Wrap Text
Condensed consolidated financial results for the year ended 28 February 2015
Oakbay Resources and Energy Limited (Incorporated in the Republic of South
Africa) (Registration number 2009/021537/06)
Share code: ORL ISIN: ZAE 000196085
("Oakbay Resources" or "the group" or “the company”)
Audited condensed consolidated financial results for the year ended
28 February 2015
Salient features
* Significant turnaround in profitability of existing open cast gold
mining operations
* Listed on JSE Main Board under the ‘General Mining’ Sector November 2014
* Over 4 900 fatality free shifts which equates to over 4.9 million
fatality free man hours
* Zero incidents of labour unrest
* Invested R90 million in uranium development and gold production
* Bankable feasibility study to be commissioned and completed early 2016
* Preparing for local and international capital raising
* Upgraded mineral resource and reserves statement
Condensed consolidated statement of financial position
Audited Audited
twelve twelve
months to months to
28 February 28 February
2015 2014
R’000 R’000
Assets
Non-current assets 7 244 453 7 155 952
Property, plant and equipment 1 969 946 1 871 519
Mineral resources and reserves 5 205 629 5 205 629
Environmental rehabilitation obligation
investments 57 536 54 598
Environmental rehabilitation guarantee deposits 2 439 2 439
Deposits 8 903 21 767
Current assets 444 518 183 840
Trade and other receivables 16 981 10 647
Amounts owing by related parties 27 962 27 345
Inventories 208 513 142 754
Cash and cash equivalents 191 062 3 094
Total assets 7 688 971 7 339 792
Equity and liabilities
Stated capital 466 398 -
Share capital - 1
Share premium - 56 025
Retained earnings 4 049 792 4 087 357
Equity attributable to owners of the company 4 516 190 4 143 383
Non-controlling interest 597 397 598 772
Total equity 5 113 587 4 742 155
Non-current liabilities 2 144 268 1 591 325
Loans and borrowings 110 367 –
Environmental rehabilitation provision 209 811 133 749
Amount owing to holding company 366 514 -
Deferred tax 1 457 576 1 457 576
Current liabilities 431 116 1 006 312
Trade and other payables 77 675 108 036
Loans and borrowings 184 362 404 695
Amount owing to holding company - 252 416
Amounts owing to related parties 169 079 241 165
Total liabilities 2 575 384 2 597 637
Total equity and liabilities 7 688 971 7 339 792
NAV per share attributable to owners of the
company (in cents) 564.52 4 143 383
Closing number of shares 800 000 000 1 000
Condensed consolidated statement of comprehensive income
Audited Audited
twelve twelve
months to months to
28 February 28 February
2015 2014
R’000 R’000
Revenue 165 049 151 211
Cost of sales (123 161) (215 947)
Gross profit/(loss) 41 888 (64 736)
Other operating income 32 426 7 953
Other operating expenses (51 142) (80 841)
Operating profit/(loss) 23 172 (137 624)
Finance income 6 572 2 055
Finance costs (68 684) (100 456)
Net finance costs (62 112) (98 401)
Loss before tax (38 940) (236 025)
Income tax - –
Loss for the year (38 940) (236 025)
Other comprehensive income – –
Total comprehensive loss for the year (38 940) (236 025)
Attributable to:
Equity holders of the company (37 565) (192 336)
Non-controlling interest (1 375) (43 689)
Total comprehensive loss for the year (38 940) (236 025)
Loss per share (in cents) (18.78) (19 233 600)
Diluted loss per share (in cents) (18.78) (19 233 600)
Headline loss per share (in cents) (18.78) (19 233 600)
Diluted headline loss per share (in cents) (18.78) (19 233 600)
Reconciliation between loss and headline loss
Total comprehensive loss for the year (38 940) (236 025)
Adjustments - -
Total headline loss for the year (38 940) (236 025)
Portion attributable to non-controlling interest (1 375) (43 689)
Headline loss attributable to owners of the
company (37 565) (192 336)
Weighted average number of shares 200 000 750 1 000
Condensed consolidated statement of cash flow
Audited Audited
twelve twelve
months to months to
28 February 28 February
2015 2014
R’000 R’000
