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Rockwell unaudited interim results for period ended 31 August 2012
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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: CA77434W2022
Share code on the TSX: RDI CUSIP Number: 77434W103
Share code on the OTCBB: RDIAF
Unaudited Condensed Interim Consolidated Financial Statements for the period ended 31 August 2012
The reports and statements set out below comprise the unaudited condensed interim consolidated financial statements:
The unaudited condensed interim consolidated financial statements, which have been prepared on the going concern basis,
were approved by the board on 10 October 2012 and were signed on its behalf by:
James Campbell Dr Mark Bristow
Director Director
Notice of no Auditor Review of Condensed Interim Consolidated Financial Statements
In accordance with National Instrument 51-102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of these condensed interim
consolidated financial statements they must be accompanied by a notice indicating that these condensed interim consolidated financial statements
have not been reviewed by an auditor.
The accompanying unaudited condensed interim consolidated financial statements of the Group have been prepared by and are the responsibility of
the Group's management, and have not been reviewed by an auditor.
Rockwell Diamonds Inc.
Unaudited Condensed Interim Consolidated Financial Statements for the period ended 31 August 2012
Consolidated Statements of Financial Position
As at As at
31 August 29 February
Amounts in Canadian Dollars Note(s) 2012 2012
Assets
Non-current assets
Mineral property interests 2 33 823 701 35 949 211
Investment in associate 3 169 56 161 049
Property, plant and equipment 4 42 718 912 49 391 831
Other financial assets 5 4 542 084 3 569 401
Reclamation deposits 14 1 837 217 3 104 716
Total non-current assets 83 091 479 92 176 208
Current assets
Inventories 6 2 265 796 1 622 880
Loans to related parties 16 135 811 276 601
Current tax receivable 40 623 -
Trade and other receivables 7 2 781 484 5 616 243
Restricted cash 8 899 145 -
Cash and cash equivalents 8 5 361 638 10 741 341
Total current assets 11 484 497 18 257 065
Total assets 94 575 976 110 433 273
Equity and liabilities
Equity
Share capital 9 145 851 553 145 632 846
Reserves (9 867 723) (2 845 771)
Retained loss (69 762 170) (65 620 276)
Total equity attributable to the equity holders of the Group 66 221 660 77 166 799
Non-controlling interest (1 879 872) (712 429)
Total equity 64 341 788 76 454 370
Liabilities
Non-current liabilities
Loans from related parties 16 356 642 400 616
Other financial liabilities 11 3 928 742 4 582 095
Capital lease obligation 12 267 184 455 086
Deferred tax 13 5 373 315 7 540 531
Reclamation obligation 14 10 595 391 11 169 329
Total non-current liabilities 20 521 274 24 147 657
Current liabilities
Loans from related parties 16 5 383 330 116
Other financial liabilities 11 1 298 487 806 049
Capital lease obligation 12 264 690 283 339
Trade and other payables 15 8 144 354 7 582 262
Bank overdraft 8 - 829 480
Total current liabilities 9 712 914 9 831 246
Total liabilities 30 234 188 33 978 903
Total equity and liabilities 94 575 976 110 433 273
Consolidated Statements of Comprehensive (Loss) Income
3 months 6 months 3 months 6 months
ended ended ended ended
31 August 31 August 31 August 31 August
Amounts in Canadian Dollars Note(s) 2012 2012 2011 2011
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Revenue 21 7 403 958 14 502 141 9 205 918 17 711 457
Production cost (7 044 592) (14 749 380) (5 186 015) (11 347 998)
Inventory movement (159 514) 643 019 506 518 693 470
Operating profit before amortisation and depreciation 199 852 395 780 4 526 421 7 056 929
Amortisation of mineral property interests (220 034) (473 441) (293 978) (495 721)
Depreciation of property, plant and equipment (1 715 753) (3 359 706) (1 526 118) (3 352 167)
Gross (loss) profit (1 735 935) (3 437 367) 2 706 325 3 209 041
Other income (expenses) 387 713 543 654 (212 368) (106 588)
General and administration expenses (1 452 631) (2 966 562) (2 406 632) (4 172 490)
Reclamation reversal (expenditure) 15 718 (480 152) - -
Results before net finance costs 22 (2 785 135) (6 340 427) 87 325 (1 070 037)
Finance income 23 159 894 229 087 69 006 176 267
Finance costs 24 (186 301) (377 285) (131 831) (240 943)
Results after net finance costs (2 811 542) (6 488 625) 24 500 (1 134 713)
Share of (loss) profit from equity accounted investment 3 (8 074) 18 666 67 562 82 435
(Loss) profit before taxation (2 819 616) (6 469 959) 92 062 (1 052 278)
Tax recovery 25 408 533 1 024 970 994 364 932 364
(Loss) profit for the period (2 411 083) (5 444 989) 1 086 426 (119 914)
Other comprehensive (loss) income:
Exchange differences on translating foreign operations (1 756 264) (7 098 719) 944 886 (186 674)
Total comprehensive (loss) income for the period (4 167 347) (12 543 708) 2 031 312 (306 588)
(Loss) profit attributable to :
Owners of the Group (2 017 211) (4 141 894) 1 263 946 347 748
Non-controlling interest (393 872) (1 303 095) (177 520) (467 662)
(Loss) profit for the period (2 411 083) (5 444 989) 1 086 426 (119 914)
Total comprehensive (loss) income attributable to:
Owners of the Group (3 819 655) (11 376 265) 2 265 024 164 521
Non-controlling interest (347 692) (1 167 443) (233 712) (471 109)
Total comprehensive (loss) profit for the period (4 167 347) (12 543 708) 2 031 312 (306 588)
(Loss) earnings per share
Per share information
Basic and diluted (loss) earnings per share (cents) 26 (0,04) (0,09) 0,04 0,01
Consolidated Statements of Changes in Equity
Share capital Foreign Share-based Total net Retained loss Total equity Non-controlling Total
currency payment reserves attributable to interest equity
translation reserve equity holders
Amounts in Canadian Dollars reserve of the Group
Balance at 1 March 2011 135 989 508 (6 364 795) 7 079 937 715 142 (53 982 868) 82 721 782 647 407 83 369 189
Loss for the year - - - - (11 637 408) (11 637 408) (2 081 976) (13 719 384)
Share-based payment expense - - 525 956 525 956 - 525 956 - 525 956
Debt conversion, net of issue costs at $0.065 per share 435 715 - - - - 435 715 - 435 715
Private placement, net of issue costs at $0.75 per share 7 756 477 - - - - 7 756 477 - 7 756 477
Exchange differences on translating foreign operations - (4 086 869) - (4 086 869) - (4 086 869) (98 614) (4 185 483)
Share issue costs (35 532) - - - - (35 532) - (35 532)
Asset and liability acquisition 1 486 678 - - - - 1 486 678 820 754 2 307 432
Total changes 9 643 338 (4 086 869) 525 956 (3 560 913) (11 637 408) (5 554 983) (1 359 836) (6 914 819)
