Wednesday 23 August 2017 The one stop source for free breaking news, expert analysis, and videos on AIM and LSE listed shares

DiamondCorp – Fat Lady in full flow and an investment lesson

By Nigel Somerville | Wednesday 10 May 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Fair play to (pro tem, albeit currently suspended) DiamondCorp (DCP). The news is bad but at least the company is being plain about it. Of course, we have to throw in the obligatory “you can’t say you were not warned” ShareProphets catchphrase, as the writing has been on the wall for months, but yesterday’s after-hours RNS looks to be the cue for a long and arduous aria.

Administrators have been appointed, the Nomad has quit and under AIM Rule 41 (the very-strict-automatic-execution-after-six-months’-suspension-unless-you-are-one-of-the-ShareProphets-AIM-China-Filthy-Forty rule) the company was due to be booted off the Casino next week anyway.

It had previously warned that this was likely to happen on 28 April, and that the company’s directors no longer considered the company a going concern. Yesterday it was confirmed, with an after-hours (5.26pm….come on, guys, really!) that administrators had indeed been appointed. In short, it is game over.

The company states that:

The Directors intend to continue to work with both the joint administrators of DiamondCorp plc and the joint Business Rescue Practitioners of the Company's operating subsidiary Lace Diamond Mines (Pty) Ltd in order to try and preserve any remaining stakeholder value

There is always hope, I suppose, but given that the Lace Diamond Mine is not operational due to storm/flood damage and a remedial plan (including funding) required labour force agreements to be reached which appeared to have happened and then all melted away with talks eventually terminated, that seems a tad unlikely now.  

One of the things which contrasts this sorry episode (and it is a sorry episode for all concerned – investors have lost out, workers have lost jobs) from other perhaps less apologetic AIM exits of recent times is that the company is at least completely blunt: the Nomad has resigned “concurrently” with the appointment of administrators (for that, read “with immediate effect”) and rather than blather on about talking to replacements in a vain attempt to suggest that another Nomad might step into the breach, we are simply told:

The Company has no current intention of appointing a replacement Nominated Adviser

I’m not quite sure why they bothered with the “current” bit of that, but it is clear that the company is toast.

Tom Winnifrith had some sympathy for the directors in that they were pretty decent people, but warned that this outcome was on the cards way back in October of last year. I hope readers took their cue.

A series of bad breaks (WildeRides’ Karma clearly isn’t a fair bedfellow) involving fire, weather, a failed fundraising, union intransigence and bondholders after a pound of flesh all look to have done for the company.

But in the end, it simply ran out of cash. Things went wrong and there was no plan B-for-bailout. I guess for investors the lesson here is not to invest in companies which leave funding issues to go to the wire with nothing in reserve for when things go wrong. Shit happens to the nice guys too….

I guess all that remains to be seen is how long the post-performance plaudits go on for, but the Casino Curtain falls on this show over the weekend. Except that it is already suspended from trading so perhaps the fat lady is, unlike Victorian children, heard but not seen as the curtain is already down.

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