OAKBAY RESOURCES AND ENERGY LIMITED - Audited Condensed Consolidated Results for the year ended 28 February 2017

Release Date: 02/06/2017 17:25
Code(s): ORL
 
Wrap Text
Audited Condensed Consolidated Results for the year ended 28 February 2017

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 RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017

SALIENT FEATURES AND FINANCIAL INDICATORS

- Excellent safety results with over 7,134 fatality free shifts
- Revenue increased by 69%
- Coal production increased by 9.58%
- Coal production of 1,205,329 tonnes
- Gold production decreased by 46.75%
- Gold production of 200.8 kg

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION  
               
                                                                                                                       Audited               Audited
                                                                                                              28 February 2017      29 February 2016
                                                                                               Notes                     R'000                 R'000
Assets                            
Non-current assets                                                                                                   9 385 594            10 725 731
Plant and equipment                                                                                                  2 089 305             2 081 515
Investment property                                                                                                      1 029                 1 029
Mineral resources                                                                                 10                 6 641 970             7 966 572
Deferred tax                                                                                                           566 200               594 659
Long-term receivables                                                                                                   12 306                10 614
Environmental rehabilitation guarantee deposits                                                                          2 465                 2 439
Environmental rehabilitation obligation investments                                                                     72 319                68 903
Current assets                                                                                                         264 488               504 150
Inventories                                                                                                            188 499               183 516
Other financial assets                                                                                                   1 830                44 380
Trade and other receivables                                                                                             71 461                51 277
Cash and cash equivalents                                                                                                2 698               224 977
Total assets                                                                                                         9 650 082            11 229 881
                            
Equity attributable to equity holders of entity                            
Equity                            
Stated capital                                                                                                         466 398               466 398
Retained income                                                                                                      4 738 454             5 308 799
                                                                                                                     5 204 852             5 775 197
Non-controlling interest                                                                                             1 627 843             1 994 047
                                                                                                                     6 832 695             7 769 244
Liabilities                            
Non-current liabilities                                                                                              2 536 927             2 973 222
Amount owing to holding company                                                                   12                   411 224               383 074
Other financial liabilities                                                                       11                    71 646                82 349
Deferred tax                                                                                                         1 859 916             2 230 640
Environmental rehabilitation provision                                                            13                   194 141               277 159
Current liabilities                                                                                                    280 460               487 415
Other financial liabilities                                                                       11                    47 200               235 147
Trade and other payables                                                                                               109 750                87 679
Amounts owing to related parties                                                                  12                   123 510               164 589
Total liabilities                                                                                                    2 817 387             3 460 637
Total equity and liabilities                                                                                         9 650 082            11 229 881
                            
                            
Net asset value and share information
                         
Net asset value per share attributable to the owners of the entity (cents)                                              650.61                721.90
Total number of ordinary shares in issue                                                                           800 000 000           800 000 000
  
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

                                                                                                                       Audited               Audited
                                                                                                              28 February 2017      29 February 2016
                                                                                               Notes                     R'000                 R'000  
Revenue                                                                                           14                   462 622               273 714
Cost of sales                                                                                     15                 (414 022)             (227 757)
Gross profit                                                                                                            48 600                45 957
Other income                                                                                                            14 450                20 287
Other operating expenses                                                                                           (1 292 106)              (67 301)
Operating loss                                                                                                     (1 229 056)               (1 057)
Finance income                                                                                                           6 610                49 392
Finance costs                                                                                                         (56 368)              (46 836)
(Loss)/profit before tax                                                                                           (1 278 814)                 1 499
Income tax expense                                                                                                     342 265              (18 412)
Loss for the period                                                                                                  (936 549)              (16 913)
Other comprehensive income                                                                                                   -                     -
Total comprehensive loss for the period                                                                              (936 549)              (16 913)
Total comprehensive loss attributable to:  
Owners of the company                                                                                                (570 345)               (5 092)
Non-controlling interest                                                                                             (366 204)              (11 821)
                                                                                                                     (936 549)              (16 913)
  