Balance at 1 March 2012 145 632 846 (10 451 664) 7 605 893 (2 845 771) (65 620 276) 77 166 799 (712 429) 76 454 370
Loss for the period - - - - (4 141 894) 4 141 894) (1 303 095) (5 444 989)
Debt conversion, net of issue costs at $0.48 per share 218 707 - - - - 218 707 - 218 707
Share-based payment expense - - 212 419 212 419 - 212 419 - 212 419
Exchange differences on translating foreign operations - (7 234 371) - (7 234 371) - (7 234 371) 135 652 (7 098 719)
Total changes 218 707 (7 234 371) 212 419 (7 021 952) (4 141 894) (10 945 139) (1 167 443) (12 112 582)
Balance at 31 August 2012 145 851 553 (17 686 035) 7 818 312 (9 867 723) (69 762 170) 66 221 660 (1 879 872) 64 341 788
Note(s) 9 10
Consolidated Statements of Cash Flows
3 months 6 months 3 months 6 months
ended ended ended ended
31 August 31 August 31 August 31 August
Amounts in Canadian Dollars Note(s) 2012 2012 2011 2011
Cash flows from operating activities
Cash receipts from customers 8 688 024 16 699 556 12 122 382 22 942 074
Cash paid to suppliers and employees (8 065 209) (17 706 619) (6 967 391) (15 874 127)
Cash generated from (used in) operations 18 622 815 (1 007 063) 5 154 991 7 067 947
Finance income 159 894 229 087 69 006 176 267
Finance costs (314 906) (377 285) (131 831) (240 943)
Tax paid 19 1 278 (40 623) 13 368 15 914
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Net cash inflow (outflow) from operating activities 469 081 (1 195 884) 5 105 534 7 019 185
Cash flows from investing activities
Purchase of property, plant and equipment 4 (1 631 687) (2 430 055) (6 585 280) (8 805 356)
Proceeds from sale of property, plant and equipment 4 716 319 760 804 6 379 283 6 379 283
Asset and liability acquisition 20 2 598 2 598 - -
Net movement in related party loans (276 285) (178 024) (2 223 033) (2 123 370)
Net movement in other financial assets (157 140) (1 364 479) (684 379) (778 747)
Increase in reclamation deposits (48 634) - - -
Decrease in reclamation deposits - 926 709 5 899 5 899
Increase in restricted cash (899 145) (899 145) - -
Net cash outflow from investing activities (2 293 974) (3 181 592) (3 107 510) (5 322 291)
Cash flows from financing activities
Proceeds on share issue 9 - - 6 450 217 6 885 931
Share issue costs 9 - (5 293) - -
Repayment of convertible loan (5 546) (5 546) - -
Proceeds from convertible loan - - 1 950 985 1 950 985
Repayment of capital lease obligations (78 596) (161 908) 983 525 881 070
Net cash (outflow) inflow from financing activities (84 142) (172 747) 9 384 727 9 717 986
Net movement in cash and cash equivalents for the period (1 909 035) (4 550 223) 11 382 751 11 414 880
Cash and cash equivalents at the beginning of the period 7 270 673 9 911 861 3 015 774 2 983 645
Total net cash and cash equivalents at end of the period 8 5 361 638 5 361 638 14 398 525 14 398 525
Accounting Policies
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
1.1 Nature of operations
Rockwell Diamonds Inc. (“Rockwell” or the “Company”) is engaged in the business of diamond production and the acquisition and exploration of natural
resource properties. The unaudited condensed interim consolidated financial statements of the Company as at and for the period ended 31 August 2012
and the year ended 29 February 2012 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”)
and the Group’s interest in associates. The Group’s mineral property interests are located in South Africa. Rockwell is incorporated under British
Columbia Business Corporations Act.
1.2 Continuance of operations
The financial statements have been prepared on the basis of accounting policies applicable to a going concern. Future events beyond the Group’s
control may change the Group’s ability to continue as a going concern. If the going concern concept was no longer appropriate, significant adjustments
would be required to the carrying value of assets and liabilities and would be recorded at that time.
1.3. Basis of preparation
1.3.1 Statement of compliance
The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34: Interim Financial Reporting.
The accounting policies applied in the unaudited condensed interim consolidated financial statements are consistent with those applied in the consolidated
financial statements for the year ended 29 February 2012, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board.
1.3.2 Basis of measurement
The unaudited condensed interim consolidated financial statements have been prepared on the historical cost basis, except where otherwise stated, as set
out in the accounting policies below.
1.3.3 Presentation currency
These unaudited condensed interim consolidated financial statements are presented in Canadian Dollars.
1.3.4 Use of estimates and judgements
In preparing the unaudited condensed interim consolidated financial statements, management is required to make estimates and assumptions that affect the
amounts represented in the unaudited condensed interim consolidated financial statements and related disclosures. Use of available information and the
application of judgement are inherent in the formation of estimates. Estimates and underlying assumptions are reviewed on a regular basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the unaudited
condensed interim consolidated financial statements is included in the following notes:
• Note 2 – Mineral property interests
• Note 4 – Property, plant and equipment
• Note 6 – Inventories
• Note 10 – Share-based payments
• Note 13 – Deferred tax
• Note 14 – Reclamation obligation
1.4 Significant accounting policies
The accounting policies set out below are applied consistently to all years presented in these unaudited condensed interim consolidated financial
statements and have been applied consistently by the Group entities.
Accounting Policies
1.4.1 Basis of consolidation
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control
is transferred to the Group.
Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,
consideration is given to potential voting rights that are currently exercisable. Judgement is applied in determining the acquisition date and determining
whether control is transferred from one party to another.
Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree,
and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration and share-based payment
awards of the acquiree that are replaced mandatorily in the business combination.
A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a
past event, and its fair value can be measured reliably.
Transaction costs incurred in connection with a business combination, such as legal fees, due diligence fees and other professional and consulting
fees are expensed as incurred, unless it is debt related. Directly attributable transaction costs related to debt instruments are capitalised.
