VANCOUVER (miningweekly.com) – A judge in Kimberley, South Africa, has issued an interim liquidation order against three subsidiaries of TSX- and JSE-listed Rockwell Diamonds.

The interim court order does not affect Rockwell Diamonds, the parent entity.

The liquidation application was enrolled on the opposed motion roll in the Kimberley High Court for Thursday.

The interim order, issued on Thursday, includes subsidiaries Rockwell Resources RSA, HC van Wyk Diamonds and Saxendrift Mine Limited.

The interim decision stems from an action by Rockwell’s former contractor C-Rock Mining, which launched a liquidation application against the three subsidiaries.

According to Rockwell, in launching its application, C-Rock relied on an alleged service level agreement, a contract mining agreement that an internal company-led forensic investigation was found to have been awarded to C-Rock under “highly irregular” circumstances.

The contract agreement also alleges an undertaking that Rockwell will reimburse C-Rock for certain tax penalties and accrued interest on such penalties, an alleged undertaking that Rockwell will pay certain debts of Saxendrift, and the construction cost of the wet plant at Wouterspan, as well as many disputed invoices stemming from alleged informal agreements with certain former company management.

Rockwell’s three subsidiaries filed late answering affidavits and applied for condonation, owing to the need to conclude an intensive three-month forensic investigation that, according to Rockwell, uncovered evidence of alleged “highly irregular and collusive activity” by one of its former senior officers.

The judge refused to entertain the application for condonation by the subsidiaries and instead granted an order for provisional liquidation of the entities.

Counsel for C-Rock has indicated that he will not be opposing the condonation application, meaning that the matter will be heard on the full merits of the case, and a return date has been set for June 22.

Rockwell said it believes the subsidiary companies do not “in the slightest” meet the criteria required for liquidation, and that the company has been advised that its bank and most of the creditors will oppose the liquidation application at final hearing. 

“As in the spoliation case with C-Rock Mining in November 2016, which the company initially lost and then won on final hearing, Rockwell RSA, Saxendrift and HC van Wyk are convinced about the merits of their case, and the damages suffered by them, and will oppose this provisional order vigorously,” Rockwell stated.

Rockwell has made significant commercial progress over the last four months and is now less than three weeks away from completing the Wouterspan plant. It will be ramping up production of the mine to full capacity during April, thus completing the turnaround plan that was announced in November.