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OAKBAY RESOURCES AND ENERGY LIMITED - Reviewed interim results

Release Date: 27/11/2015 17:00
Code(s): ORL     PDF:  
Wrap Text
Reviewed interim results

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”)

Reviewed condensed consolidated interim financial results
For the six months ended 31 August 2015

SALIENT FEATURES
* Diversification of income streams by way of commencement of contract 
  mining activities
* Declining production in open cast gold mining operations led to a 
  lower contribution from gold operations
* Over 5 500 fatality free shifts which equates to over 6.2 million 
  fatality free man hours
* Zero incidents of labour unrest
* Invested R20 million in uranium development and gold production
* Completion of scoping phase of feasibility study
* Preparing for local and international capital raising

Condensed consolidated statement of financial position

                                           Reviewed six    Audited twelve
                                           months ended      months ended
                                         31 August 2015  28 February 2015
                                Notes             R'000             R'000
Assets
Non-current assets                            7,254,362         7,244,453
Property, plant and equipment                 1,978,206         1,969,946
Mineral resources and reserves                5,205,629         5,205,629
Environmental rehabilitation
obligation investments                           58,960            57,536
Environmental rehabilitation
guarantee deposits                                2,439             2,439
Deposits                                          9,128             8,903
Current assets                                  450,995           444,518
Trade and other receivables                       1,596            16,981
Amounts owing to related
parties                             9            44,088            27,962
Inventories                                     205,578           208,513
Cash and cash equivalents                       199,733           191,062
Total assets                                  7,705,357         7,688,971
Equity
Stated capital                                  466,398           466,398
Retained earnings                             4,023,015         4,049,792
Total equity attributable to
owners of the company                         4,489,413         4,516,190
Non-controlling interest                        589,870           597,397
Total equity                                  5,079,283         5,113,587
Liabilities
Non-current liabilities                       2,156,994         2,144,268
Loans and borrowings                5            74,660           110,367
Environmental rehabilitation       
provision                           4           216,242           209,811
Amount owing to holding
company                             9           408,516           366,514
Deferred taxation                             1,457,576         1,457,576
Current liabilities                             469,080           431,116
Trade and other payables                         61,435            77,675
Loans and borrowings                5           195,492           184,362
Amounts owing to related
parties                             9           212,153           169,079
Total liabilities                             2,626,074         2,575,384
Total equity and liabilities                  7,705,357         7,688,971
Net asset value per share (in
Rands)                                             5.61              5.64
Closing number of shares                    800,000,000       800,000,000

Condensed consolidated statement of profit or loss and other 
comprehensive income

                                          Reviewed six      Reviewed six
                                          months ended      months ended
                                        31 August 2015    31 August 2014
                                                 R'000             R'000
Revenue                                        130,724            76 244
Cost of sales                                 (101,227)          (76 943) 
Gross profit/(loss)                             29,497              (699) 
Other operating income                           3,216            37 205
Other operating expenses                       (57,514)          (59 379) 
Operating loss                                 (24,801)          (22 873) 
Finance income                                  12,000               724
Finance expense                                (21,503)         (131 493) 
Loss before income tax for the period          (34,304)         (153 642) 
Taxation                                             –                 – 
Loss for the period                            (34,304)         (153 642) 
Other comprehensive income                           -                 – 
Loss and total comprehensive income
for the period                                 (34,304)         (153 642)
Loss and total comprehensive income 
attributable to:
Owners of the company                          (26,777)         (117 084) 
Non-controlling interest                        (7,527)          (36 558) 
                                               (34,304)         (153 642)
Earnings per share
Basic loss per share (cents)                     (3.35)      (11 708 400) 
Diluted loss per share (cents)                   (3.35)      (11 708 400) 
Headline loss per share (cents)                  (3.35)      (11 708 400) 
Diluted headline loss per share
(cents)                                          (3.35)      (11 708 400)
Reconciliation between earnings and 
headline earnings
Total comprehensive loss for the six
month period                                   (26,777)         (117 084) 
Adjustments:                                         -                 - 
Headline loss attributable to ordinary         (26,777)         (117 084)
shareholders
Weighted average number of shares          800,000,000             1,000