Earnings per share information  
Per share information  
Basic loss per share (cents)                                                                                           (71.29)                (0.64)
Diluted basic loss per share (cents) *                                                                                 (71.29)                (0.64)
Headline loss per share (cents)                                                                                         (5.89)                (0.68)
Diluted headline loss per share (cents) *                                                                               (5.89)                (0.68)
Reconciliation between total basic loss and total headline loss  
Total comprehensive loss for the period                                                                              (936 549)              (16 913)
Loss attributable to non-controlling interest                                                                          366 204                11 821
Total basic loss for the period attributable to owners of the company                                                (570 345)               (5 092)
Adjusted for:  
After tax loss on impairment of uranium mineral resource                                                               879 837
After tax profit on the disposal of plant and equipment                                                                                        (484)
Non-controlling interest thereon                                                                                     (356 598)                   126
Total headline loss for the period attributable to owners of the company                                              (47 106)               (5 450)
Reconciliation between ordinary shares in issue and weighted number of  
ordinary shares  
Number of shares in issue - beginning of the period                                                                800 000 000           800 000 000
Shares issued during the period                                                                                              -                     -
Number of shares in issue - at the end of the period*                                                              800 000 000           800 000 000
 

* There are no dilutive potential ordinary shares in issue.

The headline earnings per share is calculated in terms of the requirements of Circular 2/2015 as issued by the South African Institute of Chartered
Accountants ("SAICA").

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                                                 Equity attributable   
                                                                                                    to owners of the   Non-controlling  
                                                           Stated Capital     Retained income                 entity          interest  Total Equity
                                                                    R'000               R'000                  R'000             R'000         R'000
Balance at 01 March 2015                                          466 398           4 502 578              4 968 976           756 484     5 725 460
Total comprehensive loss for the period #                               -             (5 092)                (5 092)          (11 821)      (16 913)
Issue of shares to non-controlling shareholders                         -                   -                      -         2 060 697     2 060 697
Changes in ownership interest - control not lost                        -             811 313                811 313         (811 313)             -
Audited balance at 29 February 2016                               466 398           5 308 799              5 775 197         1 994 047     7 769 244
Total comprehensive loss for the period #                               -           (570 345)              (570 345)         (366 204)     (936 549)
Audited balance at 28 February 2017                               466 398           4 738 454              5 204 852         1 627 843     6 832 695

# The total comprehensive loss for the period represents operational losses for the reporting period as no element of other comprehensive income exists.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                                                                      Audited                Audited
                                                                                                             28 February 2017       29 February 2016
                                                                                                   Notes                R'000                  R'000
                                    
                                    
Cash flows from operating activities                                    
Cash (used in)/generated from operations                                                                             (24 729)                 52 863
Finance income                                                                                                          3 168                 20 463
Finance costs                                                                                                         (6 764)               (14 398)
Net cash generated from operating activities                                                                         (28 325)                 58 928
Cash flows from investing activities                                    
Acquisitions resulting in additions of plant and equipment                                                           (36 251)               (73 281)
Proceeds on disposal of plant and equipment                                                                                 -                  2 064
Acquisitions resulting in expansion of investment property                                                                  -                (1 029)
Increase in long-term receivables                                                                                     (1 692)                      -
Net cash used in investing activities                                                                                (37 943)               (72 246)
Cash flows from financing activities                                    
Proceeds from other financial liabilities                                                                                   -                 46 907
Repayment of other financial liabilities                                                                            (231 264)               (37 500)
Proceeds from loans from holding company                                                                               35 650                 45 489
Repayment of loans from holding company                                                                               (7 500)                      -
Net finance lease repayments                                                                                                -                (1 686)
Increase/(decrease) in amounts owing to related parties                                                                 4 553                (4 490)
Proceeds from/(advances to) amounts owing by related parties                                                           42 550                (1 487)
Net cash generated from financing activities                                                                        (156 011)                 47 233
Total movement in cash and equivalents for the period                                                               (222 279)                 33 915
Cash and equivalents at the beginning of the period                                                                   224 977                191 062
Total cash and equivalents at the end of the period                                                                     2 698                224 977
                                    
Commentary                                    

The directors present the condensed audited year end results for 28 February 2017. Oakbay Resources reported a 69% increase in revenue due
to the positive effect of coal mining activities undertaken during the period under review. Furthermore, the Group reported a 766.18% deterioration
in headline loss per share primarily due to a 46.75% substantial decline in gold production, compared to the prior year.

The Group recognised an after-tax impairment loss of R 879.84 million against the Uranium mineral resource after considering the independent
valuation performed on the Group's uranium resource using comparable market resources. This loss has been recognized in profit and loss for
the period.

