800

600

400

200

0

Coal sales Anthracite sales Transportation income Toll washing

Year ended % 31 March change

Group revenue increased by 94%, from r474.4 million in fY12 to r918.8 million in fY13. the increase was as a result of improved deliveries of thermal coal to eskom and the inclusion of 12 months of vaalkrantz sales, compared to three and a half months in fY12.

However, group revenue was impacted negatively by the expected decrease in 5-seam metallurgical coal sales and a decrease in sales tonnes and export prices at vaalkrantz.

SEGMENTAL REVENUE (Rm)

FY13

303.9

78.0

92.5272.9433.7

196.6

16.0

800

700

600

500

400

300

200

100

0

FY12

Coal sales Anthracite sales Transportation income Toll washing

Vanggatfontein Vaalkrantz Vanggatfontein Vaalkrantz

Vanggatfontein delivered 1.5mt of washed 2 and 4-seam thermal coal to eskom during fY13, an increase of 58% from the previous year’s 0.96mt. as expected, 5-seam metallurgical coal sales declined to 0.06mt from 0.14mt, as a result of pit 1 5-seam coal being depleted in line with the mine plan. lower than planned thermal coal sales as a result of poor plant throughput at vanggatfontein and underperformance of the mining contractor negatively impacted the results for the first half of fY13. toll washing of 0.1mt of third-party coal generated revenues of r16.0 million in fY13.

Vaalkrantz dispatched 0.33mt of anthracite to domestic and international metallurgical markets, a 7% decrease over the previous year’s 0.35mt. production was hampered by extremely difficult mining conditions in the west alfred section of the mine.



Cost of salescost of sales increased to r946.1 million in fY13, a 106% increase from the r459.8 million in fY12. this increase reflects an increase of 36% in coal production volumes at vanggatfontein from 1.1mt of rom in fY12 to 1.5mt in fY13, an increase in waste volumes of 33% from 7.3mm3 cubes in fY12 to 9.7mm3 in fY13 and the inclusion of 12 months of production at vaalkrantz compared to the 3.5 months in fY12.

COST OF SALES (Rm)

FY13 FY12

(14.1) (7.6)

733.1

344.5

1 000

800

600

400

200

0

-200

Stock Depreciation Cash cost

122.9

227.1


cost of sales (946.1) (459.8) >100

cash cost (733.1) (344.5) >100

depreciation and amortisation (227.1) (122.9) 85

inventory 14.1 7.6 86

* The comparative information has been restated as a result of the early adoption of IFRIC 20 Stripping cost in the production phase of a surface mine.


depreciation and amortisation charges increased 85% from r122.9 million in fY12 to r227.1 million in fY13, following the increase in production volumes at vanggatfontein. included in the fY13 depreciation charge is an amount of r92 million relating to pit 1 at vanggatfontein. the pit was closed at the end of the financial year as it was no longer economic to mine. production from pit 2 will be supplemented with higher yielding coal from pit 3 in fY14.


Gross (loss)/profit

Rev

enue

(Rm

)

GP

%

19%

-2%

-9%

2%

Revenue contribution

GROSS (LOSS)/PROFIT

1HFY12

600

500

400

300

200

100

0

(100)

(200)

25%

20%

15%

10%

5%

0%

(5%)

(10%)

1HFY132HFY12 2HFY13

5-seam 60%

Eskom 40%

5-seam 8%

Eskom 66%

Anthracite 26%

5-seam 6%

Eskom 62%

Anthracite 32%

5-seam 5%

Eskom 67%

Anthracite 28%

the first half of fY12 saw the majority of revenue generated from higher margin 5-seam coal accessed from pit 1 at vanggatfontein while 2 and 4-seam coal production was ramping up. from the second half of fY12 leading into the first half of fY13 thermal coal sales from pit 1 increased significantly, but at reduced margins as predicted in the mine plan. the drop in margin was exacerbated by poor performance of the mining contractor in that part of the year, as well as the sterilisation of coal in pit 1.

during July 2012 decisive action was taken when the contract of the mining contractor was terminated. the appointment of a new contractor in July 2012, coupled with the opening up of both pit 2 and 3, and further optimisation at vanggatfontein saw the gross loss in the first half of fY13 of r37.9 million being turned around to a profit of r10.6 million in the second half of fY13. this turnaround is illustrated by a negative margin of -9% in the first half of fY13 being reversed to a positive 2% margin in the second half of fY13. this improving trend in margin is expected to continue into fY14.

Mining and related expensesmining and related expenses increased to r70.5 million in fY13, from r10.4 million in fY12, as a result of a once-off loss of r51.2 million being recognised on the closure of pit 1 at vanggatfontein towards the end of the financial year. a decision was taken to close the pit as it was no longer economic to mine. low margins achieved throughout the life of pit 1 deteriorated further when the coal seams started thinning out and yields started dropping towards the end of the pit’s life.

Group overview 4annual reviews 22operational review 36operating context 56 Financial performance review 66environmental, labour and social review 74Governance 86annual financial statements 100Shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


financial performance and value creation ContinuEd

Rev

enue

(Rm

)

EB

ITD

A %

11%

19%

EBITDA FY13*

1HFY13

550500450400350300250200150100500

21%

19%

17%

15%

13%

11%

9%

7%

5%

2HFY13

*EBITDA excluding loss on derecognition of asset

Results from operationsresults from operations decreased from a profit of r4.9 million in fY12 to a loss of r139.4 million in fY13 as a result of the aspects discussed above. for a summary of individual segment contributions, refer to the segment report on pages 178 to 180.

Gain on business combinationthe fY12 results include a once-off gain following the acquisition of the lme group, vaalkrantz being the current operating asset and the remaining asset representing development projects Braakfontein and Koudelager. refer to note 6 on pages 136 to 138 to the annual financial statements for further details.

net finance costnet finance cost increased from r13.4 million to r32.2 million in fY13 as a result of a decrease in average group cash and bank balances. Group debt reduced year on year as commented on under non-current liabilities on page 71.

income taxa net income tax credit of r39.3 million was recorded in fY13 compared to the r6.2 million credit in fY12. the credit recorded in fY13 was mainly due to deferred tax credits raised as a result of operating losses at vanggatfontein and increased unredeemed capital balances. the effective tax rate for the group changed from (5.84%) in fY12 to (22.92%) in fY13.

Extracts from the consolidated statement of financial position


non-current assets 1 286.1 1 293.7 (1)

property, plant and equipment 776.1 832.7 (7)

deferred tax 51.8 16.6 >100

other 458.2 444.4 3

Current assets 143.3 194.6 (26)

cash and cash equivalents 19.6 60.5 (68)

other 123.7 134.1 (8)

Equity 686.0 803.3 (15)

non-current liabilities 460.5 455.5 1

Borrowings 235.4 248.2 (5)

deferred tax 87.4 93.8 (7)

other 137.7 113.5 21

Current liabilities 282.9 229.5 23

Borrowings 49.4 49.2 –

other 233.5 180.3 30



for a breakdown of total assets and liabilities per operation refer to the segment report on pages 178 to 180.

GROUP NET DEBT (Rm)

Net

deb

t1

Apr

il 20

12

(10.0) (2.1)

9.0(6.6)(236.8) 191.8(265.2)(210.5)

0

(50)

(150)

(200)

(250)

(300)

Net

cas

h fro

m

oper

atio

ns

Fore

ign

exch

ange

loss

es Tax

Cap

ital

addi

tions

Oth

er n

et

inve

stin

g ac

tiviti

es

Equ

ity

rais

ed

Net

deb

t31

Mar

ch 2

013




Group net debt increased as discussed under financial risk management. refer to pages 33 to 34 of this integrated annual report. in addition, a r10 million foreign exchange loss was recorded on the uSd-based borrowings from vitol Sa.

Group liquidity remained under pressure as a result of a drop in cash and bank balances and was negatively impacted by an outstanding accrual of r75.6 million included under current liabilities for invoices from dra and megacube. these invoices are the subject of litigation which is only expected to be resolved in fY15.

non-current assets decreased 1% to r1.3 billion. property, plant and equipment decreased 7% to r776.1 million as a result of depreciation charges of r227.1 million in fY13 compared to r122.9 million in fY12 and the once-off loss of r51.2 million recognised on the closure of pit 1. this decrease was offset by capital spend of r210.5 million. refer to the review of operations section on pages 40 to 43 for a breakdown of capital per operation. rehabilitation assets increased by r20.2 million following additional environmental disturbances at both operations.

Group net deferred tax liabilities decreased from r77.2 million in fY12 to r35.5 million in fY13 as a result of an increase in deferred tax assets at vanggatfontein, referred to under the statement of comprehensive income section on page 70.

Current assets decreased 26% to r143.3 million, mainly as a result of a decrease in cash and bank balances year on year.

non-current liabilities increased 1% to r460.5 million. Borrowings decreased by 5%, primarily as a result of the repayment of project finance at vanggatfontein of r42.2 million, offset by finance cost of r25.1 million and foreign exchange losses of r10 million on the uS dollar-based loan from vitol as a result of the weakening of the rand. rehabilitation liabilities increased by 22% due to additional developments at both operations of r24.6 million, explaining the movement of 21% in other non-current liabilities.

Extracts from the consolidated statement of cash flow


cash flows from operating activities 191.8 129.5 48

cash flows from investing activities (216.9) (295.9) (27)

cash flows from financing activities (15.8) 199.9 (>100)

net (decrease)/increase in cash and cash equivalents (40.9) 33.5 (>100)

cash and cash equivalents at the beginning of the period 60.5 27.0 >100

cash and cash equivalents at the end of the period 19.6 60.5 (68)



operations generated cash of r217.8 million for fY13 after taking working capital requirements of r66.3 million into account, compared to the r128.0 million generated in fY12. this increase resulted from expanded operations at vanggatfontein. cash generated by operations was further reduced by net finance cost of r23.8 million, mainly on the project finance facility at vanggatfontein and taxation paid of r2.1 million.

cash generated by operations largely funded investment in further mine development, mainly expended at vanggatfontein, with r204 million (fY12: r329.2 million) invested in the box-cut at pit 3 and continuous development (stripping cost) to expose coal in all three pits. an additional r4.0 million was invested for mine rehabilitation closure cost.

a planned capital raise in June 2012 was abandoned due to poor market conditions, with only some r9 million being raised. the group repaid the capital portion of outstanding debt of r24.4 million, mainly on the project finance facility at vanggatfontein.




KEATON ENERGY


FY13 fY12 fY11 fY10 fY09

Statement of comprehensive income (Rm)revenue 918.8 474.4 35.2 22.0 5.4Gross profit (27.3) 14.6 12.1 0.8 3.6eBitda 89.2 242.9 (13.8) (12.5) (26.3)net (loss)/profit before tax (171.6) 105.9 0.6 3.8 16.7epS (cents) (44.2) 75.2 10.3 4.1 3.4HepS (cents) (30.2) 9.5 10.3 5.6 6.4

Statement of financial position (Rm)ppe 776.1 832.7 479.5 48.0 11.5cash and cash equivalents 19.6 60.5 27.0 335.1 373.7total assets 1 429.4 1 488.3 783.4 473.4 445.3total shareholders’ equity 709.2 778.7 591.3 456.1 437.2total equity 686.0 803.3 581.5 454.3 437.2Borrowings 284.8 297.3 – – –

total liabilities 743.4 685.0 201.9 19.1 8.1

Statement of cash flows (Rm)cash flow from operating activities 191.8 129.5 3.0 9.9 7.4cash flow from investing activities (216.9) (295.9) (368.3) (48.5) (31.4)cash flow from financing activities (15.8) 199.9 57.2 – 90.5

Share price performance– High (rand per share) 3.74 3.68 6.01 10.50 15.50– low (rand per share) 1.55 2.20 2.85 5.11 6.50– at year-end (rand per share) 1.90 2.85 3.15 6.16 10.29volumes traded (millions) 16.7 13.4 20.6 18.4 43.8number of ordinary shares in issue (millions) 191.7 188.8 171.5 144.8 142.8

Financial statisticsliquidity ratios– current ratio 0.51 0.85 0.61 18.03 47.33– Quick ratio 0.37 0.75 0.55 18.03 46.48

Profitability– Gross margin (%) (3) 3 34 3 65– eBitda margin (%) 10 51 (39) (57) (485)– operating profit margin (%) (19) 22 2 17 308– return on equity (%) (8) 2 3 2 2

debt leverage– debt to equity ratio (%) 42 37 – – –– net debt to equity ratio (%) 39 29 – – –– interest cover (4.06) 0.16 (12) (770) –

other– nav per share (rand per share) 358 426 339 314 306– market cap at year-end (millions) 364.2 537.9 540.4 892.2 1 469.8– effective tax rate 22.92 (5.84) (1 054.5) 193.7 71

five-Year financial performance

REVENUE (Rm)

1 000

800

600

400

200

0

FY10FY09 FY12 FY13FY11

5.4 22.0 35.2

918.8

474.4

GROSS MARGIN (%)

70%

60%

50%

40%

30%

20%

10%

0%

(10%)

3

34

(3)

3

65


TOTAL ASSETS (Rm)

1 600

1 400

1 200

1 000

800

600

400

200

0

445.3 473.4

783.4

1 429.41 488.3


Current ratio » current assets/current liabilitiesQuick ratio » current assets less inventories divided by current liabilities.EBitdA margin » eBitda as % of salesoperating profit margin » profit from operations divided by sales.Return on equity » Headline earnings divided by ordinary shareholders’ interest in capital and reserves.debt to equity ratio » total debt divided by total equity. total debt comprises long-term borrowings, overdrafts and short-

term borrowings. total equity comprises total shareholders’ interest.net debt to equity ratio » total debt less cash and cash equivalents divided by total equity. total debt comprises long-term borrowings,

overdrafts and short-term borrowings. total equity comprises total shareholders’ interest.interest cover » profit before exceptional items and finance costs divided by finance costs.



value added Statement

the value added statement shows the wealth the group has created through mining, exploration, trading and investing activities and how it was disbursed among the group stakeholders.

Year to 31 March

2013 Rm

wealth created

%

Year to 31 march

2012 rm

wealth created

%

Cash generated:cash derived from sales and services 842.8 438.3proceeds from shares issued for cash 9.0 – cash generated from borrowings raised – 200.0cash acquired through business combination – 21.1income from investments and interest received 2.1 3.8cash (invested in)/generated from withdrawal of restricted cash (3.9) 3.4paid to suppliers for goods and services (598.6) (261.4)

Cash value added 251.4 100 405.2 100

Cash utilised:paid to suppliers for mine development/infrastructure/exploration 213.0 85 329.3 81 paid to acquire new business operations – – 5.2 1 remunerate employees and directors for services 77.2 31 35.6 9 direct taxes (income/donation) paid to government 2.1 1 1.6 –

Cash disbursed among stakeholders 292.3 117 371.7 91

Cash (invested)/generated in the group to maintain and develop operations (40.9) (17) 33.5 9

notes to the group value added statement1. tax contributiondirect taxes (as above) 2.1 1.6value added taxes levied on purchases of goods and services 124.5 82.6

126.6 84.22. Additional amounts collected by the group on behalf of

governmentvalue added tax and other duties charged on turnover 117.7 63.4employees’ tax deducted from remuneration paid 14.7 11.2unemployment insurance fund 0.4 0.3

132.8 74.93. Levies paid to governmentrates and taxes paid to local authorities 0.1 0.01royalties paid to government 1.7 2.4unemployment insurance fund 0.4 0.3Skills development levy 0.7 0.4

2.9 3.11

Group



KEATON ENERGY


EnvironmEntal, labour and social rEviEw

Keaton Energy regularly measures and reports total energy consumption and will introduce the reporting of energy efficiencies in terms of mining activities and production levels to extract efficiencies within and across its operations. the company’s focus on energy consumption and costs, and the introduction of improvement targets, will have the effect of limiting its GHG emissions to a minimum, given the nature of its operations.

Environmental impact 76 – 81

social and labour impact 82 – 85

Vaalkrantz



KEATON ENERGY



Safety, health and environmental issues are overseen on an ongoing basis by the company’s executive committee. The company may consider obtaining external assurance on these non-financial performance indicators in the future.

EnvironmEntal imPact

Keaton Energy is committed to good corporate governance and disclosure. corporate governance matters are dealt with on pages 90 to 93 of this integrated annual report. matters relating to sustainability form an integral part of the functioning of the company and are considered at every stage of our operational value chain, from feasibility studies to exploration, development, construction, operation and finally closure. EsG risks and opportunities are considered and incorporated into the company’s overall risk management approach, which is discussed on pages 60 and 93.

sHE issues are overseen by the structures detailed on page 36. the group’s safety, health and environment policy statement is available on the company’s website at www.keatonenergy.co.za.

Keaton Energy has sought to report on safety, operational, financial and EsG matters in an integrated fashion in this integrated annual report and will continue to adopt a phased approach to reporting in line with the Gri guidelines. For the purposes of this integrated annual report, the Gri’s G3.1 performance indicators are used in selecting the group’s non-financial disclosures, together with industry and south africa-specific information.

Keaton Energy has identified the most material quantitative data against which its performance should be measured, and data collection and collation systems for the identified sustainability parameters are being incrementally implemented. as this is the first year that the company has reported on many of the following EsG indicators, comparative statistics are often unavailable. in the majority of cases, performance indicators are only provided for the two core operating collieries, as the head office and project planning activities have negligible impacts.

the company may consider obtaining external assurance on these non-financial performance indicators in the future.

EnvironmEntManagEMEnt approachthe group’s approach to mitigating the effects of its operations on the environment begins with selecting areas of exploration, undertaking best practice environmental studies and complying

fully with environmental regulations. we self-regulate our systems and processes based on our genuine concern for the environment in which we work and the people who may be potentially affected, both now and in the future. compliance with regulations necessarily requires extensive consultation with all stakeholders, especially landowners, occupiers of the affected land and any party that may register itself as an interested and affected party.

pErforMancE indicatorsVanggatfonteinEnergy sources and consumption

fY13 FY12

diesel energy consumed (GJ) 384 971 390 153

Electrical energy consumed (GJ) 42 498 26 281

other sources of emissions and consumption

anFo explosives (tonnes) 5 701 4 812

ghg emissions

total direct and indirect greenhouse gas emissions (tco2e) 38 092 33 801

total direct and indirect greenhouse gas emissions (tco2e)/tonne of saleable product 0.0242 0.0305

the factors provided in the Gri guidelines were applied when converting the consumption of energy sources to energy statistics. 2006 iPcc and Eskom conversion factors were applied to energy consumption statistics in order to determine the estimated GHG emissions.

Water sources, consumption and recycling

fY13 FY12

surface water consumed (m3) –not

available

Groundwater consumed (m3) (metered boreholes) 328 893

not available

water recycled (as a % of consumption) 23not

available



Fines, spills and environmental expenditure

fY13 FY12

total number and volume of significant spills

see (1)

below nil

monetary value of significant fines for non-compliance with environmental laws and regulations (rand) nil nil

total environmental provision (rm) 112.9 96.3(1) Following a once in 50-year storm, the stormwater dam at

Vanggatfontein Colliery overflowed. This incident was reported to DWA. No permanent damage occurred.

VaalkrantzEnergy sources and consumption

fY13 FY12

diesel energy consumed (GJ) 35 727 33 598

Petrol energy consumed (GJ) 124 28

Electrical energy consumed (GJ) 34 845 30 531

other sources of emissions and consumption

anFo explosives (tonnes) 243 268

ghg emissions

total direct and indirect greenhouse gas emissions (tco2e) 12 385 11 001

total direct and indirect greenhouse gas emissions (tco2e)/tonne of saleable product 0.0388 0.0313

* FY12 information is provided for the full 12 months of the Vaalkrantz operation, despite the financial results being for only 3.5 months.

the factors provided in the Gri guidelines were applied when converting the consumption of energy sources to energy statistics. 2006 iPcc and Eskom conversion factors were applied to energy consumption statistics in order to determine the estimated GHG emissions.

Water sources, consumption and recycling

fY13 FY12

surface water consumed (m3) 76 744not

available

Groundwater consumed (m3) (estimate, see page ) 79 544

not available

water recycled (as a % of consumption) 11not

available

Fines, spills and environmental expenditure

fY13 FY12

total number and volume of significant spills nil nil

monetary value of significant fines for non-compliance with environmental laws and regulations (rand) nil nil

total environmental provision (rm) 24.6 16.6

coMpliancE and licEnsingthe group’s environmental policy requires, as a minimum, compliance with south africa’s environmental legislation. Each colliery’s EmP details potential impacts and mitigation measures and monitoring systems. audits are conducted to ensure compliance.

owing to Keaton’s commitment to ongoing compliance, the existing EmPs for both vanggatfontein and vaalkranz were audited and found not to meet future development requirements. as a result both EmPs have been amended to more accurately describe the operations.

an application for an amendment to the vanggatfontein colliery’s EmP was submitted in december 2012 following changes to the mine plan.

integrated water use licence applications have been submitted to the dwa for both operations, vanggatfontein in 2009 and vaalkrantz in June 2011. the status of these applications remains unclear.

land usE and rEhabilitationno land currently owned or managed by the group has been evaluated as being of high biodiversity value. the sensitivity of the sites with regard to their geographical position in relation to protected areas is low and as such biodiversity management Plans are not considered necessary.

the total area of land disturbed by the company’s mining operations is 392 hectares (320.0 hectares at vanggatfontein and 72 hectares at vaalkrantz).

refer to note 23 of the annual financial statements on page 165 for more information regarding total rehabilitation liabilities and funding.

Group overview 4annual reviews 22operational review 36operating context 56Financial performance review 66 Environmental, labour and social review 74Governance 86annual financial statements 100shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


EnvironmEntal imPact continuEd

in september 2008, Keaton mining received a mining permit to start opencast mining on a small area on the farm Klipfontein, near the town of ogies in mpumalanga, south africa. the mine was opened and all available coal removed. rehabilitation work at Klip colliery started in 2010 as part of the normal concurrent rehabilitation process. in october 2011, the mine did an EmP performance assessment on the site and started with the application process for mine closure from the dmr. the assessment and subsequent site visit by dmr indicated that some ongoing maintenance work and erosion control measures were needed.

an erosion control plan was implemented involving the construction of erosion control berms and the removal of declared invader species on the site. implementation of this work started early in 2013 with all the earthworks completed in april of 2013. the final vegetation establishment on the site will commence in the 2013/14 rainy season, with further monitoring and maintenance to be done until the end of 2015.

Klip colliery case study – June 2013



dust, Vibration and noisE ManagEMEntFugitive dust at the vanggatfontein colliery is monitored to

ensure compliance with legislation. a dust suppression system

installed on the 2- and 4-seam plant reduces fugitive dust levels.

a misting system, which is currently under construction, will

further reduce fugitive dust levels. control of fugitive dust

generated by the logistics operations, conducted on

predominantly unpaved roads, is managed by our mining

contractor who uses water bowsers to wet the roads.

a weather station has also been installed at vanggatfontein

to assist in determining the sources of fugitive dust by correlating

trend analysis with weather conditions. in addition, this weather

station will provide early warning of large storms and high winds.

monitoring on and around the vanggatfontein colliery

demonstrated that blast-related ground vibrations were low and

within the recommended limits. the monthly blast schedule

endeavours to minimise their impact.

mining operations at the vaalkrantz colliery are underground,

thus limiting the potential impact of dust, vibration and noise

from mining operations. as with vanggatfontein the control of

fugitive dust generated by the logistics operations, conducted

on predominantly unpaved roads, is managed by our logistics

contractor, who uses water bowsers to wet the roads.

EnErgY usE and grEEnhousE gas EMissionsKeaton Energy’s view is that the current thinking on climate

change and carbon emissions informs its actions. these

emissions are in part due to the burning of fossil fuels by the

world’s electrical power generators, industry and the transport

sector. Keaton Energy’s risk management processes require that

it take cognisance of both the risks and opportunities that relate

to climate change and consider these as part of the company’s

ongoing strategy development.

the most significant risk applicable to Keaton Energy associated

with the burning of fossil fuels is cost. as these finite resources

are depleted and world economic growth returns, the potential

for increasing energy costs must be managed. to this end,

Keaton Energy budgets diesel consumption per item of mine

equipment at vanggatfontein where the majority of group diesel

consumption occurs, with accurate records maintained at the

mine. diesel-consuming mining and logistics equipment is

maintained and operated in accordance with manufacturer

specifications.

Keaton Energy regularly measures and reports total energy

consumption and intends to introduce the reporting of energy

efficiencies in terms of mining activities and production levels to

extract efficiencies within and across its operations. where

possible, comparisons with peers will be undertaken. targets for

efficiency improvements will be investigated.

initiatives to reduce electricity consumption have begun and

further programmes will be introduced in the coming year,

together with an investigation into possible alternative sources

of energy.

the company’s focus on energy consumption and costs, and

the introduction of improvement targets, will have the effect of

limiting its GHG emissions to a minimum, given the nature and

location of its operations.

WatErwater is a precious resource that must be conserved.

the company’s vanggatfontein colliery endeavours to be self-

sufficient in terms of water supply and usage, where water

pumped from open pit workings enters Pcd and supplies the

coal processing plant, before being recycled via slimes dams

back to the plant. clean water for the operation of the flocculent

plant is provided by two on-site boreholes.

the water management system is designed to separate clean

from dirty water, and recycle the dirty water. the rehabilitation

programme also takes into account the requirement to mitigate

the possible decanting of acid mine water.

the vanggatfontein colliery does not discharge any dirty water

into the environment and undertakes regular quality monitoring

of both groundwater and surface water.



KEATON ENERGY


EnvironmEntal imPact continuEd

at the vaalkrantz colliery, the surface water is sourced from three

earth-wall dams constructed within the mine’s footprint that are

fed by surface water run-off. in addition the number 2 mrd site

Pcd collects supernatant water from the dump’s slurry pond

and returns this water to the washing plant, the primary source

of recycled water at the mine.

Historically, surface water qualities in the rietspruit East stream

were impacted by mining activities in the area. Keaton Energy

has introduced the following measures to mitigate these

concerns:

» re-profiling of the number 1 mrd to contain surface run-off

from the dump and prevent scouring of the slopes of the

discard dump.

» re-profiling of sections of the mine’s internal access roads so

that surface water run-off is contained and channelled to a

holding pond for reuse in the coal processing plant.

» re-profiling of the west adit rom Gus stockpile platform to

contain surface water run-off and direct this water to the Pcd

for reuse on dust suppression or underground.

» containment of seepage water from the old return water dam

of the beneficiation plant and the reuse of this water in the

washing plant.

» lining of its Pcds to limit water losses.

the groundwater sources consist of three springs that supply

the Enyati adit and mine office, the west adit and the local

community respectively with potable water. Groundwater that

seeps into the underground workings is stored in low-lying areas

underground from where it is pumped to the various items of

underground mining equipment that rely on a constant water

supply for their operation.

WastE and rEcYcling waste generated on the mines falls into three categories:

consumable waste; processing waste; and development waste.

the recycling of consumable waste on the mines during the

current financial period was limited to scrap metal and used oils.

there is significant potential for introducing further recycling

programmes to reduce consumable waste and lower operating

costs.

Processing waste is produced during the beneficiation of

the coal.

at the vaalkrantz colliery the recycling of processing waste

began in 2012 and will increase significantly into the future with

the potential commissioning of a new briquetting plant for the

slurry discard in august 2013. more extensive processing of the

coarse discards is also planned. the recycling of these materials

generates revenue and reduces the mine’s closure liability. slurry

discard originally disposed of in old opencast voids on the mine

will be recycled through the briquetting plant, allowing these

areas to be rehabilitated on mine closure with minimal risk to the

environment. the reprocessing of the coarse discards will

significantly reduce the total volume of this type of waste

remaining on the mine at closure.

80 Keaton Energy integrated annual report 2013





KEATON ENERGY


social and labourManagEMEnt approachthe group’s approach to labour and social issues are dictated by its code of conduct and its compliance with the mPrda, the mining charter and all applicable legislation. in particular, detailed slPs have been developed which document the group’s plans for human resource development, employment equity, equity ownership, procurement, housing and living conditions, and local economic development.

the mining charter sets a framework, targets and timetable for affecting the entry of historically disadvantaged south africans into the industry. in particular, the objectives of the mPrda are: » to promote employment and advance the social and economic welfare of all south africans;

» to contribute to the transformation of the mining industry; and » to ensure that holders of mining rights contribute towards the socio-economic development of the areas in which they are operating.

Keaton Energy undertakes to create an enabling environment for the empowerment of HdPs and is committed to socially responsible interaction with the local communities where it operates.

Keaton Energy engages with a range of stakeholders in order to identify issues that could impact the company’s continued success. Engagement with employees, unions, communities, local and national government provides an opportunity not just to identify issues but also enable the company to demonstrate its responses to them. more details regarding the company’s stakeholder engagement process and the issues identified appear on pages 62 to 63.

the information below focuses on Keaton Energy’s mining operations and excludes statistics for the 21 group employees operating from head office.

in addition, with the exception of the safety statistics, the workforce figures are for Keaton employees only.

Engagement with Keaton Energy’s core business contractors commenced during the year regarding their compliance with mPrda requirements. these specifically concern implementation of the group’s slPs and their roles and responsibilities in the monthly implementation of slP requirements.

pErforMancE indicatorsVanggatfonteinWorkforce composition and union representation at 31 March

fY13 FY12

workforce – Keaton employees 14 15

workforce – contractors 429 677

Percentage of employees subject to collective bargaining agreements 0 0

the change in mining contractors during the year resulted in fewer contractor employees and a generally more efficient operation.

Employee turnover (Keaton employees only)

fY13 FY12

number of resignations, dismissals and retirements as a percentage of the average number of employees during the period 35 7

Percent representation of HDPs at management levels

fY13 target FY12

senior 100 35 100

middle 0 40 0

Junior 100 40 100

women represented 10% (2012:14%) of the workforce engaged in core mining-related occupations.

Safety

fY13 FY12

Fatality-free shifts 1 576 714 249 618

ltiFr per 200k man hours worked 0.00 0.38

Training

fY13 FY12

average hours of training per employee per annum 16 16

total training expenditure (r) 120 639 91 132

social and labour imPact



Vaalkrantz

Workforce composition and union representation at 31 March

fY13 FY12

workforce – Keaton employees 314 312

workforce – contractors 464 411

Percentage of Keaton employees subject to collective bargaining agreements 86 88

Employee turnover (Keaton employees only)

fY13 FY12

number of resignations, dismissals and retirements as a percentage of the average number of employees during the period 11 10

Percent representation of HDPs at management levels

fY13 target FY12

senior 100 35 100

middle 25 40 33

Junior 50 40 50

women represented 7% (2012: 6%) of the workforce engaged in core mining-related occupations.

Safety

fY13 FY12

Fatality-free shifts (last fatality occurred in december 2006) 7 082 395 6 599 639

ltiFr per 200k man hours worked 0.36 0.45

Training

fY13 FY12

average hours of training per employee per annum 16 16

total training expenditure 573 576 311 138

some 13% of all Keaton Energy employees were 55 years or older at 31 march 2013.

labour rElationsonly the directly employed Keaton Energy staff members at our vaalkrantz colliery are members of organised labour. subcontractor employees at both the vaalkrantz and vanggatfontein collieries are not currently subject to recognition agreements between employers and recognised trade unions.

in terms of a recognition agreement, Keaton Energy negotiates annually with the num and amcu regarding conditions of employment. amcu currently represents 56% of the recognised bargaining unit and num 30%, while 14% of the employees are not aligned with any trade union.

the company does not use the services of labour brokers.

where practical, and subject to our recruitment policy, Keaton Energy recruits employees from historically disadvantaged communities residing near its operations. locally sourced labour (within a radius of 50km from the mine) exceeded 70% for both collieries.

safEtY and hEalththe group regards health and safety as the responsibility of each individual within the company and, to this end, each worksite (including head office) has either a designated health and safety representative or a health and safety committee, depending on the number of employees and contractors on site.

once again Keaton Energy has reported a fatality-free year. this achievement is the result of the company’s commitment to and focus on the provision of sufficient and adequate training in all areas of operations and safety.

the litFr rate at vanggatfontein was an exemplary 0.0, while the 0.36 recorded at vaalkrantz is outstanding in the context of its difficult mining conditions.

all areas of the company’s operations are covered by management-worker health and safety committees, with approximately 25% of the workforce participating in the committee meetings. the monthly agenda includes: risk assessment policies; codes of practice; accident/incident investigations; and dmr visits.

breaches of safety procedures are not tolerated at the operations.

accidents are reported in accordance with the mHsa and dmr requirements, using the samrass code book and forms. all accidents and incidents are investigated. after each accident/serious incident a ‘flash report’ is forwarded to all heads of department and the board. the board receives a monthly sHE report and a quarterly sHE presentation.

Education, counselling and preventative risk control regarding serious disease is provided to employees, their families and the greater community. treatment for serious disease is provided to employees.



KEATON ENERGY


blacK EconoMic EMpoWErMEntKeaton Energy recognises the role that the company can and should play in the transformation of the economy and indeed its own workforce. the company is able to contribute to transformation in the following three areas: » increasing the interest of HdPs in the resources industry. » Encouraging the development of black empowerment business entities through targeted procurement initiatives.

» transforming the demographics of corporate south africa by recruiting, training and developing HdPs within the business.

all of the group’s operating subsidiaries are fully empowered, in line with the requirements of the mining charter. refer to pages 12 to 13 for a graphic depiction of the group’s ownership. HdPs, including women, are represented as owners and directors of the operating subsidiaries and the holding company, and as employees in senior executive roles in the group.

Preference is given to bEE entities when making procurement decisions and contractors are also required to exercise this preference and report on its extent.

EMploYEE dEVElopMEntbursaries are awarded to employees that meet stringent criteria that would indicate probable success in an area of study related to the company’s activities. at present, three employees have been awarded bursaries for studies in mining Engineering and Human resource management.

at vaalkrantz colliery, two electricians and two fitters completed their apprenticeships, while seven miners completed learnerships.

one of Keaton Energy’s biggest human capital development challenges is maintaining the balance between current employee career aspirations, the demands of continually changing operational requirements and portable skills training. the company monitors employee skills levels and identifies operational skills gaps. training interventions are then aligned in accordance with identified skills gaps to maintain a skills base fit for current operations and exploring new coal resources.

Keaton Energy’s skills development programmes provide technical skills that are portable within the mining industry and include occupational health and safety and specific functional training.

the vanggatfontein colliery reported 183 core business training interventions during the 2013 financial year (2012: 15). a further 111 employees and contractor employees benefited from non-core training interventions (2012: 329).

the vaalkrantz colliery reported 13 core business training interventions during the 2013 financial year (2012: 90). a further 290 employees and contractor employees benefited from non-core training interventions (2012: 144).

EMploYMEnt EquitYthe group is compliant with the provision of the Employment Equity act. all appointments must be signed off by the human resource manager or chief executive officer to ensure that the principles of the act are complied with and that HdPs are appointed wherever possible in terms of skills required.

coMMunitY initiatiVEs and local EconoMic dEVElopMEntthe group realigns its slP societal commitments as the needs of neighbouring communities change and develop. needs are identified through regular formal and informal communication with local stakeholders. monthly meetings are scheduled with stakeholders from the victor Khanye and the abeQulusi local municipalities. Keaton Energy is a permanent member of the abeQulusi social corporate investment and social labour Plan implementation co-ordination and steering committee.

at this time, the group is reviewing its social investment initiatives with local stakeholders to align these with sustainable community initiatives linked to municipal idPs.

Keaton Energy is proud to contribute to public benefit investments. we are constantly mindful of our leadership role in the communities in which we operate and we strive to enhance and uplift wherever possible. For the reporting period public benefit investments were channelled to the following projects: » abeQulusi local municipality (vryheid, KwaZulu-natal)

– upgrading the water supply to a community crèche as part of a planned upgrade of its ablution facilities, with the intention of handing the crèche over to the department of Education. – transporting local school children. – the grading of local community gravel roads.

» victor Khanye local municipality (delmas, mpumalanga) – arranging pothole repairs on public roads using local labour, in conjunction with the municipality. – supporting a community vegetable garden project for elderly community members.

Further to this, the group’s planned social investment initiatives in the near term are: » abeQulusi local municipality (vryheid, KwaZulu-natal)

– investments in an agricultural development hub within wards 5, 6 and 7, which are adjacent to our mining operations at vaalkrantz colliery.

social and labour imPact continuEd



» victor Khanye local municipality (delmas, mpumalanga) – investments in an agricultural development hub on the farm strasfontein (Portion 10), currently a group asset. the intention is for ownership of this asset to be transferred to the local community. – the establishment of an abEt learning centre.

Keaton Energy has conducted a detailed review of current lEd projects committed to in the existing vanggatfontein and vaalkrantz slPs and intends submitting a section 102 application to revise these projects. vanggatfontein passed a dmr audit of its slP in July 2012.

sEcuritY and huMan rightsthe board and management are committed to upholding the human rights conventions included in the south african constitution and the labour relations act, including freedom of association, collective bargaining and protection from child and forced labour. none of the group’s operations are considered to be at risk in respect of human rights transgressions.

the board is not aware of any incidences of discrimination during the year and as such no actions were taken. discrimination on the basis of race, gender, age, nationality, language, religion or sexual orientation is specifically prohibited in terms of the group’s policies and procedures and transgressors would be subjected to disciplinary action.

responses to additional selected Gri performance indicators appear in the Gri content index available on the company’s website at www.keatonenergy.co.za.



KEATON ENERGY


governance

The Keaton energy group is committed to sound and robust corporate governance standards which underpin the group’s operational and strategic success. The board of directors takes ultimate responsibility for the group’s adherence to corporate governance standards and sees to it that all business decisions are made with reasonable care, skill and diligence.

Board of Directors 88 – 89

corporate governance statement 90 – 93

Social and ethics committee report 94

remuneration report 95 – 99




KEATON ENERGY

87Keaton Energy Integrated annual report 2013


BoarD of DIrecTorS

David Salter (54)

Group executive chairman, chairman of the SHE and nomination committees, member of the risk, audit, remuneration, and social and ethics committees

BSc (Hons), PhD, FSAIMM

Appointed in January 2008

David Salter has 34 years of international mineral technology, project development and senior mining executive management experience, and has previously served as the managing director of the Salene group, and JSe-listed Barplats Investments Limited and eland Platinum Holdings Limited. David currently serves on the boards of Transafrika resources Limited, Kameni Limited and Tharisa Limited.

Lizwi Mtumtum (41)

Lead independent non-executive director, chairman of the audit and remuneration committee, member of the risk, nomination, and the social and ethics committees

BA (Economics/Accounting)

Appointed in March 2008

Lizwi Mtumtum is an executive chairman of Ikamva Lethu Investments, a black-owned and managed investment holding company, and royal albatross Properties 260 Proprietary Limited, a black-owned and managed property investment company. He previously held senior positions at Pangbourne Properties (a property loan stock company), Yard capital (a Bee investment holding company), nedbank and nedcor. He serves as an independent non-executive director of Synergy Income fund Limited (convenience retail property). He serves as an independent non-executive director of Kameni Limited, where he is also chairman of the audit committee.

