Alexandre Alexander, the current non-executive chairman and a previous chief executive of Sydney-based company Kimberley Diamonds (KDL), was arrested by Australian Federal Police last week.
Alexander’s arrest was the result of an investigation by the Australian Securities and Investments Commission (ASIC) into a number of allegedly false and misleading Australian Securities Exchange (ASX) statements issued by KDL in late 2013 and early 2014.
From March 2013 to May 2014, KDL was negotiating a yellow diamond price increase with Tiffany & Co, which had an exclusive offtake (future output) agreement with the company’s now suspended Ellendale mine in Western Australia.
From March 2013 to May 2014, KDL was negotiating a yellow diamond price increase with Tiffany & Co, which had an exclusive offtake (future output) agreement with the company’s now suspended Ellendale mine in Western Australia.
The ASIC investigation was based on a series of statements authorised for release by Alexander during these negotiations that related to KDL’s future earnings forecasts.
It was alleged that the statements were “false and misleading” as they did not disclose the fact that KDL’s profit forecasts were based on the assumption that the company would secure a 30 per cent price increase for its yellow diamonds in the fourth quarter of the 2014 financial year.
In May 2014, KDL revealed the negotiations with Tiffany & Co had failed, and that as a result, it had revised its earnings forecast from $7.5 million to $1.5 million. The revelation caused the company’s shares to plummet 41.5 per cent.
Alexander was charged with four offences under the Corporations Act in relation to these allegations, with each charge carrying a maximum penalty of five years’ jail and/or a $34,000 fine.
A media statement issued by KDL noted that Alexander had denied all allegations and planned to defend all charges. A separate statement added that Alexander would continue in his role as non-executive chairman with the company’s “unanimous support”.
Alexander was granted bail and the case was adjourned. It will resume in Sydney on 10 November 2015.
Uncertain fate
As previously reported by Jeweller, KDL placed its subsidiary and operator of the Ellendale mine, Kimberley Diamond Company (KDC), into voluntary administration in July this year. The decision was attributed to “poor auction results in June that arose from an unexpected decline in the rough diamond market”, and consequently led to the suspension of the mine’s operations.
Last month, KDC was placed in liquidation with a media statement advising it was unclear what effect this would have on KDL.
“KDL [as a secured creditor of KDC] remains owed an outstanding amount of approximately $1.8 million from KDC, which we expect to recover in full from the sale of diamonds at auction in September,” the KDL statement read.
Diamonds were first sourced from the Ellendale mine in November 1976, and the deposit has since become a renowned global source for fancy yellow diamonds. It is believed to produ