1.   Basis of preparation
  
     Statement of compliance
     
     The audited condensed consolidated financial results are prepared in accordance with the JSE Limited Listings Requirements for abridged reports,
     and the requirements of the Companies Act of South Africa, Act 71 of 2008 applicable to condensed financial statements. The Listings
     Requirements require summary reports to be prepared in accordance with the framework concepts and the measurement and recognition
     requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting
     Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain
     the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial
     statements from which the audited condensed financial statements were derived are in terms of International Financial Reporting Standards
     (IFRS) and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements,
     except for the adoption of new, improved and revised standards and interpretations, which had no material effect on the financial results.
 
2.   Management's responsibility

     The audited condensed consolidated financial statements for the period ended 28 February 2017 were prepared under the supervision of
     Ms M Chong, CA(SA), in her capacity as Group Financial Director. The audited condensed consolidated financial statements comprise the
     condensed statement of financial position at 28 February 2017 and the condensed statements of profit or loss and other comprehensive income,
     changes in equity and cash flows for the reporting period ended then.


     The board of directors of Oakbay Resources ("the Board") takes full responsibility for the preparation of this report and that the financial 
     information has been correctly extracted from the underlying consolidated financial statements.

3.   Supplementary information

     Except for supplementary information provided in the commentary of this report, no other information has been included in the condensed
     consolidated financial statements and segmental reporting analysis.

4.   Unqualified audit opinion

     The condensed consolidated financial statements have been derived from the Group's audited consolidated annual financial statements and
     have been audited by SizweNtsalubaGobodo Inc.

     The auditor, SizweNtsalubaGobodo Inc., audited the consolidated annual financial statements for the period ended 28 February 2017 in
     accordance with International Standards on Auditing. SizweNtsalubaGobodo Inc. has issued an unmodified audit opinion on the Group's audited
     consolidated annual financial statements and reported on all key audit matters within this audit report. In accordance with their 
     responsibilities in terms of section 44(2) and 44(3) of the Auditing Profession Act ("APA"), the independent auditors have identified a 
     reportable irregularity in terms of the APA. They have reported such matter to the Independent Regulatory Board for Auditors. The independent 
     auditors have confirmed that the reportable irregularity is no longer continuing as the date of this report. The auditor's report also contain 
     an emphasis of matter on going concern conditions. However, no material uncertainty exists on the group's ability to continue as a going 
     concern. The auditor's opinion is not modified in respect of these matters. These summarised consolidated financial statements are consistent 
     in all material respects with the Group's audited consolidated annual financial statements.

     The auditor's report issued in terms of the condensed consolidated financial statements does not necessarily report on all the information
     contained in this announcement. Any reference to future financial performance included in this announcement has not been reviewed or reported
     on by the Company's auditor. This includes the supplementary information provided in terms of the condensed consolidated financial statements
     and segmental reporting analysis.

     A copy of the auditor's report on the condensed consolidated financial statements and of the auditor's report on the consolidated annual 
     financial statements are available for inspection at the Company's registered office, together with the financial statements identified in the 
     respective auditor's reports. Shareholders are advised that in order to obtain a full understanding of the nature of the auditor's engagement 
     they should obtain a copy of the auditor's report together with the accompanying financial information from the registered office of Oakbay Resources
     and Energy Ltd.

5.   Nature of the business

     Oakbay Resources' business activity is the mining and exploration of mineral resources, particularly uranium, gold and coal deposits, and the
     beneficiation thereof. The group owns one of the most significant uranium projects in Africa which holds one of the largest uranium ore bodies
     in the world, as well as a world class uranium processing plant at the Shiva Uranium mine, located near Klerksdorp in the North-W est Province
     of South Africa. The group mines and produces gold while it focuses on the development of its uranium project.

     Oakbay Resources also mines and supplies thermal coal from its Brakfontein Colliery, located near Delmas in the Mpumalanga Province of South
     Africa.

6.   Financial performance and position

     Revenue increased by 69% compared to the prior year mainly due to the impact of coal sales from the Group's newly acquired coal operations at
     the Brakfontein Colliery. Total comprehensive losses for the year increased from R16,913 million in the prior year to R936.55 million primarily 
     as a result of an after-tax impairment loss of R879.84 million relating to the group's uranium mineral resource and a significant decline in gold 
     production.

