Oakbay cries foul on IDC's legal action

Cape Town – Oakbay, which faces legal action from the Industrial Development Corporation (IDC) over its failure to pay back the R293m owed to the state-owned entity, called the IDC's actions “spurious and malicious”.

In a statement issued late on Friday, the company which is under majority control by the politically connected Gupta family, vowed that it has always “strictly abided” by all relevant financial rules and regulations and upheld all its obligations to shareholders.

“We reject the IDC’s allegations and smears that are part of a wider attempt to discredit Oakbay. Our attorneys have formally responded to the IDC,” the statement read.

On Thursday, Economic Development Minister Ebrahim Patel, who is the political head of the IDC, said in response to a Parliamentary question that he had given Oakbay until midnight (November 23) to pay back its R293m loan to the IDC.

Business Day reported earlier on Friday that the money had not been paid by the deadline set and that legal action would proceed.

The IDC agreed in 2010 to lend Oakbay R250m at a real after-tax internal rate of return of 10%. Oakbay used the money to buy the Shiva Uranium mine.

The loan was subsequently converted into equity.

Patel said he decided to launch an investigation into Oakbay following revelations of unlawful manipulations of the company’s share price. In July this year, the IDC board appointed a legal team led by Advocate Geoff Budlender SC to advise the entity on the way forward.

READ: IDC legal action against Oakbay 'too little, too late' - banker 

Based on the legal advice, the IDC consequently cancelled the restructuring agreement with Oakbay. 

The company is also facing an investigation by the Financial Services Board (FSB). A trove of emails seen by news agency Bloomberg showed that family money was used to inflate the share price of Oakbay Resources on its JSE debut three years ago.

Bloomberg reported that the Guptas boosted the value of Oakbay by lending money from a Dubai bank account to a Singapore firm, which then transferred cash to Oakbay in South Africa via Hong Kong in exchange for shares, the emails seen by Bloomberg show. 

A director at the Singapore company was then instructed by an Oakbay employee to sell 20 000 securities, according to the emails. On the day trade opened, 20 000 shares changed hands and closed at R10.08, setting Oakbay’s market value at R8bn.

That’s more than 48 times full-year revenue, whereas most Johannesburg-based mining companies have sales that exceed their market value.

The company delisted its shares in July after directors resigned and its sponsor and transfer secretaries resigned.