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JSE cancels Oakbay trades, starts probe

Companies
Johannesburg - The JSE on Friday cancelled and launched an investigation into the trading activity in Oakbay Resources and Energy shares after it picked several unusual single share trades.

Earlier on Friday, Oakbay shares surged 28 percent, with one analyst saying that the upswing could be due to a renewed optimism about the nuclear programme following former Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas's dismissal.

Oakbay’s fortunes are linked to a rising demand of uranium.

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A logo of Oakbay Investments at the entrance of their offices in Sandton, Johannesburg. The JSE on Friday launched an investigation into the trading activity in Oakbay Resources and Energy shares after detecting some unusual activity.Photo: Reuters

Oakbay has a 74 percent interest in Shiva Uranium, a mining and exploration company currently focused on uranium, gold mining and beneficiation. The mine is located 20km to the west of Klerksdorp in the North West province.

But the JSE said on Friday it had noted the single share trades in Oakbay and cancelled them. The “JSE’s approach to surveillance of trade activity is proactive,” the JSE said. “We monitor all trade taking place on the market as it happens, and respond when we pick up unusual activity.”

Ashburton Investments fund manager Wayne McCurrie said, while there was nothing wrong with single share trades, the JSE usually investigated unusual activities.

“This can be anything, including unusual movements in the share price,” said McCurrie.

The Gupta family-owned Oakbay Investments owns 80 percent of Oakbay Resources and Energy. When the company listed on the JSE in November 2014, it converted Industrial Development Corporation’s loan of approximately R256 million to a 3.57 percent equity.

In its 2015 annual report, Oakbay said it was upbeat about the prospects of the uranium industry, although its future largely hinged on rising uranium demand.

In a commentary on its results for the six months to August 31, it said it expected uranium demand and prices to rise on the back of new nuclear reactors being built around the world.



“It is an accepted fact that by 2020 uranium demand will far exceed supply. Simply put, we are operating in the ideal growth market and uranium is the place to be,” Gupta said in the annual report.

Uranium is used as fuel for nuclear power plants and is a key mineral for the aerospace and defence industries.

Read also: Guptas' Oakbay to continue to fight Gordhan

But analysts shy away from the stock because it is tightly held. Prior to the JSE’s cancellation of Oakbay trades, Stephen Meintjes, an analyst at Momentum SP Reid, said the increase in the share could be linked to the changes at National Treasury.

“Treasury is at the centre of South Africa’s plans to procure nuclear through the nuclear procurement programme,” Meintjes said. “The true cost of the programme is not known yet, because Eskom has not yet released request for proposals which would enable prospective vendors such as global energy companies, Areva of France and Rosatom of Russia, to indicate the costs of the programme.”

In September last year, Gordhan told parliament that a full cost-benefit analysis was necessary before the feasibility, affordability and procurement strategy could be properly assessed by the Treasury.

Attempts to get comment from Oakbay on Friday were not successful.

BUSINESS REPORT

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