Condensed consolidated statement of changes in equity

                                                Attributable to owners 
                                                   of the company
                                               Share     Share   Stated 
                                             capital   premium  capital
                                               R’000     R’000    R’000
Balance at 1 March 2014                            1    56,025        – 
Loss for the period
Other comprehensive income                         –         –        – 
Total comprehensive income at 
31 August 2014                                     1    56,025        –
Conversion of shares to no par value              (1)  (56,025)  56,026
Issue of ordinary shares                           –         –  410,372
Profit for the period                              –         –        – 
Other comprehensive income                         –         –        – 
Total comprehensive income at 
28 February 2015                                   –         –  466,398
Loss for the period                                –         –        – 
Other comprehensive income                         –         –        – 
Total comprehensive income at 
31 August 2015                                     –         –  466,398

                                                  Attributable to owners 
                                                      of the company
                                                     Retained
                                                     earnings      Total
                                                        R’000      R’000
Balance at 1 March 2014                             4,087,357  4,143,383
Loss for the period                                  (117,084)  (117,084) 
Other comprehensive income                                  –          – 
Total comprehensive income at 31 August 2014        3,970,273  4,026,299
Conversion of shares to no par value                        –          – 
Issue of ordinary shares                                    –    410,372
Profit for the period                                  79,519     79,519
Other comprehensive income                                  –          – 
Total comprehensive income at 28 February 2015      4,049,792  4,516,190
Loss for the period                                   (26,777)   (26,777) 
Other comprehensive income                                  –          – 
Total comprehensive income at 31 August 2015        4,023,015  4,489,413

                                              Non-controlling
                                                     interest      Total
                                                        R’000      R’000
Balance at 1 March 2014                               598,772  4,742,155
Loss for the period                                   (36,558)  (153,642) 
Other comprehensive income                                  –          - 
Total comprehensive income at 31 August 2014          562,214  4,588,513
Conversion of shares to no par value                        –          – 
Issue of ordinary shares                                    –    410,372
Profit for the period                                  35,183    114,702
Other comprehensive income                                  –          - 
Total comprehensive income at 
28 February 2015                                      597,397  5,113,587
Loss for the period                                    (7,527)   (34,304) 
Other comprehensive income                                  –          – 
Total comprehensive income at 31 August 2015          589,870  5,079,283

Condensed consolidated statements of cash flows

                                                   Reviewed      Audited 
                                                        six       twelve
                                                     months       months 
                                                      ended        ended
                                                  31 August  28 February
                                                       2015         2015
                                                      R'000        R'000
Cash flows from operating activities                 10,340      (29 955) 
Cash generated from operations                        6,714      (15,451) 
Interest paid                                           (82)     (15,228) 
Interest received                                     3,708          724
Cash flows from investing activities                (22,030)     (31 440) 
Additions to property, plant and equipment          (20,384)     (30 031) 
Rehabilitation investment                            (1,424)      (1 370) 
Increase in deposits                                   (222)         (39) 
Cash flows from financing activities                 20,361       59 822
Increase in amounts owing by related parties        (16,126)         (39) 
Repayment of loans and borrowings                   (37,500)      (4 466) 
Increase in amount owing to related parties          33,670       16 272
Decrease in finance lease liability                  (1,685)           - 
Increase in amount owing to holding company          42,002       58 327
Net increase/(decrease) in cash and cash
equivalents                                           8,671       (1 573) 
Cash and cash equivalents at the beginning of
the year                                            191,062        3 094
Cash and cash equivalents at the end of the
period                                              199,733        1 521

Commentary – Financial and operational overview
1. The directors present the reviewed condensed consolidated interim 
financial results for the six months ended 31 August 2015.

2.1 Basis of preparation
These condensed consolidated interim financial results for the six months 
ended 31 August 2015 have been prepared in accordance with the framework 
concepts and the recognition and measurement criteria of International 
Financial Reporting Standards (“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 interim financial results have been prepared under the 
supervision of Trevor Scott (BCom (Hons), BAcc, CA(SA))in his capacity as 
Financial Director of the Group.

2.2 Reviewed results – auditor’s conclusion
KPMG Inc., Oakbay' Resources’ independent auditors, have reviewed the 
condensed consolidated interim financial results of Oakbay Resources. 
The review was conducted in accordance with International Standards on 
Review Engagements 2410: Review of Interim Financial Information 
performed by the Independent Auditor of the Entity. They have expressed 
an unmodified review conclusion on the results.

The condensed consolidated interim financial results comprise the 
condensed consolidated statement of financial position at 31 August 
2015, condensed consolidated statement of comprehensive income, 
condensed consolidated statement of changes in equity and condensed 
consolidated statement of cashflows for the six months then ended and 
selected explanatory notes. The review report is available for inspection 
at Oakbay Resources’ registered office.

