Rockwell tussle hotting up
IT MAY HAVE TAKEN diamond miner Rockwell a while to respond to the hostile bid from Pala Investments, which I wrote about the other week, but it’s certainly come out fighting at last. Rockwell points out its price traded at the offer price of 36c/share (Canadian) as recently as 14 July and as high as C$59c (64% more than the offer) as recently as 13 March, suggesting the timing of the offer is directly related to the recent market slump.
Fair enough. But when Rockwell complains Pala is “trying to buy a company with an in situ diamond value of approximately US$1,1bn for $85,7bn” just what is it saying? That $1,1bn is equivalent to almost $4/share but ignores all sorts of considerations.
Rockwell CEO John Bristow is more modest, saying in a webcast only that Rockwell is worth “considerably more than $1/share”. But we know that market valuations of any developing resources company are only a tiny fraction of the value of the resource.
And though I have a high regard for Bristow’s younger brother Mark, CEO of Randgold Resources, I can see why he may not be considered the best person to head an independent assessment of the bid. It would surely have been wiser to appoint someone who couldn’t – however unfairly – be accused of being susceptible to family pressure.
None of this mutes my original criticism of the bid, in particular its continuing cavalier treatment of its SA shareholders. And I accept that Pala’s lack of SA expertise could be a fatal defect. But I’m not sure that Rockwell’s management realises just how vulnerable it is.