     The company has a strong financial position at 28 February 2017 with total assets of R9,650 billion compared to total liabilities of R2 817
     billion. Management draws attention to the fact that, as at the date of this report, the current liabilities exceed the current assets by 
     R15.9 million and despite the continued losses management is confident that based on their assessment and the turnaround strategy implemented the 
     group will remain a going concern.

7.   Safety

     The Group's Shiva Uranium mine continues with its excellent safety record and reduction of safety risk, with zero fatalities and serious injuries
     being experienced during the year. The Shiva Uranium mine has achieved over 7,134 fatality free shifts by the end of 28 February 2017, with
     thirteen lost time injuries taking place during this period. The company is firmly committed to safety practices at its operations and ensures 
     that mine employees and management strive toward and ensure safe working practices. The company's health and safety committee is responsible
     for monitoring safety plans and implementing safety initiatives at the mine. Mine management specifically emphasises the importance of using
     "on-the-job" safety training initiatives as well as constant supervision of safety standards and safety compliance.


     Safety and the reduction of safety risk remains the highest priority for management, and the company looks forward to improving its safety
     performance going forward, with an overall goal of zero harm.


8.   Segmental analysis

     Operational segmental performance

     Information related to each reportable segment is set out below. Segmental profit or loss after tax is used to measure performance because
     management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that
     operate in the same industries. The group did not have any inter-segmental revenue.

                                                      Revenue from                                                                    Profit/(loss)
                                                          external                                     Finance                       before tax for
     Segment                                             customers      EBITDA(1)    Depreciation       income        Finance cost       the period
                                                             R'000          R'000           R'000        R'000               R'000            R'000
                               
     Gold operations                               
     28 February 2017                                      118 180         40 428        (24 210)            -                   -           16 218
     29 February 2016                                      185 012            758        (19 069)            -                   -         (18 311)
     Coal Mining                           
     28 February 2017                                      344 442         94 576       (106 655)            -                   -         (12 079)
     29 February 2016                                       88 702         78 029         (1 739)            -                   -           76 290
     Uranium Development                                                  
     28 February 2017                                            -    (1 226 192)         (1 706)            -                   -      (1 227 898)                           
     29 February 2016                                            -        (4 382)               -            -                   -          (4 382)
     Central Services                          
     28 February 2017                                            -        (2 058)         (3 239)        6 610            (56 368)         (55 055)
     29 February 2016                                            -       (46 194)         (8 460)       49 392            (46 836)         (52 098)
     Total operations                          
     28 February 2017                                      462 622    (1 093 246)       (135 810)        6 610            (56 368)      (1 278 814)
     29 February 2016                                      273 714         28 211        (29 268)       49 392            (46 836)            1 499
     
     (1)Earnings before interest taxation depreciation and amortisation (EBITDA) is equal to the operating profit or (loss) before taking depreciation 
        or amortisation into account. EBITDA included the change in the rehabilitation estimate.


     Segmental assets and liabilities
  
     The amounts provided to management with respect to total assets and liabilities are measured in a manner consistent with that of the financial
     statements. These assets and liabilities are allocated based on the operations of the segment and the physical location of the asset. The table
     below provides information on segment assets and liabilities as per the statement of financial position.
  
                                                                                                               Total segment       Total segment
     Segment                                                                                                          assets         liabilities
                                                                                                                       R'000               R'000
     Gold operations
     28 February 2017                                                                                              1 009 385             421 436
     29 February 2016                                                                                                545 273             277 159
     Coal Mining
     28 February 2017                                                                                              2 765 335             592 024
     29 February 2016                                                                                              2 782 521             773 063
     Uranium Development
     28 February 2017                                                                                              5 278 005             988 323
     29 February 2016                                                                                              6 635 168           1 457 577
     Central Services
     28 February 2017                                                                                                597 357             815 604
     29 February 2016                                                                                              1 266 919             952 838
     Total operations
     28 February 2017                                                                                              9 650 082           2 817 387
     29 February 2016                                                                                             11 229 881           3 460 637
  
  
     The chief operating decision-maker reviews the group's internal reporting in order to assess performance and has determined the operating
     segments based on these reports. The business performance of the operating segments is evaluated from the market and product performance
     perspective. The segments have not changed from the prior reporting period.
  