Any forecast information included in this announcement has neither been 
reviewed nor reported on by the company’s auditors.

3. Nature of the business
Oakbay Resources and Energy Limited is incorporated in the Republic of 
South Africa. These condensed consolidated interim financial statements 
comprise the Company and its subsidiaries (together referred to as the 
'Group' and individually as “Group entities”). Its principal business 
activity is the mining and exploration of mineral resources, particularly 
uranium and gold deposits, and the possible beneficiation thereof. The 
Group currently owns and operates the Shiva Uranium Mine, a uranium and 
gold mine in the North West province of the Republic of South Africa. 
The Group is currently engaged in open cast gold mining while 
simultaneously focusing on the completion of a bankable feasibility 
study on its uranium prospects.

4.  Environmental rehabilitation provision

                                                          Six
                                                       months      Year 
                                                        ended     ended
                                                       31-Aug    28-Feb
                                                         2015      2015
                                                        R’000     R’000
Balance at the beginning of the period                209,811   133,749
Unwind of interest                                      8,287    11,141
Capitalised to property, plant and equipment             (359)   40,644
Change in estimate in environmental rehabilitation
provision recognised in profit or loss                 (1,497)   24,277
Balance at the end of the period                      216,242   209,811

5.  Loans and borrowings

Industrial Development Corporation ("IDC") borrowings
                                                          Six
                                                       months      Year 
                                                        ended     ended
                                                       31-Aug    28-Feb
                                                         2015      2015
                                                        R’000     R’000
Balance at the beginning of the period - 1 March      146,186   450,676
Loan repayments for the period                        (37,500)  (80,000) 
Conversion of debt to equity                                -  (225,022) 
Fair value adjustment ito IAS39 due to changes in
timing of cash flows                                    1,530     5,386
Fair value adjustment ito IAS39 due to conversion
of debt to equity                                           -   (60,265) 
Interest accrued                                        9,584    55,411
Balance at the end of the period                      119,800   146,186

Bank of Baroda facility
                                                          Six
                                                       months      Year 
                                                        ended     ended
                                                       31-Aug    28-Feb
                                                         2015      2015
                                                        R’000     R’000
Balance at the beginning of the period                 146,858        - 
Draw down on loan facility                                   -  144,960
Interest expense                                         3,494    1,898
Balance at the end of the period                       150,352  146,858
Total non-current liabilities                           74,660  110,367
Total current liabilities                              195,492  184,362
                                                       270,152  294,729

6. Events after the reporting period
Subsequent to 31 August 2015, Oakbay subsidiary company, Shiva Uranium,
acquired open cast mining equipment at a cost of R42 million. The 
equipment is intended to improve production capabilities in the open cast 
gold operation. Save for the equipment purchase previously described, the 
directors are not aware of any other matter or circumstance rising since 
the 31 August 2015, not otherwise dealt with in the condensed interim 
consolidated financial statements, which would affect the operations of 
the Group or the results of those operations significantly.

7. General review of operations
7.1 Safety
During the six months ended 31 August 2015, the company’s safety 
performance remained consistently excellent, 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. At 30 September 2015, the group had achieved a total of 
5 589 fatality free shifts; which equates to approximately 6.2 million 
fatality free hours. The lost time injury frequency rate (LTIFR) for 
the six month period was 1.65 per one thousand employees in service; 
which is well below the industry average of 3.8.

The continuous commitment of the mine employees and management toward 
safe working practices remains the uppermost priority of the company. 
Safety initiatives at the mine continue to be driven by the Health and 
Safety Committee and the ongoing focus on reinforcing excellent 
communication standards between the committee and workplace health and 
safety representatives is progressing well. Constant supervision of safety 
standards and safety compliance matters remains a focus point for the 
Health and Safety Committee as well as daily safety training initiatives.

During the six months, senior executive management continued with their 
initiative of chairing 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.

7.2 Gold production
Gold mining operations maintained their profitability but production for 
the six month period was constrained due to declining efficiencies in the 
open cast mining section, primarily resulting from the availability of 
open cast mining equipment. As a result, the volume of reef tons processed 
for the six months ended 31 August 2015 was lower than expected. Subsequent 
to 31 August 2015, the company invested approximately R42 million in new 
open cast mining equipment in order to ensure consistence in the availability 
of material for processing. In the face of declining production, management 
maintained their efforts to boost efficiencies, improve productivity and 
aggressively manage costs. Significant efforts in grade management ensured 
that grades consistent with expectations were maintained during the period 
under review.

