Theo Botoulas, MD, Diamond Core
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Conflict unresolved at Diamond Core
Brendan Ryan
Posted: Thu, 10 Jan 2008

[miningmx.com] -- IT has gone very quiet in the dispute between Diamond Core Resources and black economic empowerment (BEE) partner Sefalana where corporate strife erupted in October.

Neither side is saying anything further and an important meeting is scheduled for Monday when Diamond Core shareholders vote on the proposed merger with Toronto-listed BRC Diamonds to create BRC Diamond Core.

If there is going to be more trouble that is a logical venue for it to take place but the recovery in the Diamond Core share price on the JSE in recent weeks could be taken as an indicator settlement negotiations may be making progress.
on-going negotiations
Diamond Core shares dropped from around 180c to 130c as the market digested news of the bust-up but the share has now recovered to levels around 150c.

In October, Diamond Core published its “abridged” results for the year to end-June which had been qualified by auditors Charles Orbach because of uncertainty over Sefalana’s equity stake in Diamond Core.

The results stated that the BEE agreement with Sefalana had been declared void by Diamond Core, “as a direct consequence of the Sefalana consortium not having met the conditions precedent to the preference share agreement as well as other provisions.”

A statement released in reply to that by Sefalana CEO Lesedi Rakakgong said the real reason for Diamond Core’s action was; “to avoid the consequences of their flagrant, ongoing failures to adhere to and observe the obligations imposed on them in terms of the agreements.”

Rakakgong added Sefalana would “defend its interests at law.”

Diamond Core hit back on December 14 when it published audited annual results which were unqualified although the auditors still included an “emphasis of matter” on them.

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The December 14 results stated again that Sefalana had not met the conditions precedent. It added; “Sefalana has indicated that it intends disputing the action taken by the company but has not yet done so. The group has received legal advice that the success of any claim in this matter is remote.”

Approached for comment - specifically whether Sefalana had taken legal action subsequent to December 14 - Diamond Core CEO Theo Botoulas said; “all I have to say on the matter is contained in our announcements.”

Rakakgong could not be reached for comment. Sefalana’s corporate adviser, James Allan of Allan Hochreiter, would comment only that; “there have been on-going negotiations.”

Allan brought Sefalana in as Diamond Core’s BEE partner when he was previously corporate adviser to Diamond Core prior to Diamond Core’s listing on the JSE.

Should Sefalana launch a legal challenge the implications are potentially severe because it would call into question Diamond Core’s right to mine certain projects on the Orange River such as Silverstreams where a diamond recovery plant has been running since April.

Diamond Core was awarded the prospecting and mining rights to Silverstreams through the BEE agreement with Sefalana. Any uncertainty over the mining title must, in turn, affect the merger agreement with BRC Diamonds.