If the Group obtains control over one or more entities that are not businesses, then the bringing together of those entities are not business
combinations. The cost of acquisition is allocated among the individual identifiable assets and liabilities of such entities, based on their relative
fair values at the date of acquisition. Such transactions do not give rise to goodwill.
Non-controlling interests in the proportionate net assets of consolidated subsidiaries are identified and recognised separately from the Group's
interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling
interests even if this results in a debit balance being recognised for non-controlling interests.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the unaudited condensed interim consolidated
financial statements from the date that control commences until the date that that control ceases.
Associates
An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor a joint venture.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control
over those policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.
An investment in associate is accounted for using the equity method. Under the equity method, investments in associates are carried in the unaudited
condensed interim consolidated statement of financial position at cost adjusted for post-acquisition changes in the Group's share of net assets of the
associate, less any impairment losses.
Losses in an associate in excess of the Group's interest in that associate are recognised only to the extent that the Group has incurred a legal or
constructive obligation to make payments on behalf of the associate.
Unrealised profits or losses on transactions between the Group and an associate are eliminated to the extent of the Group's interest therein.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra- group transactions, are eliminated in preparing the
unaudited condensed interim consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
1.4.2 Mineral property interests
The acquisitions of mineral property interests are initially measured at cost. Mineral property acquisition costs and development expenditures incurred
subsequent to the determination of the feasibility of mining operations and approval of development by the Group are capitalised until the property is
placed into production, sold, abandoned, or when management has determined that there has been an impairment in value. Such acquisition costs are amortised
over the estimated life of the mine, based on the unit of production method, or written off to operations if the property is abandoned, allowed to lapse, or
if there is little prospect of further work being carried out by the Group. Under the unit of production method, the yearly depreciation charge is calculated
by dividing the actual resources mined into the estimated resources at the beginning of the year and then multiplying the resulting fraction by the net carrying
value of the related assets. The unit of production method results in a systematic and rational allocation of the cost of the mineral property interests over
the year the resources are utilised.
Exploration expenditure incurred subsequent to the mining operations which do not increase production or extend the life of operations are expensed in
the period incurred.
The amount presented for mineral property interests represents costs incurred to date less accumulated amortisation and impairment losses, and does
not necessarily reflect present or future values.
1.4.3 Property, plant and equipment
The cost of an item of property, plant and equipment is recognised as an asset when:
- it is probable that future economic benefits associated with the item will flow to the Group; and
- the cost of the item can be measured reliably.
Property, plant and equipment are initially measured at cost.
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to and
replace part of it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of
the replaced part is derecognised.
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Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value.
Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful life
Buildings 12 years
Plant and machinery 4 - 10 years
Motor vehicles 5 years
Office equipment 6 years
Land is not depreciated.
The residual value, useful life and depreciation method of each asset are reviewed annually. If the expectations differ from previous estimates,
the change is accounted for as a change in accounting estimate.
The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised.
The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds,
if any, and the carrying amount of the item.
1.4.4 Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group
of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating
unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating units exceeds its estimated recoverable amount.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce
the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
Impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
1.4.5 Financial instruments
Initial recognition and measurement
Financial instruments are recognised initially when the Group becomes a party to the contractual provisions of the instruments.
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement.
Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured
at cost and are classified as available-for-sale financial assets.
For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.
Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.
Subsequent measurement
Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair
value being included in profit or loss for the period.
Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.
Available-for-sale financial assets are subsequently measured at fair value. This excludes equity investments for which a fair value is not determinable,
which are measured at cost less accumulated impairment losses.
Financial liabilities are subsequently measured at amortised cost, using the effective interest method.
Investments
The Group classified its investments into the following categories: fair value through profit and loss, held-to-maturity and available-for-sale.
The classification is dependent on the purpose for which the investments were required. Management determines the classification of its investments
at the time of the purchase and re-evaluates such designation on a regular basis. Investments that are acquired principally for the purpose of generating
a profit from short term fluctuations in price are classified as trading investments and included in current assets. Investments with a fixed maturity
that management has the intention and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets, except for
maturities within 12 months from the reporting date which are classified as current assets. Investments intended to be held for an indefinite period
of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale and are included in non-current
assets unless management has the express intention of holding the investment for less than 12 months from the reporting date or unless they will need to be sold
to raise operating capital, in which case they are included in current assets.
Purchases and sales of investments are recognised on the trade day, which is the date that the Group commits to purchase or sell the asset. Cost of purchase
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includes transaction costs. Fair value through profit and loss and available-for-sale investments are subsequently carried at fair value. The fair value of
investments is based on cash value or amounts derived from cash flow models. Equity securities for which fair value cannot be measured reliably are recognised
at cost less impairment. When securities classified as available-for- sale are sold or impaired, the accumulated fair value adjustments are included in the
statement of comprehensive income as gains and losses from investment securities. Held-to-maturity investments are carried at amortised cost using the effective
yield method.
Loans to (from) related parties
Loans to related parties are recognised as loans and receivables on the date that the Group becomes a party to the contractual provisions of the loan.
The Group derecognises the loan to a related party when the contractual rights to cash flows from the asset expire, or it transfers the rights to receive
the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.
Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Loans from related parties are recognised on the date that the Group becomes a party to the contractual provisions of the loan. The Group derecognises
the loan from a related party when its contractual obligations are discharged, cancelled or expire. Loans from related parties are recognised initially
at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost
using the effective interest rate method.
Loans to (from) related parties are offset and the net amount presented in the statement of financial position when, and only when, the Group has a
legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Loans to (from) related parties are at arms length.
Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest
rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the
asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation,
and default or delinquency in payments are considered indicators that the trade receivable might be impaired. The allowance recognised is measured
as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest
rate computed at initial recognition.
Trade and other receivables are classified as loans and receivables.
Share capital and equity
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction of equity,
net of any tax effects.
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a
known amount of cash and are subject to an insignificant risk of changes in value. These are initially recorded at fair value and subsequently measured
at amortised cost.
Impairment of financial assets
At each reporting date the Group assesses all financial assets, to determine whether there is objective evidence that a financial asset or group of
financial assets has been impaired.
For amounts due to the Group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of
payment is considered indicators of impairment.
Impairment losses are recognised in profit or loss.
Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale.
Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable.
