WESCOAL HOLDINGS LIMITED - Wescoal/Keaton -Firm in2 Feb 2017
WSL KEH 201702020055A
Wescoal/Keaton -Firm intention offer by Wescoal to acquire all the issued shares of Keaton energy and cautionary

WESCOAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2005/006913/06)
Share code: WSL
ISIN: ZAE000069639
(“Wescoal”)

KEATON ENERGY HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2006/011090/06)
Share code: KEH
ISIN: ZAE000117420
(“Keaton Energy”)

JOINT ANNOUNCEMENT - FIRM INTENTION OFFER BY WESCOAL TO ACQUIRE ALL OF
THE ISSUED ORDINARY SHARE CAPITAL OF KEATON ENERGY
RENEWAL OF KEATON ENERGY’S CAUTIONARY ANNOUNCEMENT
WESCOAL CAUTIONARY ANNOUNCEMENT

1. Introduction

The respective boards of directors of Wescoal and Keaton Energy (“Wescoal Board” and “Keaton
Energy Board”, respectively) are pleased to announce that Wescoal has made an offer ("Offer") to
Keaton Energy to acquire 100% of the issued ordinary share capital of Keaton Energy (“Offer
Shares”). The Offer will be implemented by way of (i) a scheme of arrangement (“Scheme”) in
terms of section 114(1)(c) of the Companies Act 71 of 2008, as amended ("Companies Act"), to be
proposed by the Keaton Energy Board between Keaton Energy and the holders of Keaton Energy
ordinary shares (“Keaton Energy Shareholders”) or (ii) if the Scheme fails, and Wescoal so elects, a
general offer by Wescoal to Keaton Energy Shareholders to acquire the Offer Shares (“Standby
Offer”) (collectively, the “Proposed Transaction”).

The Scheme will be subject to the fulfilment of the conditions set out in paragraph 7 below (“Scheme
Conditions”) and the Standby Offer will be subject to the fulfilment of the conditions set out in
paragraph 11 below.

In the event that:
- the Scheme becomes operative, the listing of all of Keaton Energy’s ordinary shares (“Keaton
  Energy Shares”) on the Main Board of the JSE Limited (“JSE”) will be terminated, and Keaton
  Energy Shareholders will be deemed to have disposed of all of the Offer Shares for the Scheme
  Consideration (defined in paragraph 2.1 below), thereby constituting Keaton Energy as a wholly-
  owned subsidiary of Wescoal; or
- the Scheme fails and the Standby Offer is made, only Keaton Energy Shareholders who accept the
  Standby Offer will sell their Offer Shares to Wescoal for the Offer Consideration (defined in
  paragraph 2.1 below). Those Keaton Energy Shareholders who do not accept the Standby Offer
  will remain shareholders of Keaton Energy, which, if the delisting contemplated in paragraph 12
  below is approved by Keaton Energy Shareholders, may be delisted from the JSE.

In this regard, Wescoal has submitted a firm intention offer letter to Keaton Energy dated 2 February
2017 (“Firm Intention Offer Letter” or “Offer Letter”) in relation to the Proposed Transaction, which
letter was accepted and signed by Keaton Energy on 2 February 2017 (“Signature Date”).

The purpose of this joint firm intention announcement (“Firm Intention Announcement”) is to advise
Keaton Energy Shareholders and Wescoal ordinary shareholders (“Wescoal Shareholders”) of the
terms and conditions of the Proposed Transaction.

2. Salient terms of the Offer

2.1 Scheme consideration

If the Scheme becomes unconditional, the consideration payable by Wescoal to Keaton Energy
Shareholders in terms of the Scheme will be R1.80 per Keaton Energy Share, representing
approximately R525.59 million in total (“Scheme Consideration” or “Offer Consideration”). The
Scheme Consideration will be settled partly in cash (R1.20 per Keaton Energy Share) (“Cash
Component”), representing approximately R350.39 million and the remainder will be settled in
Wescoal ordinary shares (“Wescoal Shares”) (“Share Component”). The Share Component will be
settled by Wescoal in the ratio of 0.30 Wescoal Shares for every 1.00 Keaton Energy Share held
(“Switch Ratio”), resulting in 87 598 277 new Wescoal Shares (“Consideration Shares”) being
issued to Keaton Energy Shareholders at an issue price of R2.00 per Consideration Share.