Oakbay Resources’ outlook for its gold production will remain optimistic 
as further improvements in operational efficiencies are expected to translate 
into increased production and operating output. Management's 
focus on the forthcoming six month period will largely entail ensuring that 
plant processing capacity is maintained. The company also intends to 
investigate higher grade gold project opportunities that may present 
themselves over the next few months.

7.3 Uranium operations and further exploration
Notwithstanding insignificant movements in spot uranium prices during the 
six months under review, the general consensus amongst analysts is that a 
supply deficit will arise in the fourth quarter of 2017. 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 continues with the development of its uranium operations while 
the scoping assessment for the feasibility study is near completion. 
Accelerated development of the uranium operation is expected to commence 
during the 2016 calendar year. The company remains optimistic that uranium 
prices will significantly improve over the next 18 months and intends to 
capitalise on increasing investor confidence. Management intend focusing 
their efforts on securing capital to fund the accelerated development 
programme, as well as securing beneficial medium to long term supply 
agreements.

7.4 Contract mining
As part of its strategy to diversify sources of income while ongoing 
uranium development takes place, the company utilised spare resource 
capacity to undertake contract mining activities during the six month 
period ending 31 August 2015. These activities had a strong positive 
contribution to both revenue and earnings during the interim period and 
offset declining profitability from the gold operations.

8. Dividends
No dividend has been declared for the interim period (2014: Rnil).

9. Changes to the Board of Directors
Shareholders are advised that Mr. Terry Rensen has been appointed as 
the lead independent director of Oakbay Resources and Energy Limited 
with effect from 1 December 2015. Mr. Mark Pamensky will remain on 
the board as an independent non-executive director.

10. Related parties

                                                  Six months
                                                       ended  Year ended
                                                   31-Aug-15   28-Feb-15
                                                       R’000       R’000
Amounts owing by related parties
Arctos Trading Proprietary Limited                    24,155      24,155
Surya Crushers Proprietary Limited                     4,575       3,368
Blackedge Exploration Proprietary Limited                  5           - 
Tegeta Exploration and Resources Proprietary
Limited                                               14,692           -
Other                                                    661         439
                                                      44,088      27,962
Amounts owing to related parties
Westdawn Investments Proprietary Limited             (44,798)    (25,752) 
Unlimited Investments Proprietary Limited             (4,511)     (4,514) 
JIC Engineering Services Proprietary Limited         (28,946)    (28,883) 
Blackedge Exploration Proprietary Limited               (179)          - 
Scipio Proprietary Limited                            (3,184)          - 
Sahara Computers Proprietary Limited                    (154)          - 
VR Laser Proprietary Limited                            (335)          - 
Confident Concepts Proprietary Limited                  (456)          - 
Action Investments                                  (129,590)   (109,930) 
                                                    (212,153)   (169,079)

All loans owing by and to related parties are denominated in ZAR and are 
unsecured, interest free and there are no specific fixed terms of repayment 
except for the loan granted by Action Investments. The Action Investments 
loan is denominated in USD and interest is accrued at LIBOR plus 3%. The 
balance at 31 August 2015 is USD 9 758 921 (28 February 2015: USD 9 582 879) 
and the loan is repayable on demand.

                                                 Six months
                                                      ended  Year ended
                                                  31-Aug-15   28-Feb-15
                                                      R’000       R’000
Amount owing to holding company
Oakbay Investments Proprietary Limited              408,516  366,514.00
                                                    408,516  366,514.00

The repayment terms are 367 days’ notice on demand from the holding company.  
Oakbay Investments Proprietary Limited has subordinated its right to claim 
or accept repayment of its loan to the company in favour of the other 
creditors until the total assets of the company, fairly valued, exceed its 
total liabilities.

11. Segment reporting
Basis for identification of reportable segments
The chief operating decision maker’s view is that to assess the performance 
of the company there are four reportable segments, namely those relating to 
gold operations, contract mining, uranium development and head office.

The gold operation segment primarily entails gold mining and processing 
operations.  The contract mining operation primarily entails coal contract 
mining.  The uranium development segment relates to the uranium project 
development. Currently, the uranium mining and processing operation is in 
development phase and is not operating commercially. The major activities 
relating to uranium development entail mine and plant infrastructure expansion, 
as well as resource exploration.

The segment information has been prepared in accordance with IFRS 8 
Operating Segments, which defines the requirements for the disclosure of 
financial information of an entity's segments.

