TSX- and JSE-listed Rockwell Diamonds, which said late last week it would not file its annual financial statements on time, is still waiting for any definitive indication of what rogue shareholder Pala Investments thinks should be done differently at the company's South African mines, argues the company's chairperson, miningweekly reported.

“They are not prepared to define the specifics of the issues that they have with the current management,” Rockwell Diamonds chairperson David Copeland said in an interview with miningweekly.com in Toronto.

“They talk about how we need to look at financial opportunities, we need to look at operational review – well, yeah, but what exactly are you proposing?"

Pala, which last year launched and then withdrew an unsolicited takeover bid for Rockwell Diamonds, has called a special shareholders meeting for a proxy vote on removing the executive directors, scrapping the company's shareholder rights plan and holding a rights offering for which it would provide the back stop, miningweekly said.

TSX- and JSE-listed Rockwell mines high-value diamond from alluvial operations in South Africa.

Pala, which owns 19,94% of Rockwell Diamonds, says that the diamond mining company is in dire straits and that it requires an “expert restructuring effort”. It alleges there is a “lack of leadership” at Rockwell Diamonds and wants shareholders to remove Copeland, CEO John Bristow and a third executive director, Mark Bristow, who is CEO of gold miner Randgold Resources and also John's brother - a situation Pala decries as "a particularly striking example of non-independence," said the report.

However, the three executive directors maintain that Pala is attempting a “cashless takeover” - the new board will be beholden to the shareholder that put it in place, and the scrapping of the shareholder rights plan opens the way for Pala to increase its holding in the company beyond 20%, they say.

The rest of the current board includes Pala's nominee – Greg Radke – and three other independent directors, who have been noticeably silent during the war of words between the executive directors and Pala. They have, however, been nominated by Pala as part of its slate of directors, the report said.

Rockwell Diamond's share price dropped from as high as C$0,76 apiece in July 2007, to a low of 2,5 Canadian cents in November last year. The stock has since recovered to around 6,5c, it said.

In a circular to shareholders, Pala says it wants its proposed interim CEO Phillip Reynolds – who will retire in June from his position as a partner at Deloitte & Touche South Africa – to have an opportunity to restructure Rockwell, after evaluating where it is making and losing cash.

But Copeland argues that Reynolds has no experience at running a mining company, and that the remaining proposed board members lack expertise in running a mid-tier mining company, or in the diamond sector.

Further, he says that Pala is trying to persuade shareholders that the current management is to blame for the company's low share price, when the firm's weak performance should rather be viewed in light of the downturn in the diamond sector and equity markets, the report said.

“Nobody's happy with the share price. I'm not happy with the price,” he said.

“But, given where the market place is, given where diamond sales are, it's easy to criticise management for all the world's ills.”

In response to the market downturn at the tail end of 2008, Rockwell opted to extend its Christmas shutdown period, and kept its mines closed for the duration of December and January.

In February, it restarted the Holpan, Klipdam and Saxendrift diamond operations, but decided to put the Wouterspan diamond mine, where an older plant and higher labor requirements translate into higher operating costs, on care-and-maintenance. The company has also retrenched some workers and not renewed the contracts of others, said the report.

Copeland said that the company had received positive feedback from South African shareholders, regarding management's actions and performance, and is also communicating with institutions in North America.

Like Pala, the executive directors want to conduct a rights offering, but they would appoint a third party to serve as a 'back stop' – that is, to buy up the shares that are not subscribed for – while Pala would want to fulfill that role itself. The money would be used to sustain the company during the market downturn, Copeland said.

"Some months we make a bit of profit, some months we're under...so we think its important that, over the next 9, 10 months we have enough funds available to draw on."

Given Pala's attack on the competence and "leadership" of the current management and executive team, Rockwell's announcement that it will delay the filing of its annual financial documents comes at an unfortunate time, miningweekly said.

Rockwell said late on Friday that the late filing of its financial statements was the result of an “apparent material breakdown” in the company's internal controls, which management believed was related in part to various changes over the last six months, including a change of the company's CFO, change of year-end and change of auditors.

Still, the firm said it expects to be in a position to file the required documents on or before June 26.

In September last year, Pala launched a hostile bid for Rockwell valuing the company's shares at C$0,36 apiece, which was subsequently rejected by the company's board at the time.

Then, in mid-October, Pala indicated that it was considering withdrawing the bid, and initiated discussions regarding a Pala nominee and additional independents being appointed to the company's board.

But, in exchange for the changes to the board, Rockwell told Pala it wanted the two parties to enter into a “relationship agreement”, which included, among other things, a standstill commitment by Pala, and the agreement that Pala's nominee would step down if its stake fell below a certain threshold.

However, after Rockwell went ahead and appointed Radke as the Pala nominee to its board as well as two other independent directors nominated by Pala, the relationship agreement has yet to be finalized, Copeland said.