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RDI - Rockwell Announces Results for First Quarter of Fiscal 2010
ROCKWELL DIAMONDS INCORPORATED
(A company incorporated in accordance with the laws of British Columbia,
Canada)
(Incorporation number BCO354545)
(Formerly Rockwell Ventures Inc.)
(South African registration number: 2007/031582/10)
Share code on the JSE Limited: RDI - ISIN: CA77434W1032
Share code on the TSXV: RDI - CUSIP Number: 77434W103
Share code on the OTCBB: - RDIAF
("Rockwell")
ROCKWELL ANNOUNCES RESULTS FOR FIRST QUARTER OF FISCAL 2010
July 15, 2009, Vancouver, BC - Rockwell Diamonds Inc. ("Rockwell" or the
"Company") (TSX:RDI; JSE:RDI, OTCBB:RDIAF) announces financial results for the
three months ending May 31, 2009. Information is presented in Canadian
currency unless otherwise indicated.
Rockwell is engaged in alluvial diamond production with focus on the mining
and development of alluvial diamond deposits that yield high value gemstones.
The Company is currently active at three alluvial operations: Holpan, Klipdam,
and Saxendrift. A fourth operation, Wouterspan, is currently on care and
maintenance.
The Company has an excellent pipeline of brownfields projects, the majority of
these being high level terraces on the south bank of the Middle Orange River,
in the same area as its Saxendrift mine. Such terraces are typically
represented by higher grades than lower terraces in the same area. Rockwell
has also investigated other potential diamond acquisitions which would provide
accretive value to the Company; however, it is unlikely to pursue these
acquisition opportunities, unless an exceptional opportunity should appear,
until such time as current financial and diamond market conditions improve.
During the first quarter of fiscal 2010, prices for international rough
diamond sales firmed, particularly in the 2 to 10 carat range, as demand for
these goods increased. This follows the 50% or more decline in diamond prices
experienced in late 2008 and early 2009 related to the global financial crisis
and concomitant freezing of credit in the banking and diamond businesses.
Current pricing levels are estimated to be at about 55% of previous year
prices.
Although trading conditions in the rough diamond business remain challenging,
the Company is encouraged with the recent improvement in its sales prices
which reflects a combination of improved market conditions and a better
diamond mix from increased production levels.
HIGHLIGHTS
- Average diamond price received by Rockwell increased to US$555 per carat,
up 75% from the low of US$318 per carat obtained in the previous quarter.
The average price per carat received at recent monthly tenders
demonstrates strengthening prices: US$531 in March, US$585 in May, US$700
in June and US$835 in July.
- Average cash operating cost for the group during the quarter was US$2.60
per tonne compared to an average cost in the US$3.00 to US$3.50 per tonne
range that was forecasted. Cash operating cost for the each operation
was: Holpan US$2.45 per tonne; Klipdam US$2.68 per tonne and Saxendrift
US$2.45 per tonne. The average total cost for all the operations
including rehabilitation, hire purchase payments and royalties was
US$4.78 per tonne.
- On March 3, 2007, Rockwell acquired the mining and prospecting rights to
Portion 6 of the Farm Niewejaarskraal 40 and certain mining equipment
situated on Niewejaarskraal, including a dense media separation plant
previously erected and operated by Trans Hex. On March 4, 2009, Rockwell
was granted Ministerial Consent to the cession of the Mining Rights to
the Company and registration of such rights in its name.
OVERVIEW
In the three month period ended May 31, 2009:
- 4,021.74 carats were produced at the Holpan/Klipdam and Saxendrift
operations.
- 5,116.29 carats were sold at an average price of US$554.79 per carat.
- Profit share of US$454,952.95 was received from the sale by Steinmetz1 of
two stones, totalling 68.29 carats, from Wouterspan.
- Revenues from sales were $3.9 million.
- Cost of sales and amortization totalled $6.6 million, resulting in an
operating loss of $2.7 million for the period.