Wescoal has sufficient authorised but unissued Wescoal Shares to settle the Share Component. On
completion of the Scheme, Keaton Energy will become a wholly- owned subsidiary of Wescoal and
be delisted from the JSE.

The Scheme Consideration of R1.80 per Offer Share compared to the Keaton Energy Share price is
as follows:

                                                                        Before           Premium
                                                                                         (Note 3)
  30-day VWAP (cents) (Note 1)                                             134.41          33.92%

  Closing price (cents) (Note 2)                                           145.00          24.14%


  Notes:
  1. The 30-day volume weighted average price (“VWAP”) of a Keaton Energy Share traded on the
     JSE up to 1 February 2017, being the last business day immediately prior to the date of the
     Offer Letter.
  2. The closing price of a Keaton Energy Share traded on the JSE as at 1 February 2017, being
     the last business day immediately prior to the date of the Offer Letter.
  3. Using Wescoal’s closing share price of R2.51 as at the trading day preceding this
     announcement and applying the Switch Ratio, the effective consideration per Keaton Energy
     Share is R1.953, a premium of 45.30% to the 30-day VWAP of a Keaton Energy Share up to 1
     February 2017.

The Scheme Consideration is determined on the basis that Keaton Energy will not issue any further
shares, options or rights, other than those granted under the ESOPS (defined in paragraph 2.2
below) between the Signature Date and the Effective Date (defined in paragraph 7 below), or make
any distributions after the date of this Firm Intention Announcement. Should Keaton Energy
implement any such issue or make any distribution, the Scheme Consideration will be adjusted pro
rata per Keaton Energy Share.

2.2 Comparable offer

A comparable offer is also being made to all participants of the Keaton Energy Holdings Long-Term
Performance Incentive Scheme (2007) and the Keaton Energy Holdings Limited 2013 Share Plan
(“ESOPs”), as contemplated in Section 125(2) of the Companies Act read with Regulation 87(2) of the
Companies Regulations, 2011 (“Companies Regulations”), subject to the successful completion of
the Proposed Transaction (“Comparable Offer”).

2.3 Reciprocal break fee

Each of Wescoal and Keaton Energy has undertaken to the other to pay a break fee equal to 1% of
the Scheme Consideration if it breaches any material provision or material undertaking of the Offer
and, if capable of remedy, fails to remedy that breach within the time period contemplated in the Offer
Letter.

2.4 Source of funds

The Cash Component of the Scheme Consideration and the Comparable Offer, as well as other
expenses related to the Offer, will be funded by Wescoal through a combination of internal cash
resources, debt facilities and the cash raised by Wescoal through its BEE transaction implemented in
December 2016.

3. Nature of business

3.1 Wescoal

Wescoal, through its subsidiaries, engages in mining, processing, supplying, selling, and distributing
coal and coal-related products in South Africa. The Wescoal group operates through the following
subsidiaries:
3.1.1   Wescoal Mining, which is responsible for the mining, processing, hauling of thermal coal by
        road and rail, drilling and exploration of own coal reserves and sale of thermal coal. Wescoal
        Mining owns and operates three thermal coal mines and a processing plant:
   -    Elandspruit Colliery is Wescoal’s flagship mine located on the old Witbank road in
        Emalahleni, Mpumalanga;
   -    Intibane Colliery is located approximately 14km west of Ogies in Mpumalanga. Intibane is an
        open cast mine;
   -    Khanyisa Colliery is currently non-operational as it was on care and maintenance for the
        majority of 2016 but it is intended to operate as both an open cast and underground mine. It
        is located approximately 10km west of Ogies in Mpumalanga; and
   -    Wescoal Processing Plant is located close to Middelburg (Mpumalanga). It consists of a
        crushing section, drum, cyclone and fines treatment plants that can produce various grades
        of small nuts, peas, grains, duff and fine coal products.

