THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
The definitions commencing on page 5 of this circular apply mutatis mutandis to this cover.
ACTION REQUIRED BY OAKBAY SHAREHOLDERS
• If you are in any doubt as to what action you should take, you should consult your CSDP, Broker, Banker, Legal Adviser,
Accountant or other professional adviser immediately.
• If you have disposed of all of your Oakbay shares, please forward this circular together with the attached form of proxy
(yellow), to the purchaser to whom, or the CSDP or Broker or Agent through whom the disposal was effected.
• S
hareholders of Oakbay are referred to page 3 of this circular, which sets out the action required by them in respect of
this circular.
OAKBAY RESOURCES AND ENERGY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2009/021537/06)
Share code on the JSE: ORL ISIN: ZAE000196085
(“Oakbay” or “the Company”)
CIRCULAR TO OAKBAY SHAREHOLDERS
Regarding
–the acquisition by the Company of the Business carried out by Tegeta, which acquisition constitutes a related party
transaction in terms of the JSE Listing Requirements;
and incorporating
– a notice convening a general meeting of Oakbay shareholders; and
–a form of proxy (yellow), only for use by Certificated Shareholders and Dematerialised Shareholders with “ownname” registration.
Transaction Adviser and Transactional Sponsor
Independent Expert
Independent Reporting Accountants
Transactional Legal Advisor
Date of issue: Monday, 25 January 2016
Copies of this circular are available in English only, from 25 January 2016 until 23 February 2016 (both days inclusive), be obtained from the
registered office of Oakbay and PSG Capital, at the addresses set out in the “Corporate Information” section of this circular. A copy of this Circular
will also be available on Oakbay’s website (www.oakbay.co.za).
CORPORATE INFORMATION
The definitions commencing on page 5 of this circular apply mutatis mutandis to this Corporate Information section.
DIRECTORS OF OAKBAY
SPONSOR
Executive
Non-executive
Sasfin Capital
A division of Sasfin Bank Limited
(Registration number 1951/002280/06)
29 Scott Street
Waverley, 2090
(PO Box 9510, Grant Park, 2051)
Atul Kumar Gupta (Chairman)^
Dudu Jacqueline Nyamane*
Mark Vivian Pamensky*
Terence William Rensen*# (Lead independent)
COMPANY SECRETARY AND REGISTERED
OFFICE OF OAKBAY
Varun Gupta (Chief Executive Officer)^
Trevor Scott (Financial Director)
* Independent
^ Indian
# Irish
TRANSACTION ADVISER AND TRANSACTIONAL
SPONSOR
PSG Capital Proprietary Limited
(Registration number 2006/015817/07)
1st Floor
Ou Kollege Building
35 Kerk Street
Stellenbosch, 7599
(P O Box 7403, Stellenbosch, 7599)
and at
1st Floor, Building 8
Inanda Greens Business Park
54 Wierda Road West
Wierda Valley
Sandton, 2196
(P O Box 987, Parklands, 2121)
INDEPENDENT REPORTING ACCOUNTANTS AND
REGISTERED AUDITORS
KPMG (Registration number 1999/021543/21)
KPMG Crescent
85 Empire Road
Parktown, 2193 (Private Bag X9, Parkview, 2122)
TRANSFER SECRETARIES
Trifecta Capital Services Proprietary Limited
(Registration number 2009/018890/07)
Trifecta House
31 Beacon Road
Florida North, 1709
(PO Box 61272, Marshalltown, 2107)
iThemba Governance and Statutory Solutions
Proprietary Limited
(Registration number 2008/008745/07)
Monument Office Park, 0181
Block 5, Suite 102
79 Steenbok Avenue
Monument Park
(PO Box 25160, Monument Park, 0105)
Incorporated in South Africa on 10 November 2009
INDEPENDENT EXPERT
Mazars Corporate Finance Proprietary Limited
(Registration number 2003/029561/07)
Mazars House
5 St. Davids Place
Parktown
Johannesburg, 2193
(PO Box 6697, Johannesburg, 2000)
TRANSACTIONAL LEGAL ADVISOR
Falcon & Hume Inc Attorneys
(Registration No 2009/010911/21)
Second Floor
8 Melville Road, Illovo
Sandton, 2196
South Africa
(PO Box 55523 Northlands 2116 South Africa)
REGISTERED OFFICE OF TEGETA
89 Gazelle Avenue
Corporate Park South
Midrand, 1685
(PO Box 25160, Monument Park, 0105)
TABLE OF CONTENTS
The definitions commencing on page 5 of this circular apply mutatis mutandis to this table of contents.
Corporate information
Page
IFC
Forward looking-statement disclaimer
2
Action required by Shareholders
3
Salient dates and times
4
Definitions
5
Circular to Oakbay Shareholders
8
1.
Introduction and purpose of this Circular
8
2.
Rationale for the Acquisition
8
3.
Tegeta
8
4.
The Acquisition
5.
Prospects
11
6.
Financial information
11
7.
General Meeting
11
8.
Directors
12
9.
Other related matters
12
9
10. Expenses
13
11. Directors’ recommendation
14
12. Litigation statement
14
13. Advisors’ consents
14
14. Directors’ responsibility statement
14
15. Documents available for inspection
14
Annexure 1
Pro forma financial information of Oakbay
15
Annexure 2
Independent reporting accountant’s report on the pro forma financial information of Oakbay
19
Annexure 3
Independent expert opinion on the Acquisition
21
Notice of general meeting of Oakbay Shareholders
25
Form of proxy (yellow) in respect of the general meeting (only for use by Certificated Shareholders and
Dematerialised Shareholders who have selected “own-name” registration)
27
1
FORWARD LOOKING-STATEMENT DISCLAIMER
The definitions set out on page 5 of this Circular apply to this forward-looking statement disclaimer.
This Circular contains statements about Oakbay and/or the Oakbay Group that are or may be forward-looking statements.
All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. These forwardlooking statements are not based on historical facts, but rather reflect current expectations concerning future results and events
and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”,
“intend”, “foresee”, “forecast”, “likely”, “should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. Oakbay cautions that forward-looking statements are not guarantees
of future performance. Actual results, financial and operating conditions, liquidity and the developments within the industry in
which Oakbay operates may differ materially from those made in, or suggested by, the forward-looking statements contained in
this Circular.
All these forward-looking statements are based on estimates and assumptions made by Oakbay, as communicated in publicly
available documents by Oakbay, all of which estimates and assumptions, although Oakbay believes them to be reasonable, are
inherently uncertain. Such estimates, assumptions or statements may not eventuate. Factors which may cause the actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or
implied in those statements or assumptions include other matters not yet known to Oakbay or not currently considered material
by Oakbay.
Shareholders should keep in mind that any forward-looking statement made in this Circular or elsewhere is applicable only at the
date on which such forward-looking statement is made. New factors that could cause the business of Oakbay not to develop
as expected may emerge from time to time and it is not possible to predict all of them. Further, the extent to which any factor or
combination of factors may cause actual results to differ materially from those contained in any forward-looking statement are
not known. Oakbay has no duty to, and does not intend to, update or revise the forward-looking statements contained in this
Circular after the date of this Circular, except as may be required by law.
2
ACTION REQUIRED BY SHAREHOLDERS
The definitions commencing on page 5 of this Circular apply mutatis mutandis to the following action required by Oakbay
Shareholders.
PLEASE TAKE CAREFUL NOTE OF THE FOLLOWING PROVISIONS REGARDING THE ACTION REQUIRED
BY OAKBAY SHAREHOLDERS
1. If you are in any doubt as to what action to take, please consult your CDSP, broker, banker, attorney, accountant or other
professional adviser immediately.
2.
If you have disposed of all your Oakbay Shares, please forward this Circular to the purchaser of such Oakbay Shares or to
the CSDP, broker, banker or other agent through whom the disposal was effected.
3.
he General Meeting, convened in terms of the notice incorporated in this Circular, will be held at 144 Katherine Street,
T
Grayston Ridge Office Park, Sandton on 23 February 2016, commencing at 10:00.
4.
GENERAL MEETING
4.1 If you hold Dematerialised Shares:
4.1.1
Own-name registration
ou are entitled to attend, or be represented by proxy, and may vote at the General Meeting of Oakbay. If you
Y
are unable to attend the General Meeting, but wish to be represented thereat, you must complete and return
the attached form of proxy (yellow), in accordance with the instructions contained therein, to be received by
the Transfer Secretaries, Trifecta Capital Services Proprietary Limited, Trifecta House, 31 Beacon Road, Florida
North, 1709 (PO Box 61272, Marshalltown, 2107) by no later than 10:00 on 19 February 2016.
4.1.2 Other than own-name registration
If your CSDP or broker does not contact you, you are advised to contact your CSDP or broker and provide
them with your voting instructions. If your CSDP or broker does not obtain instructions from you, they will be
obliged to vote in accordance with the instructions contained in the custody agreement concluded between
you and your CSDP or broker. You must not complete the attached form of proxy (yellow). In accordance
with the custody agreement between you and your CSDP or broker you must advise your CSDP or broker
timeously if you wish to attend, or be represented at the General Meeting. Your CSDP or broker will be required
to issue the necessary letter of representation to you to enable you to attend, or to be represented at the
General Meeting.