Cash flows from operating activities (7 397) (30 504)
Cash utilised in operations (13 657) (27 703)
Interest paid (312) (4 856)
Interest received 6 572 2 055
Cash flows from investing activities (89 725) (68 355)
Additions to expand property, plant and equipment (89 725) (63 401)
Increase in environmental rehabilitation
obligation investments – (2 970)
Increase in deposits – (1 984)
Cash flows from financing activities 285 090 95 971
Issue of ordinary share capital 185 350 –
Additional borrowings 144 960 –
Repayment of borrowings (80 000) (28 347)
Payment of finance lease liabilities (3 789) –
(Decrease)/increase in amounts owing to related
parties (74 912) 4 760
(Increase)/decrease in amounts owing by related
parties (617) 52 725
Increase in amounts owing to holding company 114 098 66 833
Net increase/(decrease) in cash and cash
equivalents 187 968 (2 888)
Cash and cash equivalents at the beginning of the
year 3 094 5 982
Cash and cash equivalents at the end of the year 191 062 3 094
Statement in changes of equity
Share Share Stated
capital premium capital
R’000 R’000 R’000
Balance at 1 March 2013 1 56 025 –
Total comprehensive loss for the year - - –
Balance at 28 February 2014 1 56 025 -
Conversion of shares to no par value (1) (56 025) 56 026
Issued ordinary shares - - 410 372
Total comprehensive loss for the period - - –
Balance at 28 February 2015 - - 466 398
Total shareholder’s
equity
Retained attributable
earnings to the owners
R’000 R’000
Balance at 1 March 2013 4 279 693 4 335 719
Total comprehensive loss for the year (192 336) (192 336)
Balance at 28 February 2014 4 087 357 4 143 383
Conversion of shares to no par value
Issued ordinary shares - 410 372
Total comprehensive loss for the period (37 565) (37 565)
Balance at 28 February 2015 4 049 792 4 516 190
Non-controlling
interest Total
R’000 R’000
Balance at 1 March 2013 642 461 4 978 180
Total comprehensive loss for the year (43 689) (236 025)
Balance at 28 February 2014 598 772 4 742 155
Conversion of shares to no par value
Issued ordinary shares - 410 372
Total comprehensive loss for the period (1 375) (38 940)
Balance at 28 February 2015 597 397 5 113 587
Commentary
The directors are pleased to present the maiden annual results as a listed
company for the financial year ended 28 February 2015 (“the year”), which
reflect an improved financial performance in the second half of the year,
following the successful turnaround of the open cast gold operation,
implemented cost efficiencies and increased milling capacity.
The year was marked by a number of milestones. On 28 November 2014 the
group listed on the JSE in the ‘General Mining’ sector with an initial
market capitalisation of R 8 billion. Oakbay Resources’ continued to make
progress in its vision of becoming a global competitor in the mining,
beneficiation and supply of energy related natural resources. During the
year the group successfully embarked on a programme to diversify its
revenue streams from mining activities in order to augment the income
underpin for its expansion into uranium.
Basis of preparation
These condensed consolidated results for the twelve month period ended 28
February 2015 have been prepared in accordance with the framework concepts
and the recognition and measurement criteria of International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board and International Financial Reporting Issues Committtee
Interpretations (collectively IFRS), and the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee, as well as the
presentation and disclosure requirements of IAS 34 – Interim Financial
Reporting, the JSE Limited Listings Requirements and the Companies Act of
South Africa. The group accounting policies and methods of measurement and
recognition comply in material respects with IFRS and are consistent with
those applied in the previous financial period.
These condensed consolidated financial statements have been prepared under
the supervision of Trevor Scott (BCom (Hons), BAcc, CA(SA) in his capacity
as Financial Director.