Paul Sadler (75)

Independent non-executive director, chairman of the risk committee, member of the audit and social and ethics committees

Retired chartered accountant

Appointed in october 2010

Paul Sadler has extensive auditing experience, much of which involved the mining sector, and thus brings valuable expertise to the board. He was a partner at auditing firm KPMg from 1980 until his retirement in 2003, after which he joined the Salene group as a financial consultant. During his auditing career, he was involved with various mining companies including De Beers, aquarius and Barplats. He has also served as a member of the Barplats Investments audit committee for two years.

Gerard Kemp (59)

Independent non-executive director, member of the audit, risk, SHE and social and ethics committees

McSc Mining Engineering

Appointed in november 2012

gerard Kemp holds an MSc in Mining engineering from the University of the Witwatersrand and has completed development programmes in labour relations and management at the University of South africa, School of Leadership. gerard is currently the chief executive officer of Kaouat Iron Limited, a division of Transafrika resources. During his career he has spearheaded several successful black economic transactions and brings significant experience in corporate finance and labour relations to Keaton energy.

Antoinette Sedibe (47)

Non-executive director, chairman of the social and ethics committee, member of the risk and nomination committees

BA (Admin)

Appointed in april 2006

antoinette Sedibe, who is the managing director of andisa capital and a cofounder of rutendo Mining, started her career with nedbank’s graduate programme in 1988, before moving on to aecI’s treasury department as a foreign exchange dealer, later spending two years in the internal audit department. She assisted in setting up Polifin Treasury (a Sasol and aecI joint venture), and also gained extensive management, financial and treasury operations experience as a portfolio manager at Standard Bank’s treasury outsourcing operation, where she was appointed a director. antoinette became an executive director of andisa capital in 2003.

Phoevos Pouroulis (38)

Non-executive director, member of the risk, remuneration, nomination, and social and ethics committees

BSc (Business Science)

Appointed in January 2008

Phoevos Pouroulis started and partnered various businesses locally and throughout africa. He was involved in advising chromex Mining plc on its establishment, where he was later appointed commercial director. Phoevos is chief executive of Tharisa Limited, a chrome and platinum producer. He is a founder of Keaton energy and has been a non-executive director of Keaton energy since January 2008.



Dirk Jonker (62)

Non-executive director, member of the risk, and social and ethics committees

BA (Business Admin)

Appointed in May 2011

Dirk Jonker, a senior business executive with many years’ experience in international commodity trading and processing, is currently the managing director of IPP and gunvor International. an employee of cargill from 1974, Dirk rose to the position of general manager of the european juice division in 1986, and was appointed the company’s vice president in 1996 where he was responsible for co-ordinating the business marketing activities of the cargill food Divisions in europe. Dirk has also served in senior positions for companies including fennema chocolate Products, B&S International and, from 2009 to 2011, as the interim chief executive of Meelunie, where he reorganised and refocused the business to achieve an all-time record year in volumes and profit.

Mandi Glad (42)

Chief executive officer, member of the SHE, risk and the social and ethics committees

Appointed in May 2009

Mandi glad, who is a co-owner of rutendo Mining, is an entrepreneur with more than 20 years’ experience in owning and operating a wide range of businesses. In this time she has gained strategic industrial relations skills and her involvement with HDPs and women-led coal mining initiatives have given her detailed knowledge of the MPrDa and related regulatory processes. She played an integral role in the establishment of Keaton energy and has held the positions of both marketing and business development director and operations director before being appointed as ceo in September 2012.

Jacques Rossouw (37)

Chief financial officer, member of risk and the social and ethics committees

BCom (Hons) Accounts, CA(SA)

Appointed in December 2011

Jacques is a chartered accountant (Sa), having completed his articles with Pricewaterhousecoopers, and subsequently worked in both the high-technology and mining industries. Before joining Keaton energy in 2011, he worked as manager of corporate reporting at Harmony gold Mining company Limited.

group overview 4annual reviews 22operational review 36operating context 56financial performance review 66environmental, labour and social review 74 Governance 86annual financial statements 100Shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


corPoraTe governance STaTeMenT

The Keaton energy group is committed to sound and robust corporate governance standards which underpin the group’s operational and strategic success. The board of directors takes ultimate responsibility for the group’s adherence to corporate governance standards and sees to it that all business judgements are made with reasonable care, skill and diligence. The board charter articulates the objectives and responsibilities of the board and each of the board committees operates in accordance with written terms of reference, which are reviewed by the board annually and are available on the group’s website at www.keatonenergy.co.za.

MEMoRAnDuM of IncoRPoRAtIonon 1 May 2011, South africa’s companies act, no 71 of 2008 (as amended) (the act), came into force – replacing the companies act, no 61 of 1973. although already compliant with the majority of the terms of the act prior to it becoming effective, during 2013 Keaton energy undertook additional measures to ensure full conformance with the act, including implementation of our new Memorandum of Incorporation (which replaces our previous articles of association). The new Memorandum of Incorporation was approved at a general meeting held on 28 May 2013. Keaton energy is currently in the process of ensuring the memorandums of incorporation of all our subsidiary companies are similarly aligned.

GovERnAncE APPRoAchDuring 2013, following the resignation of Paul Miller, the company’s founding ceo and the brief tenure of rowan Karstel, Mandi glad was appointed ceo of the group. To assist in the transition, Dr David Salter assumed a short-term executive chairmanship role and Lizwi Mtumtum was appointed lead independent non-executive director to comply with good corporate governance practice.

The board also appointed gerard Kemp as an independent non-executive director and third independent member of the group’s audit committee in november 2012.

Dr Salter retained his chairmanship of the nomination and SHe committee and membership of the remuneration and audit committees. The board continues to assess its committee compositions to ensure compliance with statutory bodies.

The board applied the principles of King III on good corporate governance and complied with all Listings requirements of the JSe Limited. refer to our website at www.keatonenergy.co.za for the King III compliance checklist compliance.

The board will continually review the group’s governance framework against best practices.

BoARD of DIREctoRSThe board is the highest governing authority of the group and, in terms of the Memorandum of Incorporation, the number of directors shall not be less than four. at the date of this report, the board comprised three executive directors and six non-executive directors, of whom three were independent. The directors and brief descriptions of their qualifications and experience are noted

under the directors’ section of this Integrated annual report (pages 88 to 89). The board is responsible to shareholders for the conduct of the business of the group, which includes providing the group with clear strategic direction. The schedule of matters reviewed by the board and/or its committees includes: » approval of the group’s strategy and annual budget; » overseeing group operational performance and management; » ensuring that there is adequate succession planning at senior levels;

» overseeing director selection, orientation and evaluation; » approval of major capital expenditure or disposals, material contracts, material acquisitions and developments;

» reviewing the terms of reference of board committees; » determining policies and processes which seek to ensure the integrity of the group’s risk management and internal controls;

» maintaining and monitoring the group’s systems of internal control and risk management;

» ensuring the solvency and liquidity of the group is continuously monitored;

» communication with shareholders, including approval of all circulars, prospectuses and major public announcements;

» approval of the interim reports and accounts and the Integrated annual report and accounts (including the review of critical accounting policies and accounting judgements and an assessment of the company’s position and prospects); and

» the recommendation of dividends.

The board retains full and effective control over the business of the group and has defined levels of materiality through a written delegation of authority, which sets out decisions the board wishes to reserve for itself. The delegation is regularly reviewed and monitored. In accordance with the group’s Memorandum of Incorporation, all directors, except the executive directors, are subject to retirement by rotation and re-election by shareholders at least every three years. The executive directors excluding the executive chairman have fixed terms of employment. In terms of the act, the audit committee members are now elected by shareholders at each annual general meeting (agM). accordingly, the election and re-election of directors and audit committee members are noted on pages 194 to 195 of this Integrated annual report.

The board meets at least four times a year, or more frequently if circumstances so require. During the financial year under review, the board met four times. Information relevant to meetings is supplied on a timely basis to its members, so that they can make informed decisions.

The directors have unrestricted access to information, management and the company secretary in relation to Keaton energy. all directors are entitled to seek the advice of independent professionals on matters concerning the affairs of the group, at the group’s expense.

DIvISIon of RESPonSIBILItyThere is a clear division between the roles of the chairman and the ceo. The chairman is responsible for providing leadership to the board, overseeing its efficient operation and has been tasked with ensuring effective corporate governance practices. The ceo is responsible for formulating, implementing and maintaining



the strategic direction of Keaton energy, and ensuring that the day-to-day affairs of the group operations are appropriately supervised and controlled. With the chairman assuming role as executive chairman during the year the group appointed Lizwi Mtumtum as lead independent non-executive director to ensure the continuance of good corporate governance. The company conducts an annual evaluation of its board, board committees and individual directors and is confident that this process would raise concerns should any particular individual have too much influence. The non-executive directors all have a high degree of integrity and credibility, and the composition of the board provides for objective input into the decision-making process, thereby ensuring that no one director holds unfettered decision-making powers. The directors come from diverse backgrounds and bring to the board a wide range of experience.

BoARD coMMIttEESThe board has various committees to which it has delegated specific responsibilities. all committees operate with written terms of reference approved by the board, which are available on the company’s website at www.keatonenergy.co.za.

Audit committeeThe audit committee reviews the effectiveness of the risk management process and internal control within the group with reference to the findings of both the internal and external auditors.

The audit committee is expected to meet at least four times per year.

The audit committee’s report can be found on page 106.

The cfo is invited to all audit committee meetings.

nomination committeeThe nomination committee comprises four members, three non-executive directors, namely antoinette Sedibe, Phoevos Pouroulis, Lizwi Mtumtum and is chaired by the executive chairman Dr David Salter. The primary role of the nomination committee is to review the composition of the board and to identify and make recommendations regarding the appointment of new directors. It also satisfies itself that appropriate succession plans are in place for the board and senior management of the group, and reviews the performance of non-executive directors to ensure that they have devoted sufficient time to their duties. The chairman of the nomination committee reports to the board after each meeting.

appointments to the board are made taking into account the need for ensuring that the board provides a diverse range of skills, knowledge and expertise; while achieving a balance between skills and expertise, and the professional and industry knowledge necessary to meet the company’s strategic objectives; as well as the need for ensuring demographic representation. Upon appointment, each director receives an induction programme into the group with guidance on their individual responsibilities.

The nominations committee is expected to meet at least four times per year.

Remuneration committeeThe remuneration committee comprises non-executive directors namely Lizwi Mtumtum (chairman), Phoevos Pouroulis and the group’s executive chairman Dr David Salter. The ceo and cfo are invited to the remuneration committee meetings.

The remuneration committee approves the remuneration policies for the executive directors and senior management, having considered relevant market norms and independent advice where appropriate. no director or manager is involved in any decision as to his or her own remuneration. The committee determines targets for performance-related pay schemes operated by the group and requests the board, when appropriate, to seek shareholder approval for any amendments to the Keaton energy Long-Term Incentive Plan (Share Plan) Scheme. It also determines the policy for and scope of retirement fund arrangements, service agreements for the executive directors, executives and senior management and oversees any major changes in employee benefit structures throughout the group. furthermore, the committee annually reviews the reimbursement of any claims for expenses from the chairman of the company, executive directors and non-executive directors. The chairman of the remuneration committee reports to the board after each meeting. a remuneration report has been included on pages 95 to 99. Shareholders will be asked to adopt it as a non-binding advisory vote at this year’s agM.

The remuneration committee is expected to meet at least four times per year.

Risk committeeThe board of Keaton energy believes strongly that risk management is the responsibility of every director and can not be delegated to a small committee. Therefore, risk committee includes all the members of the board and it is chaired by Paul Sadler. The risk committee’s role is to assist the board in carrying out its risk responsibilities and has designed and implemented an annual risk management plan which details specific activities to be completed during the financial year. risk assessments are performed on a continuous basis using a top-down approach. risk management is accorded priority as an essential component in ensuring sustainability of the group, and is viewed as a discipline that cuts across all business areas of the group. risk management is considered inherent in every role and job description and is not delegated to a specialist function. The committee reviews the risk philosophy, strategy and policies as recommended by management, ensuring compliance with such policies, and with the overall risk profile of the group. The chairman of the risk committee reports to the board after each meeting.

The risk committee is expected to meet at least four times per year.

Safety, health and environmental committeeThe board-level SHe committee is chaired by the executive chairman Dr David Salter, members include the ceo Mandi glad, non-executive director gerard Kemp, the general manager Hilton Papenfus, the two mine managers and two safety managers from both operations. The primary role of the SHe



KEATON ENERGY


corPoraTe governance STaTeMenT contInuED

committee is to assist the board in its oversight of the group’s safety, health and environmental programmes – as well as its socio-economic performance. In particular, this includes the monitoring of the group’s efforts to minimise safety, health and mining-related incidents and accidents, and to ensure its compliance with relevant environmental regulations. all members of the committee have been selected on the basis of their considerable experience in the field of safety, health and environmental matters. The chairman of the SHe committee reports to the board after each meeting.

The SHe committee is expected to meet at least four times per year.

Social and ethics committeeThe social and ethics committee includes all the members of the board and it is chaired by antoinette Sedibe. Its role is to proactively review management actions and efforts to comply with relevant legislation and charters, and apply the principles of the King III report, including a review and recommendation, for board approval, policies, strategies and management implementation plans.

The social and ethics committee’s report can be found on page 94.

The social and ethics committee is expected to meet at least once a year.

coDE of BuSInESS EthIcS AnD conDuctThe board has approved and adopted a code of Business ethics and conduct (the code) which reaffirms the high standard of business conduct required of all employees, officers and directors of the group. It has been adopted as part of the group’s continuing effort to ensure that it has an effective programme to prevent and detect violations of law, and for the education and training of employees, officers and directors. In most circumstances, the code sets standards higher than that required by law. The code is available on the company’s website at www.keatonenergy.co.za.

ShARE DEALInGSIn line with best practice, the JSe Listings requirements, the group operates closed periods prior to the announcement of its interim and annual financial results. During these closed periods directors, officers and other employees who are likely to be in possession of price-sensitive information may not deal in the shares or other instruments pertaining to the shares of the company. This principle is also applied at other times whenever there is a corporate action or similar circumstances. Written requests to trade in the company’s shares by directors, officers and senior personnel and the requisite approval to trade in the company shares, outside closed periods, are kept on record at the company’s offices.

coMPAny SEcREtARy The group company secretary provides a central source of advice to the board on the JSe Listings requirements, King III and corporate governance matters. In addition to the group company secretary’s statutory and other duties, she provides the board as a whole, directors individually and the committees with guidance as to the manner in which their responsibilities should be discharged in the best interests of the group. The appointment and removal of the group company secretary is a matter for the board as a whole. The board is satisfied with the experience and expertise of the company secretary and is of the opinion that she has the necessary competence and qualifications. The board further confirms that there exists an arms-length relationship between the company secretary and the board.

othERThe board is committed to honest, open and regular communication with all stakeholders on both financial and non-financial matters. The group reports formally to shareholders when half-year and full-year results are announced. Shareholders are invited to attend agMs and all executive and non-executive directors are required, where practical, to attend this meeting.

Separate resolutions are proposed on each substantially separate issue, including the receipt of the financial statements, and shareholders are entitled to vote either in person or by proxy.

attendance at board and committee meetings for the financial year ended 31 March 2013, is indicated below.

name Boardaudit

committeenomination committee

remuneration committee

risk committee

SHecommittee

Social and ethics committee

expected number of meetings per year (4) (4) (4) (4) (4) (4) (1)JD Salter 4 4 4 4 4 4 1PBM Miller* 2 n/a n/a 2 2 2 1LX Mtumtum 4 4 4 4 4 n/a 1P Pouroulis 4 n/a 3 3 3 n/a 1J rossouw 4 4 n/a 4 4 n/a 1aPe Sedibe 4 n/a 4 n/a 4 n/a 1oP Sadler 4 4 n/a n/a 4 n/a 1M glad 4 n/a n/a 2 4 4 1D Jonker 4 n/a n/a n/a 4 n/a 1ra Karstel** – – – – – – –gH Kemp*** 2 2 n/a n/a 2 2 –* Resigned as a director and member of the SHE and risk committees on 30 June 2012.** Appointed as director of the group on 1 July 2012 and resigned as a director of the group on 6 September 2012.*** Appointed as a director and member of the SHE, risk and audit committees on 28 November 2012.



RotAtIon AnD REtIREMEnt fRoM thE BoARDIn accordance with our Memorandum of Incorporation, one-third of the non-executive directors shall retire from office at each annual general meeting. The first to retire are those directors appointed as additional members of the board during the year, followed by the longest serving members. retiring directors can immediately be re-elected by the shareholders at the annual general meeting. Directors who have served on the board for more than three years since their last election or appointment are required under the Memorandum of Incorporation to retire at the next annual general meeting.

RISK MAnAGEMEntenvironmental, social and governance (eSg) risks and opportunities are considered and incorporated into the group’s overall risk management approach, which is discussed on page 64 and in the table below.

risk management is an inherent part of every role and job description, and formal structures exist to ensure that risk management processes are in place. The board risk committee, which comprises the full board, meets at least once a quarter to review all risk management processes, procedures and outcomes. When necessary, external experts are retained to facilitate risk identification and suitable mitigation measures.

StRAtEGIc BuSInESS RISKS – 2013risk name Mitigating controls

critical skills attraction and retention Innovative recruitment initiatives and succession planning.Benchmark to ensure relevancy and effectiveness of retention strategies.Market-related remuneration offerings. Bursary scheme.accessing non-traditional and underrepresented labour pools.

costs Stringent procurement policies.focus on sustainable cost reduction programmes and models.review of supplier contracts coupled with economy of scale benefits.

regulatory environment continuous engagement with relevant authorities and other stakeholders.ensure compliance with legal and regulatory requirements to progress the granting of safety, health and environmental approvals required.

Maintain social licence to operate Drive existing programmes to achieve more than mere compliance with all aspects of the Mining charter.Proactive involvement as a responsible corporate citizen in sustainable socio-economic development initiatives in the communities in which we operate.

availability of electricity continuous engagements with eskom.

compliance with environmental legislation Transparent engagement and collaboration with relevant authorities and other stakeholders.

Market conditions Multi-product company.Diversification of commodities and markets to hedge against cyclical changes.

fraud and corruption visible and tangible zero-tolerance approach to fraud, corruption and bribery through applicable policies, internal audit, awareness campaigns, reporting mechanisms and disclosure.



KEATON ENERGY


SocIaL anD eTHIcS coMMITTee rePorT

During 2013, in accordance with section 72(4) of the companies act, no 71 of 2008, as amended, and regulation 43 of the companies regulations 2011, Keaton energy established a social and ethics committee. The committee includes all the members of the board, and is chaired by antoinette Sedibe.

The social and ethics committee fulfils an oversight role with accountability to the board.

The main objective of the committee is to assist the board in monitoring the company’s performance as a good corporate citizen and its responsibilities include:

a) Monitoring the group’s activities, with regard to any relevant legislation, other legal requirements or prevailing codes of best practice, with regard to matters relating to: » social and economic development, including the group’s standing in terms of the goals and purposes of:• the 10 principles set out in the United nations global

compact Principles;• the organisation for economic co-operation and

Development recommendations regarding corruption;• the employment equity act; and• the Broad-Based Black economic empowerment act.

» good corporate citizenship, including the group’s:• promotion of equality, prevention of unfair discrimination,

and reduction of corruption; and• contribution to the development of the communities in

which its activities are predominantly conducted. » the environment, health and public safety, including the impact of the group’s activities and of its products or services;

» consumer relationships, including the group’s advertising, public relations and compliance with consumer protection laws; and

» labour and employment, including:• the group’s standing in terms of the International Labour

organisation Protocol on decent work and• working conditions; and• the group’s employment relationships, and its

contribution toward the educational development of its employees;

b) ensure that the group’s ethics risks and opportunities are assessed and that an ethics risk profile is compiled.

c) ensure that the ethical standards guiding the group’s relationships with internal and external stakeholders are clearly identified.

d) ensure that the group’s ethical standards are integrated into all the group’s strategies and operations.

e) ensure that the group’s ethics performance is assessed, monitored, reported and disclosed.

f) To draw matters within its mandate to the attention of the board as may be required.

g) To report, through one of its members, to the shareholders at the group’s annual general meeting on matters within its mandate.

This recently established committee held its first meeting during the reporting period. Work has commenced to finalise an annual work plan to ensure the committee meets its statutory requirements.



reMUneraTIon rePorT

thE GRouP’S REWARD StRAtEGy IntEnt Keaton energy recognises that remuneration is a business issue, not only a human resources issue. The group’s reward strategy has a direct impact on company culture, employee behaviour, operational expenditure and the company’s ongoing strategic sustainability. as such it is clearly defined, monitored and managed to ensure sustained validity and effectiveness. The group’s reward strategy is aligned with its long-term strategic planning and business practices.

The objective of the group’s reward strategy is to enable the business to: » attract critical, scarce and high-performing individuals from a shrinking pool of talent;

» implement and maintain a retention strategy for employees who contribute to enhance business performance;

» fairly reward employee performance which contributes towards the employer attaining its business objectives and to reinforce, encourage and promote superior performance;

» direct employees’ energies and activities towards key business goals;

» achieve most effective returns (employee productivity) for total employee spend; and

» address diverse employee needs across differing cultures.

To achieve this, the group rewards its employees in a way that reflects the dynamics of the market and the context in which it operates. all components of the reward strategy, including the fixed pay, variable pay, performance management and learning and development are aligned to the strategic direction and business-specific value drivers of the group.

REWARD StRAtEGy DESIGn PRIncIPLES The principles that drive the reward strategy are as follows: » competitive pay levels: the group is committed to paying packages that are competitive in the mining and resources sector and, where appropriate, in the general market.

» Pay for performance: remuneration practices will reward high-performing employees for the contribution they make to the organisation.

» Internal equity: remuneration differentiation between employees will be based on criteria that are fair and objective.

» cost management: the group will manage the total cost of employment for all employees.

» Holistic approach: the group chooses to adopt an integrated approach to reward strategy, encompassing a balanced design and pay mix that includes all of the following components: • guaranteed pay;• Performance management;• annual incentive pay rewarding both business performance

and individual/team performance;

• Share-based incentives for key executives, managers and talent; and

• non-financial rewards and recognition. » regular revision: the group recognises that, in its current strategic environment, both this reward strategy and each of its components are dynamic and should be revisited regularly to ensure that the group’s practices keep pace with market practices, and the group’s evolving organisational context and objectives.

» communication: the group is committed to ensuring that all employees are aware of the organisation’s reward strategy.

REMunERAtIon GovERnAncE The board has established a remuneration committee to guide it in its responsibility in establishing, maintaining and governing the group’s remuneration policies. These policies ensure fair and equitable remuneration and rewards to group directors, executives and employees, for their individual contributions to the group’s overall performance. However, at vaalkrantz colliery, almost 90% of the workforce is represented by a bargaining unit – either aMcU or nUM – and accordingly their remuneration and benefits are negotiated annually by the bargaining unit. In maintaining and monitoring compliance with these policies the interests of shareholders are protected and the financial well-being of the group is ensured.

The committee primarily addresses reward strategies for those employees who fall outside recognised bargaining units but also ensures that collective agreements reached between the employer and organised labour are fair and in line with the group’s financial standing and market-related remuneration.

The committee, however, mainly concerns itself with the remuneration of executives and senior management by ensuring that remuneration is not only linked to individual performance but also to the group’s operational and financial performance and the market. The board is also advised on the remuneration of non-executive directors.

The committee is required to ensure that the company’s remuneration policies and practices are aligned with the group’s strategic objectives and that these policies and practices are fair and achievable.

The responsibilities and duties of the remuneration committee include: » Determine and agree with the main board the framework or broad policy for the remuneration of the ceo, the executive directors, executives and senior management. The remuneration of non-executive directors shall be a matter for the executive members of the board subject to shareholder approval at each agM. no director, executive or manager



KEATON ENERGY


reMUneraTIon rePorT contInuED

shall be involved in any decisions as to his or her own remuneration;

» In determining such policy, take into account all factors which it deems necessary. The objective of such policy shall be to ensure that executive directors, executives and senior management of the group are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the group. It shall also liaise with the nomination committee to ensure that the remuneration of newly appointed executives fall within the group’s overall policy;

» Determine targets for any performance-related pay schemes operated by the group and asking the board, when appropriate, to seek shareholder approval for any long-term performance incentive arrangements and amendments thereto;

» Within the terms of the agreed policy, determine the total individual remuneration package of each executive director, executives and senior management including, where appropriate, basic salary, benefits in kind, bonuses, incentive payments and long-term performance incentive arrangements;

» Determine the policy for and scope of retirement fund arrangements, service agreements for the executive directors, executives and senior management, termination payments and compensation commitments;

» ensure that contractual terms on termination and any payments made are fair to the individual and the group, that failure is not rewarded and that the duty to mitigate loss is fully recognised;

» Be aware of and oversee any major changes in employee benefit structures throughout the group;

» Determine the policy for the group’s short-term performance incentive schemes for all staff;

» review annually the reimbursement of any claims for expenses from the chairman of the group, executive directors and non-executive directors; and

» Produce and maintain remuneration policies that are in line with the requirements of the King code, JSe Listings requirements and any other regulatory requirements.

The committee currently comprises three non-executive directors, one of whom is independent. The current chairman of the remuneration committee, Mr Lizwi Mtumtum, is a lead independent non-executive director, elected on the basis of his business knowledge and experience, and familiarity with the challenges facing directors and executive managers. He ensured that decisions were fair and unbiased.

PoLIcy GuIDELInES on PAy MIX The group has adopted a pay mix policy that supports the philosophy that, over time, the performance-based pay of executives should equal or exceed guaranteed pay in the total expected compensation mix, and furthermore that, within the performance-based pay of the most senior executives, the orientation should be towards rewarding long-term sustainable performance (through long-term and/or share-based incentives), more so than operational performance (through annual cash incentives). The mix of guaranteed and variable pay is thus designed to meet the group’s operational needs and strategic objectives, based on targets that are stretched, verifiable and relevant.

The remuneration committee ensures that the pay mix of guaranteed and performance-driven pay in cash, shares and other elements, does not only meet the group’s needs but also provides a true reflection of sustained group and individual performance.

In reviewing and approving levels of guaranteed pay, the remuneration committee ensures that these reflect the market sector in which the group operates, and the contribution of employees, particularly executive directors and senior management. for all positions other than those for which specific premiums are deemed appropriate due to scarcity or criticality of skills, the group will target guaranteed pay levels relative to the market median of the target market. In the context of guaranteed pay, all other benefits, including pensions, benefits in kind and other financial arrangements, are scrutinised to ensure they are justified, appropriately valued and suitably disclosed. additionally the group ensures that guaranteed pay is a sufficient proportion of total remuneration to allow for a fully flexible incentive scheme to operate.

The pay mix policy addresses the major components of remuneration, namely: » Total cost to company guaranteed pay » variable pay for performance: • Short-term incentives in the form of annual cash incentives;

and• Long-Term (share-based) Incentive Plan expected reward.



PoLIcy GuIDELInES on GuARAntEED PAy (tcc) The group maintains an integrated pay line with pay levels which will ensure that it is able to remain competitive, whilst managing costs. The following steps are in place to ensure competitive pay levels: » Establishing a target market In order to compete effectively for skills in a competitive labour market, the group will clearly identify a target market for each job family or hot skill. By these terms, is meant: a target market is that market (organisations or companies) from which skills are acquired, or to which skills are lost.

a job family is a broad grouping of jobs or positions with a common skill that will typically have a common labour market.

a hot skill is a more specific skill which is typically a scarce resource in the market and is either a critical resource to the business or requires extensive training, such as specialists in their fields, etc.

» Managing total employment cost Total employment cost of which guaranteed pay is the major component, forms a significant portion of total operating costs. guaranteed pay is managed efficiently by: • ensuring that the cost of the total remuneration package

paid to employees is controlled by the group and does not include open-ended liabilities where the cost of a benefit is determined either by levels of utilisation or by external pricing factors; and

• ensuring that the remuneration package levels of employees are commensurate with their worth to the business, ie pay a market rate for a job.

To achieve effective cost management, the group manages guaranteed pay levels in terms of a single entity, Tcc, which

includes basic salary, allowances and company contributions to retirement funds and medical aid.

» Market data sources The group compares itself to the market, as published annually by Pricewaterhousecoopers remchannel Proprietary Limited and other surveys, but also to mining and resources surveys where these exist. The general job families of IT, finance and Hr are also compared to the national market. appropriate job family premia are applied where necessary. additionally the pay levels of top executive positions in the group are benchmarked against national market executive remuneration surveys.

Specific premia are determined for hot skills, to enable the group to pay a fair price for these skills, as determined by market pricing forces. These premia enable the group to compete in the market in attracting and retaining skills that are critical to its success.

» Percentile within market data for all positions other than hot skills, the group has positioned itself relative to the market median of the market, for Tcc guaranteed pay, ie excluding incentives.

for hot skills, the group has targeted itself relative to the upper quartile of the market, or otherwise applies a specific premium to the median.

» Salary reviews The group’s annual increase process is performed during november/December each year. The funds that the board makes available for the increase process is a function of the salary increases granted in the market with regard to Tcc, individual performance, other relevant economic indicators and potentially the performance of the group.

The pay mix below currently applies:

Management/staff category

guaranteed pay (Tcc)

Short-term annual cashincentive

(on target)

Long-term share-based incentives

(timing)

Long-term share-based incentive

(expected value)

ceo 100% (13 payments) 50% annual 70%

executive 100% (13 payments) 45% annual 55%

Manager 100% (12 payments) 20% Discretionary 25%

operations manager 100% (12 payments) 12% Discretionary 25%

Support 100% (12 payments) 8% Discretionary 25%

Notes All percentages applied to TCC. The annual cash incentive “on target” bonus percentages are for the achievement of stretched performances but are not necessarily maxima, as long as any higher bonus levels are as the result of an out or superperformance of the group. The expected values of the LTIP are present values of the targeted future monetary value arising from an offer of share-based incentives.



KEATON ENERGY


reMUneraTIon rePorT contInuED

PoLIcy GuIDELInES on PERfoRMAncE MAnAGEMEnt The group has established a formal framework for performance management. Individual performance is assessed in terms of a scorecard of Key Performance areas (KPas) which are derived from existing job descriptions and are aligned to the overall performance measures of the group. The KPas include financial and non-financial measures and, where appropriate, are shared rather than individually owned. Personal skills and competencies are also included in individual scorecards. Weightings are given to the scorecard elements and the overall score is established by summing the weighted scores attained and dividing by the maximum aggregate score that could have been attained.

The performance management scorecard and the assessment process also provide an opportunity to comment on developmental plans for the individual.

The performance management process occurs during april/May of each year.

PoLIcy GuIDELInES on AnnuAL IncEntIvE PAy The offer and payment of annual incentive pay (bonuses) is entirely at the discretion of the remuneration committee. The group’s incentive pool is created from a weighted scorecard of group performance measures, and is then allocated to participants according to their relative performance.

The group continuously strives towards a balance that reflects and/or accommodates (inter alia): » the requirement of the group for incentive payments to be funded from incremental performance;

» the need of the group to secure its human capital in what is a volatile and unpredictable business environment; and

» the desire to reward for key, talented and high performing employees which commensurate with their value contributions and accord with best practice in the Mining and resources market in which the group operates.

The group performance scorecard includes measures of investment return, cash flow management and comparative share price performance. Individual scorecards are aligned to key performance areas in each role which aligns to the overall group measures.

The major determinants of the size of an incentive bonus is the individual’s guaranteed package multiplied by the on target bonus percentage (from the reward Strategy – Pay Mix) multiplied by an individual performance factor multiplied by a modifier that reflects the available funds in the incentive pool.

Incentives are calculated in May of each year based on the audited performance of the group and the performance management process, and paid in June of each year.

PoLIcy GuIDELInES on LonG-tERM (ShARE-BASED) IncEntIvE PLAn The group’s LTIP has been established in terms of which eligible employees will receive a bonus award equal to the increase in the value of the notional shares between the date on which the remuneration committee approves the offer of the bonus award to the date of exercise of the bonus award. In normal circumstances, the bonus award is to be applied exclusively to the subscription of and/or to purchase the group’s shares.

» Eligibility Directors (excluding non-executives) and employees of any participating company are eligible to participate in the group’s LTIP.

» offers of bonus awards Bonus awards will be offered in terms of bonus award certificates to eligible employees on the recommendation of the remuneration committee.

» Performance conditions The offer of bonus awards will be conditional upon the achievement of performance targets as specified in the bonus award certificates, over a performance period which will usually be three financial years. at the discretion of the remuneration committee, bonus awards may be granted without performance targets. In addition to any performance targets, bonus awards will in all cases be further conditional upon the participant being and remaining employed within the group over the minimum employment period. If a participant ceases to be employed within the group during the minimum employment period, all the participant’s bonus awards will lapse. However, in terms of rule 8.1.2 and 8.1.2.2, the remuneration committee can use its discretion and allow a resigned employee/executive director to continue to hold on to bonus awards as though his/her employment as a member of the group had not terminated.

» Limits The total number of shares which are to be issued and/or transferred to a participant under the group’s LTIP in any number of 10 years, when added to the number of such shares which are to be issued and transferred to the same participant under all other employee share-based schemes operated by the group, shall not exceed 5 749 894 shares. The number of shares which are issued under the LTIP in any 10-year span, when added to the number of such shares



which may be issued in the same period under all other employee share-based schemes operated by the group, must not exceed 28 749 471 shares.

non-EXEcutIvE DIREctoRS’ PAy The remuneration committee ensures that directors are fairly rewarded for their individual contributions to overall performance. The remuneration of non-executive directors is a matter for the executive members of the board, and is approved by the company’s shareholders in general meeting, acting pursuant to a recommendation of the board. The board applies principles of good corporate governance relating to directors’ remuneration and also keeps abreast of changing trends. governance of directors’ remuneration is undertaken by the committee. The committee takes cognisance of market norms and practices, as well as the additional responsibilities placed on board members by new legislation and corporate governance principles.

The group’s policy on remuneration for non-executive directors is that this should be: » fee-based, comprising a retainer and per committee components;

» market-related with respect to fees paid and number of meetings attended by non-executive directors of companies of similar size and structure to the group and operating in the mining and resources sector; and

» not linked to share price or the group’s performance.

The group pays for all travel and accommodation expenses incurred by directors to attend board meetings and visits to group businesses. no non-executive director has an employment contract with the group although non-executive directors are required to conclude service agreements with the group which set out the duties and responsibilities expected of them as non-executive directors. The group’s non-executive directors do not receive bonuses or share options, recognising that this can create potential conflicts of interest, which can impair the independence which non-executive directors are expected to bring to bear in decision-making by the board. at the group’s agM, to be held on 17 September 2013, shareholders will be required to approve the non-executive director fees set out in the notice of agM on page 197 of this Integrated annual report.

contRActS, SEvERAncE AnD tERMInAtIon executive directors are subject to the group’s standard terms and conditions of employment where notice periods are six months. In line with the remuneration guidelines of King III, none of the executives have extended employment contracts, special termination benefits or balloon payments linked to any restraint of trade. The group’s policy when terminating the services of an

individual is to remunerate according to the guidelines established by governing labour law and, more specifically, as per the regulations of the Basic conditions of employment act prevalent at time of termination. The group aims to apply this policy to all employees, but it is subject to negotiation in special circumstances. for executive directors, unless termination of employment occurs as a result of the misconduct or poor performance of the executive director or his/her resignation (other than under circumstances of constructive dismissal), death, injury, illness or retirement, upon termination of employment the executive director shall be entitled to a severance payment equal to his/her annual cost to company employment package less any other payments made or becoming due to the executive director as a result of the termination of employment.

REtIREMEnt BEnEfItS During the year, the relevant group companies made contributions for all executive directors and employees to the Keaton energy administrative and Technical Services Provident fund with Liberty, the Keaton Mining Provident fund with Liberty and the Leeuw Mining and exploration Provident and Pension fund with Liberty and Sanlam (the funds), as part of their Tcc. The rate of contribution is between 3% and 15%, based on the pensionable salary of these individuals. The value of contributions for each executive director appears in the summary of directors’ remuneration and benefits on pages 181 to 182 of this Integrated annual report. none of the non-executive directors of the group contributed to the funds during the year or had any accrued pension fund benefits in the fund as at 31 March 2013. The remuneration committee has assessed the levels of funding and benefits of the funds and medical aid scheme with Discovery Health and satisfied itself that both were solvent and did not pose a risk to any of the group’s employees or retirees. During the year the group has also benchmarked the relative cost of group employee benefits (death, disability, etc) and has satisfied itself with the current benefit providers. The group has co-established a management committee operating according to terms of reference relevant to umbrella funds. This committee agreed a service level agreement with the consultant/financial adviser to the funds and drew up an investment policy statement.

othER BEnEfItS In addition to the benefits already described as part of their guaranteed packages, executive directors and employees also receive a death-in-service benefit. no ex-gratia payments or deferred awards of any nature were made during the review period.



KEATON ENERGY


Directors’ responsibility for the annual financial statements 102

Declaration by the company secretary 102

Directors’ report 103 – 105

Audit committee report 106

Independent auditor’s report 107

Statements of comprehensive income 108

Statements of financial position 109

Statements of changes in equity 110 – 111

Statements of cash flows 112

Significant accounting policies 113 – 131

Notes to the audited financial statements 132 – 187

The preparation of the financial statements as set out on pages 108 to 187 have been supervised by the group CFO, J Rossouw, a Chartered Accountant (SA). The financial statements have been audited by KPMG Inc., in compliance with the requirements of the Companies Act, 2008, as amended, whose audit report is presented on page 107.

ANNuAl FINANCIAl STATeMeNTS

Vaalkrantz


KeatonEnergy_Fins_PROOF 11 – 26 JULY 2013KeatonEnergy_Fins_PROOF 11 – 26 JULY 2013

KEATON ENERGY


KeatonEnergy_Fins_PROOF 11 – 26 JULY 2013

DIReCTORS’ ReSPONSIbIlITy FOR The ANNuAl FINANCIAl STATeMeNTS

DeClARATION by The COMPANy SeCReTARy

The directors are responsible for the preparation and fair presentation of the group annual financial statements and company annual financial statements of Keaton energy holdings limited, comprising the statements of financial position at 31 March 2013, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. In addition, the directors are responsible for preparing the directors’ report. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.

The directors have made an assessment of the ability of the company and its subsidiaries to continue as going concerns and have no reason to believe that the businesses will not be going concerns in the year ahead.

The auditor is responsible for reporting on whether the group annual financial statements and company annual financial statements are fairly presented in accordance with the applicable financial reporting framework.