        For further information on Wescoal’s reserves and resources please refer to the most recent
        competent person’s report on the Wescoal website (http://www.wescoal.co.za/our-
        business/resources-statement.php).


3.1.2   Wescoal Trading, which is responsible for buying, transporting and selling metallurgical coal
        and anthracite to various domestic customers. For this purpose, it operates depots in
        Gauteng, the Western Cape and KwaZulu-Natal. Some of Wescoal Mining’s production is sold
        via Wescoal Trading to non-Eskom clients.

Wescoal also provides logistical requirements for the sourcing, distribution and delivery of coal
products to the general industry. It sources and supplies coal to clients in the local industry, including
the power generation, manufacturing, and petro-chemicals sectors. Wescoal also supplies some
coal into the thermal coal export market.

Wescoal Shares have been listed on the JSE in the “Mining – Coal” sector since 1 April 2005.

3.2 Keaton Energy

Keaton Energy is a leading South African junior coal miner, with its shares listed on the JSE in the
“Mining – Coal” sector since 22 April 2008.

The Keaton Energy group operates through the following subsidiaries:

3.2.1   Keaton Mining

        The Vanggatfontein Colliery, situated 16km south-east of Delmas in Mpumalanga, comprises
        a contractor-operated opencast mine which delivers 5, 4 and 2 seam run of mine coal to
        Keaton Energy’s two coal handling and processing plants - a 100 tonnes per hour (“tph”) 5
        seam plant and a 500tph 2 and 4 seam plant. Both plants are owned by Keaton Mining but
        operated by a specialist contractor. The 2 and 4 seam products are trucked and/or railed to
        Eskom and the 5 seam plant is currently utilised to fulfil a 12-month toll washing contract.

3.2.2   Neosho Trading 86

        The Moabsvelden project is located approximately 15km east of the town of Delmas,
        Mpumalanga on the western edge of the Witbank Coalfield hosting the typical 5 to 1 coal
        seams, top to bottom sequence. In February 2014 Keaton Energy acquired 100% of the
        issued shares in Xceed Resources Limited, a company then listed on the Australian Stock
        Exchange. As a result of this transaction Neosho Trading 86 became a 74% held subsidiary
        of Keaton Energy, with the remaining 26% being held by three HDSA individuals.

        The Moabsvelden Mining Right covers an area of 250 hectares, with an expected 16-year life
        of mine. Due to its proximity to the Vanggatfontein operations, Moabsvelden will be operated
        as a satellite pit of the existing Vanggatfontein Colliery. Moabsvelden was awarded its
        Integrated Water Use License in October 2016.

3.2.3   Leeuw Mining and Exploration

        Vaalkrantz Colliery, whose disposal is subject to section 11 Ministerial consent, was placed on
        care and maintenance on 1 May 2016. Vaalkrantz Colliery produced anthracite for domestic
        and international customers.

3.2.4   Leeuw Braakfontein

        The Braakfontein thermal coal project, held by Leeuw Braakfontein Colliery is situated 10 km
        south-east of Newcastle, KwaZulu-Natal. Leeuw Braakfontein Colliery, a wholly-owned
        subsidiary of Leeuw Mining and Exploration, was specifically excluded from the disposal of
        Leeuw Mining and Exploration. Leeuw Braakfontein Colliery will be unbundled from Leeuw
        Mining and Exploration thus becoming a direct subsidiary of Keaton Energy once the disposal
        is finalised.

4. Wescoal’s rationale for the Proposed Transaction

The Wescoal Board and management are committed to growing the asset base and earnings of
Wescoal, whilst driving shareholder value. The implementation of the BEE transaction in December
2016 saw an injection of approximately R178 million in fresh equity, thereby significantly
strengthening the equity capitalisation and liquidity of Wescoal. Wescoal indicated that the proceeds
of the BEE transaction would be used to fund the organic (capital expenditure projects) and/or
inorganic (asset and business acquisitions) growth plans which included, inter alia, the acquisition of
businesses or controlling stakes in identified listed mining companies. Management of Wescoal,
having identified Keaton Energy as a potential acquisition target, has over a period of time been
engaging with Keaton Energy with respect to the implementation of the Proposed Transaction.
Below are some of the key benefits that the acquisition of Keaton Energy presents to Wescoal and
its shareholders:

