Rockwell battle still going strong

Brendan Ryan | Tue, 09 Jun 2009 17:00
[miningmx.com] -- SHARES in junior miner Rockwell Diamonds soared 61.5% in trading on the Toronto Stock Exchange (TSX) on Monday as the slugfest for control of the company continued.

Both sides are claiming the credit for the jump. This took the share price as high as 0.115 Canadian dollars before closing at C$0.105, compared with Friday’s closing price of C$0.065.

Rockwell is dual-listed on the JSE but trading is highly illiquid on the South African bourse. Shares rose a mere 6% to 50c on the JSE on Monday and were untraded on Tuesday at 50c bid and 99c offered.

Swiss-based Pala Investments is attempting to remove three Rockwell directors - chairman David Copeland, CEO John Bristow and Mark Bristow - at a special shareholders’ meeting on June 17.

The three directors, who have termed themselves the “executive directors”, contend that Pala is trying to “seize control of Rockwell without paying a premium for a change of control”.

Pala counters that Rockwell is a company in need of new leadership. Pala chief operations officer Colin Murray cited the delay in publication of Rockwell’s annual financial statements - because of “an apparent material breakdown in the company’s internal controls” - as a clear example of what is wrong with the way the company is being run.

Trading in the shares opened two cents higher on Monday after news over the weekend that the British Columbia Supreme Court (the court) had denied Pala’s petition to strike down the proxy form sent to shareholders by the executive directors.

That was hailed by Copeland as a ruling by the court in favour of shareholder democracy. This was because “Pala’s attempt to have our green proxy withdrawn was an underhanded way of stifling the dissenting voices against Pala’s brazen attempt to indirectly take control of Rockwell”.

Later that day independent voting advisory services firm RiskMetrics issued its voting recommendation for the special meeting, which was that RiskMetrics supported the election of the independent directors proposed in Pala’s proxy circular.

According to Murray, who is in South Africa at present, the Rockwell share price jumped on RiskMetrics’ advice as many institutional funds follow its lead on how they should vote.

Murray also had a different take on the court ruling against Pala because he viewed the full judgment as a “compromise” which actually worked in Pala’s favour.

Murray said: “What the ruling has done is invalidate the last two votes on the executive directors’ proxy form which concerned their fair rights offering and the vote to deny Pala’s costs.

“This means the executive directors’ proxy form is now aligned with our proxy form and there can be no confusion among shareholders as to what they are voting for on either proxy form.”

According to Copeland, the court ruling has left it to the chairman of the June 17 meeting to determine whether these two issues should be considered at that meeting.

Murray said the two issues can be put on the agenda at the meeting if shareholders controlling 50% plus one share in the company agree to do so.

He also reacted strongly to criticism by the executive directors of Pala’s proposed new board of directors for the company.

Copeland had previously described Pala’s proposed CEO - chartered accountant Philip Reynolds - as a “liquidation specialist” with no operational mining experience and no diamond experience.

Murray said: “Given the fact that they can’t finalise their financial statements, I would suggest that Philip is exactly the kind of executive they need.”

Pala’s proposed chairman to replace Copeland is Matie von Wielligh, well known in South African mining circles for having run Iscor’s iron ore operations.

His lack of diamond and junior mining experience was also highlighted by the executive directors. However, Murray commented on Tuesday that Von Wielligh was better qualified to chair Rockwell than Copeland.

“Matie has a set of skills based on his experience of the South African mining industry that are directly applicable to Rockwell. What exactly does Copeland bring to the job?” Murray queried.

The executive directors faced a split in their own board when four of the current independent directors joined the Pala side by allowing themselves to be nominated by Pala for the new board.

These included Sandile Zungu, chairman of empowerment partner African Vanguard Resources, and former operations director Hennie van Wyk. Rockwell previously bought Van Wyk’s private mining business to obtain a number of its operating assets.

Murray said: “Rockwell needs help. The fact that the majority of the existing board agreed to be on our slate is almost unheard of in this kind of situation and it shows a certain level of support from the board.”