This episode explores how the forces of globalisation reshaped London’s small company stock markets. We discover how a commodities boom led to a gold rush in financing resource firms, and tumble into the pitfalls of exploration financing. We see the old hierarchies of politics and capital reproduced in this new sector and witness the eventual downfall of OFEX, the market we have followed since its inception. Along the way we meet promoters, anacondas, and of course, diamonds. With strong language and heavy dudes.
Transcription
One morning in March 2000 I received a telephone call from a colleague, an older journalist now mostly retired but very well connected. We both were interested in the mining exploration sector, then starting to bloom on the London markets. He had some information and wondered whether I would like to follow it up. It concerned a South African mining outfit called Petra diamonds Ltd, then traded on the London Stock Exchange’s junior market AIM. He had got wind of a big deal heading towards Petra, but didn’t know what it was; he suspected that the chief executive, one Adonis Pouroulis, was seeking to take the company private against stockholders’ wishes. This certainly wasn’t the case – ironically, a quick Google reveals that just yesterday, 31 March 2020, Mr Pouroulis stepped down from the firm he founded 23 years previously. Back in 2000, in the overheated offices of Shares Magazine I spent two days telephoning everyone whose number I could get hold of and eventually reached Mr Pouroulis himself. He listened to my questions, thought for a moment and said, ‘you’d better come for breakfast.’
Breakfast was at the Cadogan Hotel in Chelsea. I’d never heard of it, despite its fame as the place where Oscar Wilde was arrested in 1895 on charges of gross indecency, and the fact that John Betjeman wrote a poem about just this. As one might expect from the place that Wilde chose to hang out with his louche pals, it was impossibly elegant. When I got to the breakfast table there were several men gathered, all suited: Mr Pouroulis, his deputy, Mr White, and a lawyer called David Price. My memory is a bit hazy, 20 years later, but I think that was his name. There was also the firm’s head of security – strange – and even more strangely a man who appeared to be connected to the Zimbabwean army. I’m convinced there were two others present who didn’t do much talking or breakfasting either. Pouroulis explained the proposed deal. Petra Diamonds was to become the vehicle for a reverse takeover – a kind of merger where the incoming company swallows up the host, keeping its name and, crucially, stock exchange listing. The incomer was called Oryx Diamonds, a firm registered in the Cayman Islands and run from Oman. Oryx’s business was operating a diamond concession in the Democratic Republic of Congo. As even I knew, the DRC was a spectacularly troubled country, with a history of destructive civil war, repressive government and a reputation for diamonds mined in the most oppressive circumstances and used to fund conflict: blood diamonds as they are known.
I don’t remember what I ate, if anything. I do remember, like a trauma memory, Pouroulis stirring honey into his coffee as he set out the specifics. The concession was worth $1 billion. $1 billion of diamonds waiting to be taken from one of the poorest, most violent, and most corrupt countries on earth. 40% of profits would go to Oryx (or Petra). 40% would go to Osleg, a company linked to the Zimbabwean army, which was charged with providing security on this immense mining operation. The Zimbabwean army was already in the area; Robert Mugabe had sent 11,000 troops to DRC to support Laurence Kabila’s government. The remaining 20% went to Comiex-Congo-Operation Sovereign Legitimacy, a company that David Price (the lawyer) vigorously denied being President Kabila’s slush fund.[1] These details became clearer over the ...