leeuw mining and exploration - keaton energy · | leeuw mining and exploration joins the fold12...

Leeuw Mining and Exploration

joins the fold

Paul Miller

Managing Director

Site visit

March 2012

Disclaimer

All statements in this presentation, other than historical facts, that address exploration activities and

mining potential are forward-looking statements. Although Keaton Energy believes the expectations

expressed in such forward-looking statements are based on reasonable assumptions, such

statements should not in any way be construed as guarantees of future performance. Factors that

could cause developments to differ materially from those expressed include exploration results,

technical analysis and lack of availability to the company of necessary capital to progress its

projects. The company is subject to specific risks inherent in the exploration and mining business

and general economic and business conditions.

March 2012 | Leeuw Mining and Exploration joins the fold 2

About KEH: pre-February 2011

» Coal exploration, development and mining company

» Four years in business

» Empowered in each operating company (26%)

» SA domiciled and funded

» JSE-listed

» 234Mt resource

» Targeting 5Mtpa longer term

» First major project fast-tracked into production

• Vanggatfontein

» Advanced exploration project

• Sterkfontein


KEH: timeline

4 March 2012 | Leeuw Mining and Exploration joins the fold

April 2006

Keaton Energy

established

May 2008

Vanggatfontein, Sterkfontein

resource upgrade: 213Mt

March 2008

206Mt Vanggatfontein,

Sterkfontein resource declared

Vanggatfontein mining right

application submitted

May 2009

Vanggatfontein

25.9Mt reserve,

163Mt resource declared

June 2009

Vanggatfontein

mining right awarded

November 2009

Vanggatfontein

Phase 1 go-ahead

February 2010

Phase 1

earthworks begin

May 2010

Surface access

dispute settled

Phase 1 plant

construction begins

July 2010

Eskom power station

coal contract negotiations

concluded

Vanggatfontein

Phase 2 go-ahead

October 2010

Phase 1 first 5 Seam coal

April 2011

Phase 2 first Eskom coal

April 2008

Listing on the

main board

of the JSE

About LME: pre-February 2011

» Coal mining and exploration junior

» BEE-controlled

» Unlisted

» KZN-located assets

» One operating anthracite mine

• Vaalkrantz

» 207 000tpa RBCT Quattro export allocation

» Four exploration projects

• Koudelager

• Braakfontein

• Balgray

• Mpati

» Under-performing

» Under-funded


About LME: background

» Formed in 2002 to acquire remaining Anglo Coal KZN assets

• followed BEE transaction process (old order mineral rights and land holdings)

» Focus on Vaalkrantz:

• IDC funding to acquire moveable assets of Capital Coal (in liquidation)

• Anglo Khula, Anglo Zimele start-up funding

• Anglo Coal guarantee to Nedbank for financing of coal processing plant

• designed, built by DRA Mineral Projects

» BEE deal structure required marketing agent appointment

» Anglo Coal provides significant data, on-going technical support

» Mine re-commissioned

• production started, debt serviced

» 2009: anthracite market collapsed in wake of financial crises


LME assets: location


LME assets: description

Asset

Vaalkrantz Anthracite

Colliery

Operating colliery with relatively short remaining life; well placed for

expansion; potential to generate cash in short term

Koudelager Project Life extension project for Vaalkrantz: mining right in place

Braakfontein Project Permitted project: estimated 48Mt (non-Samrec) coal resource near

Newcastle. Potential for 660 000tpa thermal coal mine with a

+20-year life

Mpati Project Sale to Slater Coal agreed

Balgray Project Relatively speculative project to pursue future anthracite production

for Vaalkrantz plant


100%

Loans

Transaction re-visited: LME


JPI Leeuw and

Associates

(Pty) Ltd Anglo Zimele


(Pty) Ltd

Other

Minority BEE

shareholders

DW Leeuw Aral Trust

Anglo Khula

Mining Fund

African Spirit

Trading 307

(Pty) Ltd

Leeuw Braakfontein

Colliery (Pty) Ltd

Anglo Khula

Mining Fund

Industrial Development Corporation

Preference share funding

40%

60%

11% 89%

12.5% 25%

100%

14.2% 14.2%

22.3%

KC Morgan

11.8%

Anglo

American

Thermal Coal

Nedbank


Gu

ara

nte

e

Transaction re-visited:

background

» LME in financial distress

• anthracite market collapse in 2009, following ferrochrome market collapse

post 2008 financial crises

• insufficient cash flow to service debt and open new West Adit

• R45m in urgent funding from Anglo Coal

» Keaton Energy proposed acquiring 74%, preceded by refinancing the business

» ‘All-or-nothing’ deal on all loans, shares sort by Anglo

» R65m KEH advance to LME as rescue funding: KEH agrees to take out Anglo

(at a discount)