4.1 Diverse asset and shareholder base
   - Access to a business with long-life core assets (some already producing) with a large
     resource base and infrastructure
   - Access to a business with a strong pipeline of projects offering further greenfield upside and
     potential exposure to export markets
   - Post-acquisition of Keaton Energy, Wescoal will have a diverse asset base which spans
     operating, development, exploration and trading mining activities
   - Wescoal will be diversified in terms of product offering and geographical footprint with an
     attractive growth profile
   - Wescoal will have a significantly increased shareholder base and market capitalisation with
     improved price and liquidity

4.2 Economies of scale
   - Opportunity to leverage overheads and lower fixed unit costs across businesses
   - Cost savings will be achieved from the potential rationalisation of Keaton Energy and
     Wescoal head offices
   - Financial and operating efficiencies are expected as a result of having one listed entity
   - Reduction in administrative costs which include, inter alia, listing fees, audit fees, financial
     statement preparation costs and JSE continuing obligations

4.3 Scale of production and size
   - Ownership of low-cost, long-life core assets with a large resource base and significant
     infrastructure
   - Increased resource base for Eskom supply and potentially for export market
   - Further greenfield upside offering inherent in the Keaton Energy pipeline

4.4 Balance sheet and free cash generation
   - Opportunity to restructure and consolidate debt funding with potential savings realised
   - Wescoal will benefit from a higher degree of coal price leverage with respect to large
     customers
   - Enhanced ability to raise funding and/or fund pipeline and acquisition assets from a larger
     pool of operating cash flows post the Proposed Transaction

4.5 Management
   - Keaton Energy’s operations will continue to be run by skilled operational management with
     track records and brand equity
   - The Proposed Transaction will bolster Wescoal management’s track record of structuring and
     securing value-accretive acquisitions

The Wescoal Board and management team believe that the Proposed Transaction is a significant
step towards realising their vision of creating a truly South African mid-tier coal producer that is
majority black-owned. Wescoal will continue to set its sights on being a key player in the
consolidation of the South African junior coal mining sector as a means to grow the company
significantly.

5. Keaton Energy’s rationale for the Proposed Transaction

Subject to receiving and evaluating the content of the Independent Expert’s Report (defined in
paragraph 6.3 below), the Keaton Energy Board's preliminary view is that the Offer represents a
compelling proposition and attractive opportunity for the Keaton Energy Shareholders to realise
value. Applying Wescoal’s closing share price of R2.51 (as per the trading day preceding this
announcement) to the Switch Ratio, combined with the R1.20 cash consideration per Keaton Energy
Share, the effective consideration amounts to R1.953 per Keaton Energy Share and represents a
premium of 45.30% to the 30-day VWAP of Keaton Energy Shares up to 1 February 2017.

6. Conditions to the posting of the circular to Keaton Energy Shareholders (“Scheme
   Circular”)

The posting of the Scheme Circular to Keaton Energy Shareholders will be subject to the fulfilment,
or waiver, as the case may be, of the following conditions by not later than 23:59 on the 60th day after
the Signature Date (or, to the extent applicable, such earlier date stated below):

6.1 by not later than 23:59 on the 30th business day after the Signature Date, the severance
    arrangements relating to specified Keaton Energy executives (being limited to Mandi Glad and
    Jacques Rossouw) have been entered into by all of the parties thereto, providing for the
    severance of such executives with effect from the Effective Date (defined in paragraph 7
    below) and otherwise strictly in accordance with the terms of their respective current
    employment contracts;
6.2 by not later than 23:59 on the 30th business day after the Signature Date, the participants of
    the ESOPs have agreed in writing to waive all their rights (including such future rights as they
    may be granted prior to the Effective Date, defined in paragraph 7 below) (whether in the form
    of options, share appreciation rights, restricted shares, performance shares or bonus awards)
    under the ESOPs in return for a payment by Wescoal in respect of the waiver of each right,
    equal to the difference between the strike price of each option or other right and R1.80;
6.3 the Independent Expert, as defined in paragraph 13 below, has delivered a report to the
    Keaton Energy Independent Board (“Independent Expert Report”);
6.4 the Scheme Circular has been approved by the JSE and the TRP;
6.5 the circular to Wescoal Shareholders (“Wescoal Circular”) has been approved by the JSE;
    and
6.6 any exchange control approval which might be required in relation to the Proposed
    Transaction, has/have been duly obtained in writing.

