TRADING in Rockwell Diamonds’ shares has been suspended after a South African court issued an interim liquidation order on March 24 against three of the firm’s local subsidiaries.
“The company has been advised that the TSX [Toronto Stock Exchange] has temporarily halted trading in the company’s shares in order to assess the impact of the announcement,” Rockwell said today in an announcement to the Johannesburg Stock Exchange (JSE).
“Accordingly, trading in the company’s shares on the JSE has been halted until such time as trading resumes on the TSX,” it added. “The company is engaging with the TSX in order for trading to commence as soon as possible.”
Rockwell said on March 24 that the interim orders, which are subject to a final hearing, were against Rockwell Resources RSA, HC van Wyk Diamonds, and Saxendrift Mine. The parent company is unaffected.
The process now is that an interim liquidator will be appointed who will take control of the companies and operate them in “the best interests of creditors until the final hearing,” Rockwell said. The hearing is scheduled for June 22.
Commenting on the issue of the interim liquidation orders, which were passed down by a court in Kimberley, Rockwell CEO, Tjaart Willemse, said it was “highly unusual” the court did not consider the firm’s opposing papers.
“The order granted by Judge Williams is only a provisional order and although this is not unusual, it is quite unusual that it would be issued without considering the opposing papers, specifically when it contains forensic evidence of highly irregular and collusive activity,” said Willemse.
“The company believes that the subsidiary companies do not in the slightest comply to criteria required for liquidation, and [it] has been advised that its bank and most of the creditors will oppose the application at final hearing.”
The liquidation order was brought by Rockwell’s former contractor, C-Rock Mining, which had late last year unsuccessfully bid for a spoliation order, on the allegation that it was owed monies relating to disputed invoices, reimbursement for tax penalties, and other construction costs owed to it.
“As in the spoliation case with C-Rock Mining, last November 2016, which the company initially lost and and then won on final hearing, Rockwell RSA, Saxendrift and HC van Wyk are convinced about the merits of their case,” said Willemse. It would oppose the liquidation order “vigorously”.
“The company believes that C-Rock Mining clearly chose the liquidation process to expedite spurious disputes,” he said, adding that Rockwell had made “significant commercial progress” over the last four months.
It was less than three weeks away from completion of its Wouterspan plant which would allow it to ramp up production of the mine to full level during April.
“In the light of the above, the board of Rockwell is considering all legal and practical avenues to protect the business, its employees and its important counterparties such as creditors and suppliers, since the commissioning of the Wouterspan plant is about to go into full production and the fruits of months of hard work will be delivered over the next quarter,” said Willemse.
Rockwell posted a $5.5m net loss for the third quarter (2016: -$10.5m), but said a $8m spending plan, approved by the board on November 20, would make the company profitable.
Rockwell mines for alluvial diamonds in the Northern Cape province of South Africa. Its key asset is Wouterspan which is designed to process 200,000 cubic metres of gravels a month. The gravels are then screened for rough diamonds. A number of its other assets, including the Saxendrift mine, were sold in an effort to cut debt and slash the firm’s rehabilitation liabilities.