Aug 11, 2016

Gutnick clan moves to up Merlin Diamonds stake

The Gutnick family is preparing to plough nearly $2.4 million into listed explorer and miner Merlin Diamonds a little more than a month after the clan's patriarch Joseph Gutnick entered bankruptcy.

Merlin Diamonds announced on Friday it would hold a general meeting on September 6 to consider a recapitalisation proposal that will lift the Gutnicks' stake in the group to close to 40 per cent.







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'Diamond Joe' loses his sparkle

Once a BRW rich-lister, mining magnate Joseph Gutnick has filed for bankruptcy.

Mr Gutnick already owns 14 per cent in the company however the recapitalisation will reduce his individual shareholder to 6.7 per cent while lifting his family's exposure to 32.8 per cent.

The equity injection is expected to help the struggling Northern Territory diamond mine owner to conduct further exploration of the diamond reserves on site and to develop those reserves so that they produce minerals. 

Joseph Gutnick resigned as a director of Merlin Diamonds on July 8.

Joseph Gutnick resigned as a director of Merlin Diamonds on July 8. Photo: Jesse Marlow

Chabad Properties, a company that counts Mr Gutnick among its shareholders, will provide a $2 million to the company for its exploration and development plans by way of convertible notes.

Fairfax Media revealed last month Mr Gutnick and his wife Stera issued a $2.7 million mortgage over a sprawling property on Inkerman Street in St Kilda East through Chabad Properties.

Chabad Properties, according to Merlin Diamonds notice of meeting, is the trustee of the Machon Chaim College Fund – a charitable education organisation.

Mr Gutnick resigned as a director of Merlin Diamonds on July 8, the day after he declared bankruptcy, leaving his eldest son Mordechai Gutnick to take over the chairmanship of Merlin Diamonds.

Mordechai Gutnick is also a director and shareholder of Chabad Properties and took over a number of his father's businesses ahead of the bankruptcy.

Under the recapitalisation process, Mordechai Gutnick will also tip in $392,054 for development, exploration and working capital purposes through his company NRMZ. Delaware-incorporated Regals Fund LP will also chip in $1.3 million.

If shareholders approve all three equity injections, Chabad Properties will become the group's largest shareholder with 28.23 per cent. Regals will own 20.09 per cent and NRMZ 5.53 per cent. 

Mr Gutnick's bankruptcy came after a legal stoush with the Indian Farmers Fertiliser Cooperative that resulted in a phosphate supply deal with his company Legend International that went bad. Before his bankruptcy the Supreme Court of Victoria found Mr Gutnick was personally liable to pay IFFCO $54 million over the botched deal. 

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