South African JSE-listed Keaton Energy Holdings is pleased to announce that it has made an offer to acquire Xceed Resources Ltd (Xceed) in an all cash deal.
The acquisition will be implemented by way of a scheme of arrangement. Once the transaction is implemented Xceed will become a wholly owned subsidiary of Keaton Energy and Xceed will be delisted from the Australian Securities Exchange (ASX). The offer is subject to the fulfilment of certain regulatory conditions precedent typical for a transaction of this nature.
Xceed is an Australian based public company engaged in the exploration and development of coal projects in the Republic of South Africa and presently has a market capitalisation of approximately AU$15 million. Xceed’s primary focus has been the development of thermal coal projects located within South Africa’s premier coalfields.
Commenting on the proposed transaction, Mandi Glad, Chief Executive Officer of Keaton Energy, said: “The acquisition is consistent with Keaton Energy’s strategy of strengthening its position of becoming a 5Mtpa coal producer. The Xceed transaction reflects our strong belief in the South African coal industry, and the growth of the group bodes well for Keaton’s continued delivery of records across mining, processing, sales and cash generation.”
The acquisition will increase Keaton Energy’s opencastable coal resource by more than 100 million tonnes and, importantly, increase the run of mine coal reserve in the greater Vanggatfontein Colliery area by approximately 44 million tonnes. The enlarged Keaton Energy will thus be well on its way to meeting its strategic objective of producing 5 million tonnes per year of diversified coal products.
Xceed’s most advanced asset, Moabsvelden, is located 3km from Keaton Energy’s Vanggatfontein Colliery in Mpumalanga. Moabsvelden offers significant operational synergies as a result of its proximity to Vanggatfontein, is entirely opencastable with a low stripping ratio and a mine life in excess of 15 years. Production is targeted for late-2014. Moabsvelden will be primarily an Eskom product mine with an export fraction, allowing Keaton Energy to enter the export thermal coal market for the first time.
The all-cash offer will be funded through a mix of a pre-payment for coal, equity and own funds.
Keaton Energy has entered into an agreement with Gunvor Group Ltd (Gunvor) which holds a 23.9% stake in Keaton Energy through its wholly owned subsidiary Plusbay Limited (Plusbay) to fund US$18 million of the purchase consideration. Funding will be through a combination of a pre-payment by Gunvor SA, a fully owned subsidiary of Gunvor, for the off-take of a fixed volume of export thermal coal at a fixed price, and a specific issue of Keaton Energy shares to Plusbay for cash, which is subject to the approval of Keaton Energy’s shareholders. The new issue of shares will result in the issue of 32,631,692 new Keaton Energy shares to Plusbay at a price of R1.7782 per share, increasing Plusbay’s shareholding in Keaton Energy from 23.9% to 34.99%.
“This is an exciting opportunity to deliver real value to our shareholders through increased Eskom coal production at a time when the industry is abuzz with Eskom’s impending coal supply shortfall. The transaction also provides Keaton with the opportunity to participate in the export thermal coal market for the first time. We are pleased that our major shareholder is aligned with our vision for the company, supports our growth strategy and advocates the development of the South African coal industry” Glad concluded.