     The segment relating to the coal operations of the entity reflects the coal contract mining in the previous reporting periods at the Brakfontein
     Colliery, which was acquired during February 2016, referred to as "contract mining" and the mining of coal for the Group's own benefit in the
     current period, since the acquisition, referred to as "coal mining".
  
     The head office, gold operations, coal operations and uranium development segments all operate in the Republic of South Africa. All segmental
     revenue has been derived from South African operations based on the geographic location of customers and all segment assets are located in
     the Republic of South Africa based on the physical geographic location of the assets.

9.   Operational overview

     Key indicators                                                                          28 February 2017    29 February 2016   Movement(1)
     Gold bearing ore milled (tonnes)                                                                 492 924             657 606      (25.04)%
     Gold sold (kg)                                                                                    200.80              377.08      (46.75)%
     Coal produced (tonnes)                                                                         1 205 329           1 100 000         9.58%
                                                    
     (1)The movement is based on the comparison of the respective tonnes and kilograms for the 12 month periods ended 28 February 2017 and 29 February 2016 
        as both of these periods are reflective of operations for the period.

     Gold operations
 
 
     Gold production from opencast gold mining operations at the Shiva Uranium mine for the reporting period amounted to a total of 200.8 kg. This
     was significantly lower than gold production in the comparative period, during which 377.08 kg of gold was produced.
 
 
     Gold production for the 12 months ended 28 February 2017 has been primarily constrained by the effect of the declining availability and efficiency
     of the gold treatment plant, coupled with production issues in the opencast section. The company also experienced several production stoppages
     during the period due to ongoing security issues at the Shiva Uranium mine.
 
     Mine management implemented a turnaround action plan in February 2017 with additional excavators sourced for the opencast section to boost
     production and upgrade the gold plant.
 
 
     Coal operations
 
     Following the successful completion of the acquisition of the Brakfontein Colliery in February 2016, the Group is pleased to report the first operational
     results from its coal mining activities. The coal acquisition is in line with the strategy of expanding and diversifying activities with regard to energy
     related mineral resources.
 
     Coal production for the year ended 28 February 2017 totalled 1,205,329 tonnes. Steady state production has been achieved in the second half of
     the year. Ongoing challenges relating to the reliability and efficiency of the opencast equipment has negatively affected planned production.
     Management are focusing on how to address these issues with stoppages due to labour unrest having been successfully resolved in the second
     half of the year.
 
     Uranium operations and further exploration
 
 
     The ongoing development of the Shiva Uranium project remains a priority for management and the board of directors as part of our strategy to
     unlock the significant value in the sizeable uranium ore body. While uranium prices have declined significantly and then rebounded to a depressed
     value in US Dollar terms over the past year, growth in the international nuclear industry remains positive and is expected to result in a significant
     supply deficit in the near to medium term. Given the size of the uranium ore body, together with the associated gold content and existing plant and
     underground mine infrastructure.


10.  Mineral resources
 
     The mineral resources were acquired by the group as part of a business combination in previous reporting periods. These resources relate to
     gold, coal and uranium mineral resources. The gold and coal production is ongoing however, the uranium mining activities is still in its
     development stage and no production relating to the uranium production is currently taking place.
 
     The coal resource is amortised in line with current utilisation levels of the resource. An amortisation charge of R102,6 million was recognised
     as part of the cost of inventories for the year.
 
     The Group recognised an after-tax impairment loss of R 879.84 million against the Uranium mineral resource after considering the independent
     valuation performed on the Group's uranium resource using comparable market resources. This loss has been recognized in profit and loss for
     the period.
 
11.  Other financial liabilities

                                                                                                                Audited                Audited
                                                                                                       28 February 2017       29 February 2016
                                                                                                                  R'000                  R'000
     Industrial Development Corporation ("IDC")
     Balance at the beginning of the period                                                                     123 732                146 186
     Repayments for the period                                                                                 (37 500)               (37 500)
     Application of effective-interest-rate-method to apply amortised cost in terms of IAS39 due to
                                                                                                                     -                 (3 235)
     changes in timing of cash flows
     Accrued finance cost                                                                                       32 614                  18 281
     Balance at the end of the period                                                                          118 846                 123 732


     Bank of Baroda ("BoB")
     Balance at the beginning of the period                                                                     193 764                146 858
     (Repayment)/drawn-down on loan facility                                                                  (193 764)                 46 906
     Balance at the end of the period                                                                                 -                193 764


     Analysis of current and non-current portions of other financial liabilities
     Non-current portion of other financial liabilities                                                          71 646                 82 349
     Current portion of other financial liabilities                                                              47 200                235 147
                                                                                                                118 846                317 496

    Terms and conditions relating to the IDC loan

    In terms of the loan agreement, the loan attracts interest at prime lending plus 2%. The balance of the capital amount outstanding is repayable in
    two instalments of R37.5 million due on 30 June 2017 and 31 March 2018 respectively. The capitalised interest is repayable by no later than 
    31 October 2018.