Approval of group annual financial statements and company annual financial statementsThe group annual financial statements and company annual financial statements of Keaton energy holdings limited, as identified in the first paragraph, were approved by the board of directors on 26 July 2013 and signed by

Lizwi Mtumtum Jacques RossouwIndependent non-executive director Chief financial officer

I certify, in accordance with the Companies Act, No 71 of 2008, as amended, that for the year ended 31 March 2013 Keaton energy holdings limited has lodged with the Companies and Intellectual Property Commission all such returns and notices as are required of a public company in terms of this Act, and that all such returns and notices appear to be true, correct and up to date.

ML TaylorCompany secretary26 July 2013



DIReCTORS’ RePORT

The directors have pleasure in presenting the directors’ report to the financial statements for the year ended 31 March 2013.

1 Nature of business Keaton energy holds interest in subsidiaries that develop and operate coal mines in South Africa. The mines produce thermal

coal for supply to eskom, South Africa’s power utility, and metallurgical coal of varying quality for sale to domestic and export customers.

2 Review of business and operations The financial results for Keaton energy are presented for the year ended 31 March 2013 and the comparative results are

presented for the year ended 31 March 2012.

The group’s intention, since its founding in 2006, has been to take its South African exploration prospects rapidly up the value curve – through exploration and development to mining – to produce 2Mt pa of saleable coal in the short term, a target it comfortably achieved, and to grow into a mid-tier, 5Mt pa coal producer in the medium term.

The 2013 financial year saw the Keaton energy group not only build successfully on the production platform it established in the previous year, but also advance its portfolio of development projects significantly. The following commentary summarises the group’s key activities during the year.

Safety Safety is of paramount importance to the Keaton energy group and we are pleased to announce another fatality-free year of

operation. Our continuous focus on safety, coupled with intensive safety training initiatives and rigorous management, resulted in record safety figures in Fy13. It is pleasing to report that Vanggatfontein ended the year with a zero lTIFR compared with 0.38 for Fy12 whilst Vaalkrantz lTIFR improved to 0.36 from 0.45 over the same period. We congratulate all involved in keeping our workplaces safe.

Markets Our coal is sold into three distinct markets: 1. Domestic thermal coal contracted to eskom; 2. 5-seam coal and premium anthracite to domestic metallurgical customers; and 3. Anthracite exported to brazil, through our off-take partner Gunvor SA.

Our relationship with eskom, our biggest customer by volume, has continued to strengthen through the delivery of a consistent quality product to a number of their power stations. Our entire 5-seam and premium anthracite production remains in great demand locally and all product is sold as it is produced. Domestic metallurgical coal prices remained buoyant during the period despite furnace operators reducing output. In contrast, our single export market for anthracite, the brazilian iron ore pelletising industry, saw prices decline in line with the softening of coal prices globally.

Operational review Vanggatfontein Vanggatfontein delivered 1.5Mt of washed 2 and 4-seam thermal coal to eskom during Fy13, an increase of 58% from the

previous year’s 0.96Mt. As expected, 5-seam metallurgical coal sales declined to 0.06Mt from 0.14Mt, as a result of Pit 1 5-seam coal being depleted in line with the mine plan. The spare capacity of the 5-seam plant was utilised for the toll washing of 0.1Mt of third party coal. The development of Pit 3 during the second half of the year, however, provides renewed and consistent 5-seam supply as well as better yielding 2 and 4-seam coal. Record safety and production performances were achieved at the colliery, despite significant challenges in terms of the continuity of local electricity supply, continued poor performance of the front end of the 2 and 4-seam plant and, of course, the transport workers’ strike action during the middle of the year. Mining operations improved significantly from August with the change in mining contractor. eskom has worked diligently to resolve the power supply issues, including a five-day supply change-out in December – and we have started to see benefits in this regard. Work still remains to be done to reach acceptable performance levels at the front end of the plant.

Group overview 4Annual reviews 22Operational review 36Operating context 56Financial performance review 66environmental, labour and social review 74Governance 86 Annual financial statements 100Shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY


DIReCTORS’ RePORT coNTiNuEd

Vaalkrantz Vaalkrantz dispatched 0.33Mt of anthracite to domestic and international metallurgical markets, a 7% decrease over the

previous year’s 0.35Mt. The operation suffered from extremely difficult mining conditions in the West Alfred section of the mine which limited production. Nevertheless, it is pleasing to note that, notwithstanding these difficulties, the colliery’s safety performance improved.

Group operating and financial performance Group revenue increased by 94% from R474.4 million in Fy12 to R918.8 million in Fy13. The increase was as a result of

improved deliveries of thermal coal to eskom and the inclusion of 12 months of Vaalkrantz sales compared to only three and a half months in Fy12. however, group revenue was impacted negatively by lower than planned thermal coal sales to eskom as a result of poor plant throughput at Vanggatfontein, and a decrease in sales tonnes and export prices at Vaalkrantz. The group recorded a gross loss of R27.3 million for Fy13 compared to a gross profit of R14.6 million in Fy12. This is mainly due to lower than planned thermal coal sales as noted above and a higher depreciation charge of R227.1 million compared to R122.9 million in Fy12 as a result of an increase in coal production at Vanggatfontein and the early adoption of IFRIC 20. however, the second half of Fy13 saw improved performance resulting in a decrease of the gross loss reported at half year from R37.9 million to R27.3 million for the year. Production costs were tightly controlled and cost reduction remains a key focus at both operations.

During the year, a decision was taken to close Pit 1 at Vanggatfontein as it was no longer economic. This decision resulted in a loss on the derecognition of the asset of R51.2 million. Future coal production from Pit 2 will now be supplemented by coal from Pit 3. As a result total comprehensive income declined to a loss of R132.3 million compared to a profit of R112.1 million in Fy12 which included the once off recognition of the gain on business combination of R114.4 million with the acquisition of lMe in Fy12. headline earnings per share reduced from a profit of 9.5 cents in Fy12 to a loss of 30.2 cents in Fy13.

Capital investment for the group totalled R210.5 million in Fy13 compared to R248.4 million in Fy12 (excluding the acquisition of lMe). The majority of capital was spent at Vanggatfontein, with some R204.0 million being invested, mainly applied to stripping costs of R131.0 million, box cut development in both Pit 2 and Pit 3 of R55.3 million and infrastructure of R13.9 million.

Cash and cash equivalents at the end of the year decreased by R40.9 million mainly due to the capital investment discussed above, funding of additional rehabilitation commitments of R4.0 million and the repayment of R42.1 million of the Nedbank project finance facility. These were offset by cash generated from operations of R217.8 million and cash raised by the issue of shares in July 2012 of R8.7 million.

Development pipeline During Fy13, the group completed concept studies on both the braakfontein and Sterkfontein Projects resulting in a 32%

increase in the Sterkfontein resource. both projects will be advanced in Fy14 with braakfontein taking priority. Drilling for portal placement at Koudelager, Vaalkrantz’s life extension project, will be completed during Q2 Fy14 with the intention of commencing mining activities during the course of the year.

3 Share capital Authorised share capital: 250 000 000 (Fy12: 250 000 000) ordinary shares with a par value of R0.001 (one tenth of a cent)

each (Fy12: R0.001 each).

Issued share capital: 191 663 141 (Fy12: 188 752 600) ordinary shares with a par value of R0.001 (one tenth of a cent) each (Fy12: R0.001 each). Refer to note 36 for subsequent conversion of ordinary shares into shares with no par value.

4 directorate Founding managing director, Paul Miller, left the group in July 2012 having succeeded in his mandate of taking Keaton

energy from an unlisted explorer to a listed producer. We thank him for all of his hard work and wish him well in his new endeavours. Rowan Karstel replaced Paul for a brief period before being replaced in September 2012 by current CeO, Mandi Glad. Mandi, another founding executive of the group, was previously group COO and, prior to that, group marketing director. To assist in the transition, David Salter assumed a short-term executive chairmanship role and, in the interest of good corporate governance, lizwi Mtumtum was appointed lead independent director. The board was strengthened further in November 2012 when well-known mining industry leader, Gerard Kemp, joined the board as an independent non-executive director.



The directors that held office at the date of this report are:

Name and nationality (South African, unless otherwise stated) Position independent

JD Salter (british) executive chairman NolX Mtumtum Non-executive director yes OP Sadler Non-executive director yesD Jonker (Dutch) Non-executive director NoP Pouroulis (South African/Cypriot) Non-executive director NoAPe Sedibe Non-executive director NoGh Kemp Non-executive director yesAb Glad executive director NoJ Rossouw executive director No

5 Auditors At the forthcoming AGM, shareholders will be requested to reappoint KPMG Inc. as auditors of the company and to hold

office for the ensuing year until the conclusion of the next AGM. The designated partner will be required to rotate as he has reached the five-year rotational requirement.

6 company secretary Mrs Michelle louise Taylor, the company secretary’s contact details are the same as the company’s registered address given

below.

Registered address Ground Floor eland house The braes 3 eaton Avenue bryanston 2191

7 Special resolutions Special resolutions approved for the company and its subsidiaries during the financial year are as follows:

company Special resolutions date

Keaton energy holdings limited » AGM – Special resolution number 1: Non-executive directors’ fees for the year ended 31 March 2013

28 August 2012

» Special resolution number 2: Financial assistance » Special resolution number 3: General authority to purchase shares

Keaton energy holdings limited » GM – Special resolution number 1: Conversion of par value shares to no par value shares

28 May 2013

» Special resolution number 2: Increase in authorised share capital

» Special resolution number 3: Adoption of the MOI



KEATON ENERGY


AuDIT COMMITTee RePORT

The audit committee comprises three independent non-executive directors, namely lizwi Mtumtum (chairman), Paul Sadler and Gerard Kemp and the group’s executive chairman, Dr David Salter.

During the year under review, the CFO, PricewaterhouseCoopers Inc., the internal auditors, and KPMG Inc., the external auditors, attended audit committee meetings by invitation.

In line with section 94(2) of the Companies Act, No 71 of 2008, as amended, the audit committee is no longer a committee of the board but a committee elected by shareholders at each AGM.

The audit committee’s statutory duties as set out in the Companies Act, No 71 of 2008, as amended (the Act), and provisions of the JSe listings Requirements and responsibilities as set out in the Act, are also incorporated in the audit committee’s terms of reference, which are reviewed annually and, if necessary, are amended to meet market, regulatory and internal needs. These terms of reference set out the basis for the audit committee’s functioning, including the requirement to consider and monitor the independence of external auditors, and the appropriate rotation of the lead partner and to make recommendations to the board on the appointment or dismissal of the internal and external auditors.

The audit committee’s duties relate to the management of financial risk across Keaton energy, the safeguarding of assets, the maintenance of adequate systems and control processes, and compliance with legal and accounting standard requirements in the company’s financial reporting and accounting statements. It also reviews the internal audit charter, internal audit annual plan, the external audit scope and accounting, taxation and financial reporting issues. The audit committee monitors proposed changes in accounting policy and considers the accounting and taxation implications of transactions. It also considers the appropriateness of the expertise and experience of the CFO. The findings and recommendations of the internal and external auditors are used to determine the effectiveness of internal control systems.

Consultation between internal and external auditors is encouraged to achieve an efficient audit process. The external auditors attend the audit committee meetings by invitation and have unrestricted informal access to the chairman of the audit committee. The audit committee has approved a non-audit services policy and set the principles for recommending the use of external auditors for non-audit services. The audit committee is satisfied that the independence of the external auditors is maintained at all times and is not compromised by the relationship the external auditors have built with the executive directors during their external audit functions.

The audit committee met formally four times during the financial year to consider financial reporting issues and to advise the board on a range of matters, including corporate governance practices, internal control policies and procedures, and internal and external audit management. The chairman of the audit committee is required to report to the board after each meeting.

During the year under review, the audit committee was re-appointed by the subsidiaries of the company as their respective audit committee. Furthermore, the audit committee recommended to the board the re-appointment of PricewaterhouseCoopers Inc. as the internal auditors, determined their fees and their terms of engagement, received internal audit reports as per the internal audit plan, and whose findings confirmed the group’s good internal control policies and procedures and made further recommendations on improving others. The internal auditors have a direct reporting line to the chairman of the audit committee with the operational reporting line to the chief executive officer and/or her designate. The internal auditors attend all audit committee meetings by invitation and have direct access to the chairman of the audit committee.

In addition, the audit committee recommended the re-appointment of KPMG Inc. as the external auditors, determined their fees and their terms of engagement, and reviewed and recommended the approval of the interim and annual financial statements to the board.

The board has determined that the audit committee fulfilled its responsibilities for the year under review and, as required, reports that it is satisfied with the expertise and experience of the CFO and the independence of KPMG Inc. as the external auditors.



INDePeNDeNT AuDITOR’S RePORT

To the shareholders of Keaton Energy Holdings LimitedWe have audited the group financial statements and company financial statements of Keaton energy holdings limited, which comprise the statements of financial position at 31 March 2013, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 108 to 187.

directors’ responsibility for the financial statements The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements 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 about 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, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Keaton energy holdings limited at 31 March 2013, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

other reports required by the companies Act As part of our audit of the financial statements for the year ended 31 March 2013, we have read the directors’ report, the audit committee report and the declaration by the company secretary for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. however, we have not audited these reports and accordingly do not express an opinion on these reports.

KPMG inc.Registered auditor

Per Shaun van den Boogaard KPMG ForumChartered Accountant (SA) 1226 Francis baard StreetRegistered Auditor hatfieldDirector Pretoria26 July 2013 0083



KEATON ENERGY


for the year ended 31 March 2013

STATeMeNTS OF COMPReheNSIVe INCOMe

Notes

Year to 31 March

2013 R

year to 31 March

2012(1)

R

Year to 31 March

2013 R

year to 31 March

2012(2)

R

Revenue 1 918 807 387 474 365 518 90 490 337 77 941 179 Cost of sales 2 (946 080 924) (459 792 791) (4 331 869) (3 988 134)

Gross (loss)/profit (27 273 537) 14 572 727 86 158 468 73 953 045 Other income 3 10 593 615 25 544 215 – – Mining and related expenses 10 (70 491 701) (10 349 958) – – Net gain on financial instruments 4 2 484 669 1 689 569 – – Administrative and other operating expenses (54 722 913) (26 521 135) (23 835 103) (17 047 172)(Impairment)/reversal of impairment of investments in subsidiaries – – (2 342 203) 5 410 220

Results from operating activities 5 (139 409 867) 4 935 418 59 981 162 62 316 093 Gain on business combination 6 – 114 384 579 – –

operating (loss)/profit before net finance (cost)/income (139 409 867) 119 319 997 59 981 162 62 316 093 Net finance (cost)/income 7 (32 198 738) (13 405 615) 234 782 2 285 446 Finance income 2 109 111 17 541 785 246 833 2 285 446 Finance costs (34 307 849) (30 947 400) (12 051) –

Net (loss)/profit before taxation (171 608 605) 105 914 382 60 215 944 64 601 539 Income taxation credit/(expense) 8 39 334 759 6 184 233 (3 589 871) (3 057 274)

Total comprehensive income for the year (132 273 846) 112 098 615 56 626 073 61 544 265

Total comprehensive income attributable to:Owners of the company (84 491 188) 132 014 368Non-controlling interest (47 782 658) (19 915 753)

Basic earnings per share (cents) 9 (44.2) 75.2 diluted earnings per share (cents) 9 (44.2) 75.2

The accompanying notes are an integral part of these financial statements.(1) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production phase of a surface

mine”. Refer to note 4 of the significant accounting policies.(2) The comparative information has been restated as a result of a re-presentation between finance income and revenue. Refer to note 1 of the notes

to the financial statements.

Group company



at 31 March 2013

STATeMeNTS OF FINANCIAl POSITION

Notes

31 March 2013

R

31 March2012(1)

R

31 March 2013

R

31 March2012

R

AssetsProperty, plant and equipment 10 776 069 909 832 702 579 – – Interest in subsidiary companies 11 – – 807 285 394 721 569 126 Intangible assets 12 424 130 880 423 887 605 – – Deferred tax 13 51 832 156 16 638 451 – – Restricted cash 14.1 7 423 204 7 423 204 1 418 581 1 418 581 Restricted investments 15 26 682 869 13 027 029 – –

Total non-current assets 1 286 139 018 1 293 678 868 808 703 975 722 987 707

Inventory 16 38 492 562 23 117 016 – – Trade and other receivables 17 85 214 842 104 324 841 910 765 148 753 Restricted cash 14.1 – 6 600 000 – – Cash and cash equivalents 14.2 19 614 150 60 549 397 421 656 16 560 532

Total current assets 143 321 554 194 591 254 1 332 421 16 709 285

Total assets 1 429 460 572 1 488 270 122 810 036 396 739 696 992

EquityShare capital 18 191 663 188 752 191 663 188 752 Share premium 18 640 711 274 632 053 834 640 711 274 644 053 834 Share-based payment reserve 18 & 19 12 496 640 6 180 562 8 673 572 4 233 367 Other reserves 20 (18 751 111) (18 751 111) (18 751 111) (30 751 111)Retained earnings 74 572 978 159 064 166 175 149 899 118 523 826

Total equity attributable to owners of the company 709 221 444 778 736 203 805 975 297 736 248 668 Non-controlling interest (23 184 564) 24 598 094

Total equity 686 036 880 803 334 297 805 975 297 736 248 668

Liabilitiesborrowings 21 235 389 698 248 156 340 – – long-term financial liabilities 22 303 161 612 909 – – Mine closure and environmental rehabilitation provision 23 137 450 832 112 856 645 – – Deferred tax 13 87 353 356 93 837 860 907 112 75 592

Total non-current liabilities 460 497 047 455 463 754 907 112 75 592

borrowings 21 49 428 420 49 176 373 – – Mine closure and environmental rehabilitation provision 23 2 858 620 326 211 – – Trade and other payables 24 229 801 120 179 355 823 2 315 502 2 759 068 Taxation 838 485 613 664 838 485 613 664

Total current liabilities 282 926 645 229 472 071 3 153 987 3 372 732

Total equity and liabilities 1 429 460 572 1 488 270 122 810 036 396 739 696 992


mine”. Refer to note 4 of the significant accounting policies.

Group company



KEATON ENERGY



STATeMeNTS OF ChANGeS IN eQuITy

Share capital

R

Share premium

R

Share-based

payment reserve

R

Retained earnings

R

Other reserves

R

Total equity attributable to owners of the

companyR

Non-controlling

interest (NCI)R

Total equity

R

Notes 18 18 18 and 19 20

GroupBalance at 31 March 2011 as previously reported 171 547 567 717 887 2 394 727 21 019 688 – 591 303 849 (9 757 139) 581 546 710effects of adopting IFRIC 20(1) – – – – – – – –

Revised balance at 31 March 2011 171 547 567 717 887 2 394 727 21 019 688 – 591 303 849 (9 757 139) 581 546 710

Total comprehensive income for the year – – – 132 014 368 – 132 014 368 (19 915 753) 112 098 615Transactions with owners of the company recognised directly in equityOrdinary shares issued for consideration other than cash 17 205 76 402 795 – – – 76 420 000 – 76 420 000 Share issue expenses – (66 848) – – – (66 848) – (66 848)Share-based payments – – 3 785 835 – – 3 785 835 – 3 785 835 Reserves attributable to business combination – – – – (30 751 111) (30 751 111) – (30 751 111)Share-based payments transferred – (12 000 000) – – 12 000 000 – – –changes in ownership interests in subsidiariesbusiness combination (refer note 6) – – – – – – 60 301 096 60 301 096 Dilution of non-controlling interests (refer note 6) – – – 6 030 110 – 6 030 110 (6 030 110) –

Balance at 31 March 2012 188 752 632 053 834 6 180 562 159 064 166 (18 751 111) 778 736 203 24 598 094 803 334 297

Total comprehensive income for the year – – – (84 491 188) – (84 491 188) (47 782 658) (132 273 846)Transactions with owners of the company recognised directly in equityOrdinary shares issued for cash 2 911 9 019 767 – – – 9 022 678 – 9 022 678Share issue expenses – (362 327) – – – (362 327) – (362 327)Share-based payments – – 6 316 078 – – 6 316 078 – 6 316 078

Balance at 31 March 2013 191 663 640 711 274 12 496 640 74 572 978 (18 751 111) 709 221 444 (23 184 564) 686 036 880


mine”. Refer to note 4 of the significant accounting policies.



Share capital

R

Share premium

R

Share-based

payment reserve

R

Retained earnings

R

Other reserves

R Total

R

Notes 18 18 18 and 19 20

company

Balance at 31 March 2011 171 547 567 717 887 2 065 269 56 979 561 – 626 934 264

Total comprehensive income for the year – – – 61 544 265 – 61 544 265 Transactions with owners of the company recognised directly in equityOrdinary shares issued for consideration other than cash 17 205 76 402 795 – – – 76 420 000 Share issue expenses – (66 848) – – – (66 848)Share-based payments – – 2 168 098 – – 2 168 098 Reserves attributable to business combination – – – – (30 751 111) (30 751 111)

Balance at 31 March 2012 188 752 644 053 834 4 233 367 118 523 826 (30 751 111) 736 248 668

Total comprehensive income for the year – – – 56 626 073 – 56 626 073 Transactions with owners of the company recognised directly in equityOrdinary shares issued for cash 2 911 9 019 767 – – – 9 022 678 Share issue expenses – (362 327) – – – (362 327)Share-based payments – – 4 440 205 – – 4 440 205 Share-based payments transferred – (12 000 000) – – 12 000 000 –

Balance at 31 March 2013 191 663 640 711 274 8 673 572 175 149 899 (18 751 111) 805 975 297

The accompanying notes are an integral part of these financial statements.



KEATON ENERGY



STATeMeNTS OF CASh FlOWS

Notes

Year to 31 March

2013 R

year to 31 March

2012(1)

R

Year to 31 March

2013 R

year to 31 March

2012(2)

R

cash flows from operating activities

Cash generated from/(utilised in) operations 26.1 217 763 118 128 032 891 (16 453 277) (8 538 265)Interest received 1 506 512 3 798 613 246 833 2 285 446 Interest paid (25 353 430) (702 302) (12 051) –Taxation paid 26.2 (2 118 629) (1 608 653) (2 533 530) (1 608 653)

cash flows from operating activities 191 797 571 129 520 549 (18 752 025) (7 861 472)

cash flows from investing activitiesIncrease in investments in subsidiary companies 26.3 – – (6 047 202) 11 283 894Additions to property, plant and equipment to expand operations (213 047 626) (315 940 727) – –Additions to exploration and evaluation assets (1 757 791) (52 309) – –loans advanced to lMe – (5 242 513) – (5 242 513) Acquisition of subsidiary, net of cash acquired 6 – 21 129 619 – 10 000 000 Proceeds on disposal of property, plant and equipment 1 844 975 1 754 386 – –Investment in restricted investments (10 585 682) (965 571) – –

Withdrawal from/(investment) in restricted cash 6 600 000 3 438 534 – (158 760)

cash flows from investing activities (216 946 124) (295 878 581) (6 047 202) 15 882 621

cash flows from financing activitiesProceeds from the issue of shares 9 022 678 – 9 022 678 –Payment of share issue expenses (362 327) (66 847) (362 327) (66 847) borrowings repaid (24 447 045) (311 716) – –borrowings raised – 204 540 594 – –Transaction costs relating to project finance arrangements – (4 254 687) – –

cash flows from financing activities (15 786 694) 199 907 344 8 660 351 (66 847)

Net (decrease)/increase in cash and cash equivalents (40 935 247) 33 549 312 (16 138 876) 7 954 302 Cash and cash equivalents at the beginning of the year 60 549 397 27 000 085 16 560 532 8 606 230

cash and cash equivalents at the end of the year 14.2 19 614 150 60 549 397 421 656 16 560 532 (1) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production phase of a surface

mine”. Refer to note 4 of the significant accounting policies.(2) The comparative information has been restated as a result of a re-presentation between finance income and revenue. Refer to note 1 of the notes

to the financial statements.

Group company




SIGNIFICANT ACCOuNTING POlICIeS

1 General information Keaton energy holdings limited (registration number: 2006/011090/06) (the company) and its subsidiaries (collectively

Keaton or the group) are primarily involved in coal mining and related activities including exploration, extraction and processing of coal at its operations in the Republic of South Africa.

The company is a public company incorporated and domiciled in South Africa, with its registered office at Ground Floor, eland house, The braes, 3 eaton Road, bryanston, 2191.

The group and company financial statements were authorised for issue by the board of directors on 26 July 2013.

2 Accounting policies The principal accounting policies applied in the preparation of the group and company financial statements are set out below.

These policies have been consistently applied by group entities in all years presented, unless otherwise stated. These financial statements are presented in South African Rand (R), which is the company’s functional currency. All financial information presented has been rounded to the nearest Rand.

Where reference is made in the basis of preparation to the group, it should be interpreted as being applied to the group and company as the context requires.

Basis of preparation The financial statements of the group and company have been prepared in accordance with IFRS as issued by the

International Accounting Standards board, International Financial Reporting Interpretations Committee, the Companies Act of South Africa and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting pronouncements as issued by the Financial Reporting Standards Council. The financial statements have been prepared under the historical cost convention, except for the following material items in the statement of financial position: » Derivative financial instruments are measured at fair value. » Non-derivative financial instruments at fair value through profit or loss are measured at fair value. » Share-based payments at fair value.

The preparation of the financial statements in conformity with IFRS requires the group’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. In particular, information about significant areas of estimation uncertainty or where a higher degree of judgement or complexity is involved in applying accounting are disclosed in note 3 to the accounting policies.

New standards, amendments to standards and interpretations to existing standards adopted by the group The effective dates below are for financial periods beginning on or after the given date.

The following interpretation is not yet effective but have been early adopted by the group: » IFRIC 20 – “Stripping costs in the production phase of a surface mine”. Please refer to the significant accounting policies, note 4 in this regard.

New standards, amendments to standards and interpretations to existing standards that are not yet effective and have not been early adopted

At the date of authorisation of these financial statements, the standards, amendments to standards and interpretations listed below were in issue but not yet effective. These standards and interpretations have not been early adopted by the group and management is currently evaluating the impact of these on the group. The group plans to adopt these standards, amendments to standards and interpretations, where applicable, on the dates when they become effective.



KEATON ENERGY



SIGNIFICANT ACCOuNTING POlICIeS coNTiNuEd

2 Accounting policies (continued) Basis of preparation (continued) New standards, amendments to standards and interpretations to existing standards that are not yet effective and have not been early

adopted (continued) The following standards or amendments to standards are not expected to be relevant to the group:

IFRS 1 (amendment) Government Loans (effective 1 January 2013) IFRS 10, IFRS 12 and IAS 27 (amendment) Investment Entities (effective 1 January 2014) IFRS 11 Joint Arrangements (effective 1 January 2013) IAS 19 (amendments) Employee Benefits: Defined Benefit Plans (effective 1 January 2013) IAS 28 Investments in Associates and Joint Ventures (2011) (effective 1 January 2013) Seven individual amendments to five standards – Improvements to International Financial Reporting Standards 2012 (effective

1 January 2013)

The following standards, amendments to standards and interpretations to existing standards may possibly have an impact on the group but have not yet been assessed by management:

IAS 1 (amendment) Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income (effective 1 July 2012)

The amendment requires that an entity present separately the items of other comprehensive income that would be reclassified to profit or loss in future as well as the aggregated tax amount if certain conditions are met from those that would never be reclassified to profit or loss. The amendment also changes the title of the statement of comprehensive income to the statement of profit or loss and other comprehensive income. The amendment, however, does not change the existing option to present profit or loss and other comprehensive income in two statements. The amendment is applied retrospectively, subject to transitional provisions.

IFRS 10 and IFRS 12 (amendment) Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (effective 1 January 2013)

IFRS 10 introduces a single control model to determine whether an investee should be consolidated. As a result the group may need to change its consolidation conclusion in respect of its investees, which may lead to changes in the current accounting for these investees.

IFRS 12 brings together in a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The group is currently assessing the disclosure requirements for interests in subsidiaries in comparison with the existing disclosures. IFRS 12 requires the disclosure of information about the nature, risks and financial effects of these interests.

IAS 32 Offsetting Financial Assets and Financial Liabilities (effective 1 January 2014) The amendments clarify when an entity can offset financial assets and financial liabilities.

IFRS 13 Fair Value Measurement (effective 1 January 2013) This standard provides a precise definition of fair value and represents a single source of fair value measurement and

disclosure requirements for use across IFRS. The standard clarifies factors to be considered in estimating fair value in accordance with IFRS, but does not establish valuation standards on how valuations should be performed. It does, however, identify the key principles in estimating fair values.

IAS 27 Separate Financial Statements (2011) (effective 1 January 2013) This updated standard includes the provisions on separate financial statements which remain after the control provisions of

IAS 27 have been included in the new IFRS 10.



IFRS 7 (amendment) Disclosures: Offsetting Financial Assets and Financial Liabilities (effective 1 January 2013) The amendment deals with the disclosure requirements relating to the offset of financial assets and financial liabilities in the

statement of financial position and the nature and extent of offsetting rights under enforceable master netting arrangements or similar agreements. Disclosures include a reconciliation of gross and net amounts of financial assets and financial liabilities, separately showing amounts offset and not offset in the statement of financial position.

IFRS 9 Financial Instruments IFRS 9 (2009) (effective 1 January 2015) The standard will be applied retrospectively, subject to transitional provisions. IFRS 9 addresses the initial measurement and

classification of financial assets and will replace the relevant sections of IAS 39.

under IFRS 9, there are two options in respect of classification of financial assets, namely, financial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value. embedded derivatives are no longer separated from hybrid contracts that have a financial asset host.

IFRS 9 (2010) (effective 1 January 2015) The standard will be applied retrospectively, subject to transitional provisions. IFRS 9 (2010) addresses the measurement and

classification of financial liabilities and will replace the relevant sections of IAS 39.

under IFRS 9 (2010), the classification and measurement requirements of financial liabilities are the same as per IAS 39, except for the following two aspects: » Fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss that are attributable to the changes in the credit risk of the liability will be presented in other comprehensive income. The remaining amount of the fair value change is recognised in profit or loss. however, if this requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently re-assessed.

» under IFRS 9 (2010) derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.

IFRS 9 (2010) incorporates the guidance in IAS 39 dealing with fair value measurement and accounting for derivatives embedded in a host contract that is not a financial asset, as well as the requirements of IFRIC 9 Re-assessment of Embedded Derivatives. The impact on the financial statements for the group has not yet been estimated.

IFRS 9 (amendment) (effective 1 January 2015) The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from

IAS 39, without change, except for financial liabilities that are designated at fair value through profit or loss. The amendment introduces new requirements that address the problem of volatility in profit or loss arising from an issuer choosing to measure its own debt at fair value. With the new requirements, an entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity’s own credit risk in the OCI section of the statement of comprehensive income, rather than within profit or loss.



KEATON ENERGY




2 Accounting policies (continued) Basis of preparation (continued) consolidation The consolidated financial information includes the financial statements of the company, its subsidiaries, and its interest in

special-purpose entities.

(i) business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control the group takes into consideration potential voting rights that currently are exercisable. The group measures goodwill at the acquisition date as the fair value of the consideration transferred plus the recognised amount of any non-controlling interests in the acquiree plus if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in the statement of comprehensive income. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in the statement of comprehensive income.

Transaction costs other than those associated with the issue of debt or equity securities, that the group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise subsequent changes in the fair value of the contingent consideration are recognised in the statement of comprehensive income.

When share-based payment awards are required to be exchanged for awards held by the acquiree’s employees and relate to past service, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to the past and/or future service.

(ii) Subsidiaries are all entities (including special-purpose entities) over which the group has power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the group and are deconsolidated when that control ceases.

Investments in subsidiaries are accounted for at cost less impairment in the company's separate financial statements. Interest in subsidiaries in the company’s separate financial statements include monetary items (preference share investments and loans) and are accounted for as follows: » share investments – at cost; » preference share investments – in accordance with IAS 39; and » loans – in accordance with IAS 39.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the company.

(iii) Special-purpose entities (SPes) are those undertakings that are created to satisfy specific business needs of the group. These are consolidated where the group has the right to the majority of the benefits of the SPe and/or is exposed to the majority of the risk thereof. SPes are consolidated in the same manner as subsidiaries when the substance of the relationship indicates that the SPe is controlled by the group.



(iv) Transactions with non-controlling interests: The group treats transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is recognised in equity. Gains or losses on disposals to non-controlling interests are also recognised in equity. When the group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in the statement of comprehensive income. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in OCI are reclassified to the statement of comprehensive income.

(v) Non-controlling interests: For each business combination, the group elects to measure any non-controlling interest in the acquiree either: » at fair value; or » at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Changes in the group‘s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit and loss.

(vi) loss of control: On the loss of control, the group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit and loss. If the group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently that retained interest is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

Foreign currency translation Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the

transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are re-translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are re-translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Property, plant and equipment (i) Mining assets Mining assets include mine development costs, assets under construction, plant and equipment and mine infrastructure

associated with production phase mineral interests and are initially recognised at cost, after which it is measured at cost less accumulated depreciation and impairment. Costs include expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. Mine development is derecognised when a formal decision is taken to close a pit, mainly when it becomes not economic to continue mining. Any loss realised on the derecognition of the asset is recognised in the statement of comprehensive income.

At the group’s surface mines, when it has been determined that a mineral property can be economically developed as a result of establishing proved and probable reserves, costs incurred to develop the property are capitalised as incurred until the mine is considered to have moved into the production phase. These costs include costs to further delineate the coal seam and remove overburden to initially expose the coal seams.



KEATON ENERGY




2 Accounting policies (continued) Property, plant and equipment (continued) Stripping costs incurred during the production phase of the group’s surface operations to remove overburden and expose

the coal reserve are capitalised as a stripping activity asset only when: (a) it is probable that the future economic benefits (improved access to the coal reserve) associated with the stripping

activity will flow to the group; (b) the group can identify the component of the coal reserve exposed by the stripping activity; and (c) the costs relating to the stripping activity associated with that component can be measured reliably.

The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset (mine development).The stripping activity asset is initially measured at cost, being the accumulation of costs directly attributable to the stripping activity, plus an allocation of directly attributable overhead costs. The group identifies a component as the smallest measurable portion of the coal reserve within a pit, which the stripping activity provides direct access to and is usually identified through survey results. After initial recognition, the stripping activity asset is measured at cost less accumulated depreciation and accumulated impairment losses. The stripping activity asset is depreciated on a systematic basis, over the expected production life of the identified component of the coal reserve.

At the group’s underground mines, all costs incurred to develop the property, including costs to access specific coal seams or other areas of the underground mine, are capitalised to the extent that such costs will provide future economic benefits. These costs include the cost of building access ways, continuing development, ramps, initial box cuts and other infrastructure development. These assets are depreciated on a systematic basis, over the expected production life of the coal reserve.

borrowing costs are capitalised to the extent that they are directly attributable to the acquisition and construction of qualifying assets. Qualifying assets are assets that take a substantial time to get ready for their intended use. These costs are capitalised until the asset moves into the production phase. Other borrowing costs are expensed. Where a depreciable asset is used in the construction or extension of a mine, the depreciation is capitalised against the mine’s cost.

Where an item of plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of plant and equipment.

expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalised when the costs can be reliably measured and if it is probable that the future economic benefits embodied within the component will flow to the group. The carrying amount of the replaced component, if any, is derecognised and charged to the statement of comprehensive income. Maintenance, day-to-day servicing and repairs, which neither materially add to the value of assets nor appreciably prolong their useful lives, are charged to the statement of comprehensive income.

(ii) Non-mining assets land is shown at cost and not depreciated. Other non-mining items of property, plant and equipment, which include

buildings and leasehold improvement, furniture and equipment and motor vehicles are shown at cost less accumulated depreciation and accumulated impairment losses.

(iii) Depreciation and amortisation Depreciation and amortisation of mining assets are computed principally by the units of production method based on

estimated quantities of economically recoverable proved and probable reserves, which can be recovered in future from known mineral deposits. In most instances, proved and probable reserves provide the best indication of the useful life of the group’s mines (and related assets).

Assets under construction are not depreciated until they are available for use, upon which they are transferred to another relevant mining asset category.



(iv) Depreciation and amortisation of other mining assets and non-mining items of property, plant and equipment Other mining assets and non-mining items of property, plant and equipment are depreciated either on the unit of

production method or on a straight-line basis over their estimated useful lives as follows: » buildings: life of the mine. » Plant and equipment: straight-line method. » Mine infrastructure: the life of the mine. » Vehicles: 20% per year. » Computer equipment: 33.3% per year. » Commercial, off-the-shelf software: 50% per year. » Furniture and equipment: between 10% and 20% per year. » leasehold improvements on premises occupied under operating leases are written off over the term of the lease or its useful life if shorter.

The assets’ residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the statement of comprehensive income.

(v) Depreciation and amortisation of mineral and surface use rights Mineral interests associated with development and exploration phase mineral interests are not amortised until such time

as the underlying property is converted to the production stage.

intangible assets exploration and evaluation costs, including the costs of acquiring prospecting rights and directly attributable exploration

expenditure, are capitalised as exploration and evaluation assets on a project-by-project basis, pending determination of the technical feasibility and commercial viability of each such project. Costs are recognised as exploration and evaluation costs from the date of granting of a prospecting right. The capitalised costs are presented as exploration and evaluation assets as a result of the nature of the assets acquired.

The technical feasibility and commercial viability of extracting a mineral resource is considered to be determinable when proved reserves are determined to exist. upon determination of proved reserves, exploration and evaluation assets attributable to those reserves are first tested for impairment by allocating the relevant assets to cash-generating units or groups of cash-generating units, and then reclassified from exploration and evaluation assets to other appropriate categories of non-current assets. Amortisation of these assets commences once these assets are appropriately reclassified and are in commercial production.

exploration and evaluation assets are assessed for impairment based on the guidance as provided by IFRS 6 Exploration for and Evaluation of Mineral Resources. These include: » the period to explore, as granted in terms of the prospecting rights acquired, has expired during the period; or will expire in the near future; or is not expected to be renewed;

» further exploration on the projects is neither budgeted nor planned for in the near future; » a decision was made not to develop a project; and » there is an indication that the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from a successful development or the sale of the project.

If a project is abandoned, the related costs are expensed in the statement of comprehensive income immediately.

Amortisation of exploration and evaluation assets commences when these assets are reclassified from exploration and evaluation assets to property, plant and equipment once these assets reach commercial production.

Intangible assets include acquisition related fair values of the Quattro Scheme Participation of the Richards bay Coal Terminal (RbCT). These assets are amortised on a straight-line basis over the expected life of the mines that will supply coal product to the RbCT. Intangible assets are evaluated for impairment indicators annually at the reporting date.



KEATON ENERGY




2 Accounting policies (continued) impairment of non-financial assets Assets that are subject to depreciation or amortisation are reviewed annually at the reporting date for impairment indicators

or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised in the statement of comprehensive income for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). each operating colliery, along with allocated common assets such as plants and administrative offices, is considered to be a cash-generating unit as each colliery is largely independent from the cash flows of other collieries and assets belonging to the group.