1.4.6 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and
prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities,
using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities
Deferred tax is provided for using the liability method, on all temporary differences between the carrying values of assets and liabilities for accounting
purposes and the amounts used for tax purposes and on any tax losses. No deferred tax is provided for on temporary differences relating to the initial
recognition of an asset or liability to the extent that neither accounting nor taxable profit is affected on acquisition and any adjustment to tax payable
in respect of previous years.
The provision for deferred tax is calculated using enacted rates at the reporting date that are expected to apply when the asset is realised or the liability
is settled. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the deferred tax
asset could be realised.
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Tax expenses
Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from:
- a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or
- a business combination.
Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different
period, directly in equity.
1.4.7 Inventories
Rough diamond inventories are valued at the lower of average production cost and net realisable value. Production costs include the cost of consumable materials,
direct labour, mine-site overhead expenses and amortisation. Work in progress stock piles consist of ground excavated, but not yet fully processed at year end.
The value of these stock piles represents management's best estimate of the costs incurred to excavate and screen the ground as identified by an independent
surveyor at year end.
Mine supplies are valued at the lower of cost, at the weighted average cost basis, and net realisable value.
Cost of items that are not ordinarily interchangeable, and goods and services produced and segregated for specific projects, are assigned by using a specific
identification of their individual costs.
Previous write-downs are reversed to the lower of cost and net realisable value when there is a subsequent increase in the value of inventories.
1.4.8 Share-based payments
The fair value of share-based payment awards granted to employees is recognised on the grant date as an employee cost, with a corresponding increase in reserves,
over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards
for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on
the number of awards that meet the related service and non-market performance conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there
is no true-up for differences between expected and actual outcomes.
The fair value of the employee share options is measured using the Black-Scholes formula. Measurement inputs include the share price on the measurement date,
the exercise price of the instrument, expected volatility (based on an evaluation of the Group’s historic volatility, particularly over the historic period
commensurate with the expected term), expected term of the instruments (based on historical experience and general option holder behaviour), expected dividends,
and the risk- free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account
in determining fair value.
1.4.9 Reclamation obligation
Estimated rehabilitation costs, which are based on the Group’s interpretation of current environmental and regulatory requirements, represent the present value
of the expected future costs to rehabilitate the mine properties at termination of mining operations. The estimated costs of rehabilitation are reviewed annually
and adjusted as appropriate for changes in legislation, technology or other circumstances.
Provision is made for the Group’s legal and constructive obligations to dismantle, remove and restore items of property, plant and equipment and remediation
of disturbed areas in the financial period when the related environmental disturbance occurs, based on the estimated future costs using information available
at the balance sheet date. The provision is discounted using a market-based pre-tax discount rate and the unwinding of the discount is included in interest expense.
The provision is not discounted if the discounting is not significant in relation to the provision made. Rehabilitation of disturbed areas, at the operating
Northern Cape mines, is performed on a continuous basis. Rehabilitation of disturbed areas where the alluvial open-cast bench mining process is followed and
the non-operating Northern Cape mines will be performed when the mining operations cease.
Based on current environmental regulations and known rehabilitation requirements, management has included its best estimate of these obligations in its
rehabilitation provision.
1.4.10 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the Group.
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership to the Group.
Finance leases
Finance leases are recognised as assets and liabilities in the consolidated statements of financial position at amounts equal to the fair value
of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the
consolidated statements of financial position as a finance lease obligation.
The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease.
The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each
period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.
Operating leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised
as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.
Any contingent rents are expensed in the period they are incurred.
1.4.11 Revenue
Revenue arising from the sale of diamonds are recognised when all the following conditions have been satisfied:
- the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
- the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
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- it is probable that the economic benefits associated with the transaction will flow to the Group; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided
in the normal course of business, net of value added tax.
1.4.12 Finance income and finance cost
Finance income comprises interest on funds invested, gains on reclamation deposits held and fair value gains on financial assets at fair value through
profit or loss. Finance income is recognised, in profit or loss, using the effective interest rate method.
Finance cost comprises interest expense on borrowings, unwinding of discount on provisions and fair value losses on financial assets at fair value through
profit or loss. Finance costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit
or loss using the effective interest rate method.
1.4.13 (Loss) earnings per share
The Group presents basic and diluted (loss) earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding,
adjusted for own shares held and for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.
1.4.14 Translation of foreign currencies
Foreign currency transactions
A foreign currency transaction is recorded, on initial recognition in Canadian Dollars, by applying to the foreign currency amount the spot exchange rate
between the functional currency and the foreign currency at the date of the transaction.
At the end of the reporting period:
- foreign currency monetary items are translated using the closing rate;
- non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and
- non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on
initial recognition during the period or in previous financial statements are recognised in profit or loss in the period in which they arise.
Cash flows arising from transactions in a foreign currency are recorded in Canadian Dollars by applying to the foreign currency amount the exchange rate between
the Canadian Dollars and the foreign currency at the date of the cash flow.
Consolidation
For consolidation purposes the results and financial position of a foreign operation are translated into the reporting currency using the following procedures:
- assets and liabilities are translated at the closing rate at the date of that consolidated statements of financial position;
- equity components are translated at historical rates;
- income and expenses are translated at exchange rates at the dates of the transactions; and
- all resulting exchange differences are recognised in other comprehensive income and accumulated as a separate component of equity. When a foreign investment
is disposed off the cumulative exchange differences previously recognised in other comprehensive income are transferred to profit and loss.
Exchange differences arising on a monetary item that forms part of a net investment in a foreign operation are recognised initially to other comprehensive income
and accumulated in the translation reserve. They are recognised in profit or loss as a reclassification adjustment through to other comprehensive income on
disposal of net investment.
The cash flows of a foreign subsidiary are translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows.
1.5. New standards and interpretations not yet adopted
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published
but are not yet effective, and have not been adopted early by the Group.
Management anticipates that all of the pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective
date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements
is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial
statements.
Standard Details of Amendment Annual periods
beginning on or after
IAS 1 amendment Presentation of Financial Statements: Presentation 1 July 2012
of Items of Other Comprehensive Income
IAS 28 Investments in Associates and Joint Ventures (2011) 1 January 2013
IFRS 9 (2009) Financial Instruments 1 January 2015
IFRS 9 (2010) Financial Instruments 1 January 2015
IFRS 10 Consolidated Financial Statements 1 January 2013
IFRS 12 Disclosure of Interests in Other Entities 1 January 2013
IFRS 13 Fair Value Measurement 1 January 2013
IFRIC 20 Stripping Costs in the Production Phase of a 1 January 2013
Surface Mine
The aggregate impact of the initial application of the statements and interpretations on the Group's annual financial statements has not yet been assessed by
management.