4.2 If you hold Certificated Shares
ou are entitled to attend, or be represented by proxy, and may vote at the General Meeting. If you are unable to
Y
attend the General Meeting, but wish to be represented thereat, you must complete and return the attached form
of proxy (yellow), in accordance with the instructions contained therein, to be received by the Transfer Secretaries,
Trifecta Capital Services Proprietary Limited, Trifecta House, 31 Beacon Road, Florida North, 1709 (PO Box 61272,
Marshalltown, 2107) by no later than 10:00 on 19 February 2016.
3
SALIENT DATES AND TIMES
The definitions commencing on page 5 of this Circular apply mutatis mutandis to this salient dates and times section.
2016
Record date to determine which Shareholders are eligible to receive the Circular
Circular, notice of General Meeting and form of proxy (yellow) posted to Shareholders on
Last day to trade in order to be eligible to vote at the General Meeting
15 January, Friday
25 January, Monday
5 February, Friday
Record date to be eligible to vote at the General Meeting
12 February, Friday
Last day to lodge forms of proxies in respect of the General Meeting by 10:00 on
19 February, Friday
General meeting of Oakbay Shareholders to be held at 10:00 on
23 February, Tuesday
Results of the General Meeting released on SENS on
23 February, Tuesday
Note
The above dates and times are subject to amendment. Any such amendment will be released on SENS.
4
DEFINITIONS
In this Circular, unless the context indicates otherwise, reference to the singular shall include the plural and vice versa, words
denoting one gender include the others, words and expressions denoting natural persons include juristic persons and associations
of persons and the words and expressions in the first column have the meanings stated opposite them in the second column.
“Acquisition”
the acquisition by Shiva of the Business, in terms of the Agreement;
“Act” or “Companies Act”
the Companies Act, 2008 (Act 71 of 2008), as amended;
“Agreement”
the Asset Exchange Agreement entered into on 11 December 2015, between Oakbay,
Tegeta and Shiva, in terms of which Oakbay will acquire the Business in exchange for the
Consideration Shares, subject to the fulfilment of the Conditions Precedent, a copy of which
is available for inspection by Shareholders as per paragraph 20 below, the salient terms of
which are set out in paragraph 4 of this Circular;
“BEE”
broad-based black economic empowerment as envisaged in the BEE Act;
“BEE Act”
the Broad-Based Black Economic Empowerment Act, No.53 of 2003 as amended or
substituted from time to time;
“Business”
the business carried out by Tegeta, consisting of the Business Assets and Business Liabilities
as at the Effective Date as more fully set out in paragraph 4;
“Business Day”
any day, other than a Saturday, Sunday or official public holiday in South Africa;
“Cents”
South African cents;
“Certificated Shareholders”
Oakbay Shareholders who hold Certificated Shares;
“Certificated Shares”
Oakbay Shares which have not been dematerialised, title to which is represented by a share
certificate or other document of title;
“CIPC”
the Companies and Intellectual Property Commission established in terms of the
Companies Act;
“Circular”
this document distributed to Shareholders and dated 25 January 2016, containing the circular
to Oakbay Shareholders, annexures, the notice of General Meeting, a form of proxy (yellow)
and Revised Listing Particulars;
“Common Monetary Area”
South Africa, the Republic of Namibia and the Kingdoms of Lesotho and Swaziland;
“the Company” or “Oakbay”
or “Oakbay Group”
Oakbay Resources and Energy Limited, registration number 2009/021537/06, a public
company incorporated and registered in accordance with the laws of South Africa and its
subsidiaries;
“Consideration Shares”
100 000 000 (one hundred million) Shiva shares;
“CSDP”
a central securities depository participant registered in terms of the Financial Markets Act,
with whom a beneficial holder of Oakbay Shares holds a dematerialised share account;
“Dematerialised Shares”
Oakbay Shares which have been incorporated into the Strate system and which are no longer
evidenced by certificates or other physical documents of title;
“Dematerialised Shareholders”
Oakbay Shareholders who hold Dematerialised Shares;
“Dematerialised own-name
Shareholders”
Oakbay Shareholders who hold Dematerialised Shares and who have instructed their CSDP
to hold their Oakbay Shares in their own name on the sub-register;
“Directors” or “Board”
the directors of Oakbay, details of whom are set out in paragraph 8 of the Circular;
“DMR”
Department of Mineral Resources;
“Documents of Title”
share certificates, certified transfer deeds, balance receipts or any other physical documents
of title pertaining to the Oakbay Shares in question acceptable to the board of Oakbay;
“Effective Date”
the earlier of three business days after the date upon which all of the Suspensive Conditions
are met or waived, or 29 February 2016;
5
“Emigrant”
any emigrant from South Africa whose address is outside South Africa, the Republic of
Namibia and the Kingdoms of Lesotho and Swaziland;
“Eskom”
Eskom Holdings SOC Limited, registration number 2002/015527/30, a private company
incorporated in accordance with the laws of the Republic of South Africa;
“Exchange Control
Regulations”
the Exchange Control Regulations, 1961, as amended, promulgated in terms of section 9 of
the Currency and Exchanges Act 1933, as amended;
“Financial Markets Act”
the Financial Markets Act, Act 19 of 2012;
“General Meeting”
the General Meeting of Oakbay Shareholders to be held at 10:00 on 23 February 2016 at 144
Katherine Street Grayston Ridge Office Park, Sandton, convened in terms of the notice of
General Meeting enclosed and forming part of this Circular;
“IDC”
Industrial Development Corporation of South Africa Limited (registration number
1940/014201/06) a corporation established under Section 2 of the Industrial Development
Corporation Act, 1940;
“IFRS”
International Financial Reporting Standards;
“Income Tax Act”
Income Tax Act, 1962 (Act 58 of 1962), as amended;
“JSE”
the exchange operated by the JSE Limited, registration number 2005/022939/06, a public
company incorporated and registered in accordance with the laws of South Africa and
licensed as an exchange under the Financial Markets Act;
“JSE Listings Requirements”
the Listings Requirements of the JSE;
“KPMG”
KPMG, registration number 1999/021543/21, being the independent reporting accountants
and auditors of the Company;
“Last Practicable Date”
the last practicable date before finalisation of this Circular, which date was Friday,
15 January 2016;
“Mine Act”
Mine Health and Safety Act 29 of 1996;
“MPRDA”
Mineral and Petroleum Resources Development Act, 28 of 2002;
“NERSA”
National Energy Regulator of South Africa;
“Oakbay Shares” or “Shares”
ordinary shares in Oakbay;
“Oakbay Shareholders” or
“Shareholders”
holders of Oakbay Shares, which includes Certificated Shareholders, Dematerialised
Shareholders and Dematerialised own-name Shareholders;
“Off-Take Agreement”
the Coal Supply Agreement entered into between Tegeta and Eskom in August 2014;
“Own-name Registration”
the registration of Oakbay Shareholders who hold Oakbay Shares that have been
dematerialised and are recorded by the CSDP on the sub-register kept by that CSDP in the
name of such Oakbay Shareholder;
“Prime”
means the publicly quoted rate (per cent, per annum) from time to time charged by ABSA
Bank for similar amounts on unsecured overdraft to its prime customers in good standing in
the private sector, as certified by any manager of that bank whose appointment it will not be
necessary to prove, calculated on a daily basis and compounded monthly in arrears;
“PSG Capital”
PSG Capital Proprietary Limited, registration number 2006/015817/07, a private company
incorporated and registered in accordance with the laws of South Africa, being the transaction
adviser to the Oakbay Group for the Acquisition;
“Rand” or “R”
South African Rand;
“Register”
the register of certificated Shareholders maintained by the Transfer Secretaries and the subregister of dematerialised Shareholders maintained by the relevant CSDP’s;
“Related Party”
Oakbay Investments Proprietary Limited (registration number 2006/017975/07), a company
incorporated in accordance with the laws of South Africa and the holding company of Oakbay;
“SENS”
the Stock Exchange News Service of the JSE;
6
“Share Certificates”
Share Certificates evidencing the Shares held by Certificated Shareholders or any other
Document of Title acceptable to the Board in its sole discretion;
“Shiva”
Shiva Uranium Proprietary Limited, registration number 1921/006955/06, a public company
incorporated in accordance with the laws of the Republic of South Africa and a 74%
subsidiary of the Company;
“Shiva Shares”
ordinary shares in Shiva;
“South Africa”
the Republic of South Africa;
“Strate”
Strate Proprietary Limited, registration number 1998/022242/07, a private company
incorporated in accordance with the laws of South Africa and which is a registered central
securities depository responsible for the electronic custody and settlement system used by
the JSE;
“Tegeta”
Tegeta Exploration and Resources Proprietary Limited, registration number 2006/014492/07,
a private company incorporated in accordance with the laws of the Republic of South Africa;
and
“Trifecta” or “the Transfer
Secretaries”
Trifecta Capital Services Proprietary Limited, registration number 2009/018890/07, a private
company incorporated and registered in accordance with the laws of South Africa.