» LME enters into offtake agreement with Gunvor

» Gunvor agrees to fund KEH’s acquisition

» Refinancing concluded late 2010

» Regulatory approval for equity acquisition late 2011



LME post transactions


Loans JPI Leeuw and

Associates

(Pty) Ltd

Keaton

Energy


(Pty) Ltd

DW Leeuw Aral Trust

African Spirit

Trading 307

(Pty) Ltd

Leeuw Braakfontein

Colliery (Pty) Ltd

Keaton

Energy


Preference Share Funding

40%

60%

74% 26%

100%

25%

100%

14.2% 14.2%

KC Morgan

11.8%

Keaton Energy

Gunvor

International


24.4%

Loans


accounting for refinancing


Full valuations in terms of IFRS 3 Business Combinations in progress for May 2012 release of results

Face value Allocated acquisition price

Reserve loan R15.4m R480 000

Emergency loan R47m R47m

Preference shares R14m R14m

Plant instalment sale R12m R12m

Total

R88.4

R73.48

February 2011: KEH plan for LME

» Effects for KEH

• controlling interest in second operating

mine

• substantially augmented exploration

portfolio – most value in Braakfontein

• export foothold

• broadens product range

• wider customer base

• major new shareholder

» Effects for LME

• R65 million capital injection

• 700+ jobs saved


Vaalkrantz: turning around


» 2011: transaction steering committee put in

place while regulatory approvals sought

» Capital injection used to:

• complete West Adit development

• acquire urgently-required equipment

• pay trade creditors

» New mine manager appointed

» Marketing contract terminated July 2011;

marketing function taken over by KEH

» Significantly better prices achieved

» Payroll and HR service provider replaced

by KEH in October 2011; concerted effort

to improve IR climate

Please see insert

Vaalkrantz: operational team


General Manager

Operations

H. Papenfus

Plant Manager

A. Masongo

(Minopex)

Coal Logistics

De Beer (Sikhova)

GES

S. Victor

Production

Manager: H. Burger

(as of 1 April 2012)

Siding

Manager:

P. van Aswegen

Risk

Manager:

D. Ramsden

Procurement

Manager:

S. Govender

Human Resource

Manager:

S. Buthelezi

Mine Administration B. van Aswegen

Enyati Gus & Alfred Shafts

Occupational and Primary Healthcare

OCCUSURE

Sanbonani

Security

LME West Adit &

Alfred Shafts

LME Stores

M. Leeuw

Mine Manager

X. Khanyezi

Training Centre

OHS Induction

Vaalkrantz:

historic ROM production


-

10 000

20 000

30 000

40 000

50 000

60 000

70 000

Jan-0

5

Ma

r-0

5

Ma

y-0

5

Jul-0

5

Sep-0

5

No

v-0

5

Jan-0

6

Ma

r-0

6

Ma

y-0

6

Jul-0

6

Sep-0

6

No

v-0

6

Jan-0

7

Ma

r-0

7

Ma

y-0

7

Jul-0

7

Sep-0

7

No

v-0

7

Jan-0

8

Ma

r-0

8

Ma

y-0

8

Jul-0

8

Sep-0

8

No

v-0

8

Jan-0

9

Ma

r-0

9

Ma

y-0

9

Jul-0

9

Sep-0

9

No

v-0

9

Jan-1

0

Ma

r-1

0

Ma

y-1

0

Jul-1

0

Sep-1

0

No

v-1

0

Jan-1

1

Ma

r-1

1

Ma

y-1

1

Jul-1

1

Sep-1

1

No

v-1

1

Jan-1

2

Tonnes Gus Enyati Alfred Enyati Alfred West Gus West Alfred (bought in)

Vaalkrantz: production profile


-

10 000

20 000

30 000

40 000

50 000

60 000

70 000

Jan-0

5

Ma

y-0

5

Sep-0

5

Jan-0

6

Ma

y-0

6

Sep-0

6

Jan-0

7

Ma

y-0

7

Sep-0

7

Jan-0

8

Ma

y-0

8

Sep-0

8

Jan-0

9

Ma

y-0

9

Sep-0

9

Jan-1

0

Ma

y-1

0

Sep-1

0

Jan-1

1

Ma

y-1

1

Sep-1

1

Jan-1

2

Ma

y-1

2

Sep-1

2

Jan-1

3

Ma

y-1

3

Sep-1

3

Jan-1

4

Ma

y-1

4

Sep-1

4

Jan-1

5

Ma

y-1

5

Sep-1

5

Jan-1

6

Ma

y-1

6

Sep-1

6

Jan-1

7

Ma

y-1

7

Sep-1

7

Tonnes

Historic and planned ROM production

Gus Enyati Alfred Enyati Alfred West Gus West Alfred (bought in)