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
Amounts in Canadian Dollars
2. Mineral property interests
As at As at
31 August 29 February
2012 2012
Cost Accumulated Carrying value Cost Accumulated Carrying value
amortisation amortisation
Mineral property interests 44 156 598 (10 332 897) 33 823 701 47 029 751 (11 080 540) 35 949 211
Reconciliation of mineral property interests - 31 August 2012
Opening Asset and Foreign Amortisation Closing
balance liability exchange balance
acquisition movements
(Note 20)
Mineral property interests 35 949 211 2 009 239 (3 661 308) (473 441) 33 823 701
Reconciliation of mineral property interests - 29 February 2012
Opening Assets and Foreign Amortisation Closing
balance liability exchange balance
acquisitions movements
Mineral property interests 25 175 713 13 953 802 (1 873 561) (1 306 743) 35 949 211
The Group's mineral property interests consist of the following:
Wouterspan
The Wouterspan property is located in the Herbert district of the Northern Cape Province of South Africa approximately 145km southwest of Kimberley.
The operation is located on the farm Lanyonvale (various portions) with an aggregate area of 2,579.8ha.
The operations is currently on care and maintenance.
Holpan/Klipdam
The Klipdam Property is located 45 km from Kimberley, South Africa and consists of the adjacent Holpan 161 and Klipdam 157 farms, covering an area of
4,019.9 hectares. Holpan was put on care and maintenance in May 2011.
Saxendrift
The 5,142 hectare Saxendrift mine property is located on the south bank of the Middle Orange River, and adjacent to the Wouterspan property.
Niewejaarskraal
Niewejaarskraal is located in the Hay district of the Northern Cape Province of South Africa approximately 124km southwest of Kimberley. The operations
are located on Niewejaarskraal 40 and Viegulands Put 39 (total of 3,085.695ha). The operation has been on care and maintenance since December 2009.
Makoenskloof
The Group has previously reported that it has been seeking to sell the Makoenskloof property. This process has been approved by the Board, but a previous
potential sale did not materialise.
The Group’s intention to sell Makoenskloof still remains, but this is not highly probable in terms of IFRS 5, due to the following:
- A selling price has not been established;
- A selling agent has not been appointed;
- No interested seller has been found; and
- No contracts or agreements have been established.
The accounting treatment of the property has therefore not changed, and this will remain the case until such a time as a sale is highly probable.
Windsorton Erf 2004
This is a prospecting property covering an area of 1,146 ha, and is adjacent to the Klipdam mine.
Tirisano
The Tirisano mine, totalling 10,805.57 hectares is located some 35 kilometres due north of Ventersdorp, in the North West Province and approximately
150 kilometres west of Johannesburg. The Tirisano mineral property was acquired as part of the asset and liability acquisition on 1 September 2011.
The purchase price allocated to the mineral property and is supported by a valuation performed by an independent competent person. The range of the
attributable value of the mineral property in this valuation exceeds the allocated purchase price.
Farhom, Okapi and Kanonloop
The Group holds the mineral rights to Farhom, Okapi and Kanonloop which are located in the Northern Cape. A pre-feasibility study on these mineral rights
will commence in the next 18 months after which a decision will be taken on the future of the mining potential. Management is in the process of negotiation
with the Department of Minerals and Resources to consolidate the right within the Wouterspan mineral right.
Estimations
Carats available at the mineral property interests have been estimated by a qualified geologist employed by the Group and was reviewed by an independent
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qualified geologist. These resource estimates include inferred resources which have a great amount of uncertainty as to their existence, and economic and
legal feasibiliy. The estimated carats have been published as required by National Instrument 43 -101. The carats included in 43-101 is used in the calculation
of the amortisation for the period (refer accounting policy).
Amounts in Canadian Dollars As at 31 As at 29
August February
2012 2012
3. Investment in associate
3.1. Flawless Diamonds Trading House (Pty) Ltd - (20% shareholding)
Carrying amount
Opening balance 161 049 129 660
Cost of investment in associate - -
Share of profit from equity accounted investment 18 666 36 918
Foreign exchange movements (10 150) (5 529)
Closing balance 169 565 161 049
Summarised financial information of associate
Total assets 1 923 540 2 604 145
Total liabilities 1 161 745 1 847 525
Net assets 761 795 756 620
Revenue 25 532 226 55 570 156
Total comprehensive income for the period 93 329 173 411
Capital commitments and contingent liabilities of associate - -
On 21 April 2010 the Group acquired a 20% shareholding in Flawless Diamonds Trading House (Pty) Ltd ("Flawless") incorporated in the Republic of
South Africa for ZAR700,000 ($95,690) cash. Flawless is a registered diamond broker which provides specialist diamond valuation, marketing and tender
sales services to the Group.
As the Group has significant influence over Flawless' operations it accounts for the investment using the equity method.
3.2. Banzi Trade (26) (Pty) Ltd - (49% shareholding)
Banzi Trade (26) (Pty) Ltd was incorporated in 2005 with nominal equity. The Group acquired a 49% shareholding in the same year. Since the incorporation
date the Group's portion of the losses from Banzi Trade (26) (Pty) Ltd exceeded its investment in the associate. The Group, in terms of its accounting
policy, does not account for losses in excess of its investment in associates. The Group's carrying value of its investment in Banzi Trade (26) (Pty) Ltd is Nil.