- Net general and administrative expenses amounted to $2.7 million, a write
down of assets of $0.7 million plus a future tax recovery of $1.8 million
resulting in a net loss of $4.0 million or $0.02 per share.
Diamonds in inventory at May 31, 2009 totalled 2,431.02 carats valued at
$1,558,051. Inventory in the financial statements has been valued at net
realisable value in the current period.
PRODUCTION, SALES AND INVENTORY
In the three month period ended May 31, 2009:
Operation PRODUCTION SALES
Volume Carats Average Sales Value of Average
(cubic grade (carats) Sales value
meters) (carats (US$) (US$ per
per 100 carat)
cubic
meters)
Holpan 190,660 986.99 0.52 1,144.49 316,344 276.41
Klipdam* 210,710 1,607.82 0.76 2,472.86 1,183,274 478.50
Wouterspan - - - 561.69 269,087 479.07
Saxendrift 236,963 1,426.93 0.60 937.25 1,069,744 1,141.36
Total 638,333 4,021.74 0.63 5,116.29 2,838,449 554.79
Certain quality diamonds are manufactured and sold under an agreement with
Steinmetz Diamond Group.
Operation INVENTORY
Rough Production Rough Rough
Diamond Diamond Diamond
Inventory Sales Inventory
Beginning of End of
Period Period
Holpan 839.82 986.99 1,144.49 683.01
Klipdam* 1,742.31 1,607.82 2,472.86 877.38
Wouterspan 576.85 - 561.69 13.71
Saxendrift 367.21 1,426.93 937.25 856.92
Total 3,526.19 4,021.74 5,116.29 2,431.02
*Included in the Klipdam production and inventory are 199.89 carats from bulk
sampling at Windsorton, a prospecting right which is adjacent to the Klipdam
mining operation.
PROFIT AND LOSS
For the three months ending May 31, 2009, the Company had a loss of $4.1
million compared to a net loss of $0.8 million for the three months ending May
31, 2008. The loss was due to the continued weakness in the diamond market
that commenced in the fourth quarter of fiscal 2009, along with the ongoing
global credit crisis which caused a total collapse in the demand and prices of
diamonds. Operations at the Wouterspan property are still in care and
maintenance in order to preserve the Company`s cash reserves.
During the three months ending May 31, 2009, the Company realized diamond
sales of $3.9 million compared to $7.3 million for the three months ending May
31, 2008. This decrease was a result of the economic crisis which has caused
diamond prices to collapse, resulting in prices still remaining approximately
50% below those achieved prior to November 2008.
Mining costs for the period were $4.9 million compared with $4.6 million in
the quarter ending May 31, 2008. Operations at the Holpan and Klipdam Mines
were impacted by heavy seasonal rainfall and operations at Saxendrift were
impacted by irregularities in the electrical supply from Eskom (National
Energy Supplier). Amortisation and depletion for the quarter was $1.8 million
compared to $2.6 million in the quarter ending May 31, 2008. The current
results are mainly due to lower carat production as depletion is calculated
based on the number of carats produced during the period.
Administrative costs for the quarter were $2.6 million compared to $2.8
million incurred in the quarter ending May 31, 2008. Management has been
successful in containing costs, even though the Company incurred significant
legal expenditures for a special shareholders meeting requested by Pala
Investments Holdings Ltd. ("Pala") and associated costs related to the proxy
challenge by Pala.
At May 31, 2009, the Company had cash and equivalents of $2.2 million and an
overdraft balance of $3.7 million, for a net overdraft balance of $1.5
million. This compares to cash and cash equivalents of $4 million and an
overdraft balance of $3.5 million at February 28, 2009. Working capital
deficit is now $6.6 million compared to a positive working capital of $0.6
million at February 28, 2009.
To meet short term liquidity requirements, Rockwell has invoked a payment
holiday over its lease obligations. The Company successfully negotiated a
payment holiday relating to its Komatsu equipment with one if its equipment
lessors, enabling a reduction of its cash commitments by approximately South
African Rand ("ZAR") 4 million ($546,000) per month.