Fair value less cost to sell is generally determined by using discounted estimated after-tax future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected coal prices (considering current and historical prices, price trends and related factors), production levels and cash costs of production, all based on life-of-mine plans. Future cash flows are discounted to their present value using a post-tax discount rate that reflect current market assessments of the time value of money and risk specific to the asset. Refer to note 3 of the accounting policies for a list of assumptions used to determine recoverable amounts/fair values of non-financial assets.

The term “recoverable minerals” refers to the estimated amount of coal that will be obtained from reserves and resources and all related exploration stage mineral interests after taking into account losses during coal processing and treatment. estimates of recoverable minerals from such related exploration stage mineral interests will be risk adjusted based on management’s relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest levels for which there are identifiable cash flows that are largely independent of cash flows from other asset groups. With the exception of other mine-related exploration potential and greenfields exploration potential, estimates of future undiscounted cash flows are included on an area of interest basis, which generally represents an individual operating mine.

In the case of mineral interests associated with other mine-related exploration potential and greenfields exploration potential, cash flows and fair values are individually evaluated based primarily on recent exploration results and recent transactions involving sales of similar properties, if any. Assumptions underlying future cash flow estimates are subject to significant risks and uncertainties.

Non-financial assets are reviewed annually for possible reversal of the impairment at the reporting date. Reversal of impairments is also considered when there is objective evidence to indicate that the asset is no longer impaired. Where an impairment subsequently reverses, the carrying amount of the asset or CGu is increased to the revised estimate of its recoverable amount, but not higher than the carrying value that would have been determined had no impairment been recognised in prior years.

Financial instruments Financial instruments are initially measured at fair value when the group becomes a party to their contractual arrangements.

Transaction costs are included in the initial measurement of financial instruments, with the exception of financial instruments classified as at fair value through profit or loss.

The subsequent measurement of financial instruments is discussed below.

A financial asset is derecognised when the right to receive cash flows from the asset has expired or the group has transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the assets. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss recognised in equity is recognised in the statement of comprehensive income. On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or transferred to another party and the amount paid is recognised in the statement of comprehensive income.



Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

The group classifies its financial assets in the following categories: loans and receivables, available-for-sale, held-to-maturity and at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset.

(i) Financial assets (a) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. They arise when the group provides money, goods or services directly to a debtor with no intention of trading the receivable. loans and receivables are subsequently measured at amortised cost using the effective interest method less allowance for impairment. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. loans and receivables include trade and other receivables (excluding VAT and prepayments), restricted cash, and cash and cash equivalents.

Cash and cash equivalents are defined as cash on hand, deposits held at call with banks and short-term highly liquid investments with original maturities of three months or less. Cash and cash equivalents exclude restricted cash.

Allowance for impairment of receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The group considers evidence of impairment for trade and other receivables at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.

In assessing collective impairment, the group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of trade and other receivables is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. losses are recognised in the statement of comprehensive income and reflected in an allowance for impairment account against trade and other receivables. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed (limited to the initial impairment loss recognised) through the statement of comprehensive income.

When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables.



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2 Accounting policies (continued) Financial instruments (continued) (i) Financial assets (continued) (b) Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed

maturities that the group’s management has the positive intention and ability to hold to maturity. held-to-maturity investments are subsequently measured at amortised cost using the effective interest method.

The group assesses at the end of each reporting period whether there is objective evidence that a held-to-maturity investment is impaired as a result of an event. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the held-to-maturity investment’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income. If a held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income.

(c) Financial assets at fair value through profit or loss have two subcategories: financial assets held-for-trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management in terms of specified criteria. Derivatives are also categorised as held-for-trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held-for-trading or are expected to be realised within 12 months of the reporting date. These assets are subsequently measured at fair value with gains or losses arising from changes in fair value recognised in the statement of comprehensive income in the period in which they arise.

(ii) Financial liabilities (a) Borrowings are initially recognised at fair value net of transaction costs incurred and subsequently measured at

amortised cost, comprising original debt less principal payments and amortisation, using the effective interest method. Any difference between proceeds (net of transaction cost) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowing using the effective interest method.

Fees paid on the establishment of loan facilities are capitalised as a prepayment and amortised over the period of the facility to which it relates.

borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(b) Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Payables are classified as current liabilities if payment is due within a year or less. If not, they are presented as non-current liabilities.

(iii) Compound financial instruments Compound financial instruments comprise convertible loans that can be converted to share capital at the option of the

holder, when the number of shares to be issued is fixed. The liability component of a compound financial instrument is recognised initially at fair value of a similar liability that does not have an equity conversion option. The equity option is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction cost is allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.

Interest relating to the financial liability is recognised in the statement of comprehensive income. On conversion the financial liability is reclassified to equity and no gain or loss is recognised.



(iv) Derivative financial instruments embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics

and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivate would meet the definition of a derivative and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value and the attributable transaction cost is recognised in the statement of comprehensive income. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised in the statement of comprehensive income.

inventories Inventories comprise coal run-of-mine stockpiled, coal product stockpiled and consumables. Inventories are measured at

the lower of cost and net realisable value after appropriate allowances for obsolete, redundant and slow-moving stockpiles and consumables.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to perform the sale.

Cost is determined by reference to direct mining expenditure and an appropriate portion of overhead expenditure including amortisation and depreciation at the relevant stage of production based on normal production levels. Coal stockpiles are valued at average production cost.

Leased assets and lease payments Capitalised lease assets are depreciated over the shorter of their estimated useful lives and the lease terms. Refer to the

accounting policy dealing with the group’s leases.

leases of items of property, plant and equipment, where the group has substantially all the risks and rewards of ownership, are classified as finance leases. The assets are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made/received under finance leases are apportioned between the finance expense/income and the reduction of the outstanding liability/receivable. The finance expense/income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability/receivable.

Future lease payments, net of finance charges, are included in non-current borrowings, with the current portion included under current liabilities.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Other leases are operating leases and the leased assets are not recognised on the group’s statement of financial position. Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

(i) Determining whether an arrangement contains a lease At inception of an arrangement, the group determines whether such an arrangement is or contains a lease. A specific

asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the group the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, the group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the group’s incremental borrowing rate.



KEATON ENERGY




2 Accounting policies (continued) Environmental trust funds Contributions are made to the group’s trust funds, created in accordance with statutory requirements, to fund the estimated

cost of pollution control, rehabilitation and mine closure at the end of the life of the group’s mines. The trusts are consolidated into the group as the group exercises full control of the trust. The measurement of the investments held by the trust funds is dependent on their classification under financial assets and income received and fair value movements are treated in accordance with these classifications.

Provisions Provisions are recognised when the group has a present legal or constructive obligation as a result of past events where it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

The amount recognised as a provision is the present value of the best estimate of the expenditure required to settle the present obligation at reporting date using a pretax rate that reflects current market assessment of the time value of money and the risks specific to the obligation. This estimate takes into account the associated risks and uncertainties. The increase in the provision due to the passage of time is recognised as interest expense.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic benefits will be required, the provision is reversed.

(i) Mine closure and environmental rehabilitation provision An obligation to incur environmental restoration, rehabilitation and decommissioning costs arises when disturbance is

caused by the development or ongoing production of a mining property. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalised at the start of each project as soon as the obligation to incur such costs arises.

These costs are recognised in the statement of comprehensive income over the life of the operation, through the depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and recognised in the statement of comprehensive income as extraction progresses.

Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work (that result from changes in the estimated timing or amount of the cash flow or a change in the discount rate), are added to or deducted from the cost of the related asset in the current period.

If a decrease in liability exceeds the carrying amount of the asset, the excess is recognised immediately in the statement of comprehensive income. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy dealing with impairments of non-financial assets.

current and deferred taxation The current income tax charge is the expected tax payable on the taxable income for the year and is calculated on the basis

of the tax laws enacted or substantively enacted at the reporting date in the country where the group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. under this method deferred taxes are recognised for the tax consequences of temporary differences by applying expected tax rates to the differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except to the extent that deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and does not affect the accounting or taxable profit or loss at the time of the transaction. Deferred tax is charged to the statement of comprehensive income, except where the tax relates to items recognised in OCI or directly in equity in which case the tax is also recognised in OCI or directly in equity. The effect on deferred tax of any changes in tax rates is recognised in the statement of comprehensive income, except to the extent that it relates to items previously charged or credited directly to equity.



The principal temporary differences arise from amortisation and depreciation on property, plant and equipment, provisions, unutilised tax losses and unutilised capital allowances carried forward. Deferred tax assets relating to the carry forward of unutilised tax losses and unutilised capital allowances are recognised to the extent that it is probable that future taxable profits will be available against which the unutilised tax losses and unutilised capital allowances can be utilised.

Deferred tax is provided on temporary differences arising from investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Interest received from and paid to the tax authorities is classified as finance income and expense.

Employee benefits (i) Short-term employee benefits The costs of all short-term employee benefits are recognised in the period in which the employee renders the related

service. The accruals for employee entitlements to salaries, performance bonuses and annual leave represent the amounts which the group has a present obligation to pay as a result of the employees’ service provided. The accruals have been calculated at undiscounted amounts based on current salary levels.

(ii) Defined contribution plan A defined contribution plan is a post-employment plan under which an entity pays fixed contributions into a separate

entity in terms of the defined contribution provident plan and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an expense in the statement of comprehensive income as incurred.

(iii) Equity compensation benefits entities within the group receiving goods or services shall measure the share-based payment transaction as equity-

settled only when the awards granted are its own equity instruments, or the entity has no obligation to settle the share-based payment transaction. The entity settling a share-based payment transaction when another entity in the group receives the goods or services recognises the transaction as equity-settled only if it is settled in its own equity instruments. In all other cases, the transaction is accounted for as cash-settled.

Cash-settled share-based payments are remeasured at each reporting date. The expense recognised in the statement of comprehensive income for the year represents that portion of the fair value that is attributable to the portion of the contractual period which had elapsed at the reporting date and the movement in fair value between the grant date/previous reporting date and the current reporting date, with a corresponding increase in liabilities.

equity-settled share-based payments are measured at fair value that includes market performance conditions but excludes the impact of any service and non-market performance conditions of the equity instruments at the date of the grant. The share-based payments are expensed as an employee expense with a corresponding increase in equity over the vesting period, based on the group’s estimate of the shares that are expected to eventually vest. Share-based payment expenses recognised in current and previous financial years are reversed out of comprehensive income in the event of termination of the share plan (forfeited/lapsed) for “fault” and “no fault” definitions, to the extent that shares have not become unconditional/not vested. The group used an appropriate option pricing model in determining the fair value of the options granted.

Non-market vesting conditions are included in assumptions about the number of the share appreciation rights or notional shares to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each reporting date to reflect the best estimate or actual number of share appreciation rights that vest, with any adjustment being made to both equity and the statement of comprehensive income as an employee cost. When the group issues share-based instruments to settle certain transactions, the payments are measured at the fair value of the goods and services provided. If the fair value of the goods or services cannot be determined, the share-based payment is measured at the fair value of the equity instrument at the date of the grant, the date the group obtains the goods or the counterparty renders the service.

(iv) Leave pay The group accrues for the cost of the leave days granted to employees during the period in which the leave

days accumulate.



KEATON ENERGY




2 Accounting policies (continued) Share capital Ordinary shares and share premium are classified as equity. Incremental costs directly attributable to the issue of the ordinary

shares and share options are recognised as a deduction from equity.

Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can

be reliably measured. The following specific recognition criteria must be met before revenue is recognised:

(i) Sale of coal and anthracite The group enters into contracts for the sale of coal and anthracite. Revenue arising from coal and anthracite sales under

these contracts is recognised when the price is determinable, the product has been delivered in accordance with the terms of the contract, the significant risks and rewards of ownership have been transferred to the customer, collection of the sales price is probable and associated costs can be reliably estimated. As sales from coal and anthracite contracts are subject to a customer survey with regards to quality, sales are initially recognised on a provisional basis using the group’s best estimate of the product quality. Subsequent agreed quality adjustments are recognised directly in revenue, if different from the initial certificates. Income earned from the transport of coal to third parties is recognised as revenue in the statement of comprehensive income as and when the coal is delivered.

(ii) Toll washing Toll washing revenue is generated through third party coal being washed at the group's relevant plants. Revenue is

recognised when the coal being washed enters the plant premises (over the weigh-bridge). The revenue amount is calculated by multiplying the units washed by the rate per unit as agreed upon between the group and the relevant third party.

(iii) Management fees The company has entered into a service agreement with one of its subsidiaries, Keaton Administrative and Technical

Services Proprietary limited, whereby its directors provide management services to other operating and exploration subsidiaries in the group. These services are on-charged on a monthly basis based on actual time spent managing the operating and exploration subsidiaries.

(iv) Investment income from subsidiaries In the company’s separate financial statements investment income received by the company on loan capital is classified

as revenue. Refer to note 1 on page 132 in this regard.

other income Rental income is recognised in the statement of comprehensive income on a straight-line basis over the term of the lease,

as it accrues to the group.

Finance income and costs Finance income comprises interest received and receivable on funds invested, dividend income and foreign currency gains.

Interest income is recognised on a time-proportion basis in the statement of comprehensive income as it accrues, taking into account the principal outstanding and using the effective interest method. Dividend income is recognised in the statement of comprehensive income on the date the entity has a right to receive payment.

Finance costs comprise interest payable on borrowings calculated using the effective interest method, unwinding of the discount on provisions and dividends on preference shares classified as liabilities. borrowing costs capitalised are excluded.

dividends declared Dividends declared are recognised in the period in which they are approved by the board of directors. Dividends are payable

in South African Rand net of withholding tax.



Earnings per share The group presents basic and diluted earnings per share (ePS) for its ordinary shares. basic ePS is calculated by dividing the

profit attributable to owners of the company by the weighted average number of ordinary shares outstanding during the year. Diluted ePS is determined by dividing the profit attributable to owners of the company by the weighted average number of ordinary shares outstanding, adjusted for the effects of all potential dilutive ordinary shares.

Guarantees Guarantees are not recognised by the group, but the carrying value of the guarantees are disclosed. Refer to note 14, 21,

23 and 24 in this regard.

Segment reporting The segment report has been prepared in accordance with IFRS 8 Operating Segments which defines requirements for the

disclosure of financial information of an entity’s operating segments. An operating segment is identified as a component of an entity: » that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with other components of the same entity;

» whose operating results are reviewed regularly by the entity’s chief operating decision maker (CODM) in order to allocate resources and assess its performance; and

» for which discrete financial information is available.

CODM is defined as the executive committee of the group.

The basis of segment reporting is representative of the internal structure used for management reporting as well as the structure in which the CODM reviews the information, which are the group’s mining projects in the respective operating subsidiaries. The basis of segmental allocation is determined as follows: » Operating profit/loss (before net finance income/costs and taxation) that can be directly attributed to a segment and a relevant portion of the operating profit/loss that can be allocated on a reasonable basis to a segment, including the effect of transactions with other operating segments.

» Total segment assets are those assets that are employed by a segment in its operating activities and that are either directly attributable to the segment or can be allocated to the segment on a reasonable basis.

determination of fair values A number of the group’s accounting policies and disclosures require the determination of fair value, for both financial and

non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(i) Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is the estimated

amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably. The fair value of property, plant and equipment is based on the market approach and cost approaches using quoted market prices for similar items when available and depreciated replacement cost when appropriate. Depreciated replacements cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.

(ii) Intangible assets The fair value of mining and prospecting rights in a business combination is determined using the multi-period excess

earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.

The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

(iii) Inventories The fair value of inventories acquired in a business combination is determined based on the estimated selling price in

the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.



KEATON ENERGY




2 Accounting policies (continued) determination of fair values (continued) (iv) Equity and debt securities The fair value of equity and debt securities is determined by reference to their quoted closing bid price at the reporting

date, or if unquoted, determined using a valuation technique. Valuation techniques employed include market multiples and discounted cash flow analysis using expected future cash flows and a market-related discount rate.

(v) Trade and other receivables The fair value of trade and other receivables, excluding work in progress, is estimated at the present value of future cash

flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes or when such assets are acquired in a business combination.

(vi) Other non-derivative financial liabilities Fair value, which is determined for disclosure, is calculated based on the present value of future principal and interest

cash flows, discounted at the market rate of interest at the reporting date.

(vii) Share-based payment transactions The fair value of the share appreciation rights is determined by using the black-Scholes formula. Measurement inputs

include the share price on the measurement date, the exercise price of the instrument, expected volatility (based on an evaluation of the company’s historic volatility, particularly over the historic period commensurate with the expected term), expected term of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

3 critical accounting estimates and judgements The applied estimates are based on historical data and other factors that management considers appropriate under the

given circumstances, but which are inherently uncertain and unpredictable. Such assumptions may be incomplete or inaccurate, and unexpected events or circumstances may occur. In addition, the group is subject to risks and uncertainties that may cause actual outcomes to deviate from these estimates.

It may be necessary to change previous estimates as a result of changes to the assumptions on which the estimates are based or due to new information or subsequent events. estimates and underlying assumptions are re-assessed on a regular basis. Changes to accounting estimates are recognised prospectively in the current and future periods if the change affects the current as well as future periods.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

3.1 impairment of mining assets The recoverable amount of mining assets is generally determined utilising discounted future cash flows. Management

also considers such factors as the quality of the individual mineral deposit, market risk, and asset-specific risks in determining the fair value.

Key assumptions for the calculations of the mining assets’ recoverable amounts are coal and anthracite prices, marketable real discount rates and the annual life-of-mine plans. The life-of-mine plans are based on the proved and probable reserves as included in the Reserve Declaration, which are determined in terms of SAMReC as well as, where applicable resources where management has high confidence in the mineral deposit and economical recovery of coal, based on historic and similar geological experience.



During the year under review, the group calculated the recoverable amounts (generally fair value less costs to sell) based on updated life-of-mine plans, contracted coal prices for eskom and market-related coal prices for metallurgical coal and anthracite and a real discount rate, which ranges between 9.6% and 12% (2012: 9.7% – 15.1%), depending on the asset. Cash flows used in the impairment calculations are based on life-of-mine plans which are between 9 and 13 years. Sensitivity analysis are also performed where estimates and assumptions used in the impairment calculation are stretch-tested to determine the impact on the recoverable amount. No impairment adjustments were required for the current year. Should management’s estimate of the future not reflect actual events, impairments may be identified. Factors affecting the estimates include: » changes to proved and probable reserves; » economical recovery of resources; » the yields of the coal reserves may vary significantly from time to time; » review of strategy; » unforeseen operational issues at the mines; » differences between actual commodity prices and commodity price assumptions; » changes in the discount rates; and » changes in capital, operating mining, processing and reclamation costs.

As at 31 March 2013 the group’s net asset value exceeded its market capitalisation, mainly due to poor market conditions that currently exist. This is normally a triggering event for an impairment indicator. however, based on the impairment calculations performed, as noted above, no impairment adjustments were required.

3.2 Estimate of exposure and liabilities with regard to rehabilitation costs estimated long-term environmental obligations, comprising pollution control, rehabilitation and mine closure, are

based on the group’s environmental management plans in compliance with current technological, environmental and regulatory requirements. Significant judgement is applied in estimating ultimate rehabilitation cost that will be required in future to rehabilitate the group’s mines. The ultimate cost may significantly differ from current estimates.

Management used an inflation rate of 5.50% (2012: 5.80%) and the expected life of the mines according to the life-of-mine plans in the calculation of the estimated net present value of the rehabilitation liability. The discount rates used for the calculation are dependent on the operations life-of-mine and are as follows: for one to five years – 6.10% (2012: 6.75%); for six to nine years – 6.47% (2012: 7.89%); and for ten years and beyond – 7.33% (2012: 7.90%). These estimates were based on recent yields determined on government bonds.

3.3 Estimate of taxation Significant judgement is required in determining the income tax liability. There are many transactions and calculations

for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax liabilities in the period in which such determination is made. Management has to exercise judgement with regards to deferred tax assets. Where the possibility exists that no future taxable income may flow against which these assets can be offset, the deferred tax assets are not recognised.

3.4 Fair value of share-based payments The fair value of options granted is being determined using a black-Scholes valuation model. The significant inputs

into the model are: vesting period, risk-free interest rate, volatility, price on date of grant and dividend yield. (Refer to note 19 for detail on each of these inputs used).

3.5 Assessment of contingencies Contingencies will only realise when one or more future events occur or fail to occur. The exercise of significant

judgement and estimates of the outcome of future events are required during the assessment of the impact of such contingencies. litigation and other judicial proceedings as a rule raise difficult and complex legal issues and are subject to uncertainties and complexities including, but not limited to, the facts and circumstances of each particular case, issues regarding the jurisdiction in which the suit is brought and differences in applicable law. upon resolution of any pending legal matter, the group may be forced to incur charges in excess of the presently established provisions and related insurance coverage. It is possible that the financial position, results of operations or cash flows of the group could be materially affected by the outcome of the litigation.



KEATON ENERGY




3 critical accounting estimates and judgements (continued) 3.6 coal reserves and resources Coal reserves and resources are estimates of the amount of tonnes that can be economically and legally extracted

from the group’s properties. In order to calculate the reserves and resources, estimates and assumptions are required about a range of geological, technical and economic factors, including quantities, yields, production techniques, recovery rates, production costs and commodity prices. estimating the quantities and/or yields of the reserves and resources requires the size, shape and depth of the coal deposit to be determined by analysing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological judgements and calculations to interpret the data. because the economic assumptions used to estimate the reserves and resources change from year to year, and because additional geological data is generated during the course of operations, estimates of the mineral reserves and resources may change from year to year. Changes in the reserves and resources may affect the group’s financial results and financial position in a number of ways, including: » asset carrying values may be affected due to changes in estimated cash flows; » depreciation and amortisation charged in the statement of comprehensive income may change as they are calculated on the units-of-production method; and

» environmental provisions may change as the timing and/or cost of these activities may be affected by the change in reserves.

At the end of each financial year, the estimate of proved and probable reserves and resources is updated. Depreciation of mining assets is prospectively adjusted, based on these changes.

4 change in accounting policy During the 2013 financial year, the group early adopted IFRIC 20 – “Stripping cost in the production phase of a surface mine”

and changed its accounting policy for recognising and measuring stripping cost incurred for its surface operation (refer to note 2 of the accounting policies – property, plant and equipment).

As a result of adopting IFRIC 20, the comparative group information for the year ended 31 March 2012 has been restated to comply with the transitional provision as outlined in IFRIC 20. No other prior periods were affected by the accounting policy change.



The following tables summarise the adjustments made to the statement of financial position, statement of comprehensive income, statement of cash flows and earnings and headline earnings per share on implementation of the new accounting policy:

Property, plant and

equipmentdeferred tax asset

Non- controlling

interestRetained earnings

balance at 1 April 2011 as previously reported 479 452 733 6 659 583 (9 757 139) (21 019 688) Impact of change in accounting policy – – – –

Restated balance at 1 April 2011 479 452 733 6 659 583 9 757 139 21 019 688

balance at 31 March 2012 as previously reported 884 372 226 2 170 949 34 270 651 186 593 754 Impact of change in accounting policy (51 669 647) 14 467 502 (9 672 557) (27 529 588)

Restated balance at 31 March 2012 832 702 579 16 638 451 24 598 094 159 064 166

For the year ended

31 March 2012

Statement of comprehensive income:

Increase in tax credit 14 467 502 Decrease in profit for the year 37 202 145

Statement of cash flows:Decrease in cash flows from operating activities 13 273 798 Decrease in cash flows from investing activities 13 273 798

Earnings and headline earnings per share:earnings per share as previously reported 90.9 earnings per share adjusted for impact of change in accounting policy 75.2 headline earnings per share as previously reported 25.2 headline earnings per share adjusted for impact of change in accounting policy 9.5

Group

Group



KEATON ENERGY



NOTeS TO The ANNuAl FINANCIAl STATeMeNTS

Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

1 RevenueCoal sales 433 691 193 303 870 205 – – Anthracite sales 272 947 606 92 537 556 – – Transportation income 196 643 740 77 957 757 – – Toll washing 15 524 848 – – – Management fees – – 4 548 463 4 187 541Investment income from subsidiaries – loans and receivables(1) – – 26 048 211 6 086 404Investment income from lMe – pre-acquisition(1) – – – 13 812 016Investment income from subsidiaries – preference share investment(1) – – 59 893 663 53 855 218

918 807 387 474 365 518 90 490 337 77 941 179 (1) Change in classification on company level

During the current year, the company modified the statement of comprehensive income classification of investment income received from its subsidiaries from finance income to revenue. As the company's ordinary activities relate to funding its subsidiaries, the restatement reflects more appropriately the nature of the transaction. Comparatives amounts in the statement of comprehensive income were restated for consistency, which resulted in R73.8 million being moved from finance income to revenue.

Since the amounts are classifications within the operating activities in the statements of comprehensive income, the restatement did not have any effect on the statement of financial position.

Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

2 cost of salesMining contractors 428 277 263 288 109 937 – – Amortisation and depreciation of assets(2) 235 016 536 127 065 702 – – Fuel 80 892 170 36 619 846 – – labour 56 641 846 19 265 000 4 331 869 3 988 134 Consumables and maintenance cost 13 970 789 16 269 920 – – Other direct mining costs 66 617 623 6 449 643 – – Transport costs 194 012 644 73 315 739 – – Toll washing cost 13 238 196 – – –Inventory movement (11 394 861) (1 188 445) – – Royalty expense 3 873 134 2 389 331 – – Deferred stripping capitalised(1)(2) (135 064 416) (108 503 882) – –

946 080 924 459 792 791 4 331 869 3 988 134 (1) The deferred stripping credit relates to costs incurred, in an opencast operation, in advance to prestrip an area of waste in order to expose

the coal reserve. The costs are capitalised to mine development costs in property, plant and equipment until such time as the coal exposed is subsequently mined. The stripping activity asset is depreciated on a systematic basis, over the expected production life of the identified component of the coal reserve.

(2) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production phase of a surface mine”. Refer to note 4 of the significant accounting policies.

Group company

Group company



Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

3 other incomeDiscard coal sales 4 719 426 1 609 580 – – Profit on disposal of mining right(1) – 538 215 – – Gain realised on refinancing agreement(2) – 19 125 753 – – Profit on disposal of property, plant and equipment 893 366 – – – Insurance claims – 2 192 983 – – Royalty income(1) 1 855 663 – – –Sundry income 3 125 160 2 077 684 – –

10 593 615 25 544 215 – –

4 Net gain on financial instrumentsFair value through profit or loss financial assetsFair value gain on environmental trust funds 2 174 921 150 319 – – Fair value gain on embedded derivative-equity component of convertible loan(3) – 1 539 250 – – Fair value movement on IDC equity-linked call option 309 748 – – –

2 484 669 1 689 569 – – (1) The group concluded a sales agreement with Kleinfontein Colliery Proprietary Limited (Kleinfontein), a subsidiary of Umcebo Mining

Proprietary Limited, in terms of a mining right disposed to Kleinfontein. The group generates royalty income over the life of the resource.

The agreement also resulted in the reversal of an impairment of intangible assets recognised in prior years as well as the reversal of an impairment of investment in Amahahle Exploration Proprietary Limited, a 74% held subsidiary. Refer to notes 5 and 12.

(2) The gain relates to the refinancing arrangement with LME concluded in the 2011 financial year. The group obtained a loan and preference shares from Anglo Operations Limited at a discount to their carrying values at that point in time in the records of LME, when the arrangement was concluded in the 2011 financial year. On 14 December 2011, the effective date of the LME acquisition, the group recognised the difference in the fair value of loans in the records of the company and their carrying values in the records of LME in the statement of comprehensive income.

(3) During the prior year the company exercised a call option in terms of the R10 million convertible loan granted to LME in the 2011 financial year. The option met the definition of an embedded derivative in the host contract (namely, the underlying loan agreement).

On conversion date the loan was settled and the fair value of the option was exercised against the equity component of the compound instrument in the records of LME. The difference in value of R1.5 million was credited to the statement of comprehensive income.

Group company



KEATON ENERGY


notes to the annual financial statements continued


Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

5 Results from operating activitiesResults from operating activities are stated after:Professional and consultant fees 5 636 197 4 783 026 2 327 590 2 637 479 Consulting fees 5 512 308 4 580 964 2 203 701 2 435 417 Administration fees 123 889 202 062 123 889 202 062

impairment (reversals)/losses – (1 216 171) 2 342 203 (5 410 220) Reversal of prior year impairment against

intangible assets(1) – (1 216 171) – – Reversal of impairment of investment in subsidiaries(2) – – (820 769) (6 626 125) Impairment of investment in subsidiaries(3) – – 3 162 972 1 215 905

Loss on derecognition of assets(4) 51 173 671 – – –

depreciation 225 616 188 123 208 824 – – buildings and leasehold improvements 655 306 685 603 – – Plant and equipment 21 940 727 16 147 114 – – Furniture and equipment 352 101 519 703 – – Mine development(5) 199 683 550 104 022 615 – – Mine infrastructure 11 660 853 5 076 231 – – Other 932 674 936 386 – –

Total depreciation (refer note 10) 235 225 211 127 387 652 – – Movement to inventory (9 609 023) (4 178 828) – –

depreciation recognised in: 225 616 188 123 208 824 – –

Cost of sales 225 407 513 122 886 874 – – Administrative and other operating expenses 208 675 321 950 – –(1) Refer to note 12 for additional disclosure.(2) The reversal of impairment of investment in subsidiary in the 2013 financial year relates to Keaton Administrative and Technical Services

Proprietary Limited. The 2012 reversal relates to Amalahle Exploration Proprietary Limited. Refer to note 11 in this regard.(3) The company has impaired certain investments in subsidiaries/loans to subsidiaries which are loss making and where there is no

expectation of generating profits in the foreseeable future (refer to note 11). (4) Refer to note 10, property, plant and equipment, for additional disclosure.(5) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production phase of

a surface mine”. Refer to note 4 of the significant accounting policies.

Group company



Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

5 Results from operating activities (continued)directors’ remuneration and benefitsExecutive directors – for managerial services 14 025 906 10 781 131 14 025 906 10 781 131 Short-term employee benefits: salaries 7 182 512 8 000 618 7 182 512 8 000 618 Post-employment benefits: provident fund and

group risk contributions 593 726 735 502 593 726 735 502 Termination benefits 1 764 130 – 1 764 130 – Share-based payments – equity-settled 4 485 538 2 045 011 4 485 538 2 045 011

Non-executive directors – for services rendered as directors 2 586 743 2 170 510 2 586 743 2 170 510

Total directors’ emoluments 16 612 649 12 951 641 16 612 649 12 951 641

Key management remuneration and benefits (excluding executive directors) Salaries as employees 4 713 297 2 360 178 – – Post-employment benefits: provident

fund and group risk contributions 669 498 390 139 – – Share-based payments – equity-settled 683 101 536 932 – –

6 065 896 3 287 249 – –

Employee remuneration and benefits Short-term employee benefits: salaries

as employees 55 004 022 19 972 001 3 429 526 406 761 Post-employment benefits: provident fund and

group risk contributions 4 666 486 1 945 030 253 927 44 150 Share-based payments – equity-settled 1 147 439 1 203 892 (45 333) 123 089

60 817 947 23 120 923 3 638 120 574 000

Total employee benefits 83 496 492 39 359 813 20 250 769 13 525 641

Audit fees 4 244 038 2 162 575 1 439 154 1 087 758

external audit services 3 380 761 1 332 407 1 311 761 781 432 Internal audit services 863 277 830 168 127 393 306 326

Legal fees 2 133 847 921 922 706 615 96 738 Marketing and investor relation costs 2 017 291 1 240 929 2 017 291 1 240 929 Rent paid for head office premises 887 490 717 219 – – Foreign exchange loss/(gain) 9 976 511 (3 712 842) – –

Group company



KEATON ENERGY




6 Acquisition of subsidiary and non-controlling interestThe following transaction took place during the 2012 financial year:

On 14 December 2011 (the effective date), following Ministerial consent, the group obtained control of lMe, an anthracite producer in the northern parts of KwaZulu-Natal. As a result the group obtained 71.11% of the issued share capital.

by acquiring a controlling interest in lMe, the group obtained an approximate 200 000 tonne Quattro Scheme Participation of the Richards bay Coal Terminal per annum, a foothold in the local and foreign anthracite market and various coal resources and projects in the region.

The following summarises the major classes of consideration transferred, and the recognised amounts of assets acquired and liabilities assumed at the acquisition date.

consideration transferred R

equity instruments (16 622 222 ordinary shares in Keaton (refer note 18) 74 799 999 Purchase price adjustment on equity instruments issued(1) (30 751 111)Cash claimed from non-controlling interest (NCI)(2) (10 000 000)

Total consideration transferred 34 048 888

identifiable assets acquired and liabilities assumedProperty, plant and equipment (refer note 10) 189 798 330 Intangible assets (refer note 12) 359 139 360 Cash and cash equivalents 11 129 619 Restricted investments (refer note 15) 11 911 139 Inventory: consumables 2 561 846 Inventory: anthracite stockpiles 4 541 087 Trade and other receivables 27 384 799 borrowings (254 220 443)Deferred taxation (refer note 13) (91 656 683)Mine closure and environmental rehabilitation provision (refer note 23) (15 878 833)Trade and other payables (35 975 658)

Total 208 734 563

Net cash acquiredCash and cash equivalents acquired through business combination 11 129 619 Cash claimed from NCI (refer note above) 10 000 000

Net cash acquired through business combination 21 129 619 (1) The fair value of shares issued was based on the listed share price of the holding company at 14 December 2011 (bid price) being R2.65

per share.(2) Cash claimed from NCI refers to a contractual claim which the company had in terms of the sale of shares agreement against the total

consideration paid to the NCI for the equity stake acquired, following the due diligence process.



6 Acquisition of subsidiary and non-controlling interest (continued)

Included in the acquisition date values above are the following fair value adjustments:

R

Property, plant and equipment 112 778 504 Intangible assets 341 723 777 Anthracite stockpiles 1 330 350 long-term financial liabilities (612 909)

Total 455 219 722

Fair value adjustments disclosed above are supported by:– Property, plant and equipment – independent valuations by competent persons and indexing

based on historical producer price indexes (PPI).– intangible assets – geological data, initial feasibility studies, assumptions regarding future

cost structures and mining models, assumptions regarding future coal prices and cost and the Weighted Average Cost of Capital (WACC) of the group adjusted to incorporate assumptions and risks associated with each cash-generating unit identified.

– Anthracite stockpiles – market prices.– Long-term financial liabilities – independent valuations by competent persons.

If new information obtained within one year from the acquisition date about facts or circumstances that existed at the acquisition date identifies adjustments to the above amounts or any additional provision that existed at the acquisition date, then the acquisition values will be revised.

Gain on business combinationA gain on business combination was recognised as a result of the acquisition as follows:

R

Total consideration transferred 34 048 888 Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of lMe 60 301 096 Fair value of identifiable net assets (208 734 563)

Gain on business combination (114 384 579)

At the time the company concluded the refinancing agreement with lMe in October 2010, the lMe group was a financially distressed, capital-scarce group facing possible liquidation. The injection of additional capital assisted the completion of developing the West adit, purchasing of urgently required equipment and payment of overdue accounts payables. Various other changes were also implemented in areas such as management, marketing, payroll and human resources. As at 31 March 2012 the group turned around production, generated cash, and serviced its debt as well as invested in additional capital. The above initiatives as well as the initial value placed on the undeveloped properties owned by the lMe group, resulted in a valuation at the effective date which exceeded the acquisition consideration and consequently resulted in a gain on the business combination being recognised.

The group incurred acquisition-related costs of R2.6 million related to external legal fees, due diligence costs and brokerage fees. These costs have been recognised in administrative and other operating expenses in the consolidated statements of comprehensive income.



KEATON ENERGY




6 Acquisition of subsidiary and non-controlling interest (continued)dilution of non-controlling interestAt 31 March 2012 the company exercised a call option in terms of the R10 million convertible loan granted to lMe in the 2011 financial year. In terms of the loan agreement the company had the right to acquire the shares held by leeuw braakfontein Colliery Proprietary limited (lbC), a 100% subsidiary of lMe, in lMe, through the settlement of the convertible loan. The effect of the settlement resulted in a dilution of the non-controlling interest by 2.89%, thereby increasing the company’s shareholding in the lMe group to a 74% equity interest.

The following summarises the effect of the company’s ownership interest in lMe group:R

Company’s ownership interest on 14 December 2011 148 433 465 effect of increase in company’s ownership interest 6 030 351 Share of comprehensive income from effective date to the reporting date 10 388 633

Company’s ownership interest at reporting date 164 852 449

Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013R

year to 31 March

2012(4)

R

7 Net finance (cost)/incomeFinance income Interest income – banks and money markets 1 506 512 3 641 101 246 833 2 285 446 Interest income – loans and receivables(1) – 12 224 302 – – Interest income – preference share investment(1) – 1 587 713 – – Fair value through profit and loss financial

assets – interest and dividend income(2) 602 599 88 669 – –

Total finance income 2 109 111 17 541 785 246 833 2 285 446

Finance costFinancial liabilities (27 016 729) (24 833 204) (12 051) – borrowings (25 134 160) (23 480 760) – – Amortisation of project finance cost(3) (1 534 895) (1 347 511) – – Interest expense – other (347 674) (4 933) (12 051) – Non-financial liabilities unwinding of discount on mine closure and

environmental rehabilitation provision (7 291 120) (6 114 196) – –

Total finance cost (34 307 849) (30 947 400) (12 051) –

Net finance (cost)/income (32 198 738) (13 405 615) 234 782 2 285 446 (1) Interest and dividend income for group relate to loans granted to LME in the 2011 financial year prior to the effective acquisition date

of LME. (2) Refer to note 15 for a breakdown of restricted investments.(3) Refer to note 21 for more detail on the project finance fees.(4) Investment income received from subsidiaries has been restated as revenue. Please refer to note 1 in this regard.

Group company



Year to 31 March

2013 R

year to 31 March

2012(1)

R

Year to 31 March

2013 R

year to 31 March

2012R

8 income taxation (credit)/expensecurrent tax expense Current year 2 343 450 1 496 792 2 758 351 1 496 792 under provision prior year – 116 666 116 666 deferred taxation Origination and reversal of temporary differences (41 678 209) (7 593 336) 831 520 1 511 610 Over provision prior year – (204 355) (67 794)

(39 334 759) (6 184 233) 3 589 871 3 057 274

Reconciliation of effective taxation rateNormal taxation rate for companies 28.00% 28.00% 28.00% 28.00%Adjusted for: Non-deductible expenditure (3.84%) 3.71% 4.71% 2.34% Non-taxable income 0.50% (31.80%) (26.57%) (25.69%) CGT inclusion rate adjustment 0.06% (1.07%) (0.18%) – Deferred tax – prior year recognition – (0.93%) – – Deferred tax asset not recognised (1.80%) (0.66%) – – (Over)/under provision prior year – (0.08%) – 0.08% Other reconciling amounts – (3.01%) – –

effective taxation rate 22.92% (5.84%) 5.96% 4.73%

Refer to note 13 for amounts available for offset against future taxable income.