Amounts in Canadian Dollars
4. Property, plant and equipment
As at As at
31 August 29 February
2012 2012
Cost Accumulated Carrying value Cost Accumulated Carrying value
depreciation depreciation
Land and buildings 6 458 646 (1 417 409) 5 041 237 7 293 865 (1 484 130) 5 809 735
Plant and machinery 62 691 873 (27 941 995) 34 749 878 75 464 483 (34 654 874) 40 809 609
Motor vehicles 1 516 081 (1 085 120) 430 961 1 637 108 (1 183 352) 453 756
Office equipment 1 007 953 (695 235) 312 718 1 065 166 (711 703) 353 463
Construction in progress 2 184 118 - 2 184 118 1 965 268 - 1 965 268
73 858 671 (31 139 759) 42 718 912 87 425 890 (38 034 059) 49 391 831
Reconciliation of property, plant and equipment - 31 August 2012
Opening Additions Disposals Transfers Foreign Depreciation Closing
balance exchange balance
movements
Land and buildings 5 809 735 10 324 (45 900) - (630 143) (102 779) 5 041 237
Plant and machinery 40 809 609 798 082 (330 852) 1 011 728 (4 401 367) (3 137 322) 34 749 878
Motor vehicles 453 756 82 964 - - (51 370) (54 389) 430 961
Office equipment 353 463 63 157 - - (38 686) (65 216) 312 718
Construction in progress 1 965 268 1 475 528 (4 103) (1 011 728) (240 847) - 2 184 118
49 391 831 2 430 055 (380 855) - (5 362 413) (3 359 706) 42 718 912
Reconciliation of property, plant and equipment - 29 February 2012
Opening Additions Assets and Disposals Transfers Foreign Depreciation Impairment Closing
balance liabilities exchange loss balance
acquisitions movements
Land and buildings 6 353 551 12 368 208 838 - 870 038 (357 649) (407 373) (870 038) 5 809 735
Plant and machinery 49 212 345 5 546 769 129 015 (6 104 971) 4 331 970 (2 210 677) (6 025 987) (4 068 855) 40 809 609
Motor vehicles 588 581 6 624 40 995 (13 317) - (33 626) (135 501) - 453 756
Office equipment 391 263 76 088 56 193 (35 488) - (23 988) (110 605) - 353 463
Construction in progress 6 282 698 1 161 067 - - (5 202 008) (276 489) - - 1 965 268
62 828 438 6 802 916 435 041 (6 153 776) - (2 902 429) (6 679 466) (4 938 893) 49 391 831
Assets subject to finance lease (net carrying value)
Plant and machinery 752 435 881 772
The Group’s bankers have registered two notarial general covering bonds (First Lien) of ZAR 10 million ($1.3 million) over all moveable assets related to the
property known as Holpan, district Barkley West, Northern Cape Province (refer Note 27).
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Estimates and judgements
Management performs an annual review of the Group’s property, plant and equipment to consider indicators for impairment and where indicators for impairment
were identified, the recoverable amount. Comparisons are made to similar assets available in the market taking into consideration its economic life, residual
value, current condition and application in the mining and recovery processes. Impairment indicators were identified for certain items of property, plant and
equipment and where no future economic benefits (value in use) will flow from the identified assets, judgement is applied to consider fair value less costs to sell.
Assets identified, where the carrying value exceeds the recoverable amount, are impaired. Life of mine models forms the basis against which the value in use is
measured.
Amounts in Canadian Dollars As at 31 As at 29
August February
2012 2012
5. Other financial assets
At fair value through profit or loss
Investments 4 479 017 3 498 558
The Group invests in investment policies with endowment benefits on maturity of the
policies in order to provide funding for the reclamation obligations. Premiums are invested
on an initial lump sum and/or monthly annuity premium basis with the insurers and
invested in specific investment plans. Policy investment value at any one time represents
the value of premiums and growth after deduction of administration and investment fees.
Withdrawals could be made against the policies before endowment against the deduction
of penalties, which is lower than the investment value. To surrender the policy prior to
maturity date will similarly attract penalties at a lower rate, and represents the value
accessible at any one stage. Fair value at any one stage represents the surrender value
of the investments. These policies are encumbered by the guarantees issue by Standard
Bank on behalf of the Group (refer notes 14 and 27).
At amortised cost
Deposits 63 067 70 843
This deposit relates to deposits paid to the South African electricity supplier.
63 067 70 843
Total other financial assets
4 542 084 3 569 401
Non-current assets
At fair value through profit or loss 4 479 017 3 498 558
At amortised cost 63 067 70 843
4 542 084 3 569 401
6. Inventories
Rough diamond inventories 742 075 150 751
Stockpile diamond inventory 31 684 39 490
Fuel, oil and grease 211 401 209 067
Mine supplies 1 280 636 1 223 572
2 265 796 1 622 880
No write-down of inventory was done during the period ended 31 August 2012 or 29 February 2012.
The net realisable value of rough diamond inventories are estimated at the average price per carat achieved for the most
recent diamond tender taking into account the variable factors of clarity, carat, shape and colour.
Estimates and judgements
Management performs an annual review of inventory in order to determine the net realisable value and to identify inventory that
requires a write off. Obsolete, slow moving and damaged inventory are indicators that a write off is required. Management's best
judgement is applied in estimating the write off should this be necessary.
Amounts in Canadian Dollars As at 31 As at 29
August February
201 2012
7. Trade and other receivables
Trade receivables 2 162 422 2 887 305
Prepayments 386 098 876 537
VAT 232 964 1 852 401
2 781 484 5 616 243
8. Cash and cash equivalents
Cash and cash equivalents consist of:
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Cash on hand 2 613 946
Bank balances 2 463 986 10 740 395
Short-term cash deposits 2 895 039 -
5 361 638 10 741 341
Bank overdraft - (829 480)
5 361 638 9 911 861
Current assets 5 361 638 10 741 341
Current liabilities - (829 480)
5 361 638 9 911 861
Restricted cash 899 145 -
As at 31 As at 29
August February
2012 2012
9. Share capital
Reconciliation of number of shares issued:
Number of shares - beginning of period 47 942 746 518 185 238
Private placement at $0.065 per share - -
Rights offering at subscription price of $0.05
per share - -
Debt conversion at $0.065 per share - 6 703 292
Share consolidation 15:1 (a) - (489 895 959)
Number of post consolidation shares 47 942 746 34 992 571
Private placement at $0.75 per share (b) - 10 341 969
Shares issued with asset and liability
acquisition (c) - 2 608 206
Debt conversion at $0.48 per share 466 667 -
Number of shares - end of period 48 409 413 47 942 746
The Company’s authorised share capital consists of an unlimited number of common shares, without par value, and an
unlimited number of preference shares without par value, of which no preference shares have been issued. The directors have
the authority to issue unissued shares, up to 10% of outstanding shares, without shareholders approval.
(a) Effective 11 July 2011 the Company completed a consolidation of its outstanding shares on the basis of 1 post consolidated
common share for 15 pre-consolidated shares.
(b) The Company raised $7,8 million through a private placement, with shares issued at $0.75 per share during Q3 2012.
(c) As at 1 September 2011, the Company issued 2,608,206 shares for the asset and liability purchase of Etruscan Diamonds (Pty) Ltd
and Blue Gum Diamonds (Pty) Ltd.