The average cash consumption, or expenditure rate in the first quarter of
fiscal 2010 is approximately ZAR 5 million (approximately $685,000) per month.
This cash expenditure rate has gradually been improving as sales have
increased over the first three months. The improved diamond prices and the
reduced cash outflow from the payment holiday on its lease obligations, has
resulted in a positive cash flow from operations subsequent to the end of the
quarter. Should the improving trend for diamond prices continue, along with a
weakening of the South African Rand, the Company anticipates that it should
generate sufficient cash flow at the end of the payment holiday.
Additional details can be found in the Company`s Financial Statements and
Management`s Discussion and Analysis which are filed on www.sedar.com.
PLANS MOVING FORWARD
Rockwell`s priority is to maintain flexibility and resourcefulness to overcome
the challenges of the world economic crisis and the concomitant significant
decline in international diamond prices. In this respect the Company continues
to manage costs, leverage diamond sales, and increase production to maximize
revenues at its operations.
Ongoing improvements to processing plants, mining operations, and
understanding of resources have combined to achieve a production target of
about 2,300 carats in June; July production is on target to achieve a similar
level. In conjunction with the foregoing, the Company has successfully lowered
its cash operating costs to below US$3.00 per tonne in fiscal 2010. These
initiatives remain at the forefront of the Company`s proposed future
activities.
The Board of Directors of Rockwell has proposed a rights offering to
strengthen the Company`s balance sheet. Details of this financing will be
circulated shortly.
The Company is also actively pursuing the identification and recruitment of
suitably qualified and experienced personnel to strengthen its Board of
Directors, management, financial and engineering staff.
Rockwell continues to review market conditions and, subject to the diamond
market showing higher and sustainable diamond prices going forward, intends to
re-commission the Niewejaarskraal mine, located on a high level terrace to the
west of its Saxendrift operation, and to modernize and re-commission the
Wouterspan operation.
The Company will host a telephone conference call on Thursday, July 16 at
10:00 a.m. Eastern Time (7:00 a.m. Pacific; 4:00 p.m. Johannesburg) to discuss
these results. The conference call may be accessed by dialing (888) 293-8961
(toll free) or (719) 325-2363 (toll) in North America, 0 800 404-7656 (toll
free) in the United Kingdom and 080 09 82089 (toll free) in South Africa. A
live and archived audio webcast will also be available at on the Company`s
website at www.rockwelldiamonds.com
The conference call will be archived for later playback until July 23, 2009
and can be accessed by dialing (888) 203-1112 (toll free) in Canada and the
United States, or (719) 457-0820 and using the pass code 5600484
For further information, please contact Investor Services at (604) 684-6365 or
within North America at 1-800-667-2114.
John Bristow
President and CEO
NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED
IN THIS NEWS RELEASE.
Forward Looking Statements
This release includes certain statements that may be deemed "forward-looking
statements". Other than statements of historical fact all statements in this
release that address future production, reserve or resource potential,
exploration drilling, exploitation activities and events or developments that
Rockwell expects are forward-looking statements. Although Rockwell believes
the expectations expressed in such forward-looking statements are based on
reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from
those in the forward-looking statements. Factors that could cause actual
results to differ materially from those in forward-looking statements include
market prices, exploitation and exploration successes, changes in and the
effect of government policies regarding mining and natural resource
exploration and exploitation, availability of capital and financing, and
general economic, market or business conditions. Investors are cautioned that
any such statements are not guarantees of future performance and those actual
results or developments may differ materially from those projected in the
forward-looking statements. For more information, investors should review
Rockwell`s annual Form 20-F filing with the United States Securities and
Exchange Commission www.sec.com and Rockwell`s home jurisdiction filings that
are available at www.sedar.com.
Canada
16 July 2009
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 16/07/2009 09:13:01 Supplied by www.sharenet.co.za
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