'Well north of $1 a share' – not 36c – is true value, says Rockwell

By: Martin Creamer

An offer of considerably more than $1 a share – and not the 36c Pala Investments was offering – would reflect the true value of TSX- and JSE-listed Rockwell Diamonds, CEO John Bristow said last week.

Bristow said that the company had $1,4-billion worth of diamonds in the ground plus the wherewithal to get those diamonds out of the ground.

He did not discount the possibility of a “white knight” entering the fray or a better offer being made to shareholders between now and the November 10 close of Pala’s offer, which Rockwell had advised shareholders to reject on the grounds that it was both “inadequate and unfair”.

“Over the last year, we have had interest from several companies because we have a great business, so if a better offer comes along, we will consider it accordingly,” he said.

Pala initially made an offer of 40c a share and then reduced it to 36c.

On the present value of Rock-well, Bristow said: “Our models are well north of a dollar a share.

“If we could demonstrate to shareholders that the company is worth more than a $1 a share, we would give it a bash as well,” he said.

It was “unfair” because Pala had come at Rockwell at a time when the market was depressed.

The company had three operations and was develop- ing its fourth.

“All of us juniors have been hurt by the market, but that does not detract from the underlying value of the business,” he said.

The company’s new plant at Saxendrift would “very quickly double our production”, but Pala had not allocated any value to that.

Two weeks ago, the company found a 189-ct top-of-the-range white diamond.

In his hand was the replica of a large yellow stone that had been cut into a spectacular 102-ct vivid yellow, which Bristow said was going on sale at Sotheby’s next month. Rockwell was also currently polishing a blue diamond, for which it expected to obtain a premium price.

The large white stone would, in the rough, sell for between $50 000/ct and $70 000/ct and the yellow for between $20 000/ct and $30 000/ct.

Most of Rockwell’s production was more than two carats, with average prices running at more than $2 000/ct.

The company was averaging three carats a stone at Saxondrift, which is one of those unique “elephant country” geological settings.

The company’s black empower- ment partner, African Vanguard Resources, which had helped Rockwell to grow the busi- ness, also had to be taken into account.

Pala’s offer appeared not to comply with local JSE requirements.

This showed the “shortfall” of the bid and that there were things that the company had not considered.

Rockwell’s special committee of independent directors unanimously recommended that shareholders reject the “unsolicited Pala offer to acquire all of the outstanding shares of Rockwell for $0,36/ share”.

After careful consideration, including consultation with its independent financial and legal advisers, Rockwell’s board concluded that the offer “significantly” undervalued the company and was not in the best interests of its shareholders.

To watch a video on Rockwell Diamonds CEO John Bristow, click here.

Editor: Creamer Media Reporter

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