(1) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production phase of a surface mine”. Refer to note 4 to the significant accounting policies.

Group company



KEATON ENERGY




Year to 31 March

2013

year to 31 March

2012(1)

9 Earnings per shareThe calculation of basic earnings per share is based on net (loss)/profit for the year, attributable to owners of the company, divided by the weighted average number of ordinary shares in issue during the year.Net (loss)/profit attributable to owners of the company (Rand) (84 491 188) 132 014 368 Weighted average number of ordinary shares in issue 190 945 473 175 584 048 basic earnings per share (cents) (44.2) 75.2

diluted earnings per shareFor diluted earnings per share, the weighted average number of shares in issue is adjusted to assume conversion of all potential dilutive shares as a result of share options granted to employees under the share option scheme in issue. A calculation is performed to determine the number of shares that could have been acquired at fair value, determined as the average annual market share price of the company’s shares, based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.Weighted average number of ordinary shares in issue 190 945 473 175 584 048 Potential shares – –

Weighted average number of shares for diluted earnings per share 190 945 473 175 584 048

Diluted earnings per share (cents) (44.2) 75.2

Year to 31 March 2013 year to 31 March 2012(1)

GrossR

NetR

GrossR

NetR

Headline earnings per shareThe calculation of headline earnings, net of tax and NCI, per share is based on the basic earnings per share calculation adjusted for the following items:Total comprehensive income attributable to owners of the company (84 491 188) 132 014 368 Adjusted for:loss on derecognition of property, plant and equipment 51 173 671 27 265 332 121 574 64 774 loss on disposal of property, plant and equipment 19 260 10 262 – –Profit on disposal of intangible asset – – (538 215) (286 761)Profit on disposal of property, plant and equipment (893 366) (475 986) – – Reversal of impairment of intangible asset – – (1 216 171) (647 976)Gain on business combination – – (114 384 579) (114 384 579)

Total headline earnings (57 691 580) 16 759 826

cents Cents

headline earnings per share (30.2) 9.5 Diluted headline earnings per share (30.2) 9.5 (1) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production phase of

a surface mine”. Refer to note 4 of the significant accounting policies.

Group

Group company



Numberof shares

2013

Numberof shares

2012

9 Earnings per share (continued)Weighted/diluted average number of ordinary shares:Shares in issue at 1 April 2012 (1 April 2011) 188 752 600 171 547 644 effect of shares issued 4 January 2012 – 3 996 600 effect of shares issued 7 March 2012 – 39 804 effect of shares issued 30 June 2012 2 192 873 –

Weighted number of ordinary shares at reporting date 190 945 473 175 584 048 Notional shares granted(1) – –

Diluted number of ordinary shares in issue at reporting date 190 945 473 175 584 048 (1) Anti-dilutive.

Group



KEATON ENERGY




land, buildings and leasehold improvements

R

Mine development

R

Assets under construction

R

Plant and equipment

R

Mine infrastructure

R

Furniture and equipment

R Other

R Total

R

10 Property, plant and equipmentGroupcost31 March 2013 Opening balance 38 195 570 598 077 217 4 661 746 224 550 362 94 790 981 2 470 162 2 818 410 965 564 448 Fully depreciated assets no longer in use – (16 630 686) – – – – – (16 630 686) Additions – 187 772 371 670 142 5 754 015 14 668 467 509 403 1 139 885 210 514 283 Reclassification – – (3 309 333) 3 309 333 – – – – Change in estimates – environmental rehabilitation assets – 19 746 524 – 476 274 – – – 20 222 798 Disposals – – – – – (13 249) (1 042 412) (1 055 661)

Closing balance 38 195 570 788 965 426 2 022 555 234 089 984 109 459 448 2 966 316 2 915 883 1 178 615 182

31 March 2012 Opening balance 18 380 470 275 414 954 140 315 587 42 086 741 7 147 690 1 638 429 466 686 485 450 557 Acquisitions through business combinations 19 520 000 106 958 495 1 155 200 38 702 169 22 239 956 329 024 893 487 189 798 331 Reclassification – – (137 006 254) 137 006 254 – – – – Other additions(1) 295 100 200 037 621 197 213 6 755 198 38 544 201 849 653 1 756 475 248 435 461 Change in estimates – environmental rehabilitation assets – 17 887 024 – – 26 859 134 – – 44 746 158 Transfer to inventory (deferred stripping cost) – (2 220 877) – – – – – (2 220 877) Disposals – – – – – (346 944) (298 238) (645 182)

Closing balance 38 195 570 598 077 217 4 661 746 224 550 362 94 790 981 2 470 162 2 818 410 965 564 448

31 March 2013 Opening balance (2 014 489) (106 510 701) – (17 176 451) (5 280 418) (1 036 662) (843 148) (132 861 869) Fully depreciated assets no longer in use – 16 630 686 – – – – 16 630 686 Depreciation expense (655 306) (199 683 550) – (21 940 727) (11 660 853) (352 101) (932 674) (235 225 211) loss on derecognition of assets(2) – (51 173 671) – – – – – (51 173 671) Disposals – – – – – – 84 792 84 792

Closing balance (2 669 795) (340 737 236) – (39 117 178) (16 941 271) (1 388 763) (1 691 030) (402 545 273)

31 March 2012 Opening balance (1 328 886) (2 488 086) – (1 029 337) (204 187) (742 327) (205 002) (5 997 825) Depreciation expense(1) (685 603) (104 022 615) – (16 147 114) (5 076 231) (519 703) (936 386) (127 387 652)

Disposals – – – – – 225 368 298 240 523 608

Closing balance (2 014 489) (106 510 701) – (17 176 451) (5 280 418) (1 036 662) (843 148) (132 861 869)

carrying amount

31 March 2013 35 525 775 448 228 190 2 022 555 194 972 806 92 518 177 1 577 553 1 224 853 776 069 909

31 March 2012 36 181 081 491 566 516 4 661 746 207 373 911 89 510 563 1 433 500 1 975 262 832 702 579

All plant and equipment, except leasehold improvements, are owned.(1) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production

phase of a surface mine”. Refer to note 4 of the significant accounting policies.(2) During the 2013 financial year, a decision was taken to close Pit 1 at Vanggatfontein as it was no longer economic. This resulted

in a loss on derecognition of assets of R51.2 million recorded in mining and related expenses in the statement of comprehensive income with a corresponding decrease in mine development assets.



land, buildings and leasehold improvements

R

Mine development

R

Assets under construction

R

Plant and equipment

R

Mine infrastructure

R

Furniture and equipment

R Other

R Total

R

10 Property, plant and equipmentGroupcost31 March 2013 Opening balance 38 195 570 598 077 217 4 661 746 224 550 362 94 790 981 2 470 162 2 818 410 965 564 448 Fully depreciated assets no longer in use – (16 630 686) – – – – – (16 630 686) Additions – 187 772 371 670 142 5 754 015 14 668 467 509 403 1 139 885 210 514 283 Reclassification – – (3 309 333) 3 309 333 – – – – Change in estimates – environmental rehabilitation assets – 19 746 524 – 476 274 – – – 20 222 798 Disposals – – – – – (13 249) (1 042 412) (1 055 661)

Closing balance 38 195 570 788 965 426 2 022 555 234 089 984 109 459 448 2 966 316 2 915 883 1 178 615 182

31 March 2012 Opening balance 18 380 470 275 414 954 140 315 587 42 086 741 7 147 690 1 638 429 466 686 485 450 557 Acquisitions through business combinations 19 520 000 106 958 495 1 155 200 38 702 169 22 239 956 329 024 893 487 189 798 331 Reclassification – – (137 006 254) 137 006 254 – – – – Other additions(1) 295 100 200 037 621 197 213 6 755 198 38 544 201 849 653 1 756 475 248 435 461 Change in estimates – environmental rehabilitation assets – 17 887 024 – – 26 859 134 – – 44 746 158 Transfer to inventory (deferred stripping cost) – (2 220 877) – – – – – (2 220 877) Disposals – – – – – (346 944) (298 238) (645 182)

Closing balance 38 195 570 598 077 217 4 661 746 224 550 362 94 790 981 2 470 162 2 818 410 965 564 448

31 March 2013 Opening balance (2 014 489) (106 510 701) – (17 176 451) (5 280 418) (1 036 662) (843 148) (132 861 869) Fully depreciated assets no longer in use – 16 630 686 – – – – 16 630 686 Depreciation expense (655 306) (199 683 550) – (21 940 727) (11 660 853) (352 101) (932 674) (235 225 211) loss on derecognition of assets(2) – (51 173 671) – – – – – (51 173 671) Disposals – – – – – – 84 792 84 792

Closing balance (2 669 795) (340 737 236) – (39 117 178) (16 941 271) (1 388 763) (1 691 030) (402 545 273)

31 March 2012 Opening balance (1 328 886) (2 488 086) – (1 029 337) (204 187) (742 327) (205 002) (5 997 825) Depreciation expense(1) (685 603) (104 022 615) – (16 147 114) (5 076 231) (519 703) (936 386) (127 387 652)

Disposals – – – – – 225 368 298 240 523 608

Closing balance (2 014 489) (106 510 701) – (17 176 451) (5 280 418) (1 036 662) (843 148) (132 861 869)

carrying amount

31 March 2013 35 525 775 448 228 190 2 022 555 194 972 806 92 518 177 1 577 553 1 224 853 776 069 909

31 March 2012 36 181 081 491 566 516 4 661 746 207 373 911 89 510 563 1 433 500 1 975 262 832 702 579

All plant and equipment, except leasehold improvements, are owned.(1) The comparative information has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the production

phase of a surface mine”. Refer to note 4 of the significant accounting policies.(2) During the 2013 financial year, a decision was taken to close Pit 1 at Vanggatfontein as it was no longer economic. This resulted

in a loss on derecognition of assets of R51.2 million recorded in mining and related expenses in the statement of comprehensive income with a corresponding decrease in mine development assets.



KEATON ENERGY




VehiclesR

Mining equipment

R

Computerequipment

RTotal

R

10 Property, plant and equipment (continued)Additional disclosure for leased assetsThe following assets are pledged as security for instalment sale and lease agreements:Cost 581 744 5 980 466 172 875 6 735 085 Accumulated depreciation (521 317) (4 262 879) (34 146) (4 818 342)

Carrying value 60 427 1 717 587 138 729 1 916 743

Property, plant and equipment pledged as security for borrowingsAssets (including mineral rights) with a carrying value of R630 million of the Vanggatfontein Colliery in Delmas, Mpumalanga, have been secured by the registration of a general and special notarial bond as well as the registration of mortgage bonds over the fixed property in favour of Nedbank. Refer to note 21.

The surface rights and all moveable property, plant and equipment, except for the processing plant of Vaalkrantz Colliery in Vryheid, KwaZulu-Natal, with a carrying value of R140 million, have been committed as security for the loan agreement with the IDC. Refer to note 21.

The surface rights of braakfontein in Newcastle, KwaZulu-Natal, have been committed as security for the loan agreement with Vittol S.A. Refer to note 21.

insuranceAll of the above assets, with the exception of land, mine development and motor vehicles, are insured at approximate cost of replacement.

Motor vehicles (included under Other) are insured at replacement value.

Land and buildingsPortion 3 of the farm Vanggatfontein 251, Registration Division I.R., Mpumalanga, measuring 190.1501 ha.Portion 5 (a portion of portion 4) of the farm Vanggatfontein 251, Registration Division I.R., Mpumalanga, measuring 204.8589 ha.Remaining extent of portion 4 of the farm Vanggatfontein 251, Registration Division I.R., Mpumalanga, measuring 395.0091 ha.Portion 10 of the farm Straffontein 252, Registration Division I.R., Mpumalanga, measuring 59.7374 ha.

Land and buildings acquired though business combination (refer to note 6)Remaining extent of portion 8 of the farm langkrans 367, Vryheid, KwaZulu-Natal, measuring 61.0637 ha.Remaining extent of portion 1 of the farm langkrans 367, Vryheid, KwaZulu-Natal, measuring 464.3193 ha.Remaining extent of portion 3 of the farm bloemendal 18, Vryheid, KwaZulu-Natal, measuring 239.4230 ha.Remaining extent of farm Fountaindale number 3, 4272, Vryheid, Newcastle, measuring 529.9034 ha.Remaining extent of portion 2 of the farm Weltevreden 53, hT, utrecht, KwaZulu-Natal, measuring 457.3486 ha.Remaining extent of portion 1 of the farm Weltevreden 53, hT, utrecht, KwaZulu-Natal, measuring 642.9136 ha.Remaining extent of the farm braakfontein 4278, hT, Newcastle, KwaZulu-Natal, measuring 1264.2861 ha.Remaining extent of the farm Vaalkrantz 306, Vryheid, KwaZulu-Natal, measuring 607.4635 ha.Portion 3 of the farm Rustplaas 165, hu, Vryheid, KwaZulu-Natal, measuring 171.3064 ha.Portion 4 of the farm Rustplaas 165, hu, Vryheid, KwaZulu-Natal, measuring 85.6532 ha.Portion 5 of the farm Rustplaas 165, hu, Vryheid, KwaZulu-Natal, measuring 324.151 ha.



Year to31 March

2013R

year to31 March

2012R

11 interest in subsidiary companiesunlisted – shares at cost labohlano Trading 46 Proprietary limited(1) 22 312 500 22 312 500 Keaton Mining Proprietary limited(2) 12 000 074 12 000 074 Keaton Administrative and Technical Services Proprietary limited(3) 100 100 Amalahle exploration Proprietary limited 74 74 Mafla Coal Proprietary limited 74 74 leeuw Mining and exploration Proprietary limited(4) 44 048 888 44 048 888

78 361 710 78 361 710 (1) Labohlano Trading 46 Proprietary Limited – total acquisition price 22 312 500 22 312 500 – share-based payment 17 300 000 17 300 000 – cash 5 012 500 5 012 500 (2) Keaton Mining Proprietary Limited 12 000 074 12 000 074 – initial cash cost 74 74 – share-based payment (prospecting rights) 12 000 000 12 000 000 (3) Keaton Administrative and Technical Services Proprietary Limited 100 100 – initial cash cost 100 100 (4) Leeuw Mining and Exploration – total acquisition price 44 048 888 44 048 888 – share-based payment (refer note 6) 34 048 888 34 048 888 – conversion of convertible loan (refer note 6) 10 000 000 10 000 000

company



KEATON ENERGY




Year to31 March

2013R

year to31 March

2012R

11 interest in subsidiary companies (continued)Loans receivable from subsidiary companies Keaton Mining Proprietary limited(1) 124 839 648 56 708 400 Keaton Administrative and Technical Services Proprietary limited(4) 6 285 004 12 240 328 Keaton Administrative and Technical Services Proprietary limited(2) 6 573 021 5 266 095 Mafla Coal Proprietary limited(4) 690 969 690 969 labohlano Trading 46 Proprietary limited(3) 63 507 99 969 leeuw Mining and exploration Proprietary limited(5) 5 066 341 2 013 241 leeuw Mining and exploration Proprietary limited(6) 10 887 471 55 634 580 leeuw Mining and exploration Proprietary limited(7) 63 423 030 56 038 854 leeuw Mining and exploration Proprietary limited – instalment sales agreement(8) 12 892 942 12 814 694

230 721 933 201 507 130 (1) This loan bears interest at prime plus 2%, is unsecured and has no repayment terms.(2) This loan bears interest at prime and has no repayment terms. These loans have also been impaired to their recoverable amounts. (3) This loan bears interest at prime plus 2%, is unsecured and loan increases are settled on a monthly basis with the issue of unlisted

cumulative redeemable preference shares.(4) These loans are unsecured, interest free and have no fixed terms of repayment. These loans have also been impaired to their recoverable

amounts. (5) This loan is unsecured, bears interest at an effective interest rate of 117.3% and has no repayment term.(6) This loan bears interest at prime plus 2%, is unsecured and has no capital repayment terms. Interest is settled monthly.(7) This loan bears interest at the 90-day Jibar +7%, is unsecured and has no repayment terms. (8) Keaton Energy leases a coal washing plant to LME in terms of an instalment sale agreement taken over from Nedbank Limited. The coal

washing plant serves as security for the lease. The instalment sale carries interest at prime and is payable on demand.

Year to31 March

2013R

year to31 March

2012R

unlisted cumulative redeemable preference shares at cost (including accrued finance income)Keaton Mining Proprietary limited(1) 479 985 037 424 903 728 labohlano Trading 46 Proprietary limited(1) 10 900 000 9 900 000 Amalahle exploration Proprietary limited(1) 8 000 000 8 000 000 Mafla Coal Proprietary limited(1) 3 900 000 3 900 000 leeuw Mining and exploration Proprietary limited(2) 13 689 574 10 927 216

516 474 611 457 630 944

(1) The preferences share investments are unsecured and attract dividends (finance income) at prime plus 5%, compounded quarterly in arrears. The investment in Mafla, consisting of preference shares and loans have been fully impaired. All preference dividends which are in arrear incur interest at prime plus 7%. Preference dividends are repayable after the third anniversary of the issue date, which repayment period commenced in January 2011 for Keaton Mining Proprietary Limited, May 2011 for Amahlahle Exploration Proprietary Limited and in July 2012 for Labohlano Trading 46 Proprietary Limited. To date no actual repayments have been made, other than R2.1 million to Amahlahle Proprietary Limited.

(2) The preferences share investments are unsecured and attract dividends (finance income) at an effective interest rate of 22.75%, compounded quarterly in arrears. The preference shares have no fixed redemption date.

company

company



Year to31 March

2013R

year to31 March

2012R

11 interest in subsidiary companies (continued)

Total interest in subsidiary companies 825 558 254 737 499 784

impairment of interest in subsidiary companies (refer note 5) (18 272 860) (15 930 658) Keaton Administrative and Technical Services Proprietary limited (8 919 429) (9 740 198) Mafla Coal Proprietary limited (4 591 043) (4 590 969) Amalahle exploration Proprietary limited (4 762 388) (1 599 491)

Total carrying value of interest in subsidiary companies 807 285 394 721 569 126

Represented by the carrying value of the interest in: 807 285 394 721 569 126 Keaton Mining Proprietary limited 616 824 759 493 612 202 labohlano Trading 46 Proprietary limited 33 276 007 32 312 469 Keaton Administrative and Technical Services Proprietary limited 3 938 696 7 766 324 Amalahle exploration Proprietary limited 3 237 686 6 400 584 Mafla Coal Proprietary limited – 74 leeuw Mining and exploration Proprietary limited 150 008 246 181 477 473

The directors of the company consider the carrying amount of the unlisted interests in subsidiaries to be a fair representation of the value on the investments given the various stages of development of the underlying assets.

The company has issued a limited guarantee to Nedbank, supported by a pledge of shares in and claims from subsidiaries, for the project finance facility. Refer to note 21.

The company has subordinated its claims against all loans, including preference share funding that existed on drawdown date in favour of Nedbank for the project finance facility, provided that these loans may be repaid at any time that dividend payments would be permitted.

company



KEATON ENERGY




Mineral and prospecting

rights acquiredR

Drilling expenses

R

Other evaluation expenses

R

Richards bay Coal Terminal

Quattro Scheme

ParticipationR

TotalR

12 intangible assetsGroupcarrying amount at 31 March 2011 37 135 155 15 466 064 12 473 346 – 65 074 565 Additions – – 52 309 – 52 309 Acquired through business

combination(1) 301 301 562 – 35 120 072 22 717 726 359 139 360 Amortisation – – – (378 629) (378 629) Impairment loss

reversal(2) – – 1 216 171 – 1 216 171 Disposal of

prospecting right(2) – – (1 216 171) – (1 216 171)

carrying amount at 31 March 2012 338 436 717 15 466 064 47 645 727 22 339 097 423 887 605 Additions 5 444 – 1 752 347 – 1 757 791 Amortisation – – – (1 514 516) (1 514 516)

carrying amount at 31 March 2013 338 442 161 15 466 064 49 398 074 20 824 581 424 130 880 (1) Refer to note 6.(2) The group concluded a compensation agreement with Kleinfontein, a subsidiary of Umcebo, in terms of a mining right disposed to

Kleinfontein. The group will generate royalty income over the life of the resource. The impairment recognised in the 2011 financial year was reversed following the conclusion of the agreement.

intangible assets pledged as security for borrowingsAll mineral rights of Keaton Mining Proprietary limited have been encumbered by Nedbank. Refer to note 10 and 21 for additional information.

Exploration and evaluation assets other



Year to31 March

2013R

year to31 March

2012(1)

R

Year to31 March

2013R

year to31 March

2012R

13 deferred taxRecognised deferred tax (liability)/assetAt the beginning of the year (77 199 409) 6 659 583 (75 592) 1 368 224

Recognised in the statement of comprehensive income in income taxation (refer below) 41 678 209 7 797 691 (831 520) (1 443 816)Recognised in the statement of comprehensive income – offset against the gain on business combination – (91 656 683) – –

balance at the end of the year (35 521 200) (77 199 409) (907 112) (75 592)

Movement in temporary differences during the yearRecognised in the statement of comprehensive income:Keaton Energy Holdings Limited – Group

Capital allowances 7 027 792 2 333 823 Property, plant and equipment 6 806 593 1 961 325 Other items 221 199 372 498

loans to subsidiaries – CGT rate – (2 147 393)loans to subsidiaries – (2 248 133)

Keaton Energy Holdings Limited – Companyemployee benefit provisions 78 745 (1 138 468) 78 745 (1 138 468)loans to subsidiaries – CGT rate (221 047) (110 809) (221 047) (110 809)loans to subsidiaries (523 314) (262 333) (523 314) (262 333)Other items (165 904) (165 904) – Prior year over provisions – 67 794 – 67 794

Keaton Mining Proprietary Limited Capital allowances 32 433 235 (20 700 874)

Property, plant and equipment 27 078 332 (34 766 946)Provisions 5 354 903 14 066 072

Tax losses 3 555 857 30 615 387employee benefit provisions (3 929) (89 829)Prior year under provisions – 319 389 Other differences 267 302 144 259

Leeuw Mining and Exploration Proprietary Limited Capital allowances 4 896 816 9 849 761

Property, plant and equipment 2 485 275 2 811 454 Provisions 2 058 884 1 332 114 Other items 352 657 5 706 193

Tax losses (4 954 151) (9 696 420)employee benefit provisions 345 566 (197 222)

Amalahle Exploration Proprietary Limited Tax losses (1 058 759) 1 058 759

41 678 209 7 797 691 (831 520) (1 443 816)

Group company



KEATON ENERGY




Year to31 March

2013R

year to31 March

2012R

13 deferred tax (continued)deferred tax asset recognisedKeaton Mining Proprietary limited 51 832 156 15 579 692Amalahle exploration Proprietary limited – 1 058 759

51 832 156 16 638 451

Although Keaton Mining Proprietary limited incurred losses during the 2013 financial year, a deferred tax asset is still recognised on the basis that future taxable profits are expected based on the life-of-mine (lOM) plan against which the deferred tax asset will be utilised.

The Amalahle exploration Proprietary limited deferred tax asset recognised during 2012 was reversed, as it is not probable that future taxable profits will be available against which the deferred tax asset will be utilised.

unrecognised deferred tax assetsAt the beginning of the year 6 072 420 1 530 173

Additions:Tax losses and capital allowances (refer below) 6 696 257 4 542 247

balance at the end of the year 12 768 677 6 072 420

Movement in unrecognised deferred tax assets during the yearDeferred tax assets that have been reversed/(recognised) during the year:

Amahlahle exploration Proprietary limited 1 058 759 (1 058 759)Deferred tax assets have not been recognised in respect of the following items during the year:

Tax losses in:Keaton Administrative and Technical Services Proprietary limited – 188 453 leeuw braakfontein Colliery Proprietary limited 1 695 746 1 229 892

Capital allowances/employee benefit provisions in:Keaton Administrative and Technical Services Proprietary limited 280 006 217 602 leeuw braakfontein Colliery Proprietary limited 3 386 871 3 841 947 labohlano Trading 46 Proprietary limited 274 875 123 112

6 696 257 4 542 247

The taxation losses normally expire within 12 months of the company not trading. The deductible temporary timing differences do not expire under current taxation legislation. Deferred taxation assets have not been recognised in terms of these items because the above companies do not have a history of taxable profits and taxable profits will not be available in the immediate future against which the company can utilise these losses.

All of the above amounts have been calculated at the currently enacted income taxation rate of 28% (2012: 28%). Recognised amounts will be recovered from future taxable profits.

Amounts available for offset against future taxable income:unutilised tax losses 54 793 026 145 584 448

Amounts available for offset against future taxable mining income:exploration costs 56 739 529 54 637 778

unredeemed capital expenditure 756 957 739 605 265 511

Group



Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

14 cash14.1 Restricted cash

long-term restricted cash 7 423 204 7 423 204 1 418 581 1 418 581

These bank deposits are pledged and ceded against long-term environmental guarantees and creditor payment guarantees issued by/on behalf of the group.

Short-term restricted cash – 6 600 000 – –

These bank deposits are pledged and ceded against creditor payment guarantees, property transfer guarantees and environmental rehabilitation guarantees issued by/on behalf of the group.

14.2 cash and cash equivalentsShort-term deposits 963 963 963 963 Cash in bank and on hand 19 613 187 60 548 434 420 693 16 559 569

19 614 150 60 549 397 421 656 16 560 532

cash and cash equivalents ceded as security for borrowingsAll bank accounts, cash balances and investments of Keaton Mining Proprietary limited as well as the standby equity account of Keaton energy holdings limited with a carrying value of R12.9 million have been ceded to Nedbank. Refer to note 21.

Group company



KEATON ENERGY




Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

15 Restricted investmentsAt fair value through profit or loss financial assetsInvestments held by environmental trust funds(1) 17 101 680 11 919 446 – – Other restricted investments(2) 9 581 189 1 107 583 – –

Total restricted investments 26 682 869 13 027 029 – –

Reconciliation of the movement in the environmental trust funds:balance at the beginning of the year 11 919 446 – – – Acquired through business combination(3) – 10 934 339 – – Interest income 474 047 85 586 – – Dividend income 16 980 3 083 – – Investment costs (416 297) (83 969) – – Contributions made 3 430 218 830 089 – – Fair value movement 1 677 286 150 318 – –

balance at the end of the year 17 101 680 11 919 446 – –

Reconciliation of the movement in other restricted invetments:balance at the beginning of the year 1 107 583 – – –Acquired through business combination(3) – 976 800 – –Contributions made 7 905 641 130 783 – –Interest income 92 789 – – –Dividend income 18 783 – – –Investment costs (41 242) – – –Fair value movement 497 635 – – –

balance at the end of the year 9 581 189 1 107 583 – –

These restricted investments are pledged as security for environmental rehabilitation guarantees issued by/on behalf of the group.

(1) The environmental trust funds are irrevocable trusts under the group’s control. Contributions to the trusts are invested in Sanlam and Momentum unit trusts where the underlying funds invest in equity instruments and money market investments, both local and foreign. The unit trusts investments are designated at fair value through profit or loss investments and recognised at fair value. These investments provide for the estimated cost of rehabilitation at the end of the life of the group’s mines. Income earned on the investments, consisting of dividend income, local and foreign interest and fair value adjustments are reinvested.

(2) Other restricted investments relate to guarantees provided to Transnet for the railway siding at the group’s Vaalkrantz Mine. Contributions to the fund are invested in Momentum unit trusts where the underlying funds invest in equity instruments and money market investments, both local and foreign. The unit trusts investments are fair value through profit or loss financial assets and are recognised at fair value. Income earned on the investments, consisting of dividend income, local and foreign interest, is reinvested. Also included in other restricted investments is an initial investment of R7.1 million relating to the Nedbank Bettabeta Green Exchange Traded Fund (BGreen ETF). The funds were transferred from restricted cash to restricted investments during the current year. Refer to note 14.1. The BGreen ETF tracks the Nedbank Green Index which has been developed by Nedbank Capital in line with its green principles and commitment to preserving the environment, and in response to the increased demand from environmentally concious investors. The index consists of a selection of stocks from the top 100 largest South African companies listed on the JSE. The investment is fair value through profit or loss financial assets and recognised at fair value.

(3) Refer to note 6.

Group company



Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

16 inventoryRun-of-mine stockpiles 17 662 573 8 073 495 – – Finished product stockpiles(1) 9 190 781 7 285 686 – – Consumables 11 639 208 7 757 835 – –

Total inventory 38 492 562 23 117 016 – – (1) During the 2012 financial year, the impairment of inventories to net realisable value amounted to R0.2 million. Inventories carried at net

realisable value amounted to R0.6 million.

All inventory balances of Keaton Mining Proprietary Limited of R33.4 million have been ceded to Nedbank. Refer to note 21.

Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

17 Trade and other receivablesFinancial assetsTrade receivables 76 604 296 101 150 384 – 35 229 Allowance for impairment (634 639) (332 082) – –

Trade receivables net 75 969 657 100 818 302 – 35 229 Interest receivable on bank deposits – 89 867 – 71 959 Non-financial assetsValue added tax receivable 7 011 120 1 881 338 910 765 – Other receivables (1) 2 234 065 1 535 334 – 41 565

85 214 842 104 324 841 910 765 148 753

(1) Other receivables consists of various prepayments.

Group company

Group company



KEATON ENERGY




Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

17 Trade and other receivables (continued)The ageing of trade receivables at the reporting date was:Current 72 080 553 77 270 872 – 35 229 Past due by one to 30 days 1 007 122 20 071 908 – – Past due by 31 to 60 days 3 906 3 624 872 – – Past due by 61 to 90 days – 120 471 – – Past due by more than 90 days 3 512 715 62 261 – –

76 604 296 101 150 384 – 35 229

The ageing of the allowance for impairment at the reporting date was:Current – – – – Past due by one to 30 days – – – – Past due by 31 to 60 days – 137 898 – – Past due by 61 to 90 days – 120 471 – – Past due by more than 90 days 634 639 73 713 – –

634 639 332 082 – –

The movement in the allowance for impairment:balance at 31 March 2012 332 082 – – – Allowance for impairment 302 557 332 082 – –

balance at 31 March 2013 634 639 332 082 – –

based on past experience, the group believes that no impairment allowance is necessary in respect of fully performing receivables as the amount relates to customers that have a proven track record with the group.

During the year 2012 and 2013, there was no renegotiation of the terms of any receivable.

Trade and other receivables ceded as security for borrowingsAll trade and other receivable balances of Keaton Mining Proprietary limited with a carrying value of R64.4 million have been ceded to Nedbank. Refer to note 21.

Group company



Year to 31 March

2013Number

of shares

year to 31 March

2012Number

of shares

Year to 31 March

2013 R

year to 31 March

2012R

18 ordinary share capital, share premium and share-based payment reserveAuthorised share capital Ordinary shares of 0.1 cents each(1) 250 000 000 250 000 000 250 000 250 000 issued share capitalAt the beginning of the year 188 752 600 171 547 644 188 752 171 547 Shares issued for cash during the year(2) 2 910 541 – 2 911 – Shares issued for consideration other than cash(4) – 582 734 – 583 Shares issued in business combination(3) – 16 622 222 – 16 622

191 663 141 188 752 600 191 663 188 752

Share premiumAt the beginning of the year 632 053 834 567 717 887 644 053 834 567 717 887 Shares issued for cash during the year(2) 9 019 767 – 9 019 767 – Shares issued for consideration other than cash(4) – 1 619 418 – 1 619 418 Shares issued in business combination(3) – 74 783 377 – 74 783 377 Share-based payment transferred to other reserves – (12 000 000) (12 000 000) –Share issue expenses (362 327) (66 848) (362 327) (66 848)

640 711 274 632 053 834 640 711 274 644 053 834(1) Refer to note 36 for additional information with regards to subsequent conversion of ordinary shares into shares with no par value.(2) During the financial year a general issue of shares for cash was done, totalling 2 910 541 shares at R3.10 per share.(3) The issue of shares relates to the acquisition of LME. Refer to note 6.(4) 582 734 shares were issued at a price of R2.78 as settlement of brokerage fees relating to the LME acquisition.

Group and company

Group company



KEATON ENERGY




Year to 31 March

2013 R

year to 31 March

2012R

Year to 31 March

2013 R

year to 31 March

2012R

18 ordinary share capital, share premium and share-based payment reserve (continued)Share-based payment reserve(1)

Share appreciation rights outstanding – beginning of the year 6 180 562 2 394 727 4 233 367 2 065 269 Share appreciation rights lapsed – (194 412) – – Share appreciation rights expense arising from notional shares granted 6 316 078 3 980 247 4 440 205 2 168 098

12 496 640 6 180 562 8 673 572 4 233 367

The directors are authorised, by resolution of the shareholders and until the forthcoming annual general meeting, to alot, issue and otherwise dispose of the unissued shares. This is, however, subject to the listings Requirements of the JSe limited.

(1) Refer to note 19 for detail on the share-based payment transactions.

Group company



19 Share-based payment transactionsThe group established a long-term performance incentive scheme, consisting of share appreciation rights (SARs), the objective of which is to recognise the contributions of staff to the group’s financial position and performance and to retain key employees. In terms of the scheme certain directors and employees may receive a conditional right to a bonus award (conditional bonus award) equal to the increase in the value of a number of notional Keaton energy ordinary shares (notional shares) between the date on which the remuneration committee of Keaton energy approves the offer of the conditional bonus award to the end of the performance period (normally three years following the offer) applicable to the conditional bonus award.

The aggregate number of shares which may be allocated to the share plan on any day, when added to the total number of unexercised SARs shall not exceed 28 749 471 shares. The limit applied to any one individual is 5 749 894 shares. The offer of SARs will be conditional upon achievement of performance targets as specified in the bonus award certificates, which is specific to each employee, and the minimum employment period.

Termination of employees participation in the share plan is based on “no fault” and “fault” definitions.

Fault definitionsAn award will lapse/be forfeited and revert back to the scheme and have no further force or effect on the earliest of:– the date on which the performance targets (or a portion thereof) are not achieved, as determined by the remuneration

committee; and– the date a participant’s employment with a member of the group terminates, if termination of employment occurs during

the minimum employment period.

No fault definitionsIn the event that a participant’s employment with the group is terminated by reason of death, ill health, incapacity or redundancy, disposal of the majority of the issued shares or business of the participating company, the remuneration committee may in its absolute discretion:– deem a pro-rata portion of the bonus award to become unconditional and to be capable of being exercised within three

months. The remuneration committee will take into consideration, among other things, the extent to which performance targets have been satisfied and the portion of minimum employment period which has expired; and

– allow the scheme to apply to the whole or a portion of the bonus award, which were made by the participant as though the individual had not ceased to be an employee.

Should the remuneration committee determine in its discretion that no portion of the participant’s bonus award should become unconditional and be capable of being exercised, then the bonus award shall lapse upon termination of employment.

If a participant ceases to be an executive director or employee of a participating company for any reason and a bonus award shall already have become unconditional and shall not have lapsed for any reason before the date of cessation of employment, then the bonus award will lapse seven days after cessation of employment if it is not exercised before the expiry of that seven-day period.

The fair value of each notional share granted was estimated on the date of grant using the black-Scholes option-pricing model. The cost is expensed over the vesting period. The black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the notional share award and share price volatility. expected volatility is based on the historical average volatility of Keaton energy’s share price. These estimates involve inherent uncertainties and the application of management judgement. In addition, the group is required to estimate the expected forfeiture rate and only recognise expense for those notional shares expected to vest. As a result, if other assumptions had been used, the recognised share-based appreciation right expense could have been different from that reported.

The SARs have an expiry date of six years from the grant date and the offer price equals the closing market price of the underlying shares on the 10-day volume weighted average share price immediately preceding the grant date.

The terms and conditions of the long-term performance incentive scheme stipulate that the remuneration committee of the group will determine the most appropriate manner to settle the amount due, it being the intention that the settlement will normally occur by way of an allotment and issue of new shares and/or the purchase and transfer of existing shares. however, if circumstances require, the group is entitled (on approval of the remuneration committee) to settle the amount due by way of a direct cash payment in Rand, net of taxation. These cash payments must be applied in the subscription of new or the purchase of issued shares of the company. No employees have exercised any share appreciation rights in the 2012 or 2013 financial years.