Vaalkrantz: anthracite market

» Not all anthracite the same

• most smelters sulphur-sensitive

» Demand for anthracite increasing

» Specialist niche market, supplying metallurgical reductants

» Premium anthracite:

• increasingly used to replace coke/thermal coal blends in ferrochrome smelting

• consumed locally

» Higher ash duff exported


Vaalkrantz: historic pricing


-

100

200

300

400

500

600

700

800

900

Aug-0

5

Oct-

05

De

c-0

5

Feb

-06

Apr-

06

Jun-0

6

Aug-0

6

Oct-

06

De

c-0

6

Feb

-07

Apr-

07

Jun-0

7

Aug-0

7

Oct-

07

De

c-0

7

Feb

-08

Apr-

08

Jun-0

8

Aug-0

8

Oct-

08

De

c-0

8

Feb

-09

Apr-

09

Jun-0

9

Aug-0

9

Oct-

09

De

c-0

9

Feb

-10

Apr-

10

Jun-1

0

Aug-1

0

Oct-

10

De

c-1

0

Feb

-11

Apr-

11

Jun-1

1

Aug-1

1

Oct-

11

De

c-1

1

Feb

-12

R/t

Revenue per saleable tonne

(12-month moving average across all products)

Vaalkrantz: cost profile


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011 (ytd)

Historical operating cost profile

Sundry

Electricity

Coal Logistics

Coal Processing

Mining Stores and Equipment Rental

Commissions

Head Office & Technical Services

Payroll

Sundry

Electricity

Coal logistics

Coal processing

Mining stores, equipment rental

Commissions

Head office, technical services

Payroll

KEH: value curve


HIGH

TIME

No grassroots

prospecting

projects

Discovery

Proving

commercial

Development

LOW

Production

STERKFONTEIN

LEEUWFONTEIN

BRAAKFONTEIN

MPATI

BALGRAY

VAALKRANTZ VANGGATFONTEIN

Paul Miller

Managing Director

Paul has 16 years’ experience in South

Africa’s consulting, finance and mining

industries. He joined Keaton Energy as MD

in September 2007 after a period of

consulting to the company.

Phoevos Pouroulis

Non–executive Director

Phoevos brings several years of financial

experience in the development of African

mining projects to Keaton Energy.

David Salter

Independent Non–executive Chairman

David was appointed to the Keaton Energy

board during January 2008 following a 33-

year worldwide career in mineral technology

and project development.

KEH: board


Lizwi Mtumtum

Independent Non-executive Director

Liwzi is currently Executive Chairman

of Ikamva Lethu Investments

(Proprietary) Limited. He is a board

member of Siyathenga Propery Fund

Limited and was previously an

independent non-executive director

of Eland Platinum Holdings Limited.

Antoinette Sedibe


A co–owner of Rutendo Mining,

Antoinette has almost 19 years of

hands–on and advisory experience

in financial and treasury operations

of new and established companies.

Mandi Glad

Executive Director: Business

Development and Marketing

A co–owner of Rutendo Mining,

Mandi has more than 15 years’

entrepreneurial experience in

establishing and running businesses

ranging from coal marketing to IT.

Jacques Rossouw

Financial Director

Jacques is a CA (SA), having

completed his articles with

PricewaterhouseCoopers, and

subsequently worked in both the high

technology and mining industries,

most recently as Manager: Corporate

Reporting at Harmony Gold Mining

Company Limited.

Paul Sadler

Independent Non-executive Director

Mr Sadler has extensive auditing

experience, much gained in the mining

sector. 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.

Dirk Jonker


A Dutch national, Dirk is Managing

Director of Gunvor International BV

and is based in Amsterdam. He is a

senior business executive with many

years’ experience in international

commodity trading and processing.

Coal market update

SA coal demand


0

50

100

150

200

250

300

350

400

450

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

'00

0 0

00

to

nn

es

Exports Domestic Sasol Eskom - Tied Eskom - Spot Eskom - New Build Other Generation

Investment case

» Sound market fundamentals

» Sensible strategy

• in sync with market conditions and outlook

» Excellent mix of projects – diversified across products and geography

» Operating case established

» Experienced management team



joins the fold

Paul Miller

Managing Director

Site visit

March 2012

leeuw mining and exploration - keaton energy · | leeuw mining and exploration joins the fold12...

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