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Battle lines over Rockwell
Brendan Ryan | Fri, 22 May 2009 18:15[miningmx.com] -- THE battle lines have been drawn between Pala Investments and three Rockwell Diamonds executive directors ahead of the special shareholders meeting on June 17, and the mud is flying.
At stake is ownership of a number of South African alluvial diamond mines now valued at a fraction of their former worth because of the collapse of rough diamond prices triggered by the world economic crisis.
Rockwell shares are listed on the TSX and the JSE but trading on the JSE is illiquid and the true movements in the share price are reflected on the TSX.
During the past three years Rockwell shares have traded as high as C$0.75 but, over the past 12-months, they have dropped from $0.55 to $0.025 before recovering to current levels around $0.065.
The three Rockwell executive directors - chairman David Copeland, CEO John Bristow and Mark Bristow - reckon Pala is trying to “seize control of Rockwell without paying a premium for a change of control. “
Pala counters that Rockwell is a company that needs new leadership. It believes that its proposed new board of directors provides that as well as being “unquestioningly independent of Pala with six of the seven nominees having no ties whatsoever to us.”
That’s rejected out of hand by the Rockwell executive directors who described the board as being “hand picked” by Pala and they expected Pala to dominate the new board.
They pointed out that Pala’s proposed CEO – Philip Reynolds – has “ no diamond experience, no junior mining experience and no operational experience.”
In today’s conference call Copeland commented that “the proposed CEO seems to be a liquidation specialist.”
They are also clearly infuriated by the actions of four of the “independent” directors on the current Rockwell board in effectively joining the Pala side by allowing themselves to be nominated by Pala for the new board after holding private discussions with Pala.
According to the executive directors that means the independent directors “can not credibly provide shareholders with an opposing view to the Dissident’s (Pala) proposals.”
They said in a circular to shareholders dated May 20, “the executive directors believe that there is a likelihood, should Pala at the meeting successfully install a board of directors of Rockwell marked with its stamp of approval and have the shareholders rights plan terminated, that Pala will seek to consolidate its control over the company by increasing its equity position one way or another.
“Pala’s information circular confirms Pala intends to accomplish this through a rights offering in which Pala will not only acquire its pro-rata portion of the common shares offered to all shareholders in the company, but will also agree to act as a back-stop and acquire all or a portion of all other shares not purchased by the remaining shareholders.
“Without the protections of the shareholder rights plan and full participation in the rights offering by other shareholders, there is nothing to stop Pala from significantly increasing its share position in the company.”
Copeland told the conference call that, “we will not let an insidious take over happen on our watch.”
The executive directors are proposing to hold an alternative fund raising – which they term a fair rights offering - to raise around C$3,5m through the issue of 60m shares at around C$0.06 a share.
They propose to structure the offer so that no shareholder would “alone or with others they act in concert with” end up with more than 20% of the company. This means no shareholder would be able to subscribe for so many shares that it would trigger the shareholder rights plan.
They also intend lining up a supporter who will “back stop” the issue and said they have received more than one proposal to do this and would identify the chosen guarantor before the June 17 meeting.
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