KEATON ENERGY




19 Share-based payment transactions (continued)The terms and conditions of the grants to date (excluding lapsed grants) are as follows:

Grant date1 July 2010

25 August 2010

24 August 2011

2 december 2011

2 december 2011

14 december 2011

15 december 2011

9 May 2012

6 June 2012

3 September 2012

Number of notional shares granted 225 048 2 535 272 6 538 237 3 126 473 1 041 526 410 614 905 797 78 671 4 291 138 278 656

Vesting conditions

Minimum employment

period of three years and certain

performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment

period of two years

and certain performance

targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Average contractual life of notional shares (excluding three-year exercise period after vesting) 3 years 3 years 3 years 3 years 2 years 3 years 3 years 3 years 3 years 3 yearsWeighted average share price (R) at grant date (offer or exercise price) 5.20 4.67 2.50 2.78 2.78 2.74 2.74 2.86 3.34 2.52 Fair value (R) per notional share at grant date 1.85 1.66 1.11 1.31 0.65 1.25 1.24 1.60 1.72 1.02 expected volatility factor 39.1% 39.1% 48.5% 44.1% 44.1% 44.3% 44.3% 42.3% 42.6% 45.6%expected dividends N/A N/A N/A N/A N/A N/A N/A N/A N/A N/ARisk-free interest rate (based on government bonds) 7.9% 7.9% 6.2% 6.4% 6.4% 6.7% 6.7% 6.7% 7.2% 6.1%

Year to31 March

2013R

year to31 March

2012R

Year to31 March

2013R

year to31 March

2012R

Number of share optionsShare options granted 21 431 761 16 783 296 15 591 603 12 573 530

Vested not exercised – 35 211 – – unvested 18 247 454 14 296 377 10 840 599 7 822 526 Transferred to other group companies – – 2 785 886 2 785 886 Forfeited and lapsed 3 184 307 2 451 708 1 965 118 1 965 118

Vesting periods of unvested sharesWithin one year 4 692 286 – 1 606 614 – One to two years 8 906 703 4 861 517 6 215 912 1 606 614 Two to three years 4 648 465 9 434 860 3 018 073 6 215 912

Total number of unvested shares 18 247 454 14 296 377 10 840 599 7 822 526

Activity on options granted not yet exercisedbalance at the beginning of the year 14 331 588 4 752 590 7 822 526 4 154 708 Options granted 4 648 465 12 030 706 3 018 073 8 418 822 Options transferred to other group companies – – – (2 785 886)Options exercised – – – – Options forfeited and lapsed (732 599) (2 451 708) – (1 965 118)

balance at the end of the year 18 247 454 14 331 588 10 840 599 7 822 526

SARs – Group SARs – company



19 Share-based payment transactions (continued)The terms and conditions of the grants to date (excluding lapsed grants) are as follows:

Grant date1 July 2010

25 August 2010

24 August 2011

2 december 2011

2 december 2011

14 december 2011

15 december 2011

9 May 2012

6 June 2012

3 September 2012

Number of notional shares granted 225 048 2 535 272 6 538 237 3 126 473 1 041 526 410 614 905 797 78 671 4 291 138 278 656

Vesting conditions

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment

period of two years

and certain performance

targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Minimum employment


performance targets

Average contractual life of notional shares (excluding three-year exercise period after vesting) 3 years 3 years 3 years 3 years 2 years 3 years 3 years 3 years 3 years 3 yearsWeighted average share price (R) at grant date (offer or exercise price) 5.20 4.67 2.50 2.78 2.78 2.74 2.74 2.86 3.34 2.52 Fair value (R) per notional share at grant date 1.85 1.66 1.11 1.31 0.65 1.25 1.24 1.60 1.72 1.02 expected volatility factor 39.1% 39.1% 48.5% 44.1% 44.1% 44.3% 44.3% 42.3% 42.6% 45.6%expected dividends N/A N/A N/A N/A N/A N/A N/A N/A N/A N/ARisk-free interest rate (based on government bonds) 7.9% 7.9% 6.2% 6.4% 6.4% 6.7% 6.7% 6.7% 7.2% 6.1%

Number of shares

Option price

Remaining life (years)

List of options granted not yet exercised (listed by grant date)1 July 2010 55 817 5.20 0.25 25 August 2010 2 433 559 4.67 0.40 24 August 2011 4 463 820 2.52 1.40 24 August 2011 1 161 383 2.52 0.40 2 December 2011 3 126 473 2.81 1.67 2 December 2011 1 041 526 2.81 0.67 14 December 2011 410 614 2.76 1.70 15 December 2011 905 797 2.76 1.71 9 May 2012 78 671 2.86 1.67 6 June 2012 4 291 138 3.34 2.00 3 September 2012 278 656 2.52 2.42

18 247 454

Year to31 March

2013 R

year to31 March

2012R

Year to31 March

2013 R

year to31 March

2012R

Share-based payment expense recognised 6 316 078 3 785 835 4 440 205 2 168 098

Group company



KEATON ENERGY




Year to31 March

2013R

Year to31 March

2012R

Year to31 March

2013R

Year to31 March

2012R

20 Other reservesPurchase price adjustment (30 751 111) (30 751 111) (30 751 111) (30 751 111)Share-based payment adjustment transferred from share premium 12 000 000 12 000 000 12 000 000 –

(18 751 111) (18 751 111) (18 751 111) (30 751 111)

Purchase price adjustmentThe purchase price adjustment relates to the acquisition of LME, the purchase consideration of which was settled by the issue of shares of the company. The contractually agreed issue price of the shares was R4.50, which was based on the market value of the holding company’s shares by the end of 2010 when the acquisition agreements were concluded. On the effective date, 14 December 2011, the shares were trading at a closing bid price of R2.65. The difference between the contractual issue price and bid price was charged to equity. Also refer to note 6 in this regard.

Share-based payment adjustment transferred from share premium

The transfer relates to a share based payment transaction concluded between the company, Keaton Mining Proprietary Limited and Rutendo Mining Proprietary Limited during the 2008 financial year. The transfer is made to ensure consistent treatment in transactions where share-based payments are made. Shares issued in share-based payment transaction are fair valued at grant date and the difference in the issue price and the fair value is recognised in other reserves. Previously the difference was recognised in share premium.

21 BorrowingsNedbank LimitedOn 1 April 2011 Keaton Mining Proprietary Limited (cedent or borrower) concluded a project financing agreement with Nedbank Limited (agent or financing party) and its nominated security party (cessionary) to further fund the development of its Vanggatfontein Project. The loan facility comprised a senior loan facility of R230 million, a standby debt facility of R25 million for potential project cost overruns and a standby equity subscription agreement of R50 million.

At reporting date, R204.4 million (2012: R204.4 million) of the senior loan facility had been drawn. The loan bears interest at the 91-day Jibar plus a margin of 5% (interest rate) until all completion tests have been met, after which a margin of 4.5% applies. Commitment fees of 1% annually of undrawn facilities applies and is payable to Nedbank. During the year, capital repayments of R23 million were made (2012: R nil). The facility is repayable in sculptured quarterly payments with the next repayment on 30 June 2013 and ending 30 June 2017 (refer to amendments made to the Nedbank agreement below). Total interest paid up to 31 March 2013 amounted to R19.2 million (2012: interest accrued of R21.1 million). In the event that the repayments are not made on due date interest will be levied at a margin of 2% above the interest rate.

At reporting date, no drawdowns had been made against the standby debt facility. The facility bears interest at the 91-day Jibar plus a margin of 6.5%. Commitment fees of 1% annually of undrawn facilities applies and is payable to Nedbank. The facility is repayable, if applicable, in sculptured quarterly payments ending 30 June 2017.

As part of the project finance covering security arrangement the company had to restrict R50 million of its cash as a standby equity deposit in favour of the Vanggatfontein Mine. The entire deposit was invested in the project at the reporting date, to further finance development and working capital requirements.

Group Company



Various guarantees, representations, warranties, undertakings, indemnities and pledges, normal to project financing arrangements, have been given by both the borrower and Keaton Energy (guarantor) to Nedbank. These, among other, include:

The guarantor guarantees, the full, due, proper and timeous performance of all the guaranteed financial obligations of the borrower to the bank arising before financial completion. After financial close this guarantee is limited to 1) its shareholding in the borrower and Keaton Administration and Technical Services Proprietary Limited (KATS), a 100% subsidiary of the group, and 2) all claims against the borrower and KATS. The guarantor has also subordinated any claims it has against the borrower in favour of Nedbank until such time as all obligations of the borrower in terms of the project finance documents have been discharged finally and in full.

As continuing covering security for the due compliance by the cedent with all obligations the following security exists: » Registration of general and special notarial bonds over all moveable assets owned by the borrower. » Registration of mortgage bonds over fixed properties owned by the borrower, to the extent legally possible. » Encumbrance of all mining rights to the extent possible. » Session in securitatem debiti of all existing and future debtors. » Session of standby equity bank account and all other bank accounts, cash balances and investments. » Reversionary session of all accounts ceded at financial close. » Session of the material contracts at the Vanggatfontein Project. » The Keaton Energy indemnity given to the borrower, in terms of which Keaton Energy indemnifies and holds the borrower harmless from and against any losses suffered by the borrower arising from the activities, other than the Vanggatfontein Project, conducted by the borrower prior to 1 April 2011.

» Session of all proceeds of any claims in terms of insurances at the Vanggatfontein Project.

The debt covenant tests for the group are as follows:Maximum ratio of debt to equity 50:50Loan Life Cover Ratio (minimum) 1.5:1Project Life Cover Ratio (minimum) 1.7:1Debt Service Cover Ratio (minimum) 1.3:1

During the 2013 financial year, the following amendments were made to the Nedbank agreement and debt covenant tests: » The capital repayment profile was resculpted with the next repayment due on 30 June 2013. » A grace on covenant measurements until 30 June 2013.

No breaches of the covenants were identified during the 2013 and 2012 financial years.

Industrial Development Corporation (IDC) – loan agreementLME 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 is repayable in seven equal six-monthly instalments of R935 817 and a final instalment of R435 795 which commenced on 1 December 2012.

This loan attracts interest at prime plus 2.5% which is payable monthly in arrears. The loan is 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 is further secured by a first mortgage bond over the surface rights, a general notarial bond over all movable assets, excluding the coal washing plant, and a special notarial bond over other movable assets.

Group overview 4Annual reviews 22Operational review 36Operating context 56Financial performance review 66Environmental, labour and social review 74Governance 86 Annual financial statements 100Shareholders’ information, glossary of terms and secretarial matters 188


KEATON ENERGY




21 Borrowings (continued)Industrial Development Corporation – LME Preference SharesDuring 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 “terminal redemption date” being 31 October 2015.

Dividends are compounded quarterly, with the first dividend payment scheduled to commence on 30 June 2013 and quarterly thereafter. Payment of dividends are, 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. Refer to note 22 in this regard.

Vitol S.A. – US Dollar loanDuring July 2008, LME entered into a coal sale agreement with Vitol S.A.for the supply of 500 000 tonnes of coal at a rate of 22 400 tonnes per month. This agreement has a prefinance loan clause where Vitol S.A. paid an amount of $5 500 000 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 US Dollar 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 $12 per tonne of coal supplied to Vitol S.A.

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 Leeuw Braakfontein Colliery. A further unlimited Guarantee by LME for the obligations of LBC under the agreement. Total interest repayments of R1.8 million were made during the current financial period (2012: R nil).

Investec Bank LimitedLME currently has an instalment sale agreements in place with Investec Bank Limited for mining equipment. This instalment sale agreement accumulates interest at 9%, payable in arrears in monthly instalments of R76 439 over a period of five years and are secured under the instalment sale agreement.

Other borrowingsOne of the subsidiaries in the group, KATS entered into lease agreements with an IT equipment supplier for the supply of computer equipment. These loans attract interest at 5% per annum compounded annually and are repayable over a term of 36 months.



Year to31 March

2013R

Year to31 March

2012R

Year to31 March

2013R

Year to31 March

2012R

21 Borrowings (continued)Interest-bearing borrowingsNon-current borrowingsNedbank Limited 147 561 755 170 942 324 – –

Balance at the beginning of the year 170 942 324 – – – Drawdown – 204 400 000 – – Interest 19 236 356 21 068 678 – – Repayments (interest and capital) (42 176 817) – – – Issue costs (1 392 358) (9 859 147) – – Amortisation of issue costs 1 534 895 1 347 510 – – Net adjustments to current portion (582 645) (46 014 717) – –

Industrial Development Corporation 4 199 308 6 050 697 – – Balance at the beginning of the year 6 050 697 – – – Acquired through business combination – 7 789 410 – – Interest 775 523 360 664 – – Repayments (interest and capital) (2 854 655) – – – Net adjustments to current portion 227 743 (2 099 377) – –

Industrial Development Corporation – LME preference shares 24 566 339 21 408 153 – –

Balance at the beginning of the year 21 408 153 – – – Acquired through business combination – 20 686 092 – – Dividends accrued 3 158 186 722 061 – – Net adjustments to current portion – – – –

Vitol S.A. 58 954 436 48 933 844 – – Balance at the beginning of the year 48 933 844 – – – Acquired through business combination – 52 126 655 – – Interest 1 843 381 520 031 – – Repayment (interest) (1 799 300) – – – Foreign exchange loss/(profit) 9 976 511 (3 712 842) – – Net adjustments to current portion – – – –

Investec Bank Limited – instalment sale agreements – 737 155 – – Balance at the beginning of the year 737 155 – – – Acquired through business combination, net of intercompany instalment sale agreements – 2 061 244 – – Interest 102 258 – – – Repayments (1 036 170) (311 716) – – Deferred finance charges – (6 521) – – Net adjustments to current portion 196 757 (1 005 852) – –

Other borrowings 107 860 84 167 – – Balance at the beginning of the year 84 167 – – – Lease agreements concluded 142 245 186 524 – – Interest 18 455 – – – Repayments (43 105) (36 842) – – Deferred finance cost – (13 649) – – Finance costs realised – 4 561 – – Net adjustments to current portion (93 902) (56 427) – –

Total non-current borrowings 235 389 698 248 156 340 – –

Group Company



KEATON ENERGY




Year to31 March

2013R

Year to31 March

2012R

Year to31 March

2013R

Year to31 March

2012R

21 Borrowings (continued)Current borrowingsCurrent portion of loan from Nedbank Limited 46 597 362 46 014 717 – – Current portion of loan from Industrial Development Corporation 1 871 634 2 099 377 – – Current portion of instalment sale agreements with Investec Bank Limited 809 095 1 005 852 – – Current portion of instalment sale agreements with other borrowers 150 329 56 427 – – Total current borrowings 49 428 420 49 176 373 – – Total interest-bearing borrowings 284 818 118 297 332 713 – –

The future minimum payments on the instalment sale and lease agreements are as follows:

Due within one year 996 561 1 062 278 – – Due within one and two years 82 522 821 323 – – Due between two and five years 29 220 – – –

1 108 303 1 883 601 – – The maturity of borrowings is as follows:

Current 49 428 420 49 176 373 – – Between one to two years 56 642 612 23 116 426 – – Between two to five years 178 747 086 170 967 027 – – Over five years – 54 072 887 – –

284 818 118 297 332 713 – –

22 Long-term financial liabilitiesIDC equity-linked call option 303 161 612 909 – –

303 161 612 909 – –

IDC equity-linked call optionIn addition to the rescheduled repayment terms relating to the preference shares held by the IDC in LME (refer to note 21) the IDC and LME also agreed to the payment of an additional amount. The additional amount is a derivative financial instrument, the host of which being the redeemeable cumulative preference shares.

The value of the option is dependent on a factor of between one and five, which is linked to the date the preference shares are likely to be redeemed. The factor is multiplied by an agreed base price and also multiplied by the difference between the closing price of the holding company’s shares trading on the JSE on redemption date and the strike price of R4.32 offered to the IDC.

The option under consideration is valued yearly by independent professional valuers, using a finite difference scheme for valuation. Assumptions used to value the option include a probability linked to each of the four likely redemption periods, the spot share price of the holding company on date of valuation, a term structure with Jibar, FRA and swap data as inputs and volatility. The movement on the option is recognised in the statement of comprehensive income.

Group Company

Group Company



Year to31 March

2013R

Year to31 March

2012R

Year to31 March

2013R

Year to31 March

2012R

23 Mine closure and environmental rehabilitation provisionBalance at the beginning of the year 113 182 856 46 378 807 – – Increase in provision 27 126 596 66 804 049 – –

Additional provision due to new disturbances allocated to property, plant and equipment 20 222 798 44 746 157 – – Additional provision due to new disturbances charged to the statement of comprehensive income (387 322) 64 863 – – Assumed in a business combination – 15 878 833 – – Time value of money and inflation component of rehabilitation cost. Refer to note 7 7 291 120 6 114 196 – –

Balance at the end of the year 140 309 452 113 182 856 – –

Long-term portion of provision 137 450 832 112 856 645 – –

Short-term portion of provision 2 858 620 326 211 – –

140 309 452 113 182 856 – –

The group’s mining and exploration activities are subject to extensive environmental laws and regulations. These laws and regulations are continually changing and are generally becoming more restrictive. The group has made and expects to make future expenditures to comply with such laws and regulations but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. The above is a reconciliation of the total liability for environmental rehabilitation.

Refer to note 3 of the accounting policies for the accounting estimates used and judgement applied in calculating rehabiliation provisions. While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the group has estimated that, based on current environmental and regulatory requirements, the total cost for the mines, in the current monetary terms, is approximately R168.6 million (2012: R132.9 million).

The group intends to finance the ultimate rehabilitation costs from the money invested in environmental trust funds (refer to notes 14 and 15), ongoing contributions, as well as the proceeds on sale of assets at the time of mine closure. The group has guarantees in place relating to the environmental liabilities as follows:

Year to31 March

2013R

Year to31 March

2012R

Guarantees

Environmental rehabilitation guarantees issued to the DMR 37 305 951 35 905 951

These guarantees have been issued by third parties. R27.7 million (2012: R9.5 million) in bank deposits, unit trust and exchange traded funds (included in restricted cash – note 14.1 and restricted investments – note 15), as well as a limited indemnity by both Keaton Energy and Keaton Mining Proprietary Limited are being held as security by these third parties.

Group Company

Group



KEATON ENERGY




Year to31 March

2013R

Year to31 March

2012R

Year to31 March

2013R

Year to31 March

2012R

24 Trade and other payablesFinancial liabilitiesTrade and other payables(1) 205 562 783 161 358 259 312 879 667 956 Sundry payables and accrued expenses 8 213 602 4 901 067 198 754 333 220

Non-financial liabilitiesValue added tax 377 044 2 703 448 – 110 752 Payroll accruals(2) 14 481 653 10 047 082 1 803 869 1 647 140 Income received in advance 1 166 038 345 967 – –

229 801 120 179 355 823 2 315 502 2 759 068

The following payment guarantees exist:

Payment guarantees issued to major suppliers 13 543 000 13 543 000 – –

The guarantees have been issued by third parties. R4.5 million (2012: R4.5 million) in bank deposits (included in restricted cash – note 14.1) are being held as security by the third parties.

(1) Included in trade and other payables are amounts of R33 million owing to DRA Mineral Projects Proprietary Limited, R42.5 million owing to Megacube Mining Proprietary Limited and R1.9 million owing to Workforce Proprietary Limited. The group is disputing these amounts. Refer to note 27 in this regard.

(2) Payroll accruals:

These accruals comprise leave pay accrual, bonus accrual and other salary accruals. The leave pay accrual relates to vesting leave pay to which employees may become entitled on leaving the employment of the group. The accrual arises as employees render a service that increases their entitlement to future compensated leave and is calculated based on an employee’s total cost of employment.

The bonus accrual consists of both a guaranteed portion and a performance-based portion based on the employee’s achievement of performance targets. The employee must be in service at date of payment to qualify for the performance bonus.

25 Retirement planProvident fundThe majority of the group’s salaried employees are members of the Keaton Administrative and Technical Proprietary Limited provident fund, Keaton Mining Proprietary Limited provident fund, Leeuw Mining and Exploration Proprietary Limited provident fund and the Leeuw Mining and Exploration Proprietary Limited pension fund. These funds are classified as defined contribution funds

The provident funds are operated by Liberty Corporate Benefits and Sanlam on behalf of KATS, KM and LME, are domiciled in the Republic of South Africa and are governed by the Pension Funds Act, (Act No 24 of 1956).

The total cost recognised in the statement of comprehensive income for the year of R5.9 million (2012: R2.8 million) represents contributions payable to these funds by the group at rates specified in the rules of the provident and pension funds.

Group Company



Year to31 March

2013R

Year to31 March

2012(1)

R

Year to31 March

2013R

Year to31 March

2012(2)

R

26 Notes to the statements of cash flows26.1 Cash generated from/(utilised) in operations

Net (loss)/profit before taxation (171 608 605) 105 914 382 60 215 944 64 601 539 Adjustments for: (Reversal of impairment losses)/impairment losses – (1 216 171) 2 342 203 (5 410 220) Loss on derecognition of property, plant and

equipment 51 173 671 – – – Finance income (2 109 111) (17 541 785) (246 833) (2 285 446) Finance costs 34 307 849 30 947 400 12 051 – Depreciation and amortisation 227 130 704 123 208 824 – – Consulting fees – 1 620 001 – 1 620 001 Share appreciation rights expenses 6 316 078 3 785 835 4 440 205 2 168 100 Profit on disposal of property, plant and equipment (874 106) (416 641) – – Foreign exchange losses/(profit) 9 976 511 (3 712 842) – – Change in estimate – environmental rehabilitation (387 322) 64 862 – – Fair value gain on loans granted and converted – (20 665 003) – – Fair value gains on financial instruments through

profit and loss (2 484 669) (120 084) – – Gain on business combination – (114 384 579) – – Other employee benefit expenses – 2 187 023 – 1 793 715 Other items – 46 679 – – Non-cash items included in revenue

from subsidiaries – – (82 011 269) (68 313 509)Changes in working capital 66 322 118 18 314 990 (1 205 578) (2 712 445) Inventory (5 766 523) (1 022 821) – – Trade and other receivables 19 109 999 (35 801 097) (762 012) 143 539

Trade and other payables 52 978 642 55 138 908 (443 566) (2 855 984)

217 763 118 128 032 891 (16 453 277) (8 538 265)

26.2 Taxation paidBalance at the beginning of the year (613 664) (608 859) (613 664) (608 859)Current income tax (2 343 450) (1 613 458) (2 758 351) (1 613 458)Balance at the end of the year 838 485 613 664 838 485 613 664

Paid during the year (2 118 629) (1 608 653) (2 533 530) (1 608 653)

26.3 Investment in subsidiary companiesIncrease in the carrying amount – – (85 716 268) (233 342 912)Transfer of financial assets to investment in subsidiaries – – – 150 666 208 Acquisition of subsidiary – – – 44 048 888 Interest and preference dividends capitalised – – 82 011 269 54 501 490Convertible loans converted – – – (10 000 000)(Impairment reversal)/impairment losses – – (2 342 203) 5 410 220

– – (6 047 202) 11 283 894(1) The comparative information for the period 31 March 2012 has been restated as a result of the early adoption of IFRIC 20 –

“Stripping cost in the production phase of a surface mine”. Refer to note 4 of the significant accounting policies. (2) The comparative information has been restated as a result of a re-presentation between finance income and revenue. Refer to note 1 of

the notes to the financial statements.

Group Company



KEATON ENERGY




27 Contingent liabilities, commitments and legal disputesThe group has the following contingent liabilities and commitments:

Contingent commitmentThe company has entered into the shareholders’ agreements with the external shareholders in the company’s exploration subsidiaries. The external shareholder has the option to sell to the company (all and not part of) its shares in the exploration subsidiary for a purchase price equal to the fair market value of such shares. The put option is exercisable by written notice at any time for a period of 30 days commencing on the later of 2 May 2014 and the date of fulfilment of the last condition precedent contained in the put option paragraph. The purchase consideration shall be satisfied by the issue by the company to the external shareholder of such number of Keaton Energy ordinary shares which shall be equal to the purchase consideration. In calculating the value such Keaton Energy ordinary shares, the parties shall use the volume weighted average price of the ordinary shares (post listing) as traded on the JSE over the 10 trading days immediately preceding the exercise of the put option. The put option is subject to the suspensive conditions that at the time of exercise of the put option the exploration subsidiary will not suffer any prejudice or adverse effects in terms of the Broad-Based Black Economic Empowerment Act 2003, the provisions of any charter, the MPRDA or any law relating to empowerment and that all statutory and regulatory permissions and authorities required to be able to exercise such put option are obtained within 150 days of the exercising of the option.

During the 2010 financial year, Keaton Mining Proprietary Limited (Keaton Mining), a 74% subsidiary of the company, entered into an agreement with a consortium representing certain landowners at its Sterkfontein Project (Bethal). This agreement will govern future negotiations between Keaton Mining and the landowners in terms of its exploration and mining activities, as well as land access and acquisitions. The parties have also agreed certain payment mechanisms (for coal to be mined) for future compensation as required in terms of the MPRDA.

Legal disputesLeeuw Mining and Exploration Proprietary Limited vs Workforce Proprietary LimitedThe Workforce Group Proprietary Limited (Workforce), has issued summons against Leeuw Mining and Exploration Proprietary Limited (LME) whereby it is claiming the sum of R3.2 million for alleged breaches of a staff management services agreement, in that LME has failed to pay certain invoices rendered by Workforce. LME is to defend the matter on the basis that the amounts claimed are incorrect and furthermore that it has a counterclaim against Workforce in respect of, inter alia, overpayments relating to VAT and breaches of the agreement by Workforce. Workforce has included in the summons a further claim against LME for the sum of R1.1 million in respect of an alleged debt owed by Asambeni Mining Proprietary Limited, which Workforce alleges LME accepted liability for. LME will defend these claims vigorously.

Keaton Mining Proprietary Limited (Keaton Mining) vs DRA Mineral Projects Proprietary Limited (DRA)Included in trade and other payables (note 24) is an amount of R33 million which DRA contends is owing to it as reported in Keaton Energy’s annual report for the year ended 31 March 2012. The litigation relates to whether the amount claimed by DRA is due and payable (due to various breaches of the design, supply, construction and commissioning of the Vanggatfontein coal plant phase two processing agreement by DRA). Keaton Mining has lodged several counterclaims against DRA and the litigation is ongoing.



27 Contingent liabilities and commitments (continued)Legal disputes (continued)Keaton Mining Proprietary Limited (Keaton Mining) vs Megacube Mining Proprietary Limited (Megacube)Included in trade and other payables (note 24) in the statement of financial position is an amount of R42.5 million for contract mining services rendered by Megacube to Keaton Mining for the period June 2012 to July 2012. As a result of several breaches of the contract mining agreement, Keaton Mining disputes that this amount 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

Year to31 March

2013R

Year to 31 March

2012R

Capital commitments

Authorised but not contracted 66 844 971 55 681 948

Authorised and contracted 3 863 621 13 955 382

All contracted amounts will be funded through existing funding mechanisms within the group and cash generated by operations.

Year to31 March

2013

Year to 31 March

2012

Year to31 March

2013

Year to31 March

2012

28 Operating lease paymentsLease payments 1 376 640 561 000 – –

Recognised in profit and loss 1 376 640 561 000 – –

One of the company’s subsidiaries, Keaton Mining Proprietary Limited, leases two weighbridges on the Vanggatfontein Project and a mine house. These commitments are:Non-cancellable operating lease rentals are payable as follows:Less than one year 1 297 052 459 200 – – One to five years – 72 600 – –

Total 1 297 052 531 800 – –

Group

Group Company



KEATON ENERGY




29 Financial instrumentsOverview

The group’s financial instruments expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and other price risk), credit risk and liquidity risk. The group may use derivative financial instruments to hedge certain risk exposures.

This note presents information about the group’s level of exposure to each of the above risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The board has overall responsibility for the establishment and oversight of the group’s risk management framework. The risk committee is responsible for developing and monitoring the group’s risk management policies. This committee reports at least quarterly to the board on its activities.

The group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the group’s activities. The group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The audit committee oversees how management monitors compliance with the group’s risk management framework in relation to risks faced by the group. Internal audit assists the audit committee in its oversight role. It undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

The group’s financial instruments are set out below:

Loans andreceivables

R

Held-to-maturity

investmentsR

At fair valuethrough profit

or lossfinancial

assetsR

Financial liabilities at amortised

costR

GroupAt 31 March 2013Restricted investments – – 26 682 869 – Restricted cash – 7 423 204 – – Trade and other receivables 75 969 657 – – – Cash and cash equivalents 19 614 150 – – – Borrowings – – – 284 818 118 Long-term financial liabilities – – 303 161 – Trade and other payables – – – 213 776 385

At 31 March 2012Restricted investments – – 13 027 029 – Restricted cash – 14 023 204 – – Trade and other receivables 100 908 169 – – – Cash and cash equivalents 60 549 397 – – – Borrowings – – – 297 332 713 Long-term financial liabilities – – 612 909 – Trade and other payables – – – 162 259 326



Loans andreceivables

R

Held-to-maturity

investmentsR

At fair valuethrough profit

or lossfinancial

assetsR

Financial liabilities at amortised

costR

29 Financial instruments (continued)

CompanyAt 31 March 2013Loans to subsidiaries 221 111 535 – – – Preference shares in subsidiaries 507 812 223 – – – Restricted cash – 1 418 581 – – Cash and cash equivalents 421 656 – – – Trade and other payables – – – 511 633

At 31 March 2012Loans to subsidiaries 191 076 063 – – – Preference shares in subsidiaries 452 131 601 – – – Restricted cash – 1 418 581 – – Trade and other receivables 107 189 – – – Cash and cash equivalents 16 560 532 – – – Trade and other payables – – – 1 001 176

Credit riskCredit risk is the risk that a counterparty may default or not meet its obligations timeously. Financial instruments, which subject the group to concentrations of credit risk, consist predominantly of restricted cash, restricted investments, trade and other receivables (excluding non-financial instruments), and cash and cash equivalents.

Exposure to credit risk on trade and other receivables is monitored on a regular basis to ensure that customer remains within the negotiated terms. Customers are assessed on an individual basis to determine terms and conditions of sale transactions to limit the group’s exposure to impairments. The group uses a credit agency, Experian, to recommend the appropriate credit terms of each new customer. Refer to note 17 for an analysis of the movement in allowance for impairment on trade and other receivables.

The group limits its counterparty exposures from its restricted cash and cash and cash equivalents by only dealing with well-established financial institutions of high-quality credit standing. At the reporting date all of the group’s cash resources were deposited with reputable financial institutions of quality credit standing. The group has developed cash investment guidelines to ensure no significant concentration of credit risk.



KEATON ENERGY




Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to31 March

2012

29 Financial instruments (continued)Credit risk (continued)Cash and cash equivalents and restricted cashFinancial institutions’ credit rating by exposure:BBB+ – 13 213 758 – – BBB 27 037 354 61 343 346 1 840 237 17 979 113

Cash and cash equivalents and restricted cash 27 037 354 74 557 104 1 840 237 17 979 113

Restricted cash included aboveBBB 1 219 842 14 023 204 1 418 581 1 418 581

BBB- 6 203 362 – – –

Total restricted cash 7 423 204 14 023 204 1 418 581 1 418 581

The maximum exposure to credit risk is represented by the carrying amount of all financial asset determined to be exposed to credit risk at the reporting date. The total exposure at 31 March 2013 for the group was R129.7 million (31 March 2012: R188.5 million). The total exposure at 31 March 2013 for the company was R1.8 million (31 March 2012: R18.1 million) These are illustrated in the table under the overview section above.

Liquidity riskLiquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due, by delivering cash or another financial asset. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities. In the ordinary course of business, the group receives cash from its operations and is required to fund working capital and capital expenditure requirements. The group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient marketable securities or cash resources either from operations or committed credit facilities to meet its liabilities when it falls due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation. Refer to a maturity analysis under the market risk section below. The group has also provided indemnities to third parties in terms of certain unfunded guarantees (refer to note 24). Surplus cash is managed by investment in a manner to achieve market-related returns and to provide sufficient liquidity at the minimum risk.

Group Company



Total Current

Betweenone and two

years

Betweentwo and five

yearOver

five years

29 Financial instruments (continued)The following are the contractual maturities of financial liabilities:Group31 March 2013Borrowings 284 818 118 49 428 420 56 642 612 178 747 086 –Interest on borrowings 73 421 966 33 713 629 24 103 935 15 604 402 –Trade and other payables (excluding non-financial liabilities) 213 776 385 135 421 996 78 354 389 – –

572 016 469 218 564 045 159 100 936 194 351 488 –

31 March 2012Borrowings 297 332 713 49 176 373 23 116 426 170 967 027 54 072 887 Interest on borrowings 93 903 341 28 156 442 24 190 946 38 043 270 3 512 683Trade and other payables (excluding non-financial liabilities) 166 259 326 134 328 779 31 930 547 – –

557 495 380 211 661 594 79 237 919 209 010 297 57 585 570

Company31 March 2013Trade and other payables (excluding non-financial liabilities) 511 633 511 633 – – –

511 633 511 633 – – –

31 March 2012Trade and other payables (excluding non-financial liabilities) 1 001 176 1 001 176 – – –

1 001 176 1 001 176 – – –

Capital risk managementThe group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business in a way that optimises the cost of capital and matches the current strategic business plan. There were no changes to this policy during the year. The board monitors both the demographic spread of shareholders, as well as the return on capital. Capital is defined as total shareholders’ equity, excluding non-controlling interests. The group’s target return on capital, once all operations are fully ramped-up, is between 15% and 20%. The income for the year from the group’s externally invested funds was R2.1 million (2012: R17.5 million). This equates to an average return of 1.3% (2012: 8.99%) before tax.

The company’s funds invested in its subsidiaries’ mining operations and exploration projects earn a return of between prime plus 2% and 5% after tax, cumulative and compounded quarterly. The company only recognises this return once a proved and probable reserve has been declared in a subsidiary. The income for the year from the company’s financial assets were R86.2 million (2012: R76 million). This equates to an average return of 12.6% (2012: 12.4%) before tax.

The company and group’s effective interest rate on its investments in and loans to subsidiaries, restricted cash, cash and cash equivalents and borrowings has been included under the market risk section below.



KEATON ENERGY




Year to31 March

2013R

Year to31 March

2012R

29 Financial instruments (continued)The group’s net debt to equity ratio as at the end of the reporting period was as follows:

Borrowings 284 818 118 297 332 713Less: cash and cash equivalents (19 614 150) (60 549 397)

Net debt 265 203 968 236 783 316

Total equity 686 036 880 803 334 297

Debt to equity ratio 39% 29%

Market risk

i) Foreign exchange riskThe group is exposed to foreign exchange risk primarily with respect to the US Dollar (US$). Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The group is mainly exposed to foreign exchange risk arising from borrowings denominated in a currency other than the functional currency. The group generally does not enter into forward sales, derivatives or other hedging arrangements to manage this risk.

Sensitivity analysisThe group has reviewed its foreign currency exposure on financial assets and financial liabilities and has identified the following sensitivities for a 10% change in the exchange rate.

Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to31 March

2012

ZAR against US$Increase by 10% (5 895 444) (4 893 384) – –

Decrease by 10% 5 895 444 4 893 384 – –

ii) Cash flow and fair value interest rate riskWorking capital and capital expenditure requirements are funded through cash generated by operations and the loan facilities provided to group entities. The group’s interest rate risk arises mainly from long-term borrowings, cash and bank balances and restricted cash. The group has variable interest rate borrowings and fixed rate borrowings. Variable rate borrowings expose the group to cash flow interest rate risk and fixed rate borrowings expose the group to fair value interest rate risk. The group has not entered into any agreements, such as hedging, to manage this risk. The group’s risk committee meets at least quarterly to specifically address and manage these risks.

Sensitivity analysisA change of 100 basis points in interest rates at the reporting date would have increased/(decreased) profit before tax by the amounts shown in the table on page 175. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2012.

Group

Group Company



Year to31 March

2013 R

Year to31 March

2012R

Year to31 March

2013 R

Year to31 March

2012R

29 Financial instruments (continued)Increase by 100 basis points (1 919 989) 804 478 6 959 754 6 282 890

Decrease by 100 basis points 1 919 989 (804 478) (6 959 754) (6 282 890)

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the reporting date and the periods in which they mature:

Averageeffective

interest rate

Fixed orvariable

rateTotal

R

Maturing –less than

six months(1)

R

Maturing –between

six months and one

year(1)

R

Maturing – one to

five years(1)

R

Maturingover

five years(1)

R

GroupFinancial assetsAt 31 March 2013Restricted cash(2) 3.5% – 5.4% Variable 7 423 204 – – 7 423 204 – Short-term deposits 4.7% – 5.1% Variable 963 963 – – – Cash in bank and on hand 4.5% – 5.6% Variable 19 613 187 19 613 187 – – –

27 037 354 19 614 150 – 7 423 204 –

Financial liabilitiesAt 31 March 2013Borrowings 3.9% – 14% Variable 284 818 118 20 667 013 28 761 407 235 389 698 –

Financial assets

At 31 March 2012Restricted cash(2) 4.5% – 6.6% Variable 7 423 204 – – 7 423 204 – Restricted cash(2) 5.9% Fixed 6 600 000 6 600 000 – – – Short-term deposits 5.5% – 8.7% Variable 963 963 – – – Cash in bank and on hand 5.6% Variable 60 548 434 60 548 434 – – –

74 572 601 67 149 397 – 7 423 204 –

Financial liabilitiesAt 31 March 2012

Borrowings 3.9% – 14% Variable 297 332 713 22 948 421 26 227 952 194 083 453 54 072 887 (1) It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different

amounts. (2) These deposits are invested in rolling short-term deposits, but are pledged against mining or prospecting right guarantees, mining permit

guarantees, payment guarantees and a property transfer guarantee which all have different maturity dates.

.

Group Company



KEATON ENERGY




Averageeffective

interest rate

Fixed orvariable

rateTotal

R

Maturing –less than

six months(1)

R

Maturing –between

six months and one

year(1)

R

Maturing – one to

five years(1)

R

Maturing Over five

years(1)

R

29 Financial instruments (continued)CompanyFinancial assetsAt 31 March 2013Restricted cash(1) 4.7% Variable 1 418 581 – – 1 418 581 – Loans to subsidiaries 0% – 117.3% Variable 221 111 535 – – 221 111 535 – Preference shares in subsidiaries 14% – 22.75% Variable 507 812 223 – – 507 812 223 – Short-term deposits 4.7% – 5.1% Variable 963 963 – – – Cash in bank and on hand 4.9% Variable 420 693 420 693 – – –

730 763 995 421 656 – 730 342 339 –

At 31 March 2012Restricted cash(1) 5.6% Variable 1 418 581 – – 1 418 581 –Loans to subsidiaries 0% – 117.3% Variable 191 076 063 – – 191 076 063 –Preference shares in subsidiaries 14.1% – 22.75% Variable 452 131 601 – – 452 131 601 –Short-term deposits 5.5% – 8.7% Variable 963 963 – – –Cash in bank and on hand 5.6% Variable 16 559 569 16 559 569 – – –

661 186 777 16 560 532 – 644 626 245 –(1) These deposits are invested in rolling short-term deposits, but are pledged against guarantees that are valid over the life of a prospecting

right/mining permit.

iii) Other price riskThe group is exposed to the risk of fluctuations in the fair value of its at fair value through profit or loss financial assets as a result of changes in market prices (other than changes in interest rates and foreign currencies). The company generally does not use any derivative instruments to manage this risk.

Sensitivity analysisA 1% increase in the underlying JSE traded equity investments within units trust investments funds, with all other variables held constant, would have increased profit or loss by R0.3 million (2012: R0.1 million); an equal change in the opposite direction would have decreased profit or loss by R0.3 million (2012: R0.1 million). The analysis is performed on the same basis for 2012. The financial assets to which these sensitivities have been performed are disclosed in note 15.

Commodity price sensitivityThe group did not consider there to be any significant concentration of commodity price risk.

Fair value determinationThe carrying values (less any impairment allowance) of short-term financial instruments including restricted cash, cash and cash equivalents, trade and other receivables and trade and other payables are assumed to approximate their fair values. Refer to the table below for determination of non-current financial assets’ fair values.



29 Financial instruments (continued)31 March 2013 31 March 2012

Accounting classification

Carryingamount

R

Fair value

R

Carryingamount

R

Fair value

R

GroupFinancial assets

Restricted investmentsAt fair value through profit or loss financial assets 26 682 869 26 682 869 13 027 029 13 027 029

26 682 869 26 682 869 13 027 029 13 027 029

CompanyFinancial assetsLoans to subsidiaries Loans and receivables 221 111 535 164 993 057 191 076 063 174 441 102 Preference shares in subsidiaries Loans and receivables 507 812 223 562 553 341 452 131 601 505 817 585

728 923 758 727 546 398 643 207 664 680 258 687

Basis for determining fair valuesLoans and receivables – the fair value is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. Fair values of restricted cash, cash and cash equivalents, trade and other receivables and trade and other payables are not presented as their carrying value is a reasonable approximation of their fair value.

The following table presents the group’s assets that are measured at fair value by level. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:1) Quoted prices (unadjusted) in active markets for identical assets (level 1).2) Inputs other than quoted prices included within level 1 that are observable for the asset, either directly (that is, as prices)

or indirectly (that is, derived from prices) (level 2).3) Inputs for the asset that are not based on observable market data (that is, unobservable inputs) (level 3).

