CASE STUDY ANALYSIS 1

REQUIREMENTS

You are required to study the information provided below concerning a Namibian and Australian
listed company called Deep Yellow Limited, that operates in the mining industry. You should compile
a report based on your analysis of the case study below. The objectives of your analysis and the
report are:

 To analyse the financial status of the company, with the help of the latest available
annual reports (In this case, conducting the analysis based on annual report published
in 2018).
 To study the book value and market value of share
 To analyse the statements of financial position (SOFP) and profit or loss (SOPL) for
2018
 To analyse the statement of cash flows for 2018
 To analyse the different financial ratios for 2018

Methodology
 Data source: source of data for this report is the annual reports of the company which
is a secondary source.
 Statistical Techniques: For your analysis, please use the different kind of graphs to
depict trend.
 The period under consideration is 2018: meaning that you look at two-year data.
Should any additional reports be required for your analysis, then you can include and
indicate which reports you used.
 Other than the time series analysis referred to in the bullet point above, you may
obtain the financial reports of a similar listed company in Namibia and conduct a cross-
sectional analysis of Deep Yellow PLC and your chosen company.
 You should make use of only publicly available information such as the Namibia Stock
Exchange and the Websites of the companies to aid the case below.
THE CASE OF DEEP YELLOW LIMITED

COMPANY PROFILE

Deep Yellow Limited (ASX:DYL) is a specialist uranium company implementing a new strategy to grow
shareholder wealth. This strategy is founded upon growing the existing uranium resources across the
Company’s uranium projects in Namibia and the pursuit of accretive, counter-cyclical acquisitions to
build a geographically diverse asset portfolio.

In parallel to its expansion objectives, the Company has a cornerstone suite of projects in Namibia, a
top-ranked African mining destination with a long, well regarded history of safely and effectively
developing and regulating its considerable uranium mining industry.

Deep Yellow holds four contiguous Exclusive Prospecting Licences (EPLs) covering 1,730km2 within
the heart of what is a world recognised, prospective uranium province of high significance. The
tenements are strategically located amongst the major uranium mines of this region – 20km south of
the Husab/Rössing deposits and 40km southwest of the Langer Heinrich deposit.

Previous exploration has delineated a current resource base of 50.1Mlb U308 @ 245ppm
(palaeochannel related/Langer Heinrich style deposits) and 45.1Mlb U308 @ 420ppm (alaskite related
Rössing and Husab style deposits). The belief of current management is that these resources can be
enhanced significantly and the 2017 exploration programme has already achieved a new discovery.

CORPORATE STRATEGY

Since the appointment of John Borshoff as CEO and Managing Director in October 2016, the Company
has set a new direction built around a robust strategy to grow shareholder wealth. This realignment
is designed firstly to establish the true potential of its Namibian projects and secondly to take
advantage of prevailing depressed uranium market conditions to opportunistically acquire value
adding projects and it has already delivered tangible results.

The first pillar of the new strategy is to grow resources across Deep Yellow’s existing uranium assets
in Namibia and a number of significant achievements have been made in this respect. This includes a
landmark $4.5m earn-in joint venture by the Japanese group JOGMEC and importantly, the discovery
of a new uranium deposit (Tumas 3) in April 2017 during the early stages of a 10,000m drilling
programme on Deep Yellow’s 100% owned ground. Numerous new targets remain to be tested along
a 100km highly prospective palaeochannel system that has been identified.
The second pillar of the Company’s strategy is to establish a global, multi-project, geographically
diverse uranium platform through the pursuit of selective, value accretive acquisitions. The Board
believes long-term shareholder value can be created by adopting a counter-cyclical approach in the
current low uranium price environment.