Unqualified audit opinion
The information in this report is extracted from audited information, but
is not itself audited. The directors take full responsibility for the
preparation of this report and the financial information has been
correctly extracted from the underlying annual financial statements.
The annual financial statements have been audited by Oakbay Resources’
independent auditors, KPMG Inc., whose unqualified audit report along with
the audited financial statements are available for inspection at Oakbay
Resources’ registered office during normal business hours.
Nature of the business
Oakbay Resources’ business activity is the mining and exploration of
mineral resources, particularly uranium and gold deposits, and the
beneficiation thereof. The group owns one of the most significant uranium
projects in Africa, Shiva Uranium, which boasts one of the largest high
quality uranium ore bodies in the world, as well as a world class uranium
processing plant that has been recently commissioned. Shiva Uranium mines
gold as a by- product, and undertakes contract mining services; which
complements its current operations.
Shiva Uranium is situated in Hartbeesfontein District in the North West
province of South Africa, with total resources of 196 million lbs uranium
and 5.2 million oz of gold. Its total processing capacity for uranium is
250 000 tons per month Run-of-Mine. The mine is currently processing 65 000
tons of gold per month Run-of-Mine.
Audited Audited
twelve twelve
months to months to
28 February 28 February
2015 2014
R’000 R’000
Environmental rehabilitation provision
Balance at beginning of the year 133 749 91 087
Unwinding of Interest 11 141 13 212
Capitalised to property, plant and equipment 40 644 -
Change in estimate in environmental rehabilitation
recognised in profit or loss 24 277 29 450
Balance at end of the year 209 811 133 749
Loans and borrowings
Industrial Development Corporation (“IDC”) borrowings
Reconciliation of IDC borrowings from 1 March 2014
to 28 February 2015
Opening balance at 1 March 2014 398 910
Reversal of interest determined on original terms between
1 May 2013 and 28 February 2014 (42 937)
Carrying value of IDC loan at 1 May 2013 355 973
Fair value adjustment for substantial modification in terms
of IAS39 45 057
Fair value of loan on 1 May 2013 401 030
Interest accrued to 28 February 2014 based on terms of
restructured loan agreement 49 646
Carrying value at 28 February 2014 as restated at fair value 450 676
Interest accrued for year ended 28 February 2015 55 411
Fair value adjustment in terms of IAS39 due to changes in
scheduled timing of cash flows 5 386
Fair value adjustment in terms of IAS39 due to conversion
of debt to equity (60 265)
Conversion of debt to equity (225 022)
Loan repayments for the year ended 28 February 2015 (80 000)
Carrying value of IDC loan at 28 February 2015 146 186
In April 2010, the IDC advanced the Group a loan of R 250 million.
Subsequent to the year ended 28 February 2014, the group commenced with
the process of renegotiating and restructuring this loan with the IDC.
This process was finalised on 24 June 2014 and the effective date of the
restructured loan agreement was backdated to 1 May 2013. Based on the new
terms of the restructured agreement, interest is incurred at a rate of
prime plus 2%, compounded on a daily basis. There are fixed repayment
terms for principal and interest repayments. The remaining loan and
accrued interest will be due and payable on 31 March 2018.
As part of the new restructured agreement, the accrued interest of
R202 million from the initial IDC loan agreement will accrue interest at
prime plus 2% on a daily basis. Pursuant to the revised loan agreement,
at such time that the group be listed, any outstanding accrued interest
and the interest thereon would be settled by IDC subscribing for shares
in Oakbay Resources and Energy Limited. The shares would be issued to
IDC at a 10% discount of the listing price.
Due to the renegotiated terms of the IDC loan, a fair value adjustment of
R5.3 million was passed through profit and loss and total interest expense
of R55.4 million was recognised for the year ended 28 February 2015.
Additionally, the group realised a fair value adjustment of R60.2 million
in profit and loss for the year ended 28 February 2015 due to the
discounting effect of converting the portion of the loan relating to the
accrued interest (and interest thereon) to equity upon listing of Oakbay
Resources and Energy Limited on the Johannesburg Stock Exchange. For
purposes of determining the fair value of the loan management used a
discounted cash flow model on the assumption that the prime interest rate
would remain as 9.25% going forward and there will be no changes to the
repayment terms as stated in the agreement with the IDC.
