WEALTH 4 U
ELEMENTS OF FANTASY and reality are probably best illustrated in this West Coast diamond miner that – at its mooted listing on the AIM market in London – was supposedly worth R300m. W4U’s website still claims the company – now in liquidation – successfully established itself as a significant player in shallow marine diamond mining and is “positioned to increase our fairly modest output and generate super profits!”
W4U – headed by lawyer Louis Liebenberg – was formed by the merger of 22 separate companies that each operated a small boat-based or beach-based mining operation.
The company tried to raise R56m by offering shares to the public at 100c/share. In 2007, W4U claimed less than 20m shares remained – which infers 36m shares were placed with investors or issued to mining operation vendors.
W4U also spewed out big numbers. One such claim was that the company’s geologist estimated marine diamond concessions being worked by W4U would yield 750 000 carats. W4U also suggested that once it started mid-water mining forays there could be a diamond recovery rate of 100 000 carats/year within less than three years.
Naturally, W4U shareholders couldn’t quantify that promise by scanning audited financial statements or audited production reports. In fact, W4U had the audacity to ask shareholders to accept unaudited financial statements at its AGM in late 2007.
W4U also lured shareholders by promising regular dividend payments. However, these soon dried up, with W4U conveniently citing the need to shore up cash for a listing as the reason. It would not be askew to suggest W4U’s initial dividend payments were funded by money raised from investors rather than cash generated by diamond mining operations.
The bottom line is that W4U ended up on the block in April with estimated assets (apparently a couple of old boats and some rusty plant) worth around R7m and liabilities topping R130m.