Information about reporting segments

                                                         Gold
                                                Six months    Six months
                                                     ended         ended
R’000s                                           31-Aug-15     31-Aug-14
Revenue from external customers                     98,778        76 244
Inter-segment revenue                                    –             –
                                                    98,778        76 244
Operating loss before depreciation                    (501)            – 
Depreciation                                        (8,904)            – 
EBITDA                                              (9,405)            – 
Finance cost                                             –             – 
Finance income                                           –             – 
Loss for the period                                 (9,405)            –

                                                    Contract Mining
                                                Six months    Six months
                                                     ended         ended
R’000s                                           31-Aug-15     31-Aug-14
Revenue from external customers                     31,946             – 
Inter-segment revenue                                    –             –
                                                    31,946             – 
Operating loss before depreciation                   8,817             – 
Depreciation                                          (869)            – 
EBITDA                                               7,948             –
Finance cost                                             –             – 
Finance income                                           –             – 
Loss for the period                                  7,948             –

                                                   Uranium Development
                                                Six months    Six months
                                                     ended         ended
R’000s                                           31-Aug-15     31-Aug-14
Revenue from external customers                          –             – 
Inter-segment revenue                                    –             –
                                                         –             – 
Operating loss before depreciation                  (5,667)            – 
Depreciation                                             –             – 
EBITDA                                              (5,667)            – 
Finance cost                                             –             – 
Finance income                                           –             – 
Loss for the period                                 (5,667)            –

                                                       Head Office
                                                Six months    Six months
                                                     ended         ended
R’000s                                           31-Aug-15     31-Aug-14
Revenue from external customers                          –             – 
Inter-segment revenue                                    –             –
                                                         –             – 
Operating loss before depreciation                 (16,153)            – 
Depreciation                                        (1,524)            – 
EBITDA                                             (17,677)            – 
Finance cost                                       (21,503)     (131,493) 
Finance income                                      12,000           724
Loss for the period                                (27,180)     (130,769)

                                                         Total
                                                Six months    Six months
                                                     ended         ended
R’000s                                           31-Aug-15     31-Aug-14
Revenue from external customers                    130,724        76 244
Inter-segment revenue                                    –             –
                                                   130,724        76 244
Operating loss before depreciation                 (13,504)      (13,349) 
Depreciation                                       (11,297)        9,524
EBITDA                                             (24,801)      (22,873) 
Finance cost                                       (21,503)      131,493
Finance income                                      12,000           724
Loss for the period                                (34,304)     (153,642)

                                                          Gold
                                                Six months Twelve months
                                                     ended         ended
R’000s                                           31-Aug-15     28-Feb-15
Segment assets                                     781,159       592,305
Segment liabilities                                      –       182,556

                                                    Contract Mining
                                                Six months Twelve months
                                                     ended         ended
R’000s                                           31-Aug-15     28-Feb-15
Segment assets                                           –             – 
Segment liabilities                                      –             –

                                                  Uranium Development                                                    
                                                Six months Twelve months
                                                     ended         ended
R’000s                                           31-Aug-15     28-Feb-15
Segment assets                                   6,625,232     6,769,123
Segment liabilities                                      –             –

                                                      Head Office
                                                Six months Twelve months
                                                     ended         ended
R’000s                                           31-Aug-15     28-Feb-15
Segment assets                                     223,825       327,543
Segment liabilities                              2,062,689       935,252

                                                        Total
                                                Six months Twelve months
                                                     ended         ended
R’000s                                           31-Aug-15     28-Feb-15
Segment assets                                   7,630,216     7,688,971
Segment liabilities                              2,062,689     1,117,808


Varun Gupta
Chief Executive Officer
27 November 2015

Directors: A Gupta (Chairman), V Gupta (CEO), T Scott (FD), M Pamensky 
(Independent non-executive and LID)*, D Nyamane (Independent non-executive), 
T Rensen (Independent non-executive)**

Sponsor: Sasfin Capital (a division of Sasfin Bank Limited). 

Company Secretary: iThemba Governance and Statututory Solutions
Proprietary Limited

Registered Office: 89 Gazelle Avenue, Corporate Park South, Midrand, 1685

Postal Address: Postnet Suite 458, Private Bag x9, Benmore, 2010

*Will revert from LID to independent non-executive director with effect 
from 1 December 2015
**Appointed as LID with effect from 1 December 2015 www.oakbay.co.za

27 November 2015
Date: 27/11/2015 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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