The loan has the following repayment terms at 28 February 2015:
30 June 2015 – R37.5 million
31 March 2016 – R37.5 million
31 March 2017 – R37.5 million
31 March 2018 – R37.5 million plus capitalised interest from 28 November
2014.
Safety
During the year, the company’s excellent safety record remained intact
with zero fatalities and serious injuries being experienced during the
period. Safety is a core value of the group and an integral part of the
culture with a goal of Zero Harm. During the year the Oakbay Resources
achieved its target of 4 900 fatality free shifts, and received a
commendation from the Department of Mineral Resources for this achievement.
This equates to 4.9 million fatality free man hours. The lost time injury
frequency rate (LTIFR) for the year was 3.2; which is well below the industry
average of 3.8.
This is evidence of the continuous and serious commitment of the mine
employees and management toward safe working practices. The company’s
health and safety committee continues to drive safety initiatives at the
mine and is focusing on reinforcing excellent communication standards
between the committee and workplace health and safety representatives.
Specifically, management is focusing on “on the job” training initiatives,
as well as constant supervision of safety standards and safety compliance.
During the year, senior executive management initiated a process to chair
weekly safety meetings with the relevant supervisors in order to discuss
safety achievements and pro-active action to prevent any accidents and
injuries.
Safety remains the highest priority for management and the company is
constantly re-evaluating its safety procedures in line with its philosophy
of zero tolerance to unsafe acts and reducing safety risk to its lowest
possible level.
Operational review
Gold production
Key indicators
2015 2014 % increase
Ore milled (tonnes) 791 540 576 986 37
Gold milled (kg) 571.2 463.02 23
Gold sold (kg) 378.82 345.67 10
Notwithstanding the challenge of a low grade cycle, with head grades as
low as 0,64g/ ton the gold mining operations returned to profitability
mainly as a result of concerted effort to boost efficiencies, improve
productivity and aggressively manage costs. Consistently achievable grades
remain challenging and the company’s focus has been on identifying highest
possible grade mining opportunities rather than solely focusing on increasing
the volume of milled ore.
Production in the first half of the year was impacted by critical
operational upgrades in the mine’s milling section, with production
greatly improved subsequent to completion, which had the effect of
substantially reversing the losses incurred in the first half of the year.
The latter part of the year saw improved performance as a result of the
extra milling capacity.
The company undertook scheduled crushing plant maintenance during the
final two months of the financial year. During this period, the company
maintained a reasonable level of production by opportunistically
processing material from its slimes dams, while its crushing plant
underwent a major overhaul. Accordingly, the company maintained its
profitability expectations during this maintenance period.
The company continued to focus on further expansion of miscellaneous value
adding operations at the mine that can contribute toward cost reduction
and additional income for the company such as a newly installed foundry to
create grinding media as well as a crusher plant making road aggregate
from the waste product to decrease our environmental liability and create
extra revenue.
Oakbay Resources’ outlook for its gold production is promising as further
improvements in operational efficiencies are expected to translate into
increased production and operating output.
Uranium operations and further exploration
With approximately 200 million pounds of high grade uranium ore, as well
as a world class processing plant and related mine infrastructure already
installed and commissioned on site, the company is poised to take
advantage of an expected increase demand for uranium in the short to
medium term horizon.
The company is in the process of developing its uranium operations while
the process of commissioning a bankable feasibility study is still
underway. The company intends to rapidly advance both the bankable
feasibility study, as well as its capital raising programme with a view to
accessing additional capital in the foreseeable future. The company is of
the view that at least R800 million will be required to scale up the
ongoing development and bring optimum uranium production on-line. Given
recent positive developments in uranium prices, as well as the fact that
there has been a fundamental shift in the supply/demand paradigm for
uranium, the company is focused on being prepared for the expected upswing
in uranium prices when this materialises.