The conditions in paragraphs 6.1 and 6.2 have been inserted for the benefit of Wescoal, which it will
be entitled to waive in whole or part. The remaining conditions in this paragraph 6 are not capable of
being waived.

7. Scheme Conditions

In terms of the Offer Letter, the Scheme will be subject to the fulfilment or waiver, as the case may
be, of the following conditions by not later than 23:59 on the date which is 180 days after the
Signature Date (“Long Stop Date”) (or such later date as may be agreed between Wescoal and
Keaton Energy and notified to all Keaton Energy Shareholders and Wescoal Shareholders):

7.1 as required in terms of the Listings Requirements of the JSE (“JSE Listings Requirements”),
    the Wescoal Shareholders have approved the Proposed Transaction;
7.2 the JSE has approved the listing of the Consideration Shares;
7.3 a special resolution (“Scheme Special Resolution”) has been passed at the meeting
    convened by Keaton Energy (“Scheme Meeting”), by the requisite majority of Keaton Energy
    Shareholders and (i) to the extent required in terms of section 115(3) of the Companies Act,
    the implementation of the Scheme Special Resolution is approved by the Court, and (ii) if
    applicable, Keaton Energy has not elected to treat the Scheme Special Resolution as a nullity
    in terms of section 115(5) of the Companies Act;
7.4 if the Scheme Special Resolution has been passed at the Scheme Meeting by the requisite
    majority of Keaton Energy Shareholders and any person who voted against the Scheme
    Special Resolution applies to the Court within 10 business days after the vote for a review of
    the Proposed Transaction in accordance with the requirements of section 115(3)(b) of the
    Companies Act, (i) no leave is granted by the Court to such person to apply to the Court for a
    review of the Proposed Transaction in accordance with the requirements of section 115(7) of the
    Companies Act, or (ii) if leave is granted by the Court to apply to the Court for a review of the
    Proposed Transaction in accordance with the requirements of section 115(6) of the Companies
    Act, the Court has not set aside the Scheme Special Resolution in terms of section 115(7) of the
    Companies Act;
7.5 within the time period prescribed in section 164(7) of the Companies Act, Keaton Energy
    Shareholders have not exercised the rights afforded to shareholders in terms of section 164 of
    the Companies Act (“Appraisal Rights”) in respect of more than 10% of all the Offer Shares;
7.6 the disposal by Keaton Energy of the entire issued share capital of Leeuw Mining and
    Exploration Proprietary Limited (provided that the entire issued share capital of Leeuw
    Braakfontein Colliery Proprietary Limited is unbundled by way of a distribution prior to the
    disposal) and Amalahle Exploration Proprietary Limited have been implemented by Keaton
    Energy in accordance with their terms;
7.7 if the proposed amendments to section 11 of the Minerals and Petroleum Resources
    Development Act 28 of 2002 (“MPRDA”) come into force and effect prior to the date on which
    all of the Scheme Conditions (other than this Scheme Condition) are fulfilled or waived, as the
    case may be, and to the extent necessary, any confirmation or approval which might be
    required in terms of the MPRDA from the Minister of Mineral Resources has been obtained;
7.8 the Proposed Transaction has been unconditionally approved by the relevant competition
    authorities, or conditionally approved on terms and conditions acceptable to the affected party;
    and
7.9 the TRP has issued a compliance certificate in respect of the Proposed Transaction.

The conditions in paragraphs 7.5 and 7.6 have been inserted for the benefit of Wescoal, which it will
be entitled to waive in whole or part. The condition in paragraph 7.4 has been inserted for the benefit
of Wescoal and Keaton Energy, who will be entitled to waive fulfilment of the said condition, in whole
or in part, prior to 23:59 on the Long Stop Date, if the Court approves the Scheme Special Resolution
in terms of section 115(3) of the Companies Act. The remaining conditions in this paragraph 7 are not
capable of being waived.