Level 1R

Level 2R

Level 3R

31 March 2013

Assets

Fair value through profit or loss financial assets 26 682 869 – –

31 March 2012

Assets

Fair value through profit or loss financial assets 13 027 029 – –

Refer to note 15. Level 1 fair values are either directly or indirectly derived from actively trading shares on the JSE.



KEATON ENERGY




30 Segment report for the year ended 31 March 2013

RevenueOperating profit/(loss) before

depreciation/amortisation Depreciation/amortisationOperating (loss)/profit after depreciation/amortisation Segment assets Segment liabilities

Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to 31 March

2012

Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to 31 March

2012

Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to31 March

2012

Vanggatfontein Colliery(1) (4) (5) 645 859 781 381 827 963 98 139 784 93 233 862 (184 640 885) (108 039 127) (86 501 101) (14 805 265) 807 140 415 793 052 877 1 135 923 752 940 514 657 Sterkfontein Project – – – – – – – – 65 512 888 65 091 857 56 782 921 53 605 734 Keaton Energy Holdings Limited(2) (6) 90 490 337 77 941 179 59 981 162 59 258 819 – – 59 981 162 59 258 819 801 362 823 739 696 997 4 061 094 3 372 733 Keaton Administrative and Technical Services Proprietary Limited(2) 20 241 749 11 782 788 1 917 487 (1 618 474) (208 675) (315 350) 1 708 812 (1 933 824) 7 424 245 10 270 746 16 186 376 20 637 260 Vaalkrantz Colliery(1) (4) 272 947 606 92 537 556 30 826 149 36 762 701 (42 257 618) (14 854 347) (11 431 469) 21 908 354 196 697 237 287 201 529 329 598 778 336 973 581 Leeuw Braakfontein Project – – (9 999 080) – – – (9 999 080) – 317 199 376 291 338 019 67 247 505 48 933 844 Koudelager Project – – – – – – – – 23 552 160 23 552 160 – –

Other segments(3) – – (1 367 927) 2 054 112 – – (1 367 927) 2 054 112 19 667 022 19 998 712 23 083 439 18 333 174

Total segments 1 029 539 473 564 089 486 179 497 575 189 691 020 (227 107 178) (123 208 824) (47 609 603) 66 482 196 2 238 556 166 2 230 202 897 1 632 883 865 1 422 370 983 Reconciliation to statements of comprehensive income and financial position – –

Intersegment and other consolidation adjustments (110 732 086) (89 723 968) (91 800 264) (61 546 777) – – (91 800 264) (61 546 778) (809 095 594) (741 932 775) (889 460 173) (737 435 158)

918 807 387 474 365 518 87 697 311 128 144 243 (227 107 178) (123 208 824) (139 409 867) 4 935 418 1 429 460 572 1 488 270 122 743 423 692 684 935 825 Gain on business combination – 114 384 579 Net finance (cost)/income (32 198 738) (13 405 615)Assets/liabilities not allocated to segments

Net (loss)/profit before taxation (171 608 605) 105 914 382

Total assets and liabilities 1 429 460 572 1 488 270 122 743 423 692 684 935 825

(1) Revenue represents sales to external customers only.(2) Revenue represents intersegment sales only.(3) Includes the subsidiaries Amalahle Exploration Proprietary Limited, Labohlano Trading 46 Proprietary Limited, Klip Colliery and the Mpati and

Balgray prospecting rights acquired through the business combination during the year ended 31 March 2012.(4) Coal sales to major customers as a percentage of revenue equals 91% (92% at 31 March 2012).(5) The comparative information for the period 31 March 2012 has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the

production phase of a surface mine”.(6) Investment income received by Keaton Energy Holdings Limited from its subsidiaries has been restated from finance income to revenue.



30 Segment report for the year ended 31 March 2013

RevenueOperating profit/(loss) before

depreciation/amortisation Depreciation/amortisationOperating (loss)/profit after depreciation/amortisation Segment assets Segment liabilities

Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to 31 March

2012

Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to 31 March

2012

Year to31 March

2013

Year to31 March

2012

Year to31 March

2013

Year to31 March

2012

Vanggatfontein Colliery(1) (4) (5) 645 859 781 381 827 963 98 139 784 93 233 862 (184 640 885) (108 039 127) (86 501 101) (14 805 265) 807 140 415 793 052 877 1 135 923 752 940 514 657 Sterkfontein Project – – – – – – – – 65 512 888 65 091 857 56 782 921 53 605 734 Keaton Energy Holdings Limited(2) (6) 90 490 337 77 941 179 59 981 162 59 258 819 – – 59 981 162 59 258 819 801 362 823 739 696 997 4 061 094 3 372 733 Keaton Administrative and Technical Services Proprietary Limited(2) 20 241 749 11 782 788 1 917 487 (1 618 474) (208 675) (315 350) 1 708 812 (1 933 824) 7 424 245 10 270 746 16 186 376 20 637 260 Vaalkrantz Colliery(1) (4) 272 947 606 92 537 556 30 826 149 36 762 701 (42 257 618) (14 854 347) (11 431 469) 21 908 354 196 697 237 287 201 529 329 598 778 336 973 581 Leeuw Braakfontein Project – – (9 999 080) – – – (9 999 080) – 317 199 376 291 338 019 67 247 505 48 933 844 Koudelager Project – – – – – – – – 23 552 160 23 552 160 – –

Other segments(3) – – (1 367 927) 2 054 112 – – (1 367 927) 2 054 112 19 667 022 19 998 712 23 083 439 18 333 174

Total segments 1 029 539 473 564 089 486 179 497 575 189 691 020 (227 107 178) (123 208 824) (47 609 603) 66 482 196 2 238 556 166 2 230 202 897 1 632 883 865 1 422 370 983 Reconciliation to statements of comprehensive income and financial position – –

Intersegment and other consolidation adjustments (110 732 086) (89 723 968) (91 800 264) (61 546 777) – – (91 800 264) (61 546 778) (809 095 594) (741 932 775) (889 460 173) (737 435 158)

918 807 387 474 365 518 87 697 311 128 144 243 (227 107 178) (123 208 824) (139 409 867) 4 935 418 1 429 460 572 1 488 270 122 743 423 692 684 935 825 Gain on business combination – 114 384 579 Net finance (cost)/income (32 198 738) (13 405 615)Assets/liabilities not allocated to segments

Net (loss)/profit before taxation (171 608 605) 105 914 382

Total assets and liabilities 1 429 460 572 1 488 270 122 743 423 692 684 935 825

(1) Revenue represents sales to external customers only.(2) Revenue represents intersegment sales only.(3) Includes the subsidiaries Amalahle Exploration Proprietary Limited, Labohlano Trading 46 Proprietary Limited, Klip Colliery and the Mpati and

Balgray prospecting rights acquired through the business combination during the year ended 31 March 2012.(4) Coal sales to major customers as a percentage of revenue equals 91% (92% at 31 March 2012).(5) The comparative information for the period 31 March 2012 has been restated as a result of the early adoption of IFRIC 20 – “Stripping cost in the

production phase of a surface mine”.(6) Investment income received by Keaton Energy Holdings Limited from its subsidiaries has been restated from finance income to revenue.



KEATON ENERGY




30 Segment report for the year ended 31 March 2013 (continued)Vanggatfontein CollieryThe Vannggatfontein Colliery is an operating colliery in South Africa’s Mpumalanga province, some 80 kilometres east of Johannesburg. The colliery first produced 5-seam coal in December 2010 with the production of 2- and 4-seam thermal coal following in June 2011. Vanggatfontein delivered 1 509 681 tonnes of washed 2- and 4-seam thermal coal to Eskom during the 2013 financial year (2012: 955 504 tonnes). 5-seam metallurgical coal sales declined to 65 661 tonnes in 2013 (2012: 140 241 tonnes) as a result of Pit 1 5-seam coal being depleted in line with the mine plan.

Vaalkrantz CollieryThe Vaalkrantz Anthracite Colliery is near Vryheid in South Africa’s KwaZulu-Natal province and has been in production since 2003. The colliery sold 326 597 tonnes of anthracite to domestic and international metallurgical markets during the 2013 financial year (2012: 351 331 tonnes).

Sterkfontein ProjectKeaton Energy’s Sterkfontein Project is located in the magisterial district of Bethal on the Highveld Coalfield in the Mpumalanga Province. The project covers a total area of 8 020 hectares, for which a 90.8 million tonne coal resource and 23.6 million tonne underground run of mine coal reserve have been declared.

The 4-lower seam averages 1.93m in thickness over the total project area and will on average yield 43% export quality thermal coal and 22% domestic power station steam coal.

Leeuw Braakfontein ProjectThe Leeuw Braakfontein Project is the most advanced of the development projects in the group. The project has a mining right and the group owns the surface rights. A resource of 60.7 million tonnes and a reserve of 24.9 million tonnes have been declared.

Koudelager ProjectThe Koudelager Anthracite Project, will provide future run-of-mine anthracite production to the Vaalkrantz Plant and is situated some 40 kilometres from the Vaalktantz Colliery. A resource of 11.8 million tonnes has been declared.

Keaton Energy Holdings LimitedKeaton Energy Holdings Limited holds the group’s interest in the operating subsidiaries and provides funding to those subsidiaries in terms of preference share subscription agreements and loan agreements entered into between each subsidiary and KEHL.

Keaton Administrative and Technical Services Proprietary LimitedKeaton Administrative and Technical Services, a 100% held subsidiary of KEHL, owns the group’s head office assets and provides management, technical and administrative services to the group’s operating and exploration subsidiaries.

Other segmentsOther segments include the subsidiaries Amalahle Exploration Proprietary Limited, Labohlano Trading 46 Proprietary Limited, Klip Colliery and the Impati and Balgray prospecting rights.

Assets not allocated to segments

The other assets represent VAT receivables and deferred tax assets and, due to their nature, are not allocated to the respective projects discussed above.



31 Remuneration of directorsThe remuneration of the executive directors of the company is set out in the table below:

Executive director

Basic salary

R

Travelallowance

R

Medicalaid

R

Groupbenefits

R

Leave pay

R

Terminationpay

R

Performancebonuses

RTotal

R

2013Paid by the company:

AB Glad 2 198 258 240 000 75 249 123 612 – – 1 166 227 3 803 346RA Karstel* 631 948 – 17 394 70 033 – 1 764 130 – 2 483 505PBM Miller** 467 984 – 24 018 87 308 – – – 579 310J Rossouw 1 832 347 – 62 893 312 773 – – 466 194 2 674 207

5 130 537 240 000 179 554 593 726 – 1 764 130 1 632 421 9 540 368

Executive director

Basic salary

R

Travelallowance

R

Medicalaid

R

Groupbenefits

R

Leave pay

R

Performancebonuses

RTotal

R

2012Paid by the company:PCCH Snyders*** 936 105 60 000 25 864 39 938 317 737 800 000 2 179 644 PBM Miller 1 964 400 – 83 980 335 218 225 479 1 200 000 3 809 077 JG Schönfeldt**** 1 100 294 – 65 412 172 739 289 508 900 000 2 527 953 AB Glad 1 785 109 160 000 40 616 99 943 433 395 900 000 3 419 063 J Rossouw***** 488 664 24 054 87 665 600 383

6 274 572 220 000 239 926 735 503 1 266 119 3 800 000 12 536 120

* Appointed 1 July 2012. Resigned during September 2012.** Resigned 30 June 2012.*** Resigned during July 2011.**** Resigned 1 December 2011.***** Appointed 1 December 2011.

Other than the executive directors listed above, the group has no additional prescribed officers.

The Executive Chairman, Dr JD Salter’s remuneration is disclosed as part of non-executive directors due to the nature of his remuneration. Refer to page 182.



KEATON ENERGY




31 Remuneration of directors (continued)The movement in the number of share appreciation rights of the executive directors of the company is set out in the table below:

Executive director

OpeningbalanceNumber

Shareappreciation

rightsawarded

during theyear

Number

Shareappreciation

rightsexercised

lapsedduring the

year Number

ClosingbalanceNumber

Vestingdates

Offer price

R

Shareappreciation

rights#

(unrealised)31 March

2013R

Shareappreciation

rights#

(unrealised)31 March

2012R

PBM Miller 981 070 – – 981 070 30 Jun 13 4.67 542 537 545 518 PBM Miller 1 954 451 – – 1 954 451 31 Mar 14 2.52 582 773 723 147PBM Miller 1 752 746 – – 1 752 746 30 Nov 14 2.81 586 830 –JG Schönfeldt 582 976 – – 582 976 30 Jun 13 4.67 – – JG Schönfeldt 1 161 384 – – 1 161 384 30 Nov 13 2.52 – – JG Schönfeldt 1 041 526 – – 1 041 526 30 Nov 13 2.81 – – AB Glad 569 727 – – 569 727 30 Jun 13 4.67 315 062 316 793 AB Glad 1 134 989 – – 1 134 989 31 Mar 14 2.52 338 428 419 946AB Glad 1 017 855 – – 1 017 855 30 Nov 14 2.81 340 784 –AB Glad – 1 284 431 – 1 284 431 31 Mar 15 3.63 734 912 –J Rossouw 355 872 – – 355 872 30 Nov 14 2.81 119 148 39 607 J Rossouw – 1 616 766 – 1 616 766 31 Mar 15 3.63 925 064 –

10 552 596 2 901 197 – 13 453 793 4 485 538 2 045 011

# Refer to note 19 for a detailed discussion on the recognition and measurement of share appreciation rights.

The remuneration of the non-executive directors of the company is set out in the table below:

Non-executive director

Board member fees

R

Committee fees

RTotal

R

2013JD Salter* 272 861 229 783 502 644 D Jonker 271 738 53 548 325 286 GH Kemp 99 418 47 666 147 084 L Mtumtum 272 861 202 497 475 358 P Pouroulis 272 861 93 353 366 214 OP Sadler 272 861 106 996 379 857

A Sedibe 272 861 117 439 390 300

1 735 461 851 282 2 586 743

2012JD Salter 265 339 203 390 468 729 LX Mtumtum 258 602 177 966 436 568 P Pouroulis 259 195 76 271 335 466 APE Sedibe 259 195 76 271 335 466 OP Sadler 257 267 88 983 346 250

D Jonker 209 895 38 136 248 031

1 509 493 661 017 2 170 510

* The Executive Chairman, Dr JD Salter’s remuneration is disclosed as part of non-executive directors due to the nature of his remuneration.



Year to31 March

2013R

Year to31 March

2012R

32 Related party transactionsUnless stated otherwise, all related party transactions are concluded at arm’s length in the normal course of business. All material intergroup transactions are eliminated on consolidation. The following transactions were carried out with related parties:SubsidiariesKeaton Administrative and Technical Services Proprietary Limited (100% subsidiary)

» Intercompany loan balance (interest-free) 6 285 004 12 240 328 » Intercompany loan balance (interest at prime) 6 573 021 5 266 095 » Interest on interest-bearing loan balance 529 893 155 036 » Management fee paid to Keaton Energy – management, administration and accounting services 4 548 463 4 187 541

Keaton Mining Proprietary Limited (74% subsidiary) » Preference share investment balance (excluding dividends) 341 800 000 341 800 000 » Interest on preference share investment (dividends at prime + 5%) 55 081 304 83 103 728 » Intercompany loan balance (interest at prime + 2%) 124 839 648 56 708 400 » Interest on interest-bearing loan balance 11 050 520 3 055 437 » Pledge and cession of cash for the issue of guarantees on behalf of Keaton Mining 774 648 774 648

Amalahle Exploration Proprietary Limited (74% subsidiary) » Preference share investment balance (dividends at prime + 5% – not accrued) 8 000 000 8 000 000 » Interest on preference share investment (dividends at prime + 5%) 2 050 000 – » Intercompany loan balance (interest at prime + 2% – not accrued) – – » Pledge and cession of cash for the issue of guarantees on behalf of Amalahle Exploration 360 000 360 000

Mafla Coal Proprietary Limited (74% subsidiary) » Preference share investment balance (dividends at prime + 5% – not accrued) 3 900 000 3 900 000 » Intercompany loan balance (interest at prime + 2% – not accrued) 690 969 690 969 » Pledge and cession of cash for the issue of guarantees on behalf of Mafla Coal 125 172 125 172

Labohlano Trading 46 Proprietary Limited (74% subsidiary) » Preference share investment balance (dividends at prime + 5%) 10 900 000 9 900 000 » Intercompany loan balance (interest at prime + 2%) 63 507 99 969 » Interest 10 697 7 456

Leeuw Mining and Exploration Proprietary Limited (74% subsidiary) » Preference share investment balance (dividends at prime + 5%) 13 689 574 10 927 216 » Intercompany loan balance (interest at prime + 2%) 79 376 842 113 686 675 » Instalment sale (interest at prime) 12 892 942 12 814 694 » Interest on interest-bearing loan balance 13 350 607 4 525 032 » Interest on preference share investment (dividends at 22.75%) 2 762 358 586 539 » Interest on instalment sale agreement 1 106 494 117 994

Company



KEATON ENERGY




Year to31 March

2013R

Year to31 March

2012R

Year to31 March

2013R

Year to31 March

2012R

32 Related party transactions (continued)Transactions with other related partiesBraeston Corporate and Consulting Services Proprietary Limited

» Rental paid – 75 101 – –Tharisa Minerals Proprietary Limited

» Rental paid 755 720 752 915 – –Gunvor SA(1)

» Anthracite sales 97 652 082 30 525 000 – –Vizirama Proprietary Limited

» Material handling and transportation 19 409 082 – – – » Interest-free loan 2 814 385 2 814 385

Southlub Proprietary Limited » Consumables 784 485 – – – » Payable 257 496 – – –

Outstanding balances with other related partiesBraeston Corporate and Consulting Services Proprietary Limited

» Receivable 113 944 113 944 – 10 000 The balances are unsecured, interest-free and payable within 30 days after year-end.Gunvor SA(1)

» Receivable – 19 800 000 – –The balances are unsecured, interest-free and payable within 30 days after year-end.(1) Plusbay is a 24% shareholder of the company and a subsidiary of Gunvor.

Key management compensationRefer to note 5 and 31. Key management includes the executive directors of the company, the general manager: operations and the mine manager at Vanggatfontein and Vaalkrantz.

Interest of directors in contracts31 March 2013W Leeuw and A Leeuw are directors of Leeuw Mining and Exploration Proprietary Limited and also shareholders and directors of Vizirama Proprietary Limited (Vizirama) and Southlub Proprietary Limited (Southlub). Vizirama supplied material handling and yellow equipment rentals to the group while Southlub supplied oil and other consumables to the group.

31 March 2013 and 2012P Pouroulis and JD Salter are directors of Tharisa Minerals Limited (Tharisa). Tharisa sub-let a portion of Eland House, The Braes, 3 Eaton Road, Bryanston, 2021, to Keaton Administration and Technical Services Proprietary Limited (KATS), a subsidiary of the company. Tharisa earned rental income from the letting of the property and provided property management services to the group in respect of the property. The lease was on a month-to-month basis and covered a total floor area of 456m². The lease was terminated on 30 September 2012.

Group Company



32 Related party transactions (continued)Interest of directors in contracts (continued)31 March 2012PBM Miller and P Pouroulis are shareholders of Braeston Corporate and Consulting Services Proprietary Limited (Braeston). Braeston sub-let a portion of Eland House, The Braes, 3 Eaton Road, Bryanston, 2021, to Keaton Administration and Technical Services Proprietary Limited (KATS), a subsidiary of the company. Braeston earned rental income from the letting of the property and provided property management services to the group in respect of the property. The lease was for three years and covered a total floor area of 456m².

Braeston also provided information technology facilities and support, back-up power facilities, financial management and accounting services and office support services including secretarial, cleaning, security and delivery services to the group. Braeston charged the group on a cost recovery basis. Braeston provided similar services to TransAfrika Resources Limited, Tharisa Minerals Proprietary Limited and Kameni Limited.

GeneralSome of the directors of Keaton Energy are also directors of its subsidiaries. Various shareholders’ agreements, funding agreements and management agreements exist between the group’s entities.

Other than the interest of directors in contracts listed above, no director of Keaton Energy has any material beneficial interests, whether direct or indirect, in transactions that were effected by the group during the current or immediate preceding financial year, that remain in any respect outstanding or unperformed.

33 Subsidiary companiesKeaton Energy’s interests in subsidiary companies at 31 March 2013 were as follows:

Total issued share capital

% shareholding

Keaton Administrative and Technical Services Proprietary Limited 100 100

Keaton Mining Proprietary Limited 100 74

Amalahle Exploration Proprietary Limited 100 74

Labohlano Trading 46 Proprietary Limited 100 74

Leeuw Mining and Exploration Proprietary Limited 12 000 74

Leeuw Braakfontein Colliery Proprietary Limited* 100 74

Leeuw Koudelager Colliery Proprietary Limited* 100 74

Leeuw Vaalkrantz Colliery Proprietary Limited* 100 74

* Indirect (subsidiaries of Leeuw Mining and Exploration).

34 DividendsNo dividends have been declared nor are any proposed for the year ended 31 March 2013 (31 March 2012: R nil).

35 Going concernAt 31 March 2013, the company and group had adequate funding resources to continue to operate for the foreseeable future and have therefore continued to adopt the going-concern basis in preparing the group’s financial statements. Funding resources are in the form of coal sales secured through Eskom and other off-take agreements and the directors’ authority to issue further shares for cash. The company has subordianted its claims against a number of its subsidiaries in favour and for the benefit of other creditors of these companies, subject to certain claims and conditions as set out in the subordination agreements.



KEATON ENERGY




36 Significant events after 31 March 2013 up to the date of this reportA special resolution in terms of regulation 31 of the Companies Act Regulations 2011 was adopted at the general meeting held on 28 May 2013, whereby all ordinary shares were converted into ordinary shares with no par value. It was resolved that all 250 million authorised shares and 191.7 million issued ordinary shares with a par value of 0.1 cents be converted into ordinary shares with no par value and that the share capital account and the share premium account of the company be transferred to the stated capital account. It was also resolved that the authorised share capital increase from 250 million ordinary no par value shares to 750 million ordinary no par value shares.

At the same general meeting it was resolved that the new Memorandum of Incorporation (MOI), ensuring harmonisation with the JSE Listings Requirements and the Companies Act of South Africa requirements be adopted.

On 20 June 2013 the sale of the Impati mining right held by LME, to Zinoju Coal Proprietary Limited was effected following receipt of ministerial consent. The Impati mining right was acquired through the acquisition of LME in the 2012 financial year. The sale resulted in an amount of R12 million received by LME on 25 June 2013.

Nature of interest

Number ofordinary

shares

Percentage ofissued sharecapital as at

year-end

37 Directors’ interest in share capitalDirector31 March 2013P Pouroulis# Indirect, beneficial 41 688 428 21.8% JD Salter** Indirect, beneficial 2 450 000 1.3% AB Glad Indirect, beneficial 11 100 0.0% AB Glad/APE Sedibe# Indirect, beneficial 6 209 260 3.2% PBM Miller* Indirect, beneficial 2 725 000 1.4% PBM Miller* Direct, beneficial 1 018 008 0.5%

OP Sadler# Direct, beneficial 114 285 0.1%

54 216 081 28.3%

31 March 2012PBM Miller Indirect, beneficial 2 725 000 1.4%PBM Miller Direct, beneficial 1 018 008 0.5%P Pouroulis# Indirect, beneficial 41 688 428 22.1%JD Salter# Indirect, beneficial 2 450 000 1.3%AB Glad Indirect, beneficial 7 321 0.0%AB Glad/APE Sedibe# Indirect, beneficial 6 700 000 3.5%

OP Sadler# Direct, beneficial 114 285 0.1%

54 703 042 28.9%

# Non-executive director.* Resigned June 2012.** Executive chairman.

There has been no change in the directors’ interest in the share capital of the company between the end of the financial year and the date of approval of the annual financial statements.



38 Directors’ 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. Save for restrictions concerning the non-solicitation of staff for a period of 12 months after termination of employment, the employment contracts do not contain any restraint of trade provisions. 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 performance of the executive director or his resignation (other than under circumstances of constructive dismissal), death, injury, illness or retirement, upon termination of employment the executive director shall be entitled to a severance payment equal to his annual cost to company employment package less any other payments made or becoming due to the executive director as a result of the termination of employment.



KEATON ENERGY


shareholders’ informationglossary of terms and secretarial matters

analysis of shareholders 190

glossary of terms 191 – 193

notice of annual general meeting 194 – 201

form of proxy 207

administration and contact details 209



Obitis aut as est fugiatur? Quidebit pelestr ument, officidentis mossuntia velitatetur rere aut quam andam alitatem et ipsam harumque prepern aturiae sed exerspe rfereped mod maion cor milia vellaud antiatiossit audaestrum viditat endandaerit laut perit esedi odi adite prepe cus maionsende nemolor re doluptati ommo maximax imperatur? Quibusda vitisquias sum reptatqui derum eostiur seditae velignam litatia et lacculpa quiaeceperi.

Page head continuEd

189Keaton Energy integrated annual report 2013 189Keaton Energy integrated annual report 2013

KEATON ENERGY


analysis of shareholdersas at 31 March 2013

Analysis of ordinary shareholdersnumber of

shareholdersnumber of

shares

Percentage of issued

share capital

holdings of <100 000 shares 1 958 17 222 115 8.99holdings of 100 000 to 499 999 86 17 033 525 8.89holdings of 500 000 to 999 999 5 3 961 026 2.07holdings of 1 000 000 to 4 999 999 20 44 480 928 23.21

holdings >5 000 000 6 108 965 547 56.84

total 2 075 191 663 141 100.00

Major shareholdersnumber of

shares

Percentage ofissued share

capital

other shareholders 87 028 166 45.41Plusbay limited 45 838 573 23.92langa trust 19 208 428 10.02the axel trust 18 480 000 9.64

mrs a Pouroulis 14 898 714 7.77

rutendo holdings Proprietary limited 6 209 260 3.24

total 191 663 141 100.00

Public and non-public shareholders

number ofshareholder

accountsnumber of

shares

Percentage ofissued share

capital

Public 2 063 91 608 487 47.80%non-public

directors and associates 11 54 216 081 28.29%Persons interested (other than directors), directly or indirectly, in 10% or more 1 45 838 573 23,91%

total 2 075 191 663 141 100.00%

Rutendo Holdings Proprietary Limited Other shareholders Plusbay Limited Langa Trust The Axel Trust Mrs A Pouroulis

3%

45%

24%

10%

10%

8%

nuMBER oF SHARES

South Africa Switzerland Spain Jersey USA Other

1%

66%

25%

4%2%

2%

2013 SHAREHoLdERS



glossary of terms

ABEt adult Basic education and training

Aci annual cash incentives

Ad air dried

AGM annual general meeting

AMcu association of minerals and construction Union

AR as received

ARV anti retro-viral

BEE Black economic empowerment

cGt capital gains tax

cm centimetre or centimetres, as the context indicates

coal reserve the economically mineable material derived from a measured and/or indicated coal resource. it is inclusive of diluting materials and allows for losses that may occur when the material is mined. appropriate assessments, which may include feasibility studies, have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. these assessments demonstrate at the time of reporting that extraction is reasonably justifiable. coal reserves are subdivided in order of increasing confidence into probable coal reserves and proved coal reserves

coal resource a concentration or occurrence of coal in or on the earth’s crust in such form and quantity that there are reasonable and realistic prospects for eventual economic extraction

codM chief operating decision maker

cPR competent Persons’ report

cps cents per share

cQMP coal Quality management Procedure

cSdP central securities depository Participant

cSi corporate social investment

cV calorific value

dMR department: mineral resources

dMS dense medium separation

dAFVM dry ash free volatile matter

dWA department: Water affairs

EBitdA earnings before interest, taxation, depreciation and amortisation

EiA environmental impact assessment

EMP environmental management plan

EPS earnings per share

ERB east resource Block

ESG environmental, social and governance-related issues

EtF exchange traded fund

FRA forward rate agreement

FY financial year

g grams

GJ gigajoules

GHG greenhouse gas

GM general meeting

GRi global reporting initiative

GtiS gross tonnage in situ

Ha hectare

group overview 4annual reviews 22operational review 36operating context 56financial performance review 66environmental, labour and social review 74governance 86annual financial statements 100 Shareholders’ information, glossary of terms and

secretarial matters 188

191Keaton Energy integrated report 2013

KEATON ENERGY


glossary of terms

HdP a historically disadvantaged person as defined in the mPrda, being: any person, category of persons or community, disadvantaged by unfair discrimination before the constitution of the republic of south africa no. 108 of 1996 took effect; any association, a majority of whose members are persons contemplated in the first bullet above; or any juristic person other than an association, in which persons contemplated in the first bullet above own and control a majority of the issued capital or members’ interest and are able to control a majority of the members’ votes

HEPS headline earnings per share

HdSA historically disadvantaged south african

idP integrated development plan

iFRic international financial reporting interpretations committee

iFRS international financial reporting standards

iiRc international integrated reporting committee

indicated coal Resource that part of a coal resource for which tonnage, densities, shape, physical characteristics, grade and coal content can be estimated with a reasonable level of confidence. it is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. the locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely for continuity to be assumed

inferred coal Resource that part of a coal resource for which tonnage, grade and coal content can be estimated with a low level of confidence. it is inferred from geological evidence and assumed but not verified for geological and/or grade continuity. it is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be limited or of uncertain quality and reliability

iWuLA integrated Water Use licence application

JiBAR Johannesburg inter Bank agreed rate

JSE Jse limited (registration number 2005/022939/06), a public company registered and incorporated in south africa, licensed as an exchange under the south african securities services act, no. 36 of 2004, as amended

KAtS Keaton administrative & technical service Proprietary limited

King iii code of corporate governance in south africa issued by the King committee

KEHL Keaton energy holdings limited

km Kilometre or kilometres, as the context indicates

KM Keaton mining Proprietary limited

KPA Key performance areas

kt thousand tonners

kWh Kilowatt hour, a unit of energy equal to 1 000 watt hours or 3.6 megajoules

LBc leeuw Braakfontein colliery Proprietary limited

LEd local economic development

LME leeuw mining and exploration Proprietary limited

LtiFR lost-time injury frequency rate

LtiP long-term Performance incentive scheme

LoM life-of-mine

Lti lost time incidents

m3 cubic metre

Metre or m metre or metres, as the context indicates

Measured coal Resource that part of a coal resource for which tonnage, densities, shape, physical characteristics, grade and coal content can be estimated with a high level of confidence. it is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. the locations are spaced closely enough to confirm geological and grade continuity

MHSA mine health and safety act

Mm3 million cubic metres

192 Keaton Energy integrated report 2013


Moi memorandum of incorporation

MPRdA the south african mineral and Petroleum resources development act no. 28 of 2002, as amended, which Resources development Act became effective legislation on 1 may 2004

MJ/Kg megajoules per kilogram, measure of heat-generating capacity

MRd mine residue disposal

Mt million tonnes

Mtpa million tonne per annum

MtiS mineable tonnes in situ

nAV net asset value

ndP national development Plan

nEMA national environmental management act

niHL noise-induced hearing loss

nuM national Union of mineworkers

oHSA occupational health and safety act

oci other comprehensive income

Pcd Pollution control dam

PPE Property, plant and equipment

R the south african rand, the lawful currency of south africa

RBct richards Bay coal terminal

Rd relative density

RoM run-of-mine

Rm million rand

S sulphur

SA south africa

SAcnASP south african council for natural scientific Professions

SAMREc the south african mineral resource committee

SAMREc code the south african code for the reporting of exploration results, mineral resources and mineral reserves, including the guidelines contained therein

SAnS south african national standards

SEtA sector education and training authority

SHE safety, health and environment

SLP social and labour Plan

SPE special purpose entity

tB tuberculosis

tcc total cost to company

tpa tonnes per annum

tph tonnes per hour

VAt Value-added tax payable in terms of the south african Value-added tax act, no 89 of 1991

Vct Voluntary counselling and testing

VM Volatile matter



193Keaton Energy integrated report 2013

KEATON ENERGY


notice of annual general meeting

if you are in any doubt as to what action you should take in respect of the following resolutions, please consult your central Securities Depository Participant (cSDP), broker, banker, attorney, accountant or other professional adviser immediately.

notice is hereby given that the annual general meeting of shareholders of Keaton energy will be held at l’incontro conference room, the michelangelo Hotel, nelson mandela Square, West Street, Sandton on tuesday, 17 September 2013 at 09:00 to consider and, if deemed fit, pass with or without modification, the resolutions as set out in this notice of annual general meeting and to deal with such other business as may be dealt with at the annual general meeting.

the board of directors of the company (the board) has determined that, in terms of section 62(3)(a), as read with section 59 of the companies act no 71 of 2008 (the companies act), the record date for the purposes of determining which shareholders of the company are entitled to participate in and vote at the annual general meeting is friday, 6 September 2013. accordingly, the last day to trade in Keaton energy shares in order to be recorded in the register to be entitled to vote will be friday, 30 august 2013.

Shareholders are advised that, in terms of section 63(1) of the companies act, meeting participants (including proxies) will be required to provide reasonably satisfactory identification before being entitled to participate in or vote at the annual general meeting. forms of identification that will be accepted include original and valid identity documents, driver’s licences or valid passports.

Ordinary business1. Acceptance of annual financial statements

Ordinary resolution number 1 “reSolVeD tHat the audited annual financial statements of the company and the group for the year ended 31 march 2013, including the directors’ report, audit committee’s report and independent auditor’s report be and are hereby received and accepted.”

Additional information in respect of ordinary resolution number 1the complete audited annual financial statements of the company and the group for the year ended 31 march 2013, including the directors’ report, audit committee’s report and independent auditor’s report are included in the integrated annual report of which this notice of annual general meeting forms part.

the shareholders are advised that the company’s complete audited annual financial statements for the years ended 31 march 2012 and 31 march 2013 are available on the company’s website at the following address: www.keatonenergy.co.za.

2. Re-election of directorsOrdinary resolution number 2“reSolVeD tHat mr gH Kemp, who retires in terms of the company’s memorandum of incorporation and who, being eligible, offers himself for re-election, be and is hereby re-elected as a director of the company.”

Additional information in respect of ordinary resolution number 2in terms of clause 32.5.1.2 of the company’s memorandum of incorporation, the board has the power to appoint any person as an additional director to the board, provided that such appointment is confirmed by the shareholders of the company, in accordance with clause 32.2.1 of the company’s memorandum of incorporation, at the next annual general meeting of the company.

mr gH Kemp was appointed by the board as an additional director to the board on 28 november 2012. accordingly, mr gH Kemp is required, in terms of the company’s memorandum of incorporation, to retire at the next annual general meeting of the company but is eligible for re-election. mr gH Kemp, being eligible, has offered himself for re-election.

the reason for the proposed ordinary resolution number 2 is to elect, in accordance with the company’s memorandum of incorporation and by way of a series of votes, each of which is on the candidacy of a single individual to fill a single vacancy, as required by section 68(1) of the companies act, mr gH Kemp as a director of the company. the effect of ordinary resolution number 2 is that mr gH Kemp will be elected as a director of the company.

3. Ordinary resolution number 3 (comprising ordinary resolution numbers 3.1 to 3.3, all inclusive)“reSolVeD tHat by way of separate ordinary resolutions, each of: 3.1 mr lX mtumtum, who retires in terms of the company’s memorandum of incorporation and who, being eligible, offers himself

for re-election, be and is hereby re-elected as a director of the company;3.2 mr D Jonker, who retires in terms of the company’s memorandum of incorporation and who, being eligible, offers himself for

re-election, be and is hereby re-elected as a director of the company;3.3 mr oP Sadler, who retires in terms of the company’s memorandum of incorporation and who, being eligible, offers himself

for re-election, be and is hereby re-elected as a director of the company.”

Keaton Energy Holdings Limited(Incorporated in the Republic of South Africa)

(Registration number 2006/011090/06)JSE share code: KEH ISIN: ZAE000117420

(Keaton Energy or the company)



Additional information in respect of ordinary resolution number 3 in terms of clause 32.3.3 of the company’s memorandum of incorporation one third of the non-executive directors of the company for the time being are required to retire from office at each annual general meeting. the directors of the company to retire in every year shall be those who have been longest in office since their last election, but as between persons who were elected as directors of the company on the same day, those to retire shall, unless otherwise agreed among themselves, be determined by lot. a retiring director shall be eligible for re-election.

mr lX mtumtum, mr D Jonker, and mr oP Sadler all retire in accordance with article 32.3.3 of the company’s memorandum of incorporation and, being eligible, offer themselves for re-election.

the reason for the proposed ordinary resolution number 3 is to elect, in accordance with the company’s memorandum of incorporation and by way of a series of votes, each of which is on the candidacy of a single individual to fill a single vacancy, as required by section 68(1) of the companies act, mr lX mtumtum, mr D Jonker and mr oP Sadler as directors of the company. the effect of ordinary resolution number 3 is that mr lX mtumtum, mr D Jonker and mr oP Sadler will be elected as directors of the company.

a brief curriculum vitae in respect of each director referred to in ordinary resolution numbers 2 and 3 above appears on pages 88 and 89 of the integrated annual report of which this notice of annual general meeting forms part. the Board recommends to shareholders the re-election of each of the retiring directors as set out in ordinary resolution numbers 2 and 3.

4. Election of chairman and members of the audit committee Ordinary resolution number 4 (comprising ordinary resolution numbers 4.1 to 4.3, all inclusive)“reSolVeD tHat, by way of separate ordinary resolutions: 4.1 subject to the passing of ordinary resolution number 3.1, mr lX mtumtum, be and is hereby appointed as chairman and

member of the audit committee;4.2 subject to the passing of ordinary resolution number 3.3, mr oP Sadler, be and is hereby appointed as a member of the audit

committee;4.3 subject to the passing of ordinary resolution number 2, mr gH Kemp, be and is hereby appointed as a member of the audit

committee;

in terms of section 94(2) of the companies act to hold office until the next annual general meeting of the company and to perform the duties and responsibilities stipulated in section 94(7) of the companies act and King report on governance for South africa 2009 (King iii) and to perform such other duties and responsibilities as may from time to time be delegated by the board for the company and all of its subsidiary companies.”

Additional information in respect of ordinary resolution number 4 in terms of section 94(2) of the companies act, the audit committee is a committee elected by shareholders at each annual general meeting and must comprise of at least three members.

a brief cV of each of the independent non-executive directors mentioned in ordinary resolution number 4 above appears on pages 88 and 89 of the integrated annual report of which this notice of annual general meeting forms part. in terms of the companies act regulations, 2011, at least one third of the members of the company’s audit committee must have academic qualifications or experience in economics, law, corporate governance, finance, accounting, commerce, industry, public affairs or human resource management.

the board is satisfied that the proposed members of the audit committee meet the requirements of section 94(4) of the companies act and that they are independent according to King iii and that they possess the required qualifications and experience as prescribed in the companies act regulations, 2011.