    The loan is secured against the moveable and immovable property of Shiva Uranium Proprietary Limited.


    Terms and conditions relating to the BoB facility

    Borrowings on the BoB facility are secured against, and to the extent of, cash fixed deposits invested by Oakbay Resources and Energy Limited
    and held at the BoB. The loans have no fixed terms of repayment and bear interest at variable rates linked to investment rates on fixed deposits.
    The facility was settled in full during the financial year end using cash fixed deposits on hand at the BoB.


12. Related parties(1)

    The following tables present the group's significant related party balances and transactions.

    Related party balances                                                                                       Audited                 Audited
                                                                                                        28 February 2017        29 February 2016
                                                                                                                   R'000                   R'000
    Amounts owing to the holding company
    Oakbay Investments Proprietary Limited                                                                       411 224                 383 074


    Related party transactions


    Sale of coal to related parties
    Tegeta Exploration and Resources Proprietary Limited                                                         344 442                  88 702


    Other related party events


    The Group is party to a centralised treasury function which is managed on behalf of all group companies by the holding company, Oakbay
    Investment Proprietary Limited. In addition, the holding company provided the group with a letter of financial support.

    (1)This note should be read in conjunction with the group audited annual financial statements.

13. Environmental rehabilitation provision

                                                                                                                 Audited                Audited
                                                                                                        28 February 2017       29 February 2016
                                                                                                                   R'000                  R'000
    Reconciliation of the balance for the period
    Balance at the beginning of the period                                                                       277 159                209 811
    Unwinding of interest                                                                                         16 990                 12 861
    Capitalised to property, plant and equipment                                                                   4 743                 43 604
    Change in estimate recognised in profit or loss                                                            (104 751)                  4 030
    Acquired through business combination                                                                              -                  6 853
    Balance at the end of the period                                                                             194 141                277 159


    The environmental provision includes estimated costs for the rehabilitation of gold, uranium and coal mining sites. The group is required by law
    to undertake future rehabilitation works as part of their ongoing operations. The group makes contributions into environmental rehabilitation
    obligation funds to fund the estimated future costs of rehabilitation. In addition, refer to note 18 for further information regarding the 
    environmental fund.

    Change in estimates arise from changes in resources, changes in life of mine as well as changes in laws and regulations governing environmental
    matters. Increases in decommissioning provisions relate to the increase in the expected future discounted cost of decommissioning plant and
    equipment. Changes in estimates relating to decommissioning provisions are included in the cost of property, plant and equipment. Changes in
    the rehabilitation provision relates to the expected future discounted costs of rehabilitating mining areas. Changes in estimates relating to
    rehabilitation provisions are recognised as an expense in the period in which the change in estimate arises.

14. Revenue

                                                                                                  Audited              Audited
                                                                                         28 February 2017     29 February 2016
                                                                                                    R'000                R'000       % Change
    Revenue per category          
    Gold                                                                                          118 180              185 012       (36.12)%
    Coal                                                                                          344 442               88 702        288.31%
    Total revenue                                                                                 462 622              273 714         69.02%
          
          
          
15. Cost of sales          
          
                                                                                                  Audited              Audited
                                                                                         28 February 2017     29 February 2016
                                                                                                    R'000                R'000      % Change
    Cash operating costs                                                                          382 962              198 489        92.94%
    Amortisation of coal mineral resources                                                        102 607                    -       100.00%
    Depreciation of tangible mining assets                                                         33 204               29 268        13.45%
    Change in estimate in environmental rehabilitation provision                                (104 751)                    -       100.00%
    Total cost of sales                                                                           414 022              227 757        81.78%

16. Financial instruments information

    The group has not disclosed the fair values of financial instruments measured at amortised cost as their carrying amounts closely approximate
    their fair values. There were no financial instruments measured at fair value that were individually material at the end of the reporting period.