The following shares are reserved for issue:
- Share options 3,501,236
- Daboll loan 3,499,256
10. Share-based payments
The Group has a share-based payment plan approved by the shareholders that allows the Group to grant options for up to 10%
of the issued and outstanding shares of the Group at any one time, typically vesting over two years, to its directors, employees,
officers, and consultants. The exercise price of each share option is set by the board of directors at the time of the grant and
cannot be less than the market price (less permissible discounts) on the Toronto Stock Exchange. Share options have a maximum term
of five years and typically terminate 90 days following the termination of the optionee’s employment, except in the case of retirement
or death, which terminate one year thereafter.
From time to time, the Group may grant share options to employees, directors, and service providers. The Group uses the Black-Scholes
option pricing model to estimate a fair value for these options at grant date. This model require inputs such as expected
volatility, expected life to exercise, and interest rates. Changes in any of these inputs could cause a significant change in the
share-based payment expense charged in a period.
Effective 11 July 2011 the Company completed a consolidation of its outstanding shares on the basis of 15 pre-consolidated common
shares for 1 post consolidated common share. The effect of the share consolidation has been applied retrospectively.
All options are to be setled by physical delivery of shares.
The continuity of share-based payments for the quarter ended 31 August 2012 is as follows:
Grant date 29 February Exercised Expired/ 31 August
2012 cancelled 2012
24 September 2007 322 790 - - 322 790
14 November 2007 72 421 - - 72 421
7 December 2009 707 734 - (30 000) 677 734
8 October 2010 776 722 - (73 333) 703 389
12 October 2011 1 153 627 - - 1 153 627
12 October 2011 571 275 - - 571 275
3 604 569 - (103 333) 3 501 236
Weighted average exercise price $1.64 - $2.52 $1.72
The continuity of share-based payments for the year ended 29 February 2012 is as follows:
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Grant date 28 February Granted/ Exercised Expired/ 29 February
2011 issued cancelled 2012
24 September 2007 392 767 - - (69 977) 322 790
14 November 2007 72 433 - - (12) 72 421
20 June 2008 63 333 - - (63 333) -
7 December 2009 912 173 - - (204 439) 707 734
18 January 2010 40 000 - - (40 000) -
8 October 2010 1 002 800 - - (226 078) 776 722
12 October 2011 - 1 153 627 - - 1 153 627
12 October 2011 - 584 075 - (12 800) 571 275
2 483 506 1 737 702 - (616 639) 3 604 569
Weighted average exercise price $2.70 $0.61 - $2.52 $1.64
Weighted average fair value of share
options granted during the year $0.46
Employee expenses For the For the year
Period ended 29
ended 31 February
August 2012 2012
Share options granted in previous years 212 419 209 575
Share options granted in current period - 316 381
Total share-based payment cost expensed to operations, with 212 419 525 956
the offset credited to share-based payment reserve
Amounts in Canadian Dollars As at 31 As at 29
August February
2012 2012
11. Other financial liabilities
Held at amortised cost
Industrial Development Corporation of South Africa Limited 3 110 579 3 321 741
The loan was acquired by Rockwell Diamonds Inc. with the asset and liability acquisition
of Etruscan Diamonds (Pty) Ltd, and was entered into by Blue Gum Diamonds (Pty) Ltd, a
74% owned subsidiary of Etruscan Diamonds (Pty) Ltd.
The loan is repayable in 10 equal bi-annual instalments, the first of which will be paid in
fiscal 2013, bears interest at 1.28% above the current prime rate (8.5% p.a.) and is
denominated in South African Rand.
Daboll loan 2 116 650 2 066 403
On 2 June 2011, the Group signed a Convertible Loan Agreement with Daboll
Consultants Limited. It was agreed that Daboll Consultants Limited would lend Rockwell
Diamonds Inc $2,000,000 within 5 days of the agreement being signed.
As the loan is repayable at the election of the borrower (except if converted after 12
months by the lender), it is disclosed as non-current.
The loan bears interest at 5% p.a. payable each calendar quarter, and any unpaid interest
is compounded annually.
The loan is convertible into common shares of the Company after 12 months, if it is not
repaid earlier, at the option of Daboll Consultants Limited. The conversion price is
$0.0375 per common share and a maximum of 52,488,853 can be issued in relation to
this conversion.
On 11 July 2011, the Company completed a consolidation of its outstanding common
shares on the basis of 15 pre-consolidation shares for 1 post consolidated common
share. Therefore the maximum number of shares that can be issued is now 3,499,256 at
$0.5625.
5 227 229 5 388 144
Non-current liabilities
At amortised cost 3 928 742 4 582 095
Current liabilities
At amortised cost 1 298 487 806 049
5 227 229 5 388 144
Amounts in Canadian Dollars As at 31 As at 29
August February
2012 2012
12. Capital lease obligation
Minimum lease payments due
- within one year 309 084 349 069
- between one and five years 281 754 492 589
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590 838 841 658
less: future finance charges (58 964) (103 233)
Present value of minimum lease payments 531 874 738 425
Present value of minimum lease payments due
- within one year 264 690 283 339
- between one and five years 267 184 455 086
531 874 738 425
Non-current liabilities 267 184 455 086
Current liabilities 264 690 283 339
531 874 738 425
Capital lease obligations as detailed above are secured over plant and equipment are repayable, on average, in 36 monthly
instalments and are denominated in South African Rand. Interest is charged at rates of between 1.25% to 2.00% in excess of
the prevailing prime rate, which is 8.50% per annum at 31 August 2012. There are no significant restrictions imposed on the
lessee as a result of the lease obligations.
13. Deferred tax
Deferred tax liability
Tax effect of temporary differences 5 373 315 7 540 531
Reconciliation of net deferred tax liability
At beginning of the period 7 540 531 9 728 409
Foreign exchange movement (1 142 246) (708 619)
Recognised through statement of comprehensive loss (1 024 970) (1 479 259)
5 373 315 7 540 531
Judgements and estimates used in recognition of deferred tax asset
Deferred tax assets are raised only to the extent that future taxable income will be available against which the deferred tax
asset can be set off. Management estimates future taxable income using forecasts based on the best available current
information. Based on current estimates there is not sufficient future taxable income in the Group entities to which the
unrecognised deferred tax assets relate to against which to set off the deferred tax asset and therefore no deferred tax assets
are raised.
