Oakbay upbeat despite dwindling cash

Cash held by Oakbay Resources and Energy, the JSE-listed company with interests in coal, gold and uranium and controlled by the Gupta family and Duduzane Zuma, had dwindled to R2.7m at the end of February, from R224.9m a year previously, it reported on Friday.

Current liabilities also exceeded current assets by R15.9m and its bottom-line loss for the period was R936.5m.

Auditors SizweNtsalubaGobodo issued an unmodified audit opinion on the results and, while noting it, did not raise any material uncertainty about the company’s ability to continue as a going concern.

 Oakbay did not explain how it intended to deal with its cash needs. "Despite the continued losses, management is confident that based on their assessment and the turnaround strategy implemented, the group will remain a going concern," Oakbay said. CEO George van der Merwe could not be reached for further comment.

The main use of Oakbay’s cash in this period was to repay R37.5m due to the Industrial Development Corporation (IDC) and R193.8m owed to the Bank of Baroda. The company’s operations absorbed R24.7m of working capital during the year after production difficulties at both its gold and coal mines. The shares, which were listed in 2014 at R10, were trading at 580c on Friday.

This means the IDC is showing a significant loss after agreeing in 2014 to convert R257m owed by Oakbay, which Oakbay was unable to pay, into shares at 900c each. Oakbay’s revenue was boosted by the acquisition of Brakfontein colliery in February last year.

Brakfontein, which has a 10-year coal supply agreement with Eskom, produced 1.2-million tonnes of coal for the year and achieved steady state production in the second half.

"Ongoing challenges relating to the reliability and efficiency of the opencast equipment has negatively affected planned production," management said.

Similar issues were experienced at the opencast gold mining operations of Shiva Uranium mine near Klerksdorp.