Keaton Energy Holdings Limited announced today that it plans – in a two-stage transaction – to refinance and acquire a 74% interest in South African export coal producer Leeuw Mining and Exploration (Pty) Limited (LME). 

The transaction will result in Keaton Energy acquiring an export foothold; a new major shareholder in Plusbay Limited (Plusbay), an affiliate of Gunvor Group Limited (Gunvor; www.gunvorgroup.com) one of the world’s leading energy trading companies; and will also safeguard more than 400 jobs in LME’s operations. 

LME's founding shareholder JPI Leeuw and Associates (Pty) Limited (JPI) will remain a 26% shareholder in LME. 

Keaton Energy Managing Director Paul Miller said: “This transaction will be good for Keaton Energy shareholders; provide a partial exit for existing LME shareholders to, in part, pursue other mining initiatives; and contributes significantly to the economy of Northern Kwazulu-Natal. 

It will give Keaton Energy a controlling interest in an existing mining operation; significantly increase its portfolio of advanced development projects; provide vital access to export markets and a wider customer base; and will mark a major step towards Keaton Energy’s objective of becoming a mid-tier coal producer with a diverse range of projects to complement our major Vanggatfontein and Sterkfontein projects in Mpumalanga.” 

The transaction consideration will be settled through the issue of new Keaton Energy shares, and R10 million in cash through the settlement of an existing loan to LME. 

The transaction – which is subject to relevant regulatory approvals and fulfillment of various conditions precedent – will also see Geneva-based energy trader Gunvor, through its affiliate Plusbay, become a key shareholder in Keaton Energy, with the intention to obtain a seat on the Keaton Energy Board. 

Commenting on the transaction, Filippo Faralla, Gunvor’s Coal Manager in South Africa, said: “The transaction continues our expansion by sector and geography. It marks our entry into South African coal production and complements our growing non-oil energy business, and is another significant step in our development as a leading integrated energy company.” 

David Salter, Keaton Energy’s Chairman, welcomed Gunvor’s introduction into the company as a mark of approval and said: “It is pleasing that Gunvor has recognised the achievements of Keaton Energy’s management since listing and is joining with us to develop Keaton Energy into a robust and sustainable South African coal producer.” 

Willy Leeuw, Chief Executive Officer of LME, said, “the team at LME have worked hard over a period of eight years to take a portfolio of prospecting projects up the value curve right through to producing coal for export. We look forward to partnering with Keaton Energy and Gunvor to take the company and its Kwazulu-Natal projects to the next stage of development.” 

LME owns and operates the Vaalkrantz Anthracite Colliery (Vaalkrantz) near Vryheid in South Africa’s Kwazulu-Natal province. Vaalkrantz has been in production since 2003. 

In addition, LME has: 

• a 207 000tpa participation in Richards Bay Coal Terminal’s (RBCT) Quattro export programme and a dedicated railway siding facility near Vaalkrantz; 
• a number of new order prospecting and mining rights over other Kwazulu-Natal coal properties, including: 

Refinancing 

In terms of the refinancing of LME, Keaton Energy will acquire:  

• various loans and claims in LME from Anglo Operations Limited, acting through its Anglo American Thermal Coal Division, (AOL) for R47 million, to be settled by the issue of 10 444 444 new Keaton Energy ordinary shares at R4.50 per share; and 
• 40 preference shares in LME from Anglo Khula Mining Fund (Proprietary) Limited (AKMF) for R8 million, to be settled by the issue of 1 777 778 Keaton Energy ordinary shares at R4.50 per share. 

The total consideration for the acquisition of the AOL loans and claims and the AKMF preference shares is R55 million. AOL and AKMF will then dispose of their Keaton Energy ordinary shares to Plusbay.

Acquisition 

In terms of the acquisition of 74% of LME, Keaton Energy will acquire:  

• 54% from JPI and 10% from Anglo American Zimele Limited (Anglo Zimele) for 14 177 778 and 2 444 444 new Keaton ordinary shares respectively, at a price of R4.50 per share, with a resulting total purchase consideration of R74.8 million. 
• 10% through the settlement of a R10 million short-term convertible loan recently provided to LME by Keaton Energy. 

JPI and Anglo Zimele will then dispose of their Keaton Energy ordinary shares to Plusbay.

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