7
OAKBAY RESOURCES AND ENERGY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2009/021537/06)
Share code on the JSE: ORL ISIN: ZAE000196085
(“Oakbay” or “the Company”)
Directors
Atul Kumar Gupta (Non-executive Chairman)
Varun Gupta (Chief Executive Officer)
Trevor Scott (Financial Director)
Mark Vivian Pamensky (Independent non-executive Director)
Dudu Jacqueline Nyamane (Independent non-executive Director)
Terence William Rensen (Lead Independent non-executive Director)
CIRCULAR TO OAKBAY SHAREHOLDERS
1.
INTRODUCTION AND PURPOSE OF THE CIRCULAR
1.1 Shareholders are referred to the announcement released on SENS on Friday, 11 December 2015 detailing the
proposed acquisition by Shiva of the Business in exchange for the Consideration Shares.
1.2 The Acquisition constitutes a category 2, related party transaction in terms of the JSE Listings Requirements on the
basis that Tegeta is an associate of the Related Party, based on its control over the board of Tegeta, and therefore
requires Oakbay Shareholder approval by way of an ordinary resolution. The salient terms of the Agreement are set
out in paragraph 4 of this Circular.
1.3 The purpose of this Circular is to provide Oakbay Shareholders with the requisite information in accordance with the
JSE Listings Requirements, to enable Oakbay Shareholders to make an informed decision in respect of the proposed
resolution, as set out in the notice of the General Meeting enclosed with this Circular.
2.
RATIONALE FOR THE ACQUISITION
2.1 Oakbay is the holding company of Shiva, a company with significant uranium and gold prospects in the North West
Province of South Africa. As part of the company’s strategy to expand its operational and investment portfolio to
include other energy related assets, the acquisition of the coal business of Tegeta has been proposed. Should the
transaction be approved, it will result in Shiva achieving strong operating cash flows in the future, which will be
of significance in the future development and commissioning of the uranium prospects. The Acquisition will also
diversify the Company’s income and investment streams, thereby mitigating the Company’s risk of exposure to a
single energy based commodity.
2.2 Shiva currently is the contract miner for Tegeta in respect of Tegeta’s coal mining operations conducted at the
Brakfontein colliery near Delmas, Mpumalanga.
3.TEGETA
3.1Overview
egeta is the owner of the Brakfontein colliery, a coal producing mine located in the Delmas district of Mpumalanga.
T
Tegeta currently produces approximately 200,000 tonnes per month and has an existing coal supply agreement
with Eskom.
he primary assets to be acquired in terms of the Agreement include the mineral rights over the Brakfontein colliery,
T
the mining operations thereon, plant and equipment customary for an open pit coal mining operation.
he primary intangible assets of Tegeta include the capitalised exploration costs relating to prospecting rights and
T
mining rights.
8
3.2 Geological resource
According to the most recently available mineral resources statements, the Brakfontein properties have combined
measured resources of approximately 32 million tonnes of coal and an estimated life of mine of approximately
13 to 14 years. Tegeta is the registered holder of new order mining rights in respect of both the farms Brakfontein
and Brakfontein extension.
he information provided by Tegeta to Oakbay was in the form of CPR’s compliant with the South African Mineral
T
Resource Committee for the sole purpose of conducting a due diligence investigation. This information is not publicly
available.
3.3 Tegeta Regulatory Environment
egeta is a private company incorporated in the republic of South Africa. Its regulatory environment predominantly
T
includes the following applicable laws and regulations:
•
Companies Act;
•
Income Tax Act;
•
Mineral Petroleum and Resources Development Act;
•
Royalties Act;
•
National Environmental Management Act;
•
Broad Based Economic Empowerment Act (and Codes of Good Practice);
•
Basic Conditions of Employment Act; and
•
Labour Relations Act.
4.
THE ACQUISITION
In terms of the Agreement a total of 100 000 000 Shiva Shares will be issued, constituting an interest of 19.6% of the Shiva
Shares subsequent to the issue of the Consideration Shares, implying a deal value of approximately R2.1 billion, based on
Shiva’s net asset value of R20.61 per share.
Tegeta has a net asset value of R11 million as per the reviewed interim financial period 31 August 2015, and the Business
has been valued at R2.2 billion as at the same date using the discounted cash flow (“DCF”) valuation methodology. The
abovementioned valuation falls within the range determined by the Independent Expert as more fully set out in Annexure 3.
The NAV for Shiva and value of Tegeta were determined by the financial director, Trevor Scott (V Gupta, an executive
director, was excluded from the value determination as it was concluded that he was not independent). These values were
reviewed and approved by the independent board for the purposes of the Acquisition. The independent board comprised
of the following independent non-executive directors, T Rensen, D Nyamane and M Pamensky (A Gupta, a non-executive
director was excluded from the independent board due to the fact that it was concluded that he was not independent).
4.1 Salient terms of the Agreement
4.1.1 O
akbay will acquire the Business in exchange for the Consideration Shares, which will be settled through the
allotment and issue by Shiva to Tegeta.
4.1.2 The Business consists of the Business Assets and the Business Liabilities, being;
4.1.2.1
Business Assets include:
4.1.2.1.1
Accounts receivable;
4.1.2.1.2
Cash on hand;
4.1.2.1.3
Inventory;
4.1.2.1.4
The Tegeta mineral rights, being the consents, rights and permits issued to Tegeta in
terms of the MPRDA to carry out prospecting and/or mining activities as at the Effective
Date (including any relevant data in respect of the consents, rights and permits);
4.1.2.1.5
Contracts;
4.1.2.1.6
Intangible assets;
4.1.2.1.7
Fixed assets;
4.1.2.1.8
Goodwill;
4.1.2.1.9
Intellectual property owned by Tegeta as at the Effective Date including all trademarks,
service marks, logos, trade names (excluding the name “Tegeta”) and corporate names
(including all domain names, internet and intranet names, addresses, icons and other
designations useful to identify or locate the Business on a computer network such as the
world wide web) and all applications, registrations, and renewals thereof, all business
information, all computer software (including data and related documentation);
9
4.1.2.1.10 Any other assets reflected in the accounts of Tegeta; and
4.1.2.1.11 A
ll claims, deposits, prepayments, refunds, causes of action, rights of recovery, rights
of set-off and rights of recoupment.
4.1.2.2
Business Liabilities include:
4.1.2.2.1
Accounts Payable;
4.1.2.2.2
Leave pay and bonus pay provisions and accrued expenses in relation to employees;
4.1.2.2.3
Liabilities arising in connection with any completed contracts;
4.1.2.2.4
Liabilities arising in connection with any uncompleted contracts;
4.1.2.2.5
Liabilities arising pursuant to any environmental claim; and
4.1.2.2.6
Any other liability of Tegeta reflected in the accounts of Tegeta.
4.1.2.3
ssets excluded from the Business Assets include amounts owing on loan account to Tegeta
A
from Tegeta shareholders and intellectual property rights associated with Tegeta, and the assets
acquired by Tegeta pursuant to the sale of shares and claims agreement entered into on or about 10
December 2015 between Tegeta, Oakbay, Glencore International AG and Optimum Coal Holdings
Proprietary Limited.
4.1.2.4
iabilities excluded from the Business Liabilities include any tax liability, amounts owing on loan
L
account by Tegeta to its shareholders and outstanding overdraft amounts to third parties, and the
liabilities acquired by Tegeta pursuant to the sale of shares and claims agreement entered into on or
about 10 December 2015 between Tegeta, Oakbay, Glencore International AG and Optimum Coal
Holdings Proprietary Limited.
4.2 Effective date
4.2.1 In terms of the Agreement, the effective date of the Acquisition shall be the earlier of three Business Days after
the date upon which all of the Suspensive Conditions are met or waived, or 29 February 2016.
4.3 Suspensive conditions
4.3.1 T
he Agreement is subject to the fulfilment or waiver of the following outstanding suspensive conditions by no
later than 29 February 2016:
4.3.1.1
t he board of directors of Tegeta having passed all such resolutions as may be required in order to
approve and implement the Acquisition;
4.3.1.2
t he board of directors of Shiva and Oakbay have passed all such resolutions as may be required in
order to approve and implement the Acquisition;
4.3.1.3
t he shareholders of Tegeta passing all such resolutions as may be required in terms of section 112
of the Act in order to approve and implement the Acquisition;
4.3.1.4
t he shareholders of Shiva having each waived in writing any pre-emptive rights to acquire any of the
Consideration Shares;
4.3.1.5
egeta procuring the preparation of a tax opinion from a qualified tax expert setting out the tax
T
consequences of the Acquisition and Tegeta and Shiva having confirmed in writing their satisfaction
thereof;
4.3.1.6
t he approval by the Shareholders of the Acquisition, being a related party transaction in terms of the
JSE Listings Requirements;
4.3.1.7
skom providing its written consent to the cession and assignment of the Off-Take Agreement to
E
Shiva;
4.3.1.8
Tegeta receiving exemption from the Takeover Regulations Panel in terms of section 119(6) of the Act;
4.3.1.9
t he authorised share capital of Shiva being increased sufficiently in order to issue the Consideration
Shares;
4.3.1.10 t he shareholders agreement between Tegeta, Shiva and Shiva shareholders has been executed by
the parties thereto and has become unconditional in accordance with its terms;
4.3.1.11 to the extent necessary the approval of the Shiva Memorandum of Incorporation;
4.3.1.12 a
Notice of Amendment filed with CIPC by Shiva of the amendments to the Shiva Memorandum of
Incorporation; and
10
4.3.1.13 r eceipt of all regulatory approvals and/or exemptions required for the implementation of the
Acquisition including, inter alia, those required in terms of the JSE Listings Requirements, the
Companies Act and the MPRDA having been obtained, to the extent required.