The effective date of the Scheme will be the 3rd business day after the last of the Scheme Conditions
set out above is fulfilled or waived (“Effective Date”) and the Scheme will be implemented at the
earliest date after the Effective Date.

8. Category 1 acquisition for Wescoal

In terms of the JSE Listings Requirements, the Proposed Transaction is classified as a Category 1
transaction for Wescoal and accordingly requires Wescoal Shareholder approval. The net asset
value of Keaton Energy as at 30 September 2016 was R515.9 million and the net profit after tax
attributable to Keaton Energy Shareholders for the six months ended 30 September 2016 was
R20.8 million.

9. Key shareholder support

9.1 Keaton Energy irrevocable undertakings

Wescoal does not currently hold, directly or indirectly, any beneficial interest in Keaton Energy, nor
does it hold any option to purchase any beneficial interest in Keaton Energy.

Wescoal has received irrevocable undertakings from the following Keaton Energy Shareholders to
vote in favour of the Scheme or to accept the Standby Offer (as per paragraph 11 below) (“Keaton
Energy Irrevocable Undertakings”), which shareholders hold 77.24% of the Offer Shares:


Keaton Energy Shareholder                                              Number of          Percentage
                                                                       Offer Shares       of Offer
                                                                       held               Shares

Plusbay Limited                                                          78 476 411         26.88%

Pouroulis family holding                                                 77 113 142         26.41%

Rutendo Holdings Proprietary Limited                                     69 940 074         23.95%

   Total                                                                225 529 627         77.24%


The Keaton Energy Irrevocable Undertakings shall be binding and may not be withdrawn until the
Long Stop Date, provided that such undertakings shall terminate automatically and with immediate
effect upon the earlier of:
9.1.1 the date on which the Offer terminates and/or Wescoal indicates in a written notice or public
        announcement that the Offer is no longer being proceeded with or capable of implementation;
        or
9.1.2 the date on which a firm intention to make an offer (“Superior Offer”) for the entire issued
        share capital of Keaton Energy not already held by the applicable offeror has been
        communicated to Keaton Energy (as contemplated in regulation 101(1) of the Companies
        Regulations), which is reasonably capable of implementation and which:
    ? provides for a total consideration per Keaton Energy Share equal to, or more than, the sum of
        (i) R1,20 and (ii) the 30-day VWAP per Wescoal Share as at the date of receipt of the
        Superior Offer multiplied by a factor of 0.3, with R1,20, or more, of which to be settled in
        cash; or
    ? provides for a total consideration per Keaton Energy Share equal to, or more than, R1,90,
        with R1,40, or more, of which to be settled in cash.

9.2 Wescoal irrevocable undertaking

Wescoal has received an irrevocable undertaking from the following Wescoal Shareholder to vote in
favour of the resolutions necessary to implement the Proposed Transaction, which shareholder holds
58.93% of the Wescoal Shares in issue:

                                                                                        Percentage
                                                                       Number of
Wescoal Shareholder                                                                     of Wescoal
                                                                       Wescoal
                                                                                        Shares in
                                                                       Shares held
                                                                                        issue
K2016316243 (South Africa) Proprietary Limited                          213 628 122         58.93%


10. Guarantees and confirmations to the TRP

Wescoal has delivered to the TRP an irrevocable, unconditional bank guarantee issued by Investec
Bank Limited, for the maximum possible Cash Component of the Scheme Consideration in
compliance with regulations 111(4) and 111(5) of the Companies Regulations published in terms of
sections 120 and 223 of the Companies Act.

11. Standby Offer

Wescoal will (if it so elects), as a Standby Offer, in terms of section 117(1)(c)(v) of the Companies
Act, if the Scheme Circular is not posted or the Scheme is not implemented, at any time prior to the
Long Stop Date offer to purchase the Offer Shares held by the Keaton Energy Shareholders on the
same terms and conditions as would have been applicable to the Scheme.