17. Changes to the Board of Directors

    The following changes were effected to the Board of Directors during the 12-month period ended at 28 February 2017 and as at the date of this
    report:

    - Mr AK Gupta resigned as Non-Executive Chairman with effect from 08 April 2016;
    - Mr V Gupta resigned as Chief Executive Officer with effect from 08 April 2016.;
    - Mr J Roux was appointed as Chief Executive Officer with effect from 17 May 2016 and subsequently resigned with effect from 31 March 2017;
    - Mr N Howa was appointed as Non-executive director with effect from 09 June 2016 and subsequently resigned with effect from 17 October
      2016;
    - Mr TW Rensen previously the company's Lead Independent Non-Executive Director, was appointed as Independent Non-Executive Chairman
    - with effect from 08 April 2016;
    - Ms R Ragavan was appointed as a Non-Executive Director with effect from 23 January 2017;
    - Mr TW Scott resigned as the Group Financial Director with effect from 19 February 2017 and was appointed as a Non-Executive director from
      15 this date;
    - Ms M Chong was appointed as director on 19 February 2017 and officially assumed the role of Group Financial Director with effect from 
    - March 2017; and
    - Mr GP van der Merwe was appointed as Chief Executive Officer with effect from 01 April 2017.


18. Events after the reporting period

    Changes to the board

    - Mr MV Pamensky, the Independent Non-Executive Director and Chairman of the Audit Committee, has resigned and given notice of
      resignation with the effective date of 10 June 2017.

    Other significant events

    - In terms of the provisions of the National Environmental Management Act, no. 107 of 1998 ("NEMA"), the group is required to hold an
      environmental rehabilitation investment or funds equal to the amount of the rehabilitation obligation. As at year end the shortfall amounted to
      R48,3 million. Subsequent to the reporting period the Group advanced an amount of R48,3 million into a trust account to bridge the current
      shortfall. This amount has been ring-fenced and may only be used for the group's rehabilitation obligations.

    - The group sponsor, River Group, has given notice of termination of their services on 01 June 2017. As per the agreement, the sponsor will provide
      one month's notice under normal circumstances. However, the resignation will not be effective until a replacement sponsor is sourced as required by 
      the JSE Listings requirements.

    Other than mentioned in this report, there were no other material events after the reporting date that require disclosure.

19. Dividend declaration

    In line with group strategy, no dividend has been declared for the financial period.

    For and behalf of the Board of Directors


    TW Rensen                                                                              GP van der Merwe
    Chairman                                                                               Chief Executive Officer
    02 June 2017                                                                           02 June 2017

    Directors
    TW Rensen(1) (Chairman) (Irish), GP van der Merwe (Chief Executive Officer), M Chong (Group Financial Director), DJ Nyamane(2), MV Pamensky(2),
    Ms R Ragavan(1), Mr TW Scott(3).


    (1)The director is an Independent Non-executive director.
    (2)The director is an Independent Non-executive director and Chairman of the Audit Committee
    (3)The director is a Non-executive director.

Administrative information

Registered office                                                Postal address
Grayston Ridge Office Park                                       Postnet Suite 458
Block A, Lower Ground Floor                                      Private Bag X9
144 Katherine Street                                             Benmore Sandown
Sandton                                                          2010
South Africa

Company secretary
iThemba Governance and Statutory Solutions Proprietary Limited

Monument Office Park                                             P O Box 25160
Block 5 Suite 201                                                Monument Park
79 Steenbok Avenue                                               South Africa
Monument Park                                                    0105
South Africa

External auditors
SizweNtsalubaGobodo Inc.

20 Morris Street East                                            P O Box 2939
Woodmead                                                         Saxonwold Johannesburg
South Africa                                                     2132

Transfer Secretaries
Terbium Financial Services Proprietary Limited

Capital House                                                    P O Box 61272
31 Beacon Road                                                   Marshalltown Florida North
Roodepoort                                                       2107
South Africa

Sponsor
River Group

2 Kloof Trio                                                     P O Box 2579
211 Kloof Street                                                 Brooklyn Square Waterkloof
South Africa                                                     0075

www.oakbay.co.za

River Group

02 June 2017
Johannesburg
Corporate Advisors and Sponsors



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