Diamond row scuppers float

Rebels in DR Congo: diamonds provide fighting funds

Plans to float mining firm Oryx in London this week have been cancelled amid mounting controversy over the role of gems in fuelling wars in Africa.

Oryx has a $1bn diamond concession in the Democratic Republic of Congo (DRC).

Shareholders in Petra Diamonds, which planned to merge with Oryx to facilitate the UK listing, voted to adjourn indefinitely an extraordinary general meeting on the deal.

Chairman Adonis Pouroulis said there was no choice but to adjourn after Petra's nominated adviser, UK accountants Grant Thornton, threatened to quit if the deal went ahead.

Stock market rules require listing firms to be approved by an independent adviser.

'Blood diamonds'

The British Government has voiced concerns about Oryx's activities and its links with the governments of Zimbabwe and the DRC, which are fighting together in a bloody civil war in the Congo.

Zimbabwean troops have been in the DRC since 1998, supporting the government of Laurent Kabila, which is fighting rebels backed by Rwanda and Uganda.

Oryx - which is incorporated in the Cayman Islands and run from Oman - was due to have floated on the Alternative Investment Market on Tuesday through a reverse takeover of Petra.

But its plans have faced a barrage of criticism from government officials and human-rights activists.

Mr Pouroulis said he learnt of Grant Thornton's objections on Friday.

"I understand the position that they have adopted was put to them by 'certain regulators' very late on Friday afternoon," he said.

'Integrity'

Grant Thornton - which only last week had said it saw no reason why the merger and listing should not proceed - refused to explain to angry shareholders why it had changed its mind.

A spokesman would say only that it had a responsibility to ensure the "integrity" of the London market.

The Foreign Office has been critical of firms mining diamonds in African countries at war but a spokesman said on Sunday he was unaware of any official intervention.

"Trading in diamonds from war-torn DRC is distasteful. But it is for the relevant authorities such as the Financial Services Authority or London Stock Exchange to take any action on company listings," he said.

Sensitivities

The derailment of Oryx's plan to list in the UK comes at a sensitive time, as international attention focuses on the role of diamonds in financing wars in Africa.

The British government called last week for an embargo on diamonds from Sierra Leone.

Oryx denies that it will be producing "conflict" or "blood" diamonds from the DRC concession near Mbuji Mayi, an area which has been controlled by Zimbabwean troops for some time.

But the company has profit-sharing arrangements with Osleg, a firm linked to the Zimbabwean government, and Comiex, which has ties to the DRC government, leading to fears that revenues will fuel the Congo war.

Objections

Petra and Oryx officials said they would be seeking an explanation from Grant Thornton and the UK authorities of their precise objections.

If no accommodation is reached, the two would look at a listing on an overseas stock market, possibly in North America, said Oryx Deputy Managing Director Geoffrey White.

This could be achieved by taking Petra private.

The combined Oryx-Petra would have a market capitalisation of about £90m ($135m), based on Petra's suspended share price, said Mr White.

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