4.3.2 The conditions precedent set out in paragraph 4.3.1 above are not capable of waiver.
4.4Warranties
4.4.1 The warrantees are normal for a transaction of this nature.
4.5 Voting at the General Meeting
5.
PROSPECTS
Oakbay, by way of its investment in its subsidiary company Shiva, has significant uranium and gold prospects in the
North-West Province of South Africa. Uranium is the primary source of fuel for nuclear reactors and significant growth in
the international construction of nuclear reactors is expected in the foreseeable future. The Acquisition of the Business will
provide the Company with meaningful exposure to the coal industry and will position the Company well as a diversified
miner of energy related natural resources.
6.
FINANCIAL INFORMATION
In terms of the JSE Listings Requirements, a 50% plus 1, majority of votes of all Oakbay Shareholders excluding the
Related Party present or represented by proxy at the General Meeting must be obtained in respect of the ordinary
resolution to approve the Acquisition.
6.1
Pro forma financial effects on Oakbay
The pro forma financial effects of the Acquisition, as set out below, is the responsibility of the directors of Oakbay.
The pro forma financial effects are presented in a manner consistent with the basis on which the historical financial
information of Oakbay has been prepared and in terms of Oakbay’s accounting policies. The pro forma financial
effects have been presented for illustrative purposes only and, because of their nature, may not give a fair reflection
of Oakbay’s financial position, changes in equity and results of operations post the implementation of the Acquisition.
These pro forma financial effects as set out below should be read in conjunction with the pro forma statement of
financial position as set out in Annexure 1, together with the assumptions upon which the financial effects are based,
as indicated in the notes thereto in Annexure 1.
he independent reporting accountants’ report on the pro forma financial information appears as Annexure 2 to
T
this Circular.
he table below sets out the pro forma financial effects of the Acquisition on Oakbay, based on the reviewed financial
T
results for the interim period ended 31 August 2015.
Pro forma before
the transaction
(after Oakbay listing)
Basic and diluted profit/(loss) per share (cents)
Headline loss per share (cents)
(3.35)
Pro forma after
the Acquisition
Change
(%)
1.87
156
(3.35)
(11.02)
(229)
Net asset value per share (cents)
561.18
830.88
(48)
Net tangible asset value per share (cents)
(89.53)
(199.99)
(123)
Weighted average number of shares in issue
800 000 000
800 000 000
–
Number of shares in issue
800 000 000
800 000 000
–
6.2 Material changes
6.2.1 T
here have been no material changes in the financial or trading position of Oakbay since its results for the
interim period ended 31 August 2015. 6.2.2 T
here have been no material changes in the financial or trading position of Tegeta since its results for the
interim period ended 31 August 2015. 7.
GENERAL MEETING
A general meeting of the Oakbay Shareholders has been convened and will be held at 10:00 on 23 February 2016 at
Grayston Ridge Office Park, 144 Katherine Street, Sandton, 2196, South Africa, for the purpose of considering, and if
deemed fit, passing, with or without modification, the necessary resolutions to give effect to the Acquisition and the matters
incidental thereto. The resolution to be put to Shareholders for their approval is set out in the notice of general meeting of
Oakbay Shareholders annexed to this Circular.
11
8.DIRECTORS
8.1 Directors’ interests
8.1.1 T
he Directors (and their associates), in aggregate, directly and indirectly hold approximately 64% of Oakbay
Shares at the Last Practicable Date, as follows:
Beneficial
Director
Total
Total
Direct
Indirect
Shares
%
Atul Gupta
–
511 996 720
511 996 720
64
Total
–
511 996 720
511 996 720
64
8.1.2 S
ave for being a Shareholder of Oakbay, no director of Oakbay or any director who has resigned in the last
18 months, save for the Related Party, has or had any material beneficial interest, directly or indirectly, in any
transaction which is, or was, material to the business of Oakbay and which was effected by Oakbay during
the current financial year, or in any previous financial year, which remains in any respect outstanding or
unperformed.
8.1.3 The director’s interests post the Acquisition are detailed below:
Beneficial
Director
Total
Total
Direct
Indirect
Shares
%
Atul Gupta
–
511 996 720
511 996 720
64
Total
–
511 996 720
511 996 720
64
Note:
Mr Gupta’s interest in Oakbay is held through Oakbay Investments and Islandsite 180, and includes indirectly beneficial
holdings held by an associate totalling 255 998 360 shares.
8.1.4 O
akbay has concluded formal service contracts with the Chief Executive Officer, V Gupta and the Financial
Director, T Scott.
8.1.5 The salient details relating to Oakbay Directors’ emoluments for the year ended 28 February 2015 are:
Board
Fees
(R’000)
Bonuses and
performance
related
Salary
payments
(R’000)
(R’000)
Subsistence
and travel
allowance
(R’000)
Leave
accrual
(R’000)
Total
(R’000)
GP van Der Merwe1
–
681
–
–
39
720
2
T Scott
–
315
–
43
14
372
V Gupta
–
633
–
–
36
669
AK Gupta
–
–
–
–
–
–
101
–
–
–
–
101
T Rensen
80
–
–
–
–
80
D Nyamane2
80
–
–
–
–
80
261
1 629
–
43
89
2 022
M Pamensky
2
2
Total
1. Resigned on 31 July 2015
2.
Appointed 25 September 2014
3.
None of the directors have received remuneration for any management, consulting, technical or other fees directly
or indirectly, including payments to management companies, a part of which is paid to a director. No director has
received any other material benefits, contributions under any pension scheme, and commission, gain or profit share,
any share options, any shares in terms of a share purchase or option agreement from the Company or its associates,
other than as disclosed above.
9.
OTHER RELATED MATTERS
9.1 Material contracts
9.1.1 S
ave for the Agreement and the IDC restructuring agreement, as at the Last Practicable Date, the Company
had not entered in to any material contracts otherwise than in the ordinary course of business during the past
three years. As at the Last Practicable Date, the Company had no obligations or settlements that are material.
9.1.2 In terms of the IDC restructuring agreement, the IDC loan was granted in terms of the IDC loan agreement for
the purpose of Oakbay acquiring its 74% shareholding in Shiva. The process of re-financing and restructuring
the IDC loan was finalised on 24 June 2014.
12
9.1.3 In terms of the IDC loan restructuring agreement, the outstanding interest portion of the IDC loan as at
28 November 2014, being the date of the listing of the Company on the JSE, converted into equity in Oakbay.
On 28 November 2014 which was the listing date of the Company, debt with a face value of R256 million was
converted into equity pursuant to a loan restructuring agreement between the IDC and the Company.
9.1.4 T
he total outstanding balance of the IDC loan, being capital and interest as at 31 August 2015 was
R119 800 000.
9.1.5 T
he IDC loan bears interest at prime plus 2 percent on a daily basis. All interest due on the outstanding
amount will be capitalised into the capital portion of the loan and is repayable in one lump sum due on
31 October 2018.
9.1.6
The Group has provided the following security for the IDC loan:
• a mortgage bond over all immovable property held by Shiva to the value of R250 million;
• a general notarial bond over all the movable assets of Shiva to the value of R250 million;
• the mining right (NW 30/5/1/2/2/228 MR) to the value of R600 million; and
• a cession of all of Shiva’s debtors, insurance claims and cash balances.
9.1.7 U
ntil all obligations in terms of the IDC loan agreement and IDC loan restructuring agreement have been
discharged, or at any time while IDC is a shareholder of Shiva, Oakbay and Oakbay Investments have
undertaken to procure that Shiva shall, if required by the IDC, sell up to 30 percent of the mine’s day to
day uranium production to an offtaker/s selected by the IDC on terms no less favourable to Shiva than any
existing arm’s length offtake agreements to which Shiva is party.
9.1.8 Oakbay has not entered into any promoter’s agreements since incorporation.
9.2. Major shareholders
9.2.1 Insofar as is known to Oakbay, the following Shareholders, other than Directors, beneficially held, directly or
indirectly, an interest of 5% or more of the issued share capital of Oakbay as at the Last Practicable Date:
Name
Number of
Shares
directly held
Number of
Shares
indirectly held
Shareholding in
Oakbay %
Oakbay Investments
639 995 900
–
79.99
Action Investment1
67 764 272
–
8.47
Saranya
45 176 181
–
5.65
752 936 353
–
94.11
2
Total
1. The shareholders being HK Agarwal (89.06%) and Vinod Agarwal (10.94%), who are also the directors.
2. The shareholders being Nikhil Agarwal (99.99%) and Subhash Bhardwaj (0.01%), who are also the directors.
10.EXPENSES
The estimated costs of preparing and distributing this Circular, and all other annexures, holding the General Meeting and
implementing the Acquisition, including the fees payable to professional advisors, are approximately R6 120 000, excluding
Value Added Taxation, and include the following:
Expenses
R’000
Transaction Advisor – PSG Capital
5 000
Independent Expert – Mazars
JSE documentation fee
Printing and postage costs
250
15
65
Reporting Accountants reports – KPMG
350
Legal advisor – Falcon Hume
350
TRP fees
Other – contingency
Estimated total
50
–
6 120
Notes:
1.
Oakbay and Tegeta have incurred no preliminary expenses in relation to the Circular during the 3 years preceding this Circular, save
for the fees presented in the table above.
2.
Other contingency costs refers to other expenses that may be necessary to be incurred for the implementation of the Acquisition.
13
11. DIRECTORS’ RECOMMENDATION
The Directors have considered the terms and conditions of the Acquisition and are of the opinion that the terms of the
Acquisition are fair and in the interests of Oakbay Shareholders.
The directors entitled to vote at the General meeting recommend that Oakbay Shareholders vote in favour of the resolutions
to be proposed at the General Meeting.
12. LITIGATION STATEMENT
The Directors are not aware of any legal or arbitration proceedings (including any such proceedings that are pending
or threatened), involving the Oakbay Group which may have, or have had, a material effect on the Company’s financial
position during the last 12 months preceding the date of this Circular.
The Directors of Oakbay are not aware of any legal proceedings (including any such proceedings that are pending or
threatened), involving the Oakbay Group which may have an influence on the rights to explore or mine.
13. ADVISORS’ CONSENTS
The parties referred to in the Corporate Information section on the inside front cover of this Circular have consented in
writing to act in the capacities stated and to their names being stated in the Circular and, in the case of the auditors,
independent reporting accountants and the independent expert, have consented to the reference to their reports in the
form and context in which they appear, and have not withdrawn their consents prior to the publication of the Circular.
14. DIRECTORS’ RESPONSIBILITY STATEMENT
The directors, whose names are given on the Corporate Information page of this Circular collectively and individually
accept full responsibility for the accuracy of the information furnished relating to Oakbay and Tegeta, and certify that to the
best of their knowledge and belief, that there are no facts which have been omitted which would make any statement false
or misleading, and that all reasonable enquiries to ascertain such facts have been made, and that this Circular contains all
information required by law and the JSE Listings Requirements.
15. DOCUMENTS AVAILABLE FOR INSPECTION
The following documents, or copies thereof, will be available for inspection by Oakbay Shareholders during normal business
hours at the registered office of Oakbay and at the offices of PSG Capital from 25 January 2016 until 23 February 2016
(both days inclusive):
15.1 the Memorandum of Incorporation of Shiva;
15.2 the Memorandum of Incorporation of Oakbay;
15.3 the Agreement;
15.4 the reporting accountants’ report on the pro forma financial information of Oakbay;
15.5 T
he consolidated historical financial information of Oakbay for the three years ended 28 February 2013, 28 February
2014 and 28 February 2015;
15.6 the report of the Independent Expert;
15.7 service contracts of executive directors of Oakbay; and
15.8 a copy of this Circular.
SIGNED AT SANDTON ON 25 JANUARY 2016 BY TREVOR SCOTT ON BEHALF OF ALL THE DIRECTORS OF OAKBAY
RESOURCES AND ENERGY LIMITED IN TERMS OF POWERS OF ATTORNEYS SIGNED BY SUCH DIRECTORS
TREVOR SCOTT
14
ANNEXURE 1
PRO FORMA FINANCIAL INFORMATION OF OAKBAY
The pro forma financial information at 31 August 2015 for Oakbay is set out below. The pro forma information has been prepared
for illustrative purposes only to provide information on how the Acquisition might have impacted on the financial position,
changes in equity and results of operations of Oakbay. Due to their nature, the pro forma financial information may not fairly
present Oakbay’s financial position, changes in equity, results of operations or cash flows after the Acquisition. The pro forma
financial information is presented in a manner that is consistent with the accounting policies of Oakbay.
The pro forma financial information as set out below should be read in conjunction with the limited assurance report of the
Independent Reporting Accountants to Oakbay, which is included as Annexure 2 to this Circular.
The directors of Oakbay are responsible for the preparation of the pro forma financial information. The pro forma statement of
financial position of Oakbay has been prepared on the assumption that the Acquisition was affected on 31 August 2015.
15
DETAILED PRO FORMA STATEMENTS OF FINANCIAL POSITION AT 31 AUGUST 2015 – ACQUISITION OF
BUSINESS OF TEGETA EXPLORATION AND RESOURCES PROPRIETARY LIMITED
On the assumption that the acquisition was effective on the last day of the interim financial period ending 31 August 2015
BEFORE
ADJUSTMENTS –
AFTER
REVIEWED
ACQUISITION
R’000
R’000
R’000
1
ACQUISITION3
2
Assets
Non current assets
Property, plant & equipment
Mineral resources Deferred taxation
Environmental rehabilitation obligation investments
Environmental rehabilitation guarantee deposits
Other investments
Deposits
7 254 362
3 058 210
10 312 571
1 978 206
8 575
1 986 781
5 205 630
3 041 355
–
1 198
1 198
58 960
–
58 960
2 441
–
2 441
–
7 082
7 082
2a
8 246 985
9 125
–
9 125
450 995
75 890
526 884
Trade and other receivables
1 596
64 446
66 042
Amount owing by related parties
44 088
–
–
–
Inventories
205 578
4 022
Cash and cash equivalents
199 733
7 422
7 705 357
3 134 100
10 839 456
4 489 413
96 964
4 586 377
466 398
–
466 398
Current assets
Amount owing by shareholder
Total assets
44 088
6
–
209 600
3
207 155
Equity and liabilities
Capital and reserves
Stated capital
Accumulated profit
4 023 015
96 964
2c
4 119 979
589 870
2 096 915
2b & 2d
2 686 785
Total equity
5 079 283
2 193 879
7 273 162
Non current liabilities
2 156 994
903 782
3 060 776
Non controlling interest
Loans and borrowings
74 660
1 196
75 856
Environmental rehabilitation provision
216 242
6 655
222 897
Amounts owing to holding company
408 516
20 470
428 986
–
24 449
24 449
1 457 576
851 012
469 080
36 439
505 519
61 434
24 261
85 695
Amounts owing to related parties
Deferred taxation
Current liabilities
Trade and other payables
Taxation payable
2e
2 308 588
–
100
100
Loans and borrowings
195 492
12 078
207 570
Amounts owing to related parties
212 154
–
212 154
Total liabilities
2 626 074
940 221
3 566 295
Total equity and liabilities
7 705 357
3 134 100
10 839 456
Nav per share (in cents)
561.18
12.12
573.30
TNAV per share (in cents)
(89.53)
(368)
(457.58)
Number of shares issued
800 000 000
–
800 000 000
16
Notes:
1.
The “before” financial information has been extracted without adjustment from the Group’s reviewed condensed statement of financial
position at 31 August 2015.
2.
The “adjustments – acquisition” financial information reflects the effect of the acquisition and consolidation of the assets and liabilities of
Tegeta at 31 August 2015 and specifically reflects the pro-forma financial effects on the statement of financial position as if the transaction
had taken place on that date.
ll items, unless specifically addressed below, have been extracted directly from the reviewed statement of financial position of Tegeta at
A
31 August 2015.
2a. M
ineral resource assets have been adjusted by R3.041 million to reflect the fair value of the mineral resource acquired from Tegeta
in terms of IFRS 3 – Business Combinations and represents the fair value of mineral resource assets that were identifiable upon
acquisition.
2b. N
on-controlling interests have been adjusted by R2.061 million to reflect the fair value of the purchase consideration (100 million
Shiva shares).
2c. A
ccumulated profit includes adjustments of R139 million relating to the gain on bargain purchase realised on acquisition, R11.2 million
in elimination of pre-acquisition accumulated profits of Tegeta, and R5.7 million in transaction costs. The adjustment for transaction
costs is not expected to have a continuing impact.
2e. D
eferred tax liabilities have been adjusted to take into account temporary timing differences relating to mineral resource assets
recognised at fair value on acquisition, and is reflected at tax rates that are expected to apply when the underlying asset is recovered.
2f. O
ther than what has been specifically addressed above, all items can be considered as continuing adjustments to the extent that they
represent assets and liabilities of Tegeta that have been acquired by Shiva.
3.
he “after” financial information illustrates the financial effects of the acquisition of the business of Tegeta on the statement of financial
T
position at 31 August 2015.
17
DETAILED PRO FORMA STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED
31 AUGUST 2015 – ACQUISITION OF BUSINESS OF TEGETA EXPLORATION AND RESOURCES
PROPRIETARY LIMITED
On the assumption that the acquisition was effective on the first day of the interim financial period ending 31 August 2015
BEFORE
REVIEWED1
ADJUSTMENTS –
AFTER
ACQUISITION2
ACQUISITION3
R’000
R’000
Revenue
130 724
119 241
249 965
Cost of sales
(101 227)
(33 671)
(134 898)
Gross profit
29 497
85 570
3 216
139 675
2a
142 891
Other operating expenses
(57 514)
(164 486)
2b & 2c
(222 000)
Operating (loss)/profit
(24 801)
60 760
35 959
Finance income
12 000
182
12 182
Finance expense
(21 503)
(2 077)
(23 580)
(Loss)/profit for the year
(34 304)
58 865
–
30 393
Net (loss)/profit for the year
(34 304)
89 258
54 954
Other comprehensive income
–
–
–
(34 304)
89 258
54 954
(26 777)
41 726
14 948
Other operating income
Taxation
Total comprehesive (loss)/profit for the year
R’000
115 067
24 561
2d
30 393
Attributable to:
Equity holders of the company
Non controlling interest
(7 527)
47 532
40 005
(34 304)
89 258
54 953
Earnings per share (in cents)
(3.35)
5.22
1.87
Diluted earnings per share (in cents)
(3.35)
5.22
1.87
Headline loss per share (in cents)
(3.35)
(7.67)
(11.02)
(3.35)
(7.67)
(11.02)
800 000 000
–
800 000 000
Total comprehensive income for the year
Diluted headline loss per share (in cents)
Weighted average number of shares
Notes:
1. he “before” financial information has been extracted without adjustment from the Group’s reviewed condensed statement of comprehensive
T
income for the six months ended 31 August 2015.
2.
The “adjustments – acquisition” financial information reflects the effect of the Acquisition and consolidation of the income and expenditure
of Tegeta on 1 March 2015 on the statement of comprehensive income for the six months ended 31 August 2015, and specifically reflects
the effects of the transaction had it taken place on the first day of the financial period. Unless separately specified below, all items in the
adjustments column reflect values extracted from the statement of comprehensive income of Tegeta for the six months ended 31 August
2015.
2a. A
gain on bargain purchase of R139.4 million has been recognised on the difference between the fair value of the purchase consideration
and the fair value of the identifiable net assets of Tegeta.
2b. A
mortisation on the mineral resource amounting to R108.5 million for the six months ended 31 August 2015 has been taken into
account. The mineral resource is amortised on a straight line basis over life of mine of 14 years. Amortisation charges have been
considered to be a continuing adjusting item and will occur annually until conclusion of life of the mineral resource asset.
2c. Includes transaction costs of R6.1 million; which is a non-continuing adjusting item.
2d. D
eferred tax includes the effects of the unwinding on temporary differences relating to the amortisation of the Tegeta mineral resource
asset and will occur anually until the conclusion of the life of the mineral resource asset.
2f. All adjustments with the exception of transaction costs is expected to have a continuing impact.
3.
he “after” financial information illustrates the financial effects of the acquisition of the business of Tegeta on the statement of comprehensive
T
income for the six months ended 31 August 2015.
18
ANNEXURE 2
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE PRO
FORMA FINANCIAL INFORMATION OF OAKBAY
The Directors
Oakbay Resources and Energy Limited
Grayston Ridge Office Park
Block A
Lower Ground Floor
144 Katherine Street
Sandown
Sandton
19 January 2016
1.
REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION
We have completed our assurance engagement to report (“Report”) on the compilation of pro forma earnings, headline and
diluted earnings, net asset value and net tangible asset value per share of Oakbay Resources and Energy Limited (“Oakbay”
or “the Company”), pro forma statement of financial position of Oakbay, the pro forma statement comprehensive income
of Oakbay and the related notes, including a reconciliation showing all of the pro forma adjustments to the share capital,
reserves and other equity items relating to Oakbay, (collectively “Pro forma Financial Information”). The Pro forma Financial
Information is set out in the Salient Features, paragraph 7 and Annexure 1 of the Circular to be issued by the Company on
or about 25 January 2016 (“Circular”).
The Pro forma Financial Information has been compiled by the directors of Oakbay to illustrate the impact of the Acquisition
(“Transaction”) as detailed in the Circular on the Company’s financial position and changes in equity as at 31 August 2015
and the Company’s financial performance for the period ended 31 August 2015.
As part of this process, the Company’s earnings, diluted earnings, headline earnings and diluted headline earnings
per share, statement of comprehensive income and statement of financial position have been extracted by the
directors from the Company’s interim financial statements for the period ended 31 August 2015 (“Published Financial
Information”), on which a review report has been published. In addition, the directors have calculated the net asset
value and net tangible asset value per share as at 31 August 2015 based on financial information extracted from the
Published Financial Information.
2.
DIRECTORS’ RESPONSIBILITY FOR THE PRO FORMA FINANCIAL INFORMATION
The directors of Oakbay are responsible for compiling the Pro forma Financial Information on the basis of the applicable
criteria as detailed in paragraphs 8.15 to 8.33 of the Listings Requirements of the JSE Limited and the SAICA Guide on
Pro forma Financial Information, revised and issued in September 2014 (“Applicable Criteria”).
3.
REPORTING ACCOUNTANTS’ RESPONSIBILITY
Our responsibility is to express an opinion about whether the Pro forma Financial Information has been compiled, in all
material respects, by the directors on the basis of the Applicable Criteria, based on our procedures performed.
We conducted our engagement in accordance with International Standard on Assurance Engagements (ISAE) 3420,
Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued
by the International Auditing and Assurance Standards Board. This standard requires that the reporting accountants’
comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the
directors have compiled, in all material respects, the Pro forma Financial Information on the basis of the Applicable Criteria.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any Published
Financial Information used in compiling the Pro forma Financial Information, nor have we, in the course of this engagement,
performed an audit or review of the Published Financial Information used in compiling the Pro forma Financial Information.
The purpose of Pro forma Financial Information included in the Circular is solely to illustrate the impact of the Transaction
on the unadjusted Published Financial Information as if the Transaction had been undertaken on 1 March 2015 for purposes
of the pro forma earnings, diluted earnings, headline and diluted headline earnings per share and the pro forma statement
of comprehensive income and on 31 August 2015 for purposes of the net asset value and net tangible asset value per
share and statement of financial position. Accordingly, we do not provide any assurance that the actual outcome of the
Transaction, subsequent to its implementation, will be as presented in the Pro forma Financial Information.
19
A reasonable assurance engagement to report on whether the Pro forma Financial Information has been properly compiled,
in all material respects, on the basis of the Applicable Criteria involves performing procedures to assess whether the
Applicable Criteria used by the directors in the compilation of the Pro forma Financial Information provide a reasonable
basis for presenting the significant effects directly attributable to the Transaction and to obtain sufficient appropriate
evidence about whether:
• The related pro forma adjustments give appropriate effect to the Applicable Criteria; and
• The Pro forma Financial Information reflects the proper application of those pro forma adjustments to the unadjusted
Published Financial Information.
The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s
understanding of the nature of the Company, the Transaction in respect of which the Pro forma Financial Information has
been compiled and other relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the Pro forma Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
4.OPINION
In our opinion, the Pro forma Financial Information has been compiled, in all material respects, on the basis of the Applicable
Criteria.
Yours faithfully
KPMG Inc.
Per Bavhana Sooku
Chartered Accountants (SA)
Director
20
ANNEXURE 3
INDEPENDENT EXPERT OPINION ON THE ACQUISITION
19 January 2016
The Directors
Oakbay Resources and Energy Limited
Grayston Ridge Office Park,
Block A, Lower Ground Floor
144 Katherine Street
Sandown
Sandton
2191
DEAR SIRS,
INDEPENDENT FAIRNESS OPINION IN RESPECT OF THE ACQUISITION BY SHIVA URAINIUM (PTY) LTD
(“SHIVA” OR THE “ISSUER”) OF THE COAL BUSINESS OF TEGETA EXPLORATION AND RESOURCES (PTY)
LTD (“TEGETA”), IN EXCHANGE FOR SHIVA CONSIDERATION SHARES (“THE TRANSACTION”)
INTRODUCTION
We have been appointed by the Board of Directors to advise the shareholders of Oakbay Resources and Energy Limited
(“Oakbay”) whether, in our opinion the proposed acquisition by Shiva of the coal business of Tegeta, which will be settled through
the issue of shares in Shiva (“the purchase consideration”), is fair to the shareholders of Oakbay.
Oakbay Investments (Pty) Ltd (“Oakbay Investments”) is a shareholder of Tegeta with an effective holding of 34.59%. In addition,
Oakbay Investments has an 80% shareholding in Oakbay. As Oakbay Investments is able to exercise in aggregate more than
10% of the voting right in Tegeta and Shiva, the transaction is classified as a related party transaction in terms of section 10.4(f)
of the Listings Requirements.
EXPLANATION OF THE TERM ‘FAIR’
Fairness
The term ‘fairness’ is defined in Schedule 5 of the JSE Listings Requirements as being primarily based on quantitative issues.
Therefore, the transaction would be considered fair to the Oakbay shareholders if the total consideration payable by Shiva is
equal to or less than an arm’s length market related value of Tegeta.
ASSUMPTIONS
We arrived at our opinion based on the following assumptions:
• Current economic, regulatory and market conditions will not change materially. This included an analysis of publically available
information relating to the forecast market outlook;
• That reliance can be placed on the audited annual financial statements of Shiva for the years ended 28 February 2013,
28 February 2014 and 28 February 2015 during the course of this assignment;
• That reliance can be placed on the audited annual financial statements of Tegeta for the years ended 28 February 2014 and
28 February 2015 during the course of this assignment;
• That reliance can be placed on the year-to-date (“YTD”) management accounts of Tegeta for the 6 month period ended
31 August 2015;
• That reliance can be place on the forecast financial information of Tegeta for the 6 month period 1 September 2015 to
29 February 2016;
• That reliance can be place on the forecast financial information of Tegeta for the period ending 28 February 2017 to
28 February 2029; and
• Where relevant, representations made by management and/or directors were corroborated to source documents prepared
by third parties, independent analytical procedures performed by us and by examining and analysing external factors that
influence the business. This included an analysis of the forecast financial information against that of the audited annual
financial statements for reasonability.
21
SOURCES OF INFORMATION
In the course of our analysis, we relied upon financial and other information, including financial information obtained from
management together with industry related and other information available in the public domain. Our conclusion is dependent
on such information being accurate in all material respects.
The principle sources of information used in formulating our opinion regarding the transaction include:
• Audited annual financial statements of Shiva for the years ended 28 February 2013, 28 February 2014 and 28 February 2015;
• Audited financial statements of Tegeta for the 12 months ended 28 February 2014 and 28 February 2015;
• Unaudited YTD management accounts of Tegeta for the 6 months ended 31 August 2015;
• The draft circular;
• The rationale for the transaction, together with the terms and conditions thereof;
• Forecast financial information for Tegeta as provided by management;
• Information and assumptions made available by and from discussions held with management; and
• Publicly available information relating to Shiva, Tegeta and other competitors in the sector that we deemed to be relevant,
including company announcements.
We obtained the information through:
• Conducting interviews with management and / or advisors; and
• Extracting information from the internet and the press.
We satisfied ourselves as to the appropriateness and reasonableness of the information with reference to:
• Audited annual financial statements for the years ended 28 February 2013, 28 February 2014 and 28 February 2015 of Shiva;
• Audited annual financial statements for the years ended 28 February 2014 and 28 February 2015 of Tegeta;
• Conducting analytical reviews on the financial statements;
• Understanding the industries in which the entities operate; and
• Assessing whether replies from management and / or advisors on certain issues were corroborated by third parties and
documentary evidence where possible.
LIMITING CONDITIONS AND RELATED PARTY RELATIONSHIPS
We have relied upon the accuracy of information provided to us or otherwise reviewed by us, for the purposes of this opinion,
whether in writing or obtained through discussion with the management of Oakbay. We express no opinion on this information.
There were no limiting conditions, or any restrictions of scope imposed by the client whilst this opinion was being prepared.
Our opinion is based on current economic, regulatory, market as well as other conditions. Subsequent developments may affect
this opinion, which we are under no obligation to update, review or re-affirm.
This letter and opinion is provided solely for the benefit of the shareholders of Oakbay in connection with and for the purposes
of their consideration of the transaction.
There is no relationship between Mazars Corporate Finance (Pty) Ltd (“MCF”) and any other parties involved in this transaction.
MCF has no shares in Oakbay, Shiva or Tegeta nor any other party involved in the transaction. MCF’s fees are not payable
in shares.
Each shareholder’s individual decision may be influenced by such shareholder’s particular circumstances and accordingly each
shareholder should consult an independent advisor if in any doubt as to the merits or otherwise of the transaction.
PROCEDURES
In order to assess the fairness of the terms and conditions relating to the transaction, we have performed, amongst others, the
following procedures:
• Reviewed the audited annual financial statements for the years ended 28 February 2013, 28 February 2014 and 28 February
2015 of Shiva;
• Reviewed the audited annual financial statements for the years ended 28 February 2014 and 28 February 2015 of Tegeta;
• Reviewed the forecast financial information of Tegeta as provided by management;
• Considered information made available by and from discussions held with the directors and management of Oakbay;
• Reviewed general economic, market and related conditions in which Shiva and Tegeta operate;
• Considered the rationale for the transaction;
• Reviewed the valuation methodologies used by our mining expert;
• Reviewed the competency of our mining expert;
• Reviewed the methodologies available for performing valuations of businesses operating in this industry;
• Performed an indicative valuation of Shiva using the Net asset value (“NAV”) approach;
• Performed an indicative valuation of Tegeta using the Discounted Cash Flow (“DCF”) approach; and
• Conducted appropriate sensitivity analyses given a reasonable range of key assumptions on the valuations above.
22
We believe the above procedures commercially justify the conclusion outlined below.
CONFIRMATION OF PERFORMANCE OF VALUATION AND VALUATION METHODOLOGY
We confirm that we have performed a valuation of Shiva utilising the NAV approach and Tegeta utilising the DCF approach.
The valuations were performed taking cognisance of Shiva’s and Tegeta’s current and planned operations as well as other
market factors affecting these operations. Using the values derived from the above valuations, a comparison was made to the
consideration payable.
Shiva has not commenced mining operations of the uranium resources thus the cash flows that are generated by Shiva are not a
true reflection of Shiva’s operations. The value of Shiva lies with the mineral resource. The mining operations have commenced
within Tegeta and therefore cash flows are available to utilise the DCF method.
Key value drivers to the DCF valuation of Tegeta are as follows:
Internal:
•
•
•
•
•
•
The achievability of the forecasts provided for the duration of the life of mine;
The discount rate applicable to Tegeta;
Forecast capital expenditure requirements;
Revenue growth rates;
Profit margins;
Performed an analysis and review of the forecast revenue growth rates. This included sensitivity analyses performed on
the forecast revenue by increasing and decreasing revenue by 10% and the impact thereof on the valuation, being a 10%
increase and decrease on the total value, respectively;
• Performed an analysis and review of the forecast profit margins. This included a sensitivity analysis performed on the forecast
earnings before interest, taxation, depreciation and amortisation (“EBITDA”) margins by increasing and decreasing the EBITDA
margins by 1% and 2% and assessed the impact thereof on the valuation, being a 3% and 5% increase and decrease on the
total value, respectively; and
• A ssessed the reasonability of the forecast working capital assumptions against that of the historical net working
capital movement.
External:
• P
erformed sensitivity analyses on the long term inflation rate assumed at 5.6% and assessed the impact thereof on the
valuation; and
• Interest rates with the Prime Rate being 9.5%.
Key value drivers to the NAV method of Shiva are as follows:
Internal:
• Fair market value of the mineral assets taking into account the independent valuation as performed by the mining expert;
• Fair market value of other assets taking into account the realisable value of these; and
• Fair market value of the liabilities based on the outstanding amounts payable.
External:
• P
erformed sensitivity analyses on the long term inflation rate assumed at 5.6% and assessed the impact thereof on the
valuation.
Using the values derived from the above valuations, a comparison was made between the consideration paid and the
consideration received.
The valuation of Shiva resulted in an indicative value range of between R17.54 and R21.43 per share. The current consideration
of R20.61 per share falls within this valuation range and is therefore considered to be a fair consideration price per share.
The valuation of Tegeta resulted in an indicative value range of between R1 958 788 757 and R2 204 652 725. As the effective
consideration payable by Shiva of R2 061 000 000 falls within this valuation range the transaction is considered to be fair to the
shareholders of Oakbay.
Our procedures and enquiries did not constitute an audit in terms of International Standards on Auditing. Accordingly, we cannot
express any opinion on the financial data or other information used in arriving at our opinion.
OPINION
Our opinion is based upon the market, regulatory and trading conditions as they currently exist and can only be evaluated at
the date of this letter. It should be understood that subsequent developments may affect our opinion, which we are under no
obligation to update, revise or re-affirm.
23
We have considered the terms and conditions of the proposed transaction, and based upon, and subject to the aforegoing, we
are of the opinion that the purchase by Shiva of the coal business of Tegeta for a total consideration of 100 000 000 Shiva Shares
at R20.61 per share is fair to the shareholders of Oakbay.
CONSENT
We hereby consent to the inclusion of this letter in the circular to the shareholders of Oakbay in terms of the JSE Listing
Requirements.
Yours faithfully
Anoop Ninan
Director
Mazars Corporate Finance (Pty) Ltd
PO Box 6697
Johannesburg
2000
19 January 2016
24
OAKBAY RESOURCES AND ENERGY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2009/021537/06)
Share code on the JSE: ORL ISIN: ZAE000196085
(“Oakbay” or “the Company”)
Directors:
Atul Kumar Gupta (Non-executive Chairman)
Varun Gupta (Chief Executive Officer)
Trevor Scott (Financial Director)
Mark Vivian Pamensky (Independent non-executive Director)
Dudu Jacqueline Nyamane (Independent non-executive Director)
Terence William Rensen (Lead Independent non-executive Director)
NOTICE OF GENERAL MEETING OF OAKBAY SHAREHOLDERS
Notice is hereby given that a general meeting of Shareholders of Oakbay (“the General Meeting”) will be held at 144 Katherine
Street Grayston Ridge Office Park, Sandton at 10:00 on 23 February 2016 for the purpose of considering, and if deemed fit,
passing, with or without modification, the following resolutions set out in this Notice of General Meeting
Note:
•
The definitions commencing on page 5 of the circular to which this Notice of General Meeting is attached, apply mutatis mutandis to this
Notice of General Meeting and to the resolutions set out below.