The Standby Offer is subject to the same conditions detailed in paragraph 7 above which, as at the
date of failure of the posting of the Scheme Circular or implementation (save for the Scheme
Conditions in paragraphs 7.3, 7.4 and 7.5 above), have yet to be fulfilled or waived, as the case may
be.

The Standby Offer shall, unless Wescoal determines otherwise, only become operative if Keaton
Energy Shareholders (i) holding at least 50.1% of the Offer Shares have delivered written
acceptances of the Standby Offer, and (ii) have approved, by a resolution passed by a simple
majority, the delisting of Keaton Energy from the JSE.

12. Termination of the Keaton Energy listing

Following implementation of the Proposed Transaction, application will be made to the JSE to
terminate the listing of the Keaton Energy Shares on the JSE.


13. Recommendations and fair and reasonable opinion

Keaton Energy has convened its independent board, comprised of Messrs LX Mtumtum, OP Sadler
and D Salter (“Keaton Energy Independent Board”), to consider the terms and conditions of the
Proposed Transaction and the Comparable Offer. The Keaton Energy Independent Board will
appoint an independent expert (“Independent Expert”), as required in terms of section 114(2) of the
Companies Act and as contemplated in regulations 87(5) and 110 of the Companies Regulations,
to provide it with external advice in relation to the Proposed Transaction and the Comparable Offer,
respectively, and to make appropriate recommendations to the Keaton Energy Independent Board in
the form of a fair and reasonable opinion.

The Wescoal Board intends, based on the information currently available to it, to make a
recommendation to Wescoal Shareholders to vote in favour of the resolutions to be proposed at the
Wescoal general meeting (“Wescoal General Meeting”) to give effect to the Proposed Transaction.

14. Documentation

Details of the Proposed Transaction will be included in the Wescoal Circular, which will contain, inter
alia, a notice of the Wescoal General Meeting and a form of proxy. The Wescoal Circular is expected
to be posted to Wescoal Shareholders in due course.

Details of the Scheme and the Standby Offer will be included in the Scheme Circular, which will
contain, inter alia, details of the Proposed Transaction, a notice of the Scheme Meeting, a form of
proxy, a form of surrender and transfer and Standby Offer form. The Scheme Circular is expected to
be posted to Keaton Energy Shareholders in due course.

The salient dates and times pertaining to the Proposed Transaction will be released on SENS and
published in the press at the time of posting of the abovementioned circulars.

15. Cautionary announcements

As the pro forma financial effects of (i) the Proposed Transaction on Wescoal, and (ii) the Scheme on
Keaton Energy Shareholders, have not yet been published:

15.1   Wescoal Shareholders are advised to exercise caution when dealing in their shares; and
15.2   Keaton Energy Shareholders are advised to continue to exercise caution when dealing in
       their shares,

until such time as the aforementioned pro forma financial effects are published.

16. Keaton Energy responsibility statement

The Keaton Energy Independent Board accepts responsibility for the information contained in this Firm
Intention Announcement to the extent that it relates to Keaton Energy. To the best of their
knowledge and belief, the information contained in this Firm Intention Announcement is true and
nothing has been omitted which is likely to affect the importance of the information.

17. Wescoal responsibility statement

The Wescoal Board accepts responsibility for the information contained in this Firm Intention
Announcement to the extent that it relates to Wescoal. To the best of their knowledge and belief,
the information contained in this Firm Intention Announcement is true and nothing has been omitted
which is likely to affect the importance of the information.

Johannesburg
2 February 2017

Investment Bank, Corporate Advisor and Sponsor to Wescoal
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Legal Advisor to Wescoal
Edward Nathan Sonnenbergs Inc.

Corporate Advisor to Keaton Energy
Taurum Proprietary Limited

Legal Advisor to Keaton Energy
Werksmans Inc.

Sponsor to Keaton Energy
Investec Bank Limited


There will be a Wescoal Shareholders’ conference call on Friday, 3 February at 12:00
For further information please call Jacques de Bie, Singular Systems IR on 082 691 5384

Date: 02/02/2017 05:31:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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