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Diamond miner liquidated

Marc Hasenfuss | Tue, 12 May 2009 14:33
[miningmx.com] -- WEST coast marine diamond miner Wealth 4 U Mining & Exploration – which supposedly held an enterprise value of R300m – has been liquidated.

Liquidator Johan Nel of Ronel Financial Trust confirmed a final liquidation order had been granted over W4U in late April after an application by two shareholders.

In 2007 W4U – a self proclaimed ‘dazzling investment opportunity – attempted to raise R150m by issuing shares at 100c/share to public investors. It is still not clear how much funding W4U raised from the public, but it seems individual boat owners that mined in shallow waters were convinced to sell their assets into the company in exchange for scrip.

W4U’s original aim was to consolidate smaller mining outfits around the West Coast into a larger operating entity that would have the economies of scale to produce a high yielding return.

Some of the assets have been lying around near Port Nolloth for almost two years.
At W4U’s AGM in late 2007 founder and CEO Louis Liebenberg claimed the company comprised 11 diving boats and nine shore units as well as offices in Johannesburg, Cape Town and Port Nolloth.

But it seems W4U’s 1700 shareholders will probably get nothing from the liquidation proceedings with Nel reckoning that W4U’s assets at best top around R7m. This pales in comparison to liabilities – comprising mainly shareholder claims – of around R130m.

Nel notes: "It’s not a pretty picture…some of the assets have been lying around near Port Nolloth for almost two years. Things are rusty and many are ‘non-runners’".

Fin24 and Finweek raised questions around W4U for the past two years – especially the company’s high dividend promises, ambitious production targets and the claims around securing shareholder value via a listing.

W4U’s Liebenberg claimed in October 2006 that: "It is our firm belief that the company can harvest just over 100 000 carats per year. This would give a gross annual income of R220m and a net dividend of close to 3% per month."

The company’s short term was for 900 carats a month from share-based operations and 1 000 carats a month from boats - production that supposedly would yield annual revenues of R45m.

Based on these production forecasts W4U claimed in 2007 that the company would qualify for a listing on the Alternative Investment Market (AIM) in London – even mentioning a possible opening share price of 30p (which Liebenberg pointed out was "much higher than the current internal valuation of 260c/share").

At the time I calculated that with 126m shares in issue the ‘internal valuation’ inferred a market capitalisation of over R300m. Interesting then that the liquidator could only find assets worth maybe R7m…

Nel says an enquiry under section 417 of the Company’s Act will be convened at the end of the month in order to determine how the funds raised from investors had been used by W4U.

Nel said he would also be compiling a report on developments at W4U and this would be sent to shareholders in due course.

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