Amounts in Canadian Dollars
14. Reclamation obligation
Reconciliation of obligation - 31 August 2012
Opening Reclamation Foreign Asset and Closing
balance expenditure/ exchange liability balance
obligation movements acquisition
recognised (Note 20)
Holpan, Wouterspan, and Klipdam Mines 2 318 100 (90 222) (249 533) - 1 978 345
Saxendrift Mine 2 019 017 297 938 (237 903) - 2 079 052
Tirisano Mine 6 832 212 272 436 (764 831) - 6 339 817
Jasper Mining - - - 198 177 198 177
11 169 329 480 152 (1 252 267) 198 177 10 595 391
Reconciliation of obligation - 29 February 2012
Opening Reclamation Foreign Reversed Accretion Closing
balance expenditure/ exchange during the expense balance
obligation movements year
recognised
Holpan, Wouterspan, and 2 565 377 (104 569) (142 708) - - 2 318 100
Klipdam Mines
Saxendrift Mine 1 249 261 856 781 (87 025) - - 2 019 017
Tirisano Mine - 536 320 (356 220) 6 370 317 281 795 6 832 212
3 814 638 1 288 532 (585 953) 6 370 317 281 795 11 169 329
Estimated rehabilitation costs, which are based on the Group’s interpretation of current environmental and regulatory
requirements, represent the present value of the expected future costs to rehabilitate the mine properties during and at
termination of mining operations. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for
changes in legislation, technology or other circumstances.
Based on current environmental regulations and known rehabilitation requirements, management has included its best
estimate of these obligations in its rehabilitation provision based on professional surveys of the environmental disturbance.
The current value of the reclamation cost is $12,538,964 (29 February 2012: $14,085,050).
The ultimate rehabilitation will be financed from existing funds and policies invested for this purpose, ongoing contributions as
well as the proceeds on sale of assets and metal from plant clean-up at the time of the mine closure. The expected timing of
the cash flows in respect of the provisions is dependent on the mineral property award and/or the Life of Mine. However, it is
reasonably possible that the Group’s estimates of its ultimate rehabilitation liabilities could change as a result of changes in
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regulations or cost estimates. The following key assumptions were used in estimating the reclamation obligation:
Discount period: 4 - 18 years
South African discount rate: 8.5%
South African inflation rate: 7%
As required by regulatory authorities, at 31 August 2012, the Group had cash reclamation deposits totalling $1,837,217
(29 February 2012 – $3,104,716) comprised of $1,058,017 (29 February 2012 – $1,160,196) for the Holpan, Wouterspan and
Klipdam mine, $Nil (29 February 2012 – $Nil) for the Saxendrift mine, $779,200 (29 February 2012 – $1,944,520) for the
Tirisano mine and $Nil (29 February 2012 - $Nil) for Jasper Mining. These deposits are invested in interest bearing money
market linked investments. These investments have been pledged as security in favour of the guarantees the bank issued on
behalf of the Group. Refer to note 27.
Amounts in Canadian Dollars As at 31 As at 29
August February
2012 2012
15. Trade and other payables
Trade payables 3 695 295 2 706 586
Royalties payable 2 982 688 3 201 935
Other payables 482 716 362 626
Payroll accruals 983 655 553 162
VAT - 757 953
8 144 354 7 582 262
16. Related party balances
Balances payable
Banzi Trade (e) 797 4 065
Hunter Dickinson Services Inc. (a) - 43 425
Seven Bridges Trading (c) 4 586 -
CEC Engineering (b) - 4 292
Dr. D.M. Bristow (h) - 278 334
Liberty Lane (g) 356 642 400 616
362 025 730 732
Current balances payable 5 383 330 116
Non-current balances payable 356 642 400 616
362 025 730 732
Balances receivable
Banzi Trade (e) 97 300 105 530
Steinmetz - 127 817
Mogopa Minerals (f) 38 511 43 254
Current balances receivable 135 811 276 601
Amounts in Canadian Dollars 3 months 6 months 3 months 6 months
ended ended ended ended
31 August 31 August 31 August 31 August
2012 2012 2011 2011
17. Related party transactions
Services rendered and expenses reimbursed:
Hunter Dickinson Services Inc. (a) 25 676 74 144 465
90 183 424
CEC Engineering (b) - 10 788 331
23 33 012
Seven Bridges Trading (c) 10 715 30 416 704
31 50 083
Banzi Trade (e) 841 2 605 120
31 132 882
Mogopa Minerals (f) (788) 18 602 - -
Flawless Diamonds Trading House (d) - - 1 847 945 3 390 728
Sales rendered to:
Banzi Trade (e) - - 119 128
Flawless Diamonds Trading House (d) 72 114 142 842 - -
All related party transactions are calculated at arms length transaction values in the normal course of business.
(a) Hunter Dickinson Services Inc. (“HDSI”) is a private company with a director in common with the Group. HDSI
provides geological, technical, corporate development, administrative and management services to, and incurs third
party costs on behalf of, the Group on a full cost recovery market related basis pursuant to an agreement dated 21 November 2008.
(b) CEC Engineering Ltd is a private company owned by David Copeland, a director of the Group, which provides engineering and
project management services at market rates.
(c) Seven Bridges Trading 14 (Pty) Ltd ("Seven Bridges Trading") is a wholly-owned subsidiary of Randgold Resources Ltd, a
public company where Mark Bristow, a director of the Group, serves in an executive capacity. Seven Bridges Trading provides
office, payroll and other administrative and management services.
(d) Flawless Diamonds Trading House (Pty) Ltd (“Flawless Diamonds Trading House”) is a private company where certain directors, former
directors and officers of the Group, namely, Mr J.B. Brenner and Dr D.M. Bristow, are shareholders. During fiscal 2011 the Group
acquired a 20% shareholding in Flawless Diamonds Trading House (refer note 3). Flawless is a registered diamond broker which provides
specialist diamond valuation, marketing and tender sales services to the Group for a fixed fee of 1% of turnover which is below the market
rate charged by similar tender houses.
(e) Banzi Trade 26 (Pty) Ltd (“Banzi Trade”) is 49% owned by HC van Wyk Diamonds Ltd and 51% by Bokomoso Trust. Banzi Trade is an empowered
private company established to provide self sustaining job creation programs to local communities as part of the company’s Social and Labour
Plan which is required in terms of the Minerals and Petroleum Resources Development Act (“MPRDA”). Banzi provides the Group with building
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materials at market rates.
(f) The Bakwena Ba Mogopa Trust is the beneficial owner of 26% in the Tirisano Mