Industrial Development Corporation (IDC) officials met with Atul Gupta and members of his business ahead of providing financial assistance to Oakbay Resources & Energy, it was revealed on Tuesday.

IDC CEO Geoffrey Qhena confirmed the meetings took place in a written reply provided by Economic Development Minister Ebrahim Patel to Democratic Alliance MP Michael Cardo on Tuesday.

“It is common knowledge that the IDC has provided financial assistance to Oakbay Resources & Energy Limited,” said Qhena.

“In the period leading up to the finalisation of negotiations regarding the transaction and in the normal course of business, Mr Ufikile Khumalo (who was at the time the divisional executive responsible for mining and beneficiation) and Mr Abel Malinga (the current divisional executive responsible for mining & metals industries) held several meetings with officials, executives and shareholders of Oakbay Resources & Energy, including Mr Atul Gupta and Mr Jagdish Parekh.”

No meetings at Saxonwold

Qhena said “none of these meetings took place at the Guptas' Saxonwold Estate”.

“All meetings with officials, executives and shareholders of Oakbay Resources took place at the offices of the IDC. None of these meetings took place at the Guptas' Saxonwold Estate.”

He said the current divisional executive for mining and metals industries, Abel Malinga, met twice with Oakbay Resources chief financial officer Ronica Ragavan to finalise the terms for restructuring Oakbay Resources’ existing facilities with the IDC.

This was followed by another meeting to seek an “early redemption of IDC facilities by Oakbay Resources”.

No political considerations associated with restructure

Cardo also asked what political and commercial considerations led the IDC to strike a restructuring deal with Oakbay at a reduced interest rate of prime plus 2%, given that the specified company defaulted on its first R250-million loan to the IDC.

Qhena said “there were no political considerations associated with the restructure (and) the restructuring was done purely on commercial terms as set out below”.

“The original R250-million loan is expected to be fully repaid, as R137.5-million has already been received to date and R112.5m is outstanding as at April 30 2016.

“The next instalment of R37.5-million is payable by the end of June 2016, with intention of the full capital being repaid by March 31 2018.

“The interest of R257-million being from April 14 2010 to May 31 2014 (the date on which the amount converted was determined) was converted into shares when the entity was listed (at a 10% discount to the listing price).

“The additional interest (after conversion) of prime plus 2% will be repaid as a lump sum on March 31 2018.”

Risk profile of the company changed

Qhena said the risk profile of the company at the time of its investment compared to the risk profile of the company at the time of restructuring differed materially.

“At the time of the acquisition, the mine was under care and maintenance and the company was not generating any revenue, which needed to be brought back into production.

“The turnaround strategy of the company was based on an improvement in operational efficiencies and productivity,” he said. “The IDC initially viewed the asset as a pure uranium play (the gold potential was not considered at the time due to the level of accuracy of the information); compared to the time of restructuring, there was a demonstrable open cast gold reserve with a proven operational record.

“At the time of the acquisition, the ‘perceived’ risks were higher, hence the equity type return of 10% real after tax internal rate of return.

“Our pricing mechanism always takes into account both the level of risk and developmental impact, and the repayment profile mirrors the anticipated cash flow generation of the asset/project.”

IDC demanded part settlement

At the time of the restructuring, Qhena said the IDC demanded that the company part settle R100-million of the original facility before its restructuring.

“In addition, the main shareholder had injected an additional R293-million and the company was generating positive cash flows from the gold production concomitant with now a demonstrable operational track record from the gold production.

“Moreover, the IDC facility was reduced by R100-million and the balance of the original capital continued to be secured by the assets of the company, giving the IDC a security cover of more than one times – hence the prime plus 2% post the restructuring.

“It is not the first time that the IDC has done a restructuring of this nature where a debt facility is converted into equity,” he said. “Ordinarily, both the interest and capital is converted into equity.

"The difference in this instance is that only the interest portion was converted retaining the capital for it to still be repaid, thus putting us in a better position.”