5. Re-appointment of external auditorsOrdinary resolution number 5“reSolVeD tHat KPmg inc. (with mr W Pretorius being the individual registered auditor) be and are hereby re-appointed as the external auditors of the company and of the group for the financial year ending 31 march 2014 and to hold office until the conclusion of the next annual general meeting of the company, and that their remuneration for the financial year ending 31 march 2014 be determined by the audit committee.”




KEATON ENERGY


notice of annual general meeting cOntinuEd

Additional information in respect of ordinary resolution number 5in accordance with section 90(1) of the companies act, KPmg inc. is proposed to be re-appointed as the external auditors of the company, as nominated by the company’s audit committee, until the conclusion of the company’s next annual general meeting. the audit committee conducted an assessment of the performance and the independence of the external auditors and considered whether or not the external auditors comply with the requirements of sections 90(2) and 90(3) of the companies act and section 22 of the JSe limited (JSe) listings requirements and the board considered and accepted the findings. the board is satisfied that the proposed external auditors being KPmg inc., and mr W Pretorius, the individual registered auditor, who will undertake the audit of the company and the group for the financial year ending 31 march 2014 comply with the relevant provisions of the companies act and are duly accredited by the JSe.

Special business6. control of authorised but unissued shares

Ordinary resolution number 6“reSolVeD tHat the authorised but unissued shares in the capital of the company be and are hereby placed under the control and authority of the directors and that they be and are hereby authorised to allot, issue, grant options over and otherwise dispose of such shares to such persons on such terms and conditions and at such times as they may from time to time and at their discretion deem fit, subject to the provisions of the companies act, as may be amended from time to time, the company’s memorandum of incorporation and the JSe listings requirements. Such authority shall be valid until the date of the next annual general meeting of the company and provided that it shall not extend past 15 (fifteen) months from the date of this annual general meeting. ”

Additional Information in respect of ordinary resolution number 6the reason for ordinary resolution number 6 is that in terms of the company’s memorandum of incorporation and subject to the provisions of the companies act, as may be amended from time to time and the JSe listings requirements, the shareholders of the company may authorise the directors to allot, issue, grant options over or otherwise dispose of such shares, as the directors in their discretion deem fit. the effect of ordinary resolution number 6 is to ensure that the directors have the necessary flexibility to allot and issue shares and grant options as they deem fit.

7. General authority to issue shares for cashOrdinary resolution number 7“reSolVeD tHat, subject to ordinary resolution number 6 being passed, the directors of the company be and are hereby authorised, by way of a general authority, to allot and issue shares (and/or any options or convertible securities) for cash to such persons on such terms and conditions as the directors may from time to time in their discretion deem fit, subject to the provisions of the company’s memorandum of incorporation, the companies act, as may be amended from time to time and the JSe listings requirements and subject to the following limitations, namely that: » the equity securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue.

» any such issue will only be made to “public shareholders” as defined in the JSe listings requirements and not to related parties, unless the JSe otherwise agrees.

» the number of shares issued for cash shall not in the aggregate in the current financial year exceed 15% (fifteen per cent) of the company’s issued share capital of ordinary shares. the number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue, added to those that may be issued in the future (arising from the conversion of options/convertible securities) at the date of such application, less any ordinary shares issued, or to be issued in the future arising from options/convertible shares issued, during the current financial year, plus any ordinary shares to be issued pursuant to a rights issue which has been announced, is irrevocable and is fully underwritten or an acquisition (in respect of which final terms have been announced) which acquisition ordinary shares may be included as though they were shares in issue at the date of application.

» this authority is valid until the company’s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from the date that this authority is given.

» a paid press announcement giving full details of the issue, including the impact on net asset value and earnings per share, will be published at the time of any issue representing, on a cumulative basis within 1 (one) financial year, 5% (five percent) or more of the number of shares in issue prior to the issue.

» the maximum discount permitted at which equity securities may be issued is 10% (ten percent) of the weighted average traded price on the JSe of those shares measured over the 30 (thirty) business days prior to the date that the price of the issue is agreed between the company and the party subscribing for the securities.”



Additional Information in respect of ordinary resolution number 7in terms of the company’s memorandum of incorporation, as well as the JSe listings requirements, the shareholders of the company have to approve a general issue of shares for cash. the existing authorities granted by the shareholders of the company at the previous annual general meeting held on 28 august 2012 expire at the annual general meeting to be held on 17 September 2013, unless renewed. this authority will be subject to the company’s memorandum of incorporation, the companies act and the JSe listings requirements. the directors of the company consider it advantageous to renew this authority to enable the company to take advantage of any business opportunity that may arise in the future.

this ordinary resolution number 7 is required, under the JSe listings requirements, to be passed by achieving a 75% (seventy-five percent) majority of the votes cast in favour of such resolution by all shareholders present or represented by proxy and entitled to vote, at the annual general meeting.

8. Approval of group remuneration policyOrdinary resolution number 8“reSolVeD tHat the group remuneration policy, as described in the remuneration report on pages 95 to 99 of the integrated annual report of which this notice of annual general meeting forms part, is hereby approved by way of a non-binding advisory note, as recommended in King iii”.

Additional information in respect of ordinary resolution number 8in terms of King iii recommendations, every year, the company’s remuneration policy should be tabled for a non-binding advisory vote at the annual general meeting. the non-binding advisory note is to enable shareholders of the company to express their views on the remuneration policies adopted and on their implementation. accordingly, the shareholders of the company are requested to endorse the company’s remuneration policy as recommended by King iii.

9. Adoption of the Keaton Energy 2013 share plan Ordinary resolution number 9“reSolVeD tHat the Keaton energy 2013 share plan which has been tabled at this annual general meeting and initialled by the chairman of the annual general meeting for purposes of identification, be and is hereby approved and adopted by Keaton energy shareholders.”

Additional information in respect of ordinary resolution number 9the Keaton energy 2013 share plan will be available for inspection during normal business hours at the registered office of the company from the date of posting of this notice of annual general meeting to Keaton energy shareholders, up to and including the date of the annual general meeting. the salient features of the Keaton energy 2013 share plan are set out in annexure 1 to this notice of annual general meeting.

the Keaton energy 2013 share plan has been approved by the JSe, and the directors of the company are of the opinion that the adoption of the Keaton energy 2013 share plan will be beneficial to Keaton energy and its shareholders and recommend that shareholders of Keaton energy vote in favour of this ordinary resolution number 9.

this ordinary resolution number 9 is required, under the JSe listings requirements, to be passed by achieving a 75% (seventy-five percent) majority of the votes cast in favour of such resolution by all shareholders present or represented by proxy and entitled to vote, at the annual general meeting.

10. Keaton Energy long-term performance incentive schemeSpecial resolution number 1 “reSolVeD tHat all the ordinary shares required for the purpose of carrying out the rules of the Keaton energy long-term performance incentive scheme, other than those which have previously been issued for the Keaton energy long-term performance incentive scheme in terms of resolutions duly passed at previous annual general meetings of the company, be and are hereby specifically placed under the control of the directors, who be and are hereby authorised to issue those shares pursuant to the rules of the Keaton energy long-term performance incentive scheme, including the issue to persons contemplated in section 41(1) of the companies act.”

Additional information in respect of special resolution number 1 in terms of section 41(1) of the companies act, a special resolution is required to be passed by the shareholders of the company for the allotment and issue of shares to directors, future directors, prescribed officers or future prescribed officers of the company. the reason for special resolution number 1 is for the shareholders of the company to authorise the directors of the company to allot and issue shares to directors, future directors, prescribed officers and future prescribed officers of the company pursuant to and in accordance with the rules of the Keaton energy long-term performance incentive scheme. the effect of special resolution number 1 is to ensure that the directors have the authority to allot and issue shares to the directors, future directors, prescribed officers or future prescribed officers of the company pursuant to and in accordance with the rules of the Keaton energy long-term performance incentive scheme.




KEATON ENERGY



11. Approval of non-executive directors’ remunerationSpecial resolution number 2“reSolVeD tHat the fees payable to the non-executive directors, for their service as directors, for the period 1 September 2013 until the next annual general meeting are hereby approved as follows:

current annual fee

Proposed annual fee (1 September 2013)

until the next annual general meeting)

chairman of main board r282 966 r291 455chairman of sub committee r56 593 r58 291non-executive director r282 966 r291 455member of subcommittee (excluding social and ethics committee) r42 445 r43 718member of social and ethics committee r10 611 r10 929* Proposed increase of 3%

Additional Information in respect of special resolution number 2in terms of section 66(8) and 66(9) of the companies act, remuneration may only be paid to directors for their services as directors in accordance with a special resolution approved by the shareholders of the company within the previous two years and if not prohibited in terms of the company’s memorandum of incorporation. therefore, the reason for and the effect of special resolution number 2 is to approve the payment of and the remuneration payable by the company to its non-executive directors for their services as directors of the company in terms of section 66 of the companies act. the fees payable to the non-executive directors are detailed above. Details on the remuneration policy are included in the remuneration report on pages 95 to 99 of the integrated annual report of which this notice of annual general meeting forms part.

furthermore, in terms of King iii, remuneration payable to non-executive directors should be approved by shareholders in advance or within the previous two years.

12. Financial assistance in terms of sections 44 and 45 of the companies ActSpecial resolution number 3 “reSolVeD tHat the directors of the company may, as a general approval, authorise the company to provide direct or indirect ‘financial assistance’ as contemplated in sections 44 and/or 45 of the companies act, by way of loans, guarantees, the provision of security or otherwise, to any of its present or future subsidiaries and/or any other company or corporation that is or becomes ‘related’ or ‘inter-related’ to the company, as required from time to time, for any purpose or in connection with any matter, including but not limited to, the subscription of any option, or any securities issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company as contemplated in terms of section 44 of the companies act, subject to the requirements of:1) the companies act, in particular sections 44 and 45 thereof;2) the JSe listings requirements; 3) the company’s memorandum of incorporation; and4) any other applicable laws that may exist from time to time,

such authority to endure until the forthcoming annual general meeting of the company.”

Additional information in respect of special resolution number 3the Board may not authorise the company to provide direct or indirect financial assistance as contemplated in sections 44 and 45 of the companies act to any company or corporation which is related or inter-related to the company unless:1) the particular provision of financial assistance is pursuant to a special resolution of the shareholders, adopted within the

previous two years, which approved such assistance, either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category.

2) the board is satisfied that, immediately after providing the financial assistance, the company would satisfy the “solvency and liquidity test” (being the test set out in section 4(1) of the companies act) and the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.

3) the board has ensured that any conditions or restrictions in respect of granting the financial assistance set out in the company’s memorandum of incorporation have been satisfied.

therefore the reason for special resolution number 3 is to obtain approval from the shareholders of the company to enable the company to provide financial assistance, when the need arises, in accordance with the provisions of sections 44 and 45 of the companies act, the company’s memorandum of incorporation, the JSe listings requirements and any other applicable laws that may exist from time to time. the effect of special resolution number 3 is that the company will have the necessary authority to authorise and provide the financial assistance as and when required.



the board undertakes that, insofar as the companies act requires, it will not adopt a resolution to authorise such financial assistance, unless the directors are satisfied that: » immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test as contemplated in section 4 of the companies act; and

» the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.

13. General authority to repurchase sharesSpecial resolution number 4“reSolVeD that, the company be and is hereby authorised, by way of a general authority, in terms of the provisions of the JSe listings requirements, the companies act and as permitted by the company’s memorandum of incorporation, to acquire, as a general repurchase, the issued ordinary shares of the company, upon such terms and conditions and in such amounts as the board may from time to time determine, but subject to the applicable requirements of the company’s memorandum of incorporation, the provisions of the companies act and the JSe listings requirements, where applicable, and provided that:a) the number of ordinary shares in the aggregate acquired in any one financial year shall not exceed 20% (twenty percent) of the

company’s ordinary shares in issue at the date on which this special resolution number 4 is passed.b) the repurchase of shares will be effected through the main order book operated by the JSe trading system and done without

any prior understanding or arrangement between the company and the counter party (reported trades are prohibited).c) the company has been given authority to repurchase its shares by its memorandum of incorporation.d) this general authority shall only be valid until the company’s next annual general meeting, provided that it shall not extend

beyond 15 (fifteen) months from the date of passing of this special resolution number 4.e) in determining the price at which the company’s ordinary shares are acquired by the company in terms of this general authority,

the maximum premium at which such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of the market price at which such ordinary shares are traded on the JSe, as determined over the 5 (five) business days immediately preceding the date of the repurchase of such ordinary shares by the company.

f) at any point in time, the company may only appoint 1 (one) agent to effect any repurchase(s) on the company’s behalf.g) a resolution has been passed by the board of the company confirming that the board has authorised the repurchase, that the

company satisfied the solvency and liquidity test contemplated in the companies act and that since the solvency and liquidity test was performed, there have been no material changes to the financial position of the group.

h) the company may not repurchase ordinary shares during a prohibited period, as defined in the JSe listings requirements, unless the company has a repurchase programme in place where the dates and quantities of the ordinary shares to be traded during the relevant period are fixed and not subject to any variation and full details of the programme have been disclosed in an announcement over SenS (the Securities exchange news Service) prior to the commencement of the prohibited period.

i) a press announcement will be published giving such details as may be required in terms of the JSe listings requirements as soon as the company has cumulatively repurchased 3% of the number of shares in issue at the date of the passing of this special resolution number 4 and for each 3% in aggregate of the initial number of shares acquired thereafter.

j) the board undertakes that it will not implement the proposed authority to repurchase shares, unless the directors are of the opinion that, for a period of 12 (twelve) months after the date of the repurchase that: » the company and the group will be able, in the ordinary course of business, to pay its debts; » the assets of the company and the group, fairly valued in accordance with international financial reporting Standards, will be in excess of the liabilities of the company and the group;

» the share capital and reserves of the company and the group will be adequate for ordinary business purposes; and » the working capital of the company and the group will be adequate for ordinary business purposes.”

the company will ensure that its sponsor has confirmed the adequacy of the company’s working capital, in writing, to the JSe in terms of the JSe listings requirements, prior to entering the market to proceed with the repurchase.

Additional information in respect of special resolution number 4the reason for and effect of this special resolution number 4 is to grant the board a general authority in terms of the JSe listings requirements, up to and including the date of the following annual general meeting of the company, (provided that it shall not extend beyond 15 (fifteen) months from the date that this special resolution number 4 is passed), to approve the company’s purchase of shares in itself, subject to the restrictions contained in special resolution number 4 and to authorise the company to acquire shares issued by the company in terms of the aforesaid approval. Please refer to the additional disclosure of information contained in this notice of annual general meeting, which disclosure is required in terms of the JSe listings requirements.




KEATON ENERGY




Other disclosures in terms of section 11.26 of the JSE Listings Requirementsfor the purposes of considering Special resolution number 4 and in compliance with the JSe listings requirements, the information listed below has been included in the integrated annual report of which this notice of annual general meeting forms part: » Directors and management – refer to pages 88 and 89 of the integrated annual report; » major shareholders of Keaton energy – refer to page 190 of the integrated annual report; » Directors’ interests in shares – refer to page 186 of the integrated annual report; and » Share capital of Keaton energy – refer to pages 155 and 156 of the integrated annual report.

Material changesthere have been no material changes in the affairs or the financial position of Keaton energy and its subsidiaries since the date of signature of the audit report and the date of this notice of annual general meeting.

directors’ responsibility statementthe directors, whose names are given on pages 88 and 89 of this integrated annual report, collectively and individually accept full responsibility for the accuracy of the information pertaining to special resolution number 4 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 special resolution number 4 contains all such information required by law and the JSe listings requirements.

Litigation statementin terms of section 11.26 of the JSe listings requirements, save for the legal proceedings mentioned on pages 168 and 169 of the integrated annual report, the directors, whose names appear on pages 88 and 89 of this integrated annual report, are not aware of any other legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the group’s financial position.

Approvals required for resolutionsordinary resolution numbers 1 to 6 (all inclusive) and ordinary resolution number 8 contained in this notice of annual general meeting require the approval by more than 50% (fifty percent) of the votes exercised on the resolutions by shareholders present or represented by proxy at the annual general meeting, and further subject to the provisions of the companies act, the company’s memorandum of incorporation and the JSe listings requirements.

ordinary resolution numbers 7 and 9 and special resolution numbers 1 to 4 (all inclusive) contained in this notice of annual general meeting require the approval by at least 75% (seventy-five percent) of the votes exercised on the resolutions by shareholders present or represented by proxy at the annual general meeting, and further subject to the provisions of the companies act, the company’s memorandum of incorporation and the JSe listings requirements.

Voting and proxieseach ordinary shareholder who, being a natural person, is present in person or by proxy, or, being a company, is present by representative or proxy at the annual general meeting, is entitled to one vote on a show of hands.

on a poll, a Keaton energy ordinary shareholder present in person or by proxy or represented in terms of section 57(5) of the companies act, shall be entitled to one vote for each Keaton energy ordinary share held.

an ordinary shareholder entitled to attend and vote at the annual general meeting is entitled to appoint a proxy or proxies to attend and act in his/her stead.

a proxy need not be a member of the company. for the convenience of registered members of the company, a form of proxy is attached hereto.

the attached form of proxy is only to be completed by those ordinary shareholders who: » hold ordinary shares in certificated form; or » are recorded on the sub-register in “own name” dematerialised form.

ordinary shareholders who have dematerialised their ordinary shares through a cSDP or broker without “own name” registration and who wish to attend the annual general meeting, must instruct their cSDP or broker to provide them with the relevant letter of representation to attend the annual general meeting in person or by proxy and vote. if they do not wish to attend in person or by proxy, they must provide the cSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the cSDP or broker.



Proxy forms should be lodged with the company at its registered address at ground floor, eland House, the Braes, 3 eaton road, Bryanston, 2191, South africa or the company’s transfer secretaries, computershare investor Services Proprietary limited, ground floor, 70 marshall Street, Johannesburg, 2001, South africa, or posted to the company’s transfer secretaries at Po Box 61051, marshalltown, 2107, South africa so as to be received by them by no later than 10:00am on friday, 13 September 2013, in accordance with clause 29.4.3 of the company’s memorandum of incorporation. any shareholder who completes and lodges a form of proxy will nevertheless be entitled to attend and vote in person at the annual general meeting.

By order of the board

ML taylorcompany Secretary

26 July 2013Johannesburg




KEATON ENERGY


Salient features of the Keaton Energy Holdings Limited 2013 share plan (plan)

capitalised terms referred to herein shall bear the meaning assigned to them in the plan. a summary of the main terms of the plan is set out below.

1 Purpose the purpose of the plan is to attract, motivate, reward and retain executives, senior managers and/or key employees of Keaton

energy and its subsidiaries (group) who are able to influence the performance of the group, on a basis which aligns their interests with those of Keaton energy shareholders.

2 Administration of the plan 2.1 upon the approval and adoption of the plan by Keaton energy shareholders, the board shall appoint a compliance officer

who shall be accountable to the board and who shall be responsible for the administration of the plan. 2.2 the compliance officer shall comply with his duties as set out in section 97 of the companies act. 2.3 Subject to the provisions of the plan, any applicable laws and the approval of the board, the board shall be entitled to make

and establish rules and regulations and to amend same from time to time as the board may deem necessary or expedient for the proper implementation and administration of the plan.

3 Eligibilty 3.1 any executive, senior manager and/or key employee of any member of the group, including any present or future executive

director holding salaried employment or office may be selected by the board in its sole and absolute discretion to be a participant in the plan (eligible employee).

3.2 a non-executive director of any member of the group shall not be eligible for participation in the plan. 4 Limits 4.1 the prior approval of the JSe and the prior authority of shareholders granted by way of an ordinary resolution passed by

75% majority of the votes cast by Keaton energy shareholders present or represented at a general meeting (excluding all of the votes attached to shares owned or controlled by existing participants in the plan) will be required if:

4.1.1 the aggregate number of shares which may be acquired by all participants under the plan is to exceed 10 000 000 shares; or

4.1.2 by any one participant is to exceed 1 500 000 shares. 4.2 Shares which have been purchased through the JSe and transferred to participants in settlement will not be taken into

account in the determination of the number of shares which may be acquired by participants in terms of 4.1 above. 4.3 once a share has been settled, it shall not thereafter be counted in the number of shares comprising the aggregate

amounts set out in 4.1. rolling over is prohibited.

5 General description of the plan eligible employees may participate in this plan in terms of any one, or a combination of, the share appreciation method, the

performance share method or the restricted share method as described in 6, 7 and 8 hereafter.

6 the share appreciation method Allocations 6.1 an allocation is a conditional and notional award made to an eligible employee which may on vesting result in the settlement

of share appreciation rights to the participant. 6.2 the board may, at the direction of its remuneration committee, resolve to make allocations to eligible employees from time

to time in accordance with an allocation methodology. 6.3 the allocation methodology forms part of Keaton energy’s declared remuneration policy, which is approved and managed

by Keaton energy’s remuneration committee and approved by shareholders in general meeting by way of a non-binding advisory note as recommended in King iii on an annual basis.

anneXure 1



6.4 the basis of the allocation is set out in the allocation letter which shall, among other things, specify the number of share appreciation rights allocated to the eligible employee, the allocation price per share appreciation right, the allocation date, the vesting dates and any performance criteria imposed by the board which will be determine the manner in which the number of share appreciation rights shall be adjusted prior to the vesting thereof.

6.5 acceptance by an eligible employee of an allocation must be communicated to the board in writing within such time period as the board may prescribe.

6.6 an allocation which is not accepted by an eligible employee timeously shall be deemed to have been cancelled with immediate effect, subject to reinstatement or extension by the board in its sole and absolute discretion.

6.7 there shall be no consideration payable for an allocation. 6.8 no shares (or rights associated therewith) shall be transferred or issued to participants pursuant to an allocation, nor shall

a participant have any expectation of earning any dividends or other distributions made. no participant shall have a right to vote in respect of an allocation unless and until the share appreciation rights under an allocation are settled in accordance with the provisions of the rules of the plan.

Vesting 6.9 Subject to 6.11, share appreciation rights in respect of an allocation shall vest in equal thirds on the third, fourth and fifth

anniversaries of the date on which such allocation was made. 6.10 the board will dictate the performance criteria for each allocation. Prior to the vesting date, the board shall, in respect of an

allocation, assess and determine the extent to which any performance criteria have been achieved. 6.11 the share appreciation rights comprising that portion of an allocation in respect of which the performance criteria have

been achieved shall vest on the vesting date.

Exercise and settlement 6.12 a participant is entitled to exercise one or more of his vested share appreciation rights by giving an exercise notice to that

effect to Keaton energy, provided that such notice is given on or before the seventh anniversary of the allocation date or such later date as may be prescribed in the rules.

6.13 any share appreciation rights which have vested but have not been exercised by the participant within the time period set out in 6.12 above shall be forfeited and shall automatically lapse.

6.14 Where share appreciation rights have been exercised, the participant receives the benefit of the positive growth (ie the appreciation) in the fair market value of the shares from the date of allocation to the date of exercise.

6.15 Share appreciation rights exercised shall be settled as soon as practically possible after receipt by Keaton energy of the exercise notice in respect of those share appreciation rights exercised.

6.16 the share appreciation rights exercised shall, at the election of Keaton energy, be settled: 6.16.1 in the form of shares, which shares may be allotted and issued by Keaton energy or alternatively acquired on the

JSe and transferred to the participant; or 6.16.2 in the form of a cash bonus.

termination of employment 6.17 unless the board determines otherwise, and subject to the rules, if a participant ceases to be employed by any member of

the group by reason of: 6.17.1 death, ill health, disability, dismissal based on operational requirements, retirement, mutual agreement or the

employer company by which he is employed ceasing to be a member of the group (no fault termination) prior to the vesting or exercise of an allocation then the allocation shall automatically vest or be deemed exercised on the date of termination of employment and shall be settled to the participant as soon as practically possible after the date of termination of employment; or

6.17.2 misconduct, poor performance or resignation (fault termination) prior to the vesting or exercise of an allocation, then such allocation shall be forfeited and cancelled on date of termination of employment.




KEATON ENERGY


anneXure 1 cOntinuEd

7 the performance share method Awards 7.1 an award is a conditional and notional award made to an eligible employee which may on vesting result in the settlement

of performance shares to the participant. 7.2 the board may, at the direction of its remuneration committee, resolve to make awards to eligible employees from time to

time in accordance with an award methodology. 7.3 the award methodology forms part of Keaton energy’s declared remuneration policy, which is approved and managed by

Keaton energy’s remuneration committee and approved by shareholders in general meeting by way of a non-binding advisory note as recommended in King iii on an annual basis.

7.4 the basis of the award is set out in the award letter which shall, among other things, specify the targeted number of performance shares which may vest as part of the award to the eligible employee on the award date, the vesting date and the performance criteria imposed by the board which will be determine the manner in which the number of performance shares shall be adjusted prior to the settlement thereof.

7.5 the provisions contemplated in 6.5 to 6.8 above (all inclusive) mutatis mutandis apply to awards made by Keaton energy to a participant.

Vesting and settlement 7.6 Subject to 7.8, performance shares in respect of an award shall vest on the third anniversary of the date on which such

award was made. 7.7 the board will dictate the performance criteria for each award. Prior to the vesting date, the board shall, in respect of an

award, assess and determine the extent to which any performance criteria have been achieved. 7.8 the performance shares comprising that portion of an award in respect of which the performance criteria have been

achieved shall vest on the vesting date. 7.9 the number of performance shares which have vested in respect of an award shall be settled to the participant as soon as

practically possible after the vesting date. 7.10 the performance shares shall be settled in the manner contemplated in 6.16 above.


the group by reason of a: 7.11.1 no fault termination prior to the vesting date of his award, the performance shares available to be settled to him

under an award in terms of 7.12 shall vest on the date of termination of employment and shall be settled to the participant as soon as practically possible after the date of termination of employment; or

7.11.2 fault termination prior to the vesting date of his award, his award shall be forfeited and cancelled on date of termination of employment.

7.12 if a participant ceases to be employed by the group and pursuant to 7.11, performance shares are to be settled to such participant under an award, the targeted number of performance shares which are to be settled to him shall be less than the targeted number of performance shares originally conditionally awarded to such participant. the board will, in determining the number of performance shares to be settled to him, take into account the number of completed calendar months which have elapsed from the award date to the date of termination of employment as well as the performance of Keaton energy as at the date of termination of employment.

7.13 notwithstanding the provisions of 7.12, the board may, as directed through its remuneration committee, in the circumstances contemplated in 7.11 permit such a participant to acquire a greater number of performance shares.

8 the restricted share method Grants 8.1 the board may, at the direction of its remuneration committee, resolve to make grants to eligible employees from time to

time in accordance with a grant methodology. 8.2 a grant is a conditional and notional award made to an eligible employee which may on vesting result in the settlement of

restricted shares to the participant.



8.3 the grant methodology forms part of Keaton energy’s declared remuneration policy, which is approved and managed by Keaton energy’s remuneration committee and approved by shareholders in general meeting by way of a non-binding advisory note as recommended in King iii on an annual basis.

8.4 the basis of the grant is set out in the grant letter which shall, among other things, specify the number of restricted shares which may vest as a result of the grant to the eligible employee, the grant date, the vesting date and any conditions attaching to the grant as set out in the rules.

8.5 the provisions contemplated in 6.5 to 6.8 above (all inclusive) mutatis mutandis apply to grants made by Keaton energy to a participant.

Vesting and settlement 8.6 restricted shares in respect of a grant shall vest on the third anniversary of the date on which such grant was made. 8.7 the number of restricted shares which have vested in respect of a grant shall be settled to the participant as soon as

practically possible after the vesting date. 8.8 the restricted shares shall be settled in the manner contemplated in 6.16 above.


the group by reason of a: 8.9.1 no fault termination prior to the vesting date of his grant, the restricted shares available to be settled to him under

a grant in terms of 8.10 shall vest on the date of termination of employment and shall be settled to the participant as soon as practically possible after the date of termination of employment; or

8.9.2 fault termination prior to the vesting date of a grant, such grant shall be forfeited and cancelled on date of termination of employment.

8.10 if a participant ceases to be employed by the group and pursuant to 8.9, restricted shares are to be settled to such participant under a grant, the number of restricted shares which are to be settled to him shall be less than the number of restricted shares originally conditionally awarded to such participant under a grant. the board will, in determining the number of restricted shares to be settled to him, take into account the number of completed calendar months which have elapsed from the grant date to the date of termination of employment.

9 termination of employment 9.1 a participant who ceases to be employed by any member of the group on the basis that he is: 9.1.1 immediately thereafter employed by another member of the group; or 9.1.2 thereafter re-employed by such member of the group pursuant to it being determined that his employment was

terminated on a basis which was not lawful in terms of the lra; shall be deemed not to have terminated his employment for the purposes of the plan and his rights (whether conditional or

otherwise) in and to the share appreciation rights, performance shares and/or restricted shares shall be deemed to be unaffected.

9.2 a participant who is an executive director of any member of the group who retires and/or resigns from his position as an executive director on the basis that he is immediately re-elected in accordance with the memorandum of incorporation of that member of the group shall be deemed not to have terminated his employment with such member of the group.

10 Poor performance and discilpinary procedures the vesting, exercise (if applicable) and/or settlement of any allocation, award or grant shall be suspended pending the final

determination of any disciplinary or poor performance procedures which may be instituted against any participant.




KEATON ENERGY


anneXure 1 cOntinuEd

11 insolvency if Keaton energy is placed in business rescue or liquidation, then the plan shall lapse as from the date of business rescue or

liquidation and any allocation, grant or award which has not yet been settled shall lapse from that date.

12 Adjustment 12.1 Subject to 12.4, if Keaton energy makes any distribution or undertakes any corporate action affecting the rights of its

shareholders, then such adjustments shall be made to the rights of participants as may be determined by the board to be fair and reasonable to the participants concerned. any adjustments shall be confirmed by the auditors to Keaton energy and to the JSe, in writing, at the time the adjustment is finalised and should give a participant the entitlement to the same proportion of the share capital to which he was previously entitled.

12.2 any adjustment made shall be reported on in Keaton energy’s annual financial statements in the year during which the adjustment is made.

12.3 no adjustments shall be required in the event of the issue of equity securities as consideration for an acquisition in terms of 12.4, the issue of securities for cash and the issue of equity securities for a vendor consideration placing.

12.4 if Keaton energy undergoes a change of control after an allocation date, award date or grant date, then the rights (whether conditional or otherwise) in and to the share appreciation rights, performance shares and/or restricted shares of participants under the plan will, to the extent necessary, be accommodated on a basis which shall be determined by the board to be fair and reasonable to participants.

13 tax liability 13.1 any member of the group shall be entitled to withhold or deduct any tax in any jurisdiction which is payable in connection

with the making of any allocation, award or grant, settlement to a participant of shares, the payment of a cash amount or otherwise in connection with the plan.

13.2 alternatively a member of the group may be relieved from the obligation to settle any shares or to pay any cash amount to a participant in terms of the plan until that participant has either made payment to such member of the group of an amount equal to the tax or entered into an arrangement to secure that such payment has been made.



for use only by ordinary shareholders who: » hold ordinary shares in certificated form (certificated ordinary shareholders); or » have dematerialised their ordinary shares (dematerialised ordinary shareholders) and are registered with “own name” registration, at the annual general meeting of shareholders of the company to be held at l’incontro conference room, the michelangelo Hotel, nelson mandela Square, West Street, Sandton on tuesday, 17 September 2013 at 09h00.

Dematerialised ordinary shareholders holding ordinary shares other than with “own name” registration who wish to attend the annual general meeting must inform their cSDP or broker of their intention to attend the annual general meeting and request their cSDP or broker to issue them with the relevant letter of representation to attend the annual general meeting in person or by proxy and vote. if they do not wish to attend the annual general meeting in person or by proxy, they must provide their cSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the cSDP or broker. these ordinary shareholders must not use this form of proxy.

i/We

of (address)

being the holder(s) of Keaton energy ordinary shares,

Do hereby appoint (see note 2):

1. of or failing him/her

2. of or failing him/her

3. the chairman of the annual general meeting, as my/our proxy to act for me/us and on my/our behalf at the annual 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 thereat and at any adjournment thereof; and to vote for and/or against the resolutions and/or abstain from voting in respect of the Keaton energy ordinary shares registered in my/our name(s), in accordance with the following instructions (see note 3):

number of ordinary shares

for against abstainOrdinary resolution number 1: acceptance of financial statementsOrdinary resolution number 2: re-election of mr gH Kemp as a directorOrdinary resolution number 3.1: re-election of mr lX mtumtum as a directorOrdinary resolution number 3.2: re-election of mr D Jonker as a directorOrdinary resolution number 3.3: re-election of mr oP Sadler as a directorOrdinary resolution number 4.1: appointment of mr lX mtumtum as chairman and member of the

audit committeeOrdinary resolution number 4.2: appointment of mr oP Sadler as a member of the audit committeeOrdinary resolution number 4.3: appointment of mr gH Kemp as a member of the audit committeeOrdinary resolution number 5: re-appointment of KPmg inc. as external auditors of the companyOrdinary resolution number 6: control of authorised but unissued sharesOrdinary resolution number 7: general authority to issue shares for cashOrdinary resolution number 8: approval of the group remuneration policyOrdinary resolution number 9: adoption of the Keaton energy 2013 share planSpecial resolution number 1: authorisation to issue shares in terms of the Keaton energy long-

term performance incentive scheme Special resolution number 2: approval of non-executive directors’ remunerationSpecial resolution number 3: financial assistance in terms of sections 44 and 45 of the

companies act Special resolution number 4: general authority to repurchase shares

Please indicate with an “X” in the space provided above how you wish your votes to be cast.

Signed at on 2013

Signature

assisted by (where applicable)

each shareholder is entitled to appoint one or more proxies (who need not be a shareholder of the company) to attend, speak and vote in place of that shareholder at the annual general meeting.

form of ProXy

(Incorporated in the Republic of South Africa)(Registration number 2006/011090/06)

JSE share code: KEH ISIN: ZAE000117420(Keaton Energy or the company)



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KEATON ENERGY


noteS to tHe form of ProXy

Summary of shareholders’ rightsin respect of proxy appointments as contained in section 58 of the companies act, no. 71 of 2008, as amended (the companies act).

Please note that in terms of section 58 of the companies Act:• this proxy form must be dated and signed by the shareholder appointing the proxy.• you may appoint an individual as a proxy, including an individual who is not a shareholder of the company, to participate in, speak

and vote at a shareholders’ meeting on your behalf.• your proxy may delegate his/her authority to act on your behalf to another person, subject to any restriction set out in this proxy

form.• this proxy form must be delivered to the transfer secretaries of the company, namely computershare investor Services Proprietary

limited, before your proxy exercises any of your rights as a shareholder at the annual general meeting.• the appointment of your proxy or proxies will be suspended at any time to the extent that you choose to act directly and in person

in the exercise of any of your rights as a shareholder at the annual general meeting.• the appointment of your proxy is revocable unless you expressly state otherwise in this proxy form. • as the appointment of your proxy is revocable, you may revoke the proxy appointment by (i) cancelling it in writing, or making a later

inconsistent appointment of a proxy and (ii) delivering a copy of the revocation instrument to the proxy and to the company. Please note the revocation of a proxy appointment constitutes a complete and final cancellation of your proxy’s authority to act on your behalf as of the date stated in the revocation instrument, if any, or the date on which the revocation instrument was delivered to the company and the proxy as aforesaid.

• if this proxy form has been delivered to the company, as long as that appointment remains in effect, any notice that is required by the companies act or the company’s memorandum of incorporation to be delivered by the company to you will be delivered by the company to you or your proxy or proxies, if you have directed the company to do so, in writing and paid any reasonable fee charged by the company for doing so.

• your proxy is entitled to exercise, or abstain from exercising, any voting right of yours at the annual general meeting, but only as directed by you on this proxy form.

• the appointment of your proxy remains valid only until the end of the annual general meeting or any adjournment or postponement thereof unless it is revoked by you before then on the basis set out above.

notes1. the person whose name stands first on the proxy form and who is present at the annual general meeting will be entitled to act as

a proxy to the exclusion of those whose names follow thereafter.2. a shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that

shareholder in the appropriate box provided. if there is no clear indication as to the voting instructions to the proxy, the proxy form will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat.

3. if no proxy is inserted in the spaces provided, then the chairman shall be deemed to be appointed as the proxy to vote or abstain as the chairman deems fit.

4. a shareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholder or by his/her proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or by his/her proxy. a proxy shall be entitled to demand that voting take place on a poll.

5. in order to be effective, forms of proxy must reach the registered address of the company or the company’s transfer secretaries no later than 10:00am on friday, 13 September 2013 being no later than 48 (forty-eight) hours before the annual general meeting to be held at 10:00am tuesday, 17 September 2013, provided that the chairman of the annual general meeting may in his discretion, accept proxies that have been delivered after the expiry of the aforementioned period up and until the time of commencement of the annual general meeting.

6. Documentary evidence establishing the authority of a person signing this proxy form in a representative capacity must be attached to this proxy form unless previously recorded by the company or waived by the chairman of the annual general meeting. cSDPs or brokers registered in the company’s sub-register voting on instructions from beneficial owners of shares registered in the company’s sub-register, are requested that they identify the beneficial owner in the sub-register on whose behalf they are voting and return a copy of the instruction from such owner to the company or to the company’s transfer secretaries, together with this form of proxy.

7. any alteration or correction made to this proxy form must be initialled by the signatory/ies, but may not be accepted by the chairman.8. a minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are

produced or have been registered by the company.

Registered address: transfer secretaries:ground floor, eland House computershare investor Services Proprietary limitedthe Braes ground floor3 eaton road 70 marshall StreetBryanston Johannesburg2191 2001South africa`




aDminiStration anD contact DetailS

Registered addressground flooreland Housethe Braes3 eaton roadBryanston2191South africa

Postnet Suite 464Private Bag X51Bryanston2021South africa

tel: +27 (0) 11 317 1700fax: +27 (0) 11 463 4759Website: www.keatonenergy.co.za

investor relationsJudi HattinghKeaton energytel: +27 (0) 11 317 1700fax: +27 (0) 11 463 4759email: [email protected]

company secretaryMichelle taylorKeaton energytel: + 27 (0) 11 317 1700fax: + 27 (0) 11 463 4759

transfer secretariescomputershare investor Servicesregistration number: 2004/003647/07ground floor70 marshall StreetJohannesburg2001

Po Box 61051marshalltown2001

BASTION GRAPHICS

Keaton Energy Holdings LimitedRegistration number: 2006/011090/06Share code: KEHiSin code: ZAE000117420

investment bank, corporateadviser and sponsornedbank capital135 rivonia roadSandown2196

Po Box 1144Johannesburg2000

Reporting accountants and auditorsKPMG incorporatedregistered accountants and auditorschartered accountants (Sa)

KPmg forum1226 Schoeman StreetHatfieldPretoria0083

Po Box 11265Hatfield0028




KEATON ENERGY


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