Diamonds Confirm Fair Rights Offering Is Best Option for Shareholders and Refute Pala's Allegations
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Hunter Dickinson to me
show details 11:51 AM (4 hours ago) Reply

PDF Available at www.executivedirectorsrockwell.com

May 26, 2009, Vancouver, BC - The Executive Directors of Rockwell Diamonds Inc. (TSX: RDI; JSE: RDI; OTCBB: RDIAF), David Copeland, P.Eng, Chairman, Dr. John Bristow, CEO and Dr. Mark Bristow, today responded to the May 25, 2009 news of Pala Investment Holdings Limited (“Pala”) noting that it is at odds with the documentary record and reiterating why they believe their proposed Fair Rights Offering is the most appropriate and equitable financing solution for all shareholders.

"The Fair Rights Offering will achieve a number of key objectives," said Mr. Copeland. "It will provide the company with added liquidity in the current difficult markets, which will allow us to continue our conservative plan of operations and enable us to protect the company against opportunistic advances by predatory operators or investors. The Fair Rights Offering will do so without excessively diluting existing shareholders, and on a basis that all shareholders are being treated fairly and not being asked to give up the protection of the Shareholders Rights Plan in return for these funds."

Noting that the documentary record conflicts with Pala's news release statements, Mr. Copeland commented, "All Rockwell directors received a 10 page memo from Rockwell's corporate counsel dated April 20, 2009 reviewing in detail the three main financing options available to Rockwell, namely a private placement, a prospectus and a rights offering. Rockwell was awaiting further input from its financial advisors on the memo when Pala pre-emptively interrupted that process by pressing for the special meeting a month or so before the planned annual meeting."

"For Pala to claim that a private placement was settled, or that we have flip-flopped, is simply misleading," said Mr. Copeland. "Pala's Rights Offering coupled with striking down the Shareholders Rights Plan is self-serving, allowing Pala to make yet another attempt to acquire control of the company without paying shareholders a premium."

Typically, rights offerings are not fully subscribed, and with Pala acting as what is referred to as a "back-stop", they would acquire all rights which were not subscribed to by other shareholders. As such, this back-door approach would enable Pala to increase its position in the company, thereby gaining further control. The purpose of the standby-guarantee (proposed by the Executive Directors) is to help ensure that the Fair Rights Offering is successful without allowing any shareholder to exceed 20% ownership. In consultation with financial advisors, the Executive Directors will ensure the standby fees are within acceptable market rates for this type of compensation.

Mr. Copeland concluded by saying, "Rockwell shareholders will quickly see that the third party stand-by fee we propose represents a small investment in Rockwell's independence and that the true cost of Pala's offer of a free back-stop will be ruinous."

The Executive Directors have established a purpose-specific web site, www.executivedirectorsrockwell.com, where information is available for all shareholders relating to the issues concerning the Special Meeting. This site will be updated regularly and kept current leading up to the Special Meeting on June 17, 2009.

THE FUTURE OF ROCKWELL DIAMONDS INC. WILL BE DETERMINED BY THE OUTCOME OF THIS VOTE.

DO NOT ALLOW A DISSIDENT MINORITY SHAREHOLDER TO TAKE CONTROL OF ROCKWELL AND YOUR INVESTMENT

VOTE ONLY THE GREEN PROXY

The Executive Directors urge you to support their continued stewardship of the Company by voting AGAINST the special resolution to remove them from office and by voting FOR a Fair Rights Offering, which will provide balance to the Company's shareholder constituents, by using the GREEN form of proxy.

For More Information Contact:

The Laurel Hill Advisory Group by email at rockwellinfo@laurelhillag.com or by phone at:
North America: Toll Free 1-888-882-6737 Collect 1-416-637-4661
Europe: Toll Free 00-800-8655-1111 Collect 1-416-637-4661
South Africa: Toll Free 0-800-982-179 Collect 1-416-637-4661

The views and opinions of the Executive Directors on the