Financial performance and position
The company’s financial performance for the year significantly improved
compared to the prior year. The company made a loss for the year of
R38.9 million compared with a loss of R236 million in the prior year. The
primary reason for the improvement in financial performance was a result
of increased gold production and higher achieved grades that came into
effect in the final quarter of the financial year.
The company’s finance expenses decreased significantly in the final
quarter of the financial year, due to the effect of converting a portion
of the IDC loan to equity upon listing.
The company had a strong financial position at 28 February 2015 with total
assets of R7.6 billion compared to total liabilities of R2.5 billion. The
company has cash reserves of R191 million at year-end.
Prospects
The group, supported by its strong balance sheet and improving prospects
of gold production and contract mining operations presents a positive
landscape ahead. The group currently has gold and uranium operations in
the North West province of the Republic of South Africa and is focusing on
value added strategies on both its gold and uranium assets. The company is
in the process of commissioning a definitive feasibility study on its
uranium project, which is expected to be completed in 2016.
The fundamental shift in the uranium market is an exciting development and
Oakbay Resources’ believes it is well poised to take advantage of the
expected upswing in demand. Further, given Oakbay Resources ability to
profitably mine low grade gold resources, the group is well positioned to
achieve low net cost uranium mining and production once re-commencement of
the uranium business takes place.
Oakbay Resources’ listing on the JSE enhances the group’s ability to
access capital to take advantage of rising uranium prices. The group
intends to start taking steps to secure a long-term uranium offtake
agreement and expects to initiate full development of our uranium
operations in the short term future.
Oakbay Resources’ will continue to advance its endeavours in increasing
gold production, while focusing on cost containment and grade management.
The company is also in the process of investigating some alternative
projects, such as using spare capacity (while uranium operations are under
development) to pursue contract mining opportunities.
Changes to the board
Changes to the board of directors during the year are set out below:
Name Resigned
A Chawla 25 September 2014
R Ragavan 25 September 2014
Name Appointed
AK Gupta 25 September 2014
MV Pamensky 25 September 2014
TW Rensen 25 September 2014
DJ Nyamane 25 September 2014
V Gupta 25 September 2014
GP van der Merwe 25 September 2014
TW Scott 25 September 2014
Dividends
In line with group strategy, no dividend has been declared for the year.
Appreciation
We thank our board for their guidance and counsel and, the management team
for their hard work and commitment. We also thank our new investors for
their confidence in the group that we will deliver the shareholder value
we have undertaken to provide. Appreciation also goes to our business partners,
suppliers and advisors for their support.
For and on behalf of the board of directors
G van Der Merwe
CEO
29 May 2015
Directors: AK Gupta+ (Chairman), GP van Der Merwe (CEO), MV Pamensky*
(Lead Independent Director), DJ Nyamane*, T Rensen*, TW Scott (FD); V Gupta.
*independent non-executive +non-executive
Registered Office:
Grayston Ridge Office Park, Block A, Lower Ground Floor,
144 Katherine Street, Sandown, Sandton, South Africa
Postal address
Postnet Suite 458
Private Bag X9
Benmore, 2010
Company secretary: iThemba Governance and Statutory Solutions (Pty)
Limited, Monument Office Park, Suite 5 – 102, 79 Steenbok Avenue,
Monumentpark, 0181, (PO Box 25160, Monumentpark, 0181)
Sponsor: Sasfin Capital, A division of Sasfin Bank Limited, 29 Scott
Street, Waverley, 2090, (PO Box 9510, Grant Park, 2051)
Transfer Secretaries: Trifecta Capital Services Proprietary Limited, Business Partners Tower Hive,
5th Floor, 3 Caxton Road, Industria, 2093, (PO Box
61272, Marshalltown, 2107)
Investor Relations: Envisage Investor & Corporate Relations, 4th Floor, South Wing,
Hyde Park Corner, Jan Smuts Avenue, Hyde Park, 2196 www.oakbay.co.za
Date: 29/05/2015 02:21:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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