Diamond miner Trans Hex has put its unprofitable unit West Coast Resources (WCR) into liquidation, citing a fall of nearly a third in diamond prices and handing its biggest shareholder, Christo Wiese, another setback.
The second-biggest miner of the gemstones to De Beers on the JSE in the 1980s and early 1990s, Trans Hex is struggling with weak diamond prices on worries about oversupply and the rising popularity of laboratory-grown diamonds.
Its share price has fallen more than 70% over the past
five years.
The company, which also competes with Petra Diamonds, said it had applied to the high court in Cape Town to wind up WCR after failing to seal a deal to offload the business and get a third party to run it.
"WCR is not in a position to meet its working-capital requirements without the necessary funding being made available to WCR," Trans Hex said late on Friday.
"Accordingly, shareholders are advised that the major shareholder of WCR … today lodged an application to the high court [Western Cape division] for WCR to be placed into provisional liquidation."
Trans Hex, which counted investment heavyweight Remgro as its biggest shareholder until 2010, bought WCR five years ago, hoping the business would give it a new lease on life after the depletion of diamonds at two flagship mines on the banks of the Orange River.
But a combination of falling diamond prices and lower than expected grades of diamonds from WCR, rendered the business commercially unsound.
The liquidation means another headache for Wiese, whose reputation as one of SA’s most respected stewards of shareholder capital was tarnished with the near collapse of retailer Steinhoff.
Wiese is also in the middle of reviving investment group Brait, which buckled under the weight of weak consumer demand in the UK after an ill-fated acquisition of the British high street retailer New Look.
Another top shareholder, RAC Investment Holding, a long-term investment entity tied to Warren Buffet-style fund manager RECM & Calibre, has also been taking pain. Collectively, RAC and Wiese’s Cream Magenta and Metcap own almost 80% of Trans Hex. The liquidation comes months after the trio offered a more than 100% premium to Trans Hex’s minority shareholders and to take the R104m firm private, a move that would have ended its run of nearly four decades as a listed company.
The offer to minority shareholders at 100c a share is well above the 42c-53c range the share has traded at from the beginning of May and the end of June, and is worth about R23m.
In May, Trans Hex accepted a University of the Western Cape offer to acquire its head office property in Parow for R30m, versus a carrying value in Trans Hex’s books of less than R1.2m.
The share price was flat at 91c at close of trade on the JSE on Friday.
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