[miningmx.com] — MARINE diamond wannabe Wealth 4 U Mining & Exploration (W4U) – a self-proclaimed “dazzling investment opportunity” – appears to be heading for the rocks.
Instead of meeting its extravagant claims of hauling in valuable carats from the sea, it seems W4U has found itself out of its depth operationally scarcely two years after hitting South Africa’s west coast waters.
Basically Wealth 4 U is an unlisted company which raised (or rather attempted to raise) considerable funding from the public over the last few years. The company intended patching together a number of small shallow miners into a larger company, and then pursuing other marine mining opportunities in deeper waters.
the politics are wearing me down
Like so many small unlisted projects W4U dangled big returns — suspiciously big returns. As recently as September 2007 (at the occasion of the company AGM) there were suggestions that hard working executives could develop W4U “into the largest marine and alluvial diamond company in Africa giving unsurpassed returns to its shareholders”.
But the reality is that W4U’s ambitions seem to be floundering rather badly. Last week we were alerted to the fact that W4U had not published its monthly production reports to shareholder since November 2007 – even though the company’s website proclaims “updated production report coming soon”.
The lack of updated production figures will probably convince even the most optimistic shareholder that W4U is facing some serious operational issues.
Perhaps the writing was already on the wall when W4U reneged on its promise to follow a generous dividend policy – claiming the company needed to retain funds ahead of a proposed listing on London’s Capital Plus Markets.
Probably only the most gullible investor would have swallowed a line about the need to retain capital and cash flow ahead of a listing. It was far more likely that W4U simply did not have the operational cash flow to afford to pay dividends to shareholders.
Last week I managed to track down W4U prime mover, chairman and CEO Louis Liebenberg, who confirmed production had stalled on the back of a deteriorating relationship with state owned diamond giant Alexkor.
W4U scours for diamonds in certain Alexkor concessions off the Namaqualand coast, but this arrangement seems badly flawed with Liebenberg alleging “blatant discrimination” by Alexkor.
Liebenberg was not terribly specific on the hitches with Alexkor. But a statement like “the politics are wearing me down” as well as the inevitable references to court action suggest that Alexkor may well be a convenient scapegoat to divert attention from a mining model that neither viable or sustainable.
I managed to contact an Alexkor executive this weekend, but the person concerned was not at liberty to discuss the W4U matter. I was passed onto Alexkor’s Mineral Resource Manager Geoff Davies, but I unfortunately could not raise him by cellphone on Sunday.
In any event I don’t think Alexkor are going to be too fussed with W4U. With no cash flow from production, it is W4U that has to grapple with the rather serious problem of staying afloat.
Liebenberg claims he has liquidated personal assets to ensure the company has sufficient funding – which is a sad state of affairs and a far cry from the earlier claims the W4U would produce “above average” returns for shareholders.
The way forward – as Liebenberg envisages it – looks rather desperate. Liebenberg told Miningmx that the company would move its mining vessels (let’s be frank: these are just a fleet of small boats) to Namibia in two to three weeks.
It seems naive to think W4U can carry on regardless by simply shifting operational focus to marine diamond mining concessions in another country.
Certainly the viability of such a strategy will be intensely debate at the AGM this year.
Shareholders may also use this occasion of the AGM to question Liebenberg about earlier claims – including the listing of W4U on London’s Plus Markets by the second quarter of 2008 and an R80m investment by Swiss investors to expand the group’s much mooted deep water concessions.
Personally I am quite keen to scan W4U’s “audited’ annual report for the 2006/07 financial year – which curiously were not presented to shareholders at last year’s AGM. In think shareholders – at this delicate juncture – may wish to see that auditors have signed off claims that W4U’s fixed assets did indeed amount to R309m and that concessions were revalued at R253m.
