De Beers in another public spat with AfDiamonds

Brian Benza
Staff Writer | Tuesday March 16, 2010 00:00

 

In a statement to the London Stock Exchange (LSE) where African Diamonds has its primary listing, Chairman John Teeling says De Beers failed to notify it about a transfer of over a million shares which the diamond giant held in African Diamonds.

'The board of African Diamonds has been informed by its registrars that one million shares in an account we believe to be controlled by De Beers have been sold or transferred without the company being notified,' says Teeling. 'This, if true, breaches Financial Services Authority (FSA) rules.'

According to FSA rules, account holders must inform a company when shareholdings breach percentage points. African Diamonds says the account in question, which held 4,423,293 shares or 5.8 percent, now holds 3,423,293 shares or 4.49 percent.

Reached for comment, Teeling said they were not pleased with De Beers selling a significant chunk of the company's shares on the open market without first notifying them because this could have considerable influence on the share price.

'When you have a disgruntled shareholder who goes on to dump shares onto the open market without first telling the company, it creates a tap in the market,' a peeved Teeling said by phone from Dublin.

'First, it leaves us vulnerable to a takeover; secondly, the share price will continuously go down as investors will still think the disgruntled shareholder has got more shares to offload.'

Teeling also accuses De Beers of deliberately lowering the share price, saying they could have fetched as much as 55 pence per share for the one million but had instead settled for 40 pence a share. 'As I speak today, the share price has since gone down to 38 pence,' he said.

De Beers' reaction has been to demand a full retraction of African Diamonds' allegations. 'We take our regulatory obligations extremely seriously and confirm that we made the necessary filings in accordance with the relevant regulations,' said Lynette Gould, De Beers's spokesperson.

Asked to elaborate, Gould told Mmegi the account involved had nothing to do with the 70 percent shareholding that De Beers held in AK6, from which it has since disinvested.

The two companies previously held a shareholder agreement in the AK6 diamond deposit in which De Beers held a 70.3 percent stake. Last year, the speed at which to develop AK6 became a contentious issue between the two companies and resulted in De Beers selling its AK6 stake to Lucara Diamond Corp. for $49 million.

'Despite the disinvestment from AK6 last year, De Beers still held a 5.8 percent shareholding in African Diamonds, the company,' Gould told Mmegi by phone from London.

'There was a disposal transaction that took place in the first week of March, which African Diamonds is claiming they were not notified of. We strongly disagree with these allegations and we have since asked them to retract these claims.'

The David versus Goliath war between these two firms is a recurrence of what took place last year when African Diamonds ended up taking De Beers to court after they failed to agree on timelines for the development of AK6.

Teeling says it could be a long haul before the latest fall-out is settled.