INDUSTRY

Mining sector has remained the bedrock of the Namibian economy in all conditions of the economy –
in good times and in turbulent times as seen in the last 2 yrs. The mining sector recorded a healthy
growth in 2017 (12.2%) on the back of a combination of a rebound in commodity prices and an
increase in production of diamonds, gold and uranium. New mines being developed are smaller in
nature. However, their combined contribution will make a positive impact, particularly in spin offs to
rest of the economy. There is a major potential for growth of mining input and service industry in the
upstream linkages with lucrative local procurement spend. Industry has sustained a local spend in
excess of N$ 11. billion/year in the last 3 years. Industry commitment to supporting local suppliers of
goods and services and growing the job market. Outlook for commodity prices is extremely positive;
2018 opened with the gold price breaching US$1,300/oz, copper breaching US$7,000/mt and zinc
above US$3,400/mt. Electric motor vehicles and renewable energy storage solutions are driving
demand for commodities. The battery component of electric motor vehicles is made from an array of
minerals, namely; cobalt, lithium, graphite, rare earths and nickel. Copper requirements in such cars
are 20% more than conventional vehicles. This is extremely positive in that it will drive Namibian
exploration for years to come.

ANALYSTS OPTIMISTIC ABOUT MINING

The outlook for the mining industry is generally positive, although some downward risks still exists,
says the senior manager of research and development at FNB, Daniel Motinga.
He says the risk will mainly come from the slowdown in the Chinese economy which has a deflationary
effect on commodity prices. The second risk will come from domestic sources such as industrial action
at some of the major mines.

Independent economist, Klaus Schade said that he expects output from diamond mining to stay the
same as last year while copper production will increase after the resumption of copper mining at
Otjihase and Matchless mines last year. Motinga, however believes a significant share of the mining
sector’s contribution to GDP will probably come from the uranium subsector. He said while it is
difficult to quantify the full benefit of uranium to the economy at this stage, he estimates that uranium
output will increase by around 10% this year.
Schade, like Motinga is optimistic about the increase in uranium production, compared to last year’s
low production which was largely as a result of the adverse weather conditions and industrial action.
He says uranium production is also expected to increase after the completion of Stage 3 of the
expansion of the Langer Heinrich Uranium Mine. Although mining companies have been hit by the
fuel increments effected since the beginning of the year, Motinga said mining companies are taking
out fuel hedges to manage this risk.

“On a positive note, we are seeing a decline in international oil prices which bodes well for energy/fuel
intensive producers,” he says to ensure that Namibia continues to be globally competitive, the FNB
economist suggests that the country needs to provide a conducive and welcoming investment climate.
Schade also says that it is important to provide investors with a stable and predictable policy
environment. “We need therefore to engage the business community through their associations in
the development of new policies to maintain a conducive policy environment,” he advises.

Schade reasons that macro-economic stability and fiscal discipline remains Namibia’s biggest assets
despite relatively high budget deficits currently owing to expansionary budgets.
He says the constant upgrades of our infrastructure, transport, communication, energy and water will
ensure that we stay competitive. “The link to the West African Cable System will improve our
communication infrastructure, the planned expansion of the Walvis Bay harbour will ensure that the
port can handle all incoming and outgoing shipments efficiently.”Schade stresses on the need to
improve the skills of the local workforce in order to attract more investment and the need to start
investing into skills that will be required by offshore gas and oil exploration companies if they discover
deposits. “We need to look into our labour laws and balance workers protection and workers rights
with the degree of flexibility and labour productivity expected by investors.”

CAPITAL STRUCTURE

Fully Paid Shares 201,085,968

Listed Options (exp. 1 June 2022, @ 50 cents*) 62,469,618

Acceleration @ 78 cents for 20 business days

FINANCIAL REPORTS
SOURCES:

The Chamber of Mines of Namibia. Mining Industry Performance in 2017. Available at

<http://www.chamberofmines.org.na/files/6315/2466/0912/1._Mining_Industry_Performance_201
7.pptx.pdf> Accessed on 06 June 2019.

Deep Yellow Limited. <http://deepyellow.com.au/> Accessed on 06 June 2019.

Namibia Economist. (2012). Analysists optimistic about mining. Available at

<https://economist.com.na/1964/special-focus/analysts-optimistic-about-mining/> Accessed on 07
June 2019.