•
The Related Party and its associates will be taken into account in determining a quorum at the General Meeting, but their votes will not be
taken into account in determining the results of the voting on Ordinary Resolution number 1.
1.
ORDINARY RESOLUTION NUMBER 1 – ACQUISITION OF THE BUSINESS OF TEGETA
“RESOLVED AS AN ORDINARY RESOLUTION that the acquisition by the Company of the Business carried out by Tegeta
for a total purchase consideration to be settled by way of the issue of 100 000 000 Oakbay Shares, on the terms more
fully set out in the Agreement, the salient terms whereof are contained in the Circular and copies of which have been made
available for inspection by Shareholders, be and is hereby approved in terms of the JSE Listings Requirements.”
Reason and effect
The reason for Ordinary Resolution number 1 is to approve the acquisition of the Business of Tegeta in accordance with
the JSE Listings Requirements.
The effect of Ordinary Resolution number 1, if passed by Shareholders other than the Related Party including associates,
is that the Company will be granted the necessary authority by Shareholders in terms of the JSE Listings Requirements to
implement the Acquisition.
VOTING AND PROXIES
The date on which Shareholders must be recorded, as such in the share register maintained by the Transfer Secretaries of
the Company (“the Share Register”) for purposes of being entitled to receive this notice is 15 January 2016.
The date on which Shareholders must be recorded in the Share Register for purposes of being entitled to attend and vote
at this meeting is 12 February 2016. Accordingly, the last day to trade to be entitled to attend and vote at this meeting is
5 February 2016.
25
Section 63(1) of the Companies At, No 71 of 2008, as amended, requires that meeting participants provide satisfactory
identification. Meeting participants will be required to provide proof of identification to the reasonable satisfaction of the
Chairman of the General Meeting and must accordingly bring a copy of their identity document, passport or drivers license
to the General Meeting. If in doubt as to whether any document will be regarded as satisfactory proof of identification,
meeting participants should contact the Transfer Secretaries for guidance.
Shareholders entitled to attend and vote at the General Meeting, may appoint one or more proxies to attend, speak and vote
in his/her stead. A proxy need not be a member of the Company. A form of proxy (yellow), in which the relevant instructions
for its completion are set out, is enclosed for use by a Certificated Shareholder or Dematerialised Shareholder with “Own
Name” registration who wishes to be represented at the General Meeting. Completion of a form of proxy (yellow) will not
preclude such Shareholder from attending and voting (in preference to that Shareholder’s proxy) at the General Meeting.
By order of the board
iThemba Governance and Statutory Solutions Proprietary Limited
Company Secretary
25 January 2016
Registered office
Block 5, Suite 102
79 Steenbok Avenue
Monument Park, 0105
Transfer secretaries
Trifecta Capital Services Proprietary Limited
(Registration number 2009/018890/07)
Trifecta House
31 Beacon Road
Florida North, 1709
(PO Box 61272, Marshalltown, 2107)
26
OAKBAY RESOURCES AND ENERGY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2009/021537/06)
Share code on the JSE: ORL ISIN: ZAE000196085
(“Oakbay” or “the Company”)
FORM OF PROXY – FOR USE BY CERTIFICATED AND OWN-NAME
DEMATERIALISED SHAREHOLDERS ONLY
The definitions commencing on page 5 of the circular to which this Form of Proxy is attached, apply mutatis mutandis to this
Form of Proxy.
For use at the General Meeting of Shareholders of the Company, to be held at 144 Katherine Street, Grayston Ridge Office Park,
Sandton at 10:00 on 23 February 2016.
I/We (Full names in BLOCK LETTERS please)
of (address)
Telephone number Cellphone number
Email address
being the registered holder(s) of: ordinary Shares in Oakbay Limited hereby appoint:
1.
or failing him/her
2.
or failing him/her
3.
the chairman of the General Meeting
as my/our proxy to vote for me/us on my/our behalf at the General Meeting which will be held for the purpose of considering and,
if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at each adjournment thereof and
to vote for and/or against the said resolutions and/or to abstain from voting in respect of the Shares of the Company registered
in my/our name(s), in accordance with the following instructions (see notes):
Number of Shares
For
Against
Abstain
Ordinary resolution number 1
Approving the Acquisition
Please indicate your voting instruction by way of inserting the number of Shares or by a cross in the space provided.
Signed at
on
2016
Signature
Assisted by me (where applicable) (State capacity and full name)
Each Shareholder is entitled to appoint one or more proxy(ies) (who need not be a Shareholder(s) of the Company) to attend,
speak and, vote in his stead at the General Meeting.
Please read the notes on the reverse side of this form of proxy
Notes:
1.
A Oakbay Shareholder may insert the name of a proxy or the names of two alternative proxies of the Shareholder’s choice in the space(s)
provided, with or without deleting “the chairman of the General Meeting”, but any such deletion must be initialled by the Shareholder.
The person whose name stands first on the form of proxy (yellow) and who is present at the General Meeting will be entitled to act as proxy
to the exclusion of those whose names follow.
2.
A member is entitled to one vote on a show of hands and on a poll one vote in respect of each Share held. A resolution put to the vote shall
be decided by a show of hands unless before, or on the declaration of the results of the show of hands, a poll shall be demanded by any
person entitled to vote at the General Meeting.
3.
A Oakbay Shareholder’s instructions to the proxy(ies) must be indicated by the insertion of the relevant number of Shares to be voted on
behalf of that Shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the chairman of the
meeting, if he/she is the authorised proxy, to vote in favour of the resolutions at the meeting, or any other proxy to vote or to abstain from
voting at the meeting as he/she deems fit, in respect of all the Shares concerned. A Shareholder or his/her proxy is not obliged to use all the
votes exercisable by the Shareholder or his/her proxy, but the total of the votes cast and in respect whereof absentions are recorded may
not exceed the total of the votes exercisable by the Shareholder or his/her proxy.
4.
When there are joint registered holders of any Shares, any one of such persons may vote at the meeting in respect of such Shares as if he/
she was solely entitled thereto, but, if more than one of such joint holders be present or represented at any meeting, that one of the said
persons whose name stands first in the register in respect of such Shares or his/her proxy, as the case may be, shall alone be entitled to
vote in respect thereof. Several executors or administrators of a deceased member, in whose name any Shares stand, shall be deemed joint
holders thereof.
5.
Forms of proxy (yellow) must be completed and returned to be received by the Transfer Secretaries of the Company, Trifecta House,
31 Beacon Road, Florida North, 1709 (PO Box 61272, Marshalltown, 2107), so as to be received by not later than 10:00 on 19 February 2016
alternatively, such form of proxy (yellow) may be handed to the Chairman of the General Meeting prior to the exercise of the voting rights in
terms thereof in respect of the resolution in question.
6.
Any alteration of correction made to this form of proxy (yellow) must be initialled by the signatory (ies).
7.
Documentary evidence establishing the authority of a person signing this form of proxy (yellow) in a representative capacity must be
attached to this form of proxy (yellow) unless previously recorded by the Company’s Transfer Secretaries or waived by the chairman of the
General Meeting.
8.
The completion and lodging of this form of proxy (yellow) will not preclude the relevant Shareholder from attending the General Meeting and
speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such Shareholder wish to.
9.
Summary of Rights Contained in Section 58 of the Act
In terms of section 58 of the Act:
• a
Shareholder may, at any time and in accordance with the provisions of section 58 of the Act, appoint any individual (including an
individual who is not a Shareholder) as a proxy to participate in, and speak and vote at, a Shareholders meeting on behalf of such
Shareholder;
• a
proxy may delegate her or his authority to act on behalf of a Shareholder to another person, subject to any restriction set out in the
instrument appointing such proxy;
• irrespective of the form of instrument used to appoint a proxy, the appointment of a proxy is suspended at any time and to the extent
that the relevant Shareholder chooses to act directly and in person in the exercise of any of such Shareholder’s rights as a Shareholder;
• any appointment by a Shareholder of a proxy is revocable, unless the form of instrument used to appoint such proxy states otherwise;
• if an appointment of a proxy is revocable, a Shareholder may revoke the proxy appointment by: (i) cancelling it in writing, or making a
later inconsistent appointment of a proxy and (ii) delivering a copy of the revocation instrument to the proxy and to the company; and
• a
proxy appointed by a Shareholder is entitled to exercise, or abstain from exercising, any voting right of such Shareholder without
direction, except to the extent that the relevant company’s memorandum of incorporation, or the instrument appointing the proxy,
provides otherwise.