Pala loses Rockwell bid

Brendan Ryan | Thu, 18 Jun 2009 07:45
[miningmx.com] -- SWISS-based Pala Investments has failed in its attempt to remove three directors from the board of Rockwell Diamonds and so gain effective control of the company.

Rockwell shares dropped 37% to 6c a share in trading on the Toronto Stock Exchange yesterday as a result.

At a special shareholders’ meeting held in Vancouver yesterday a total of 74% of Rockwell’s shares were voted.

More than 57% of the votes were cast against the removal of the three directors - chairman David Copeland, CEO John Bristow and Mark Bristow who have termed themselves “the executive directors.”

According to a Rockwell statement that vote meant the “current board is retained.”

The statement added that 62% of the votes cast were in favour of continuing the Rockwell shareholder rights plan while 57% voted to “direct Rockwell not to reimburse the dissident of the meeting (Pala) for its costs associated with the meeting.”

The executive directors dropped their proposed “fair rights offering” from the meeting agenda on advice of counsel and because of its advisory nature.

However, 57% of the votes were in favour of the fair rights offer which is one that would not compromise the shareholders rights plan and limits any shareholder to less a maximum holding of just under 20% in the company.

Copeland commented, “the executive directors are gratified by the voting support of Rockwell shareholders but we also recognize there is work yet to be done.

“We are committed to working to unite the board in order to make management enhancements, ensure operational efficiency, deliver timely financial information, establish internal controls and executive the rights offering plan to fund the company with minimum dilution.

“We will make all necessary efforts to achieve these goals with our colleagues on the Rockwell board.”

That could prove interesting. The Rockwell board split over the Pala action with all the other directors accepting nominations to the new board of directors that Pala wanted to put in place.

Pala COO Colin Murray said in Johannesburg last week that Pala would not support any fundraising carried out by Rockwell while the present board of directors was in place.

According to an analyst Rockwell has two urgent priorities. These are to raise funds and improve its management systems. These were shown to be deficient through Rockwell’s inability to get its financial results out on schedule because of an “apparent material breakdown” in its internal controls.

Rockwell also needs to deal somehow with Pala which could remain a serious liability to the company if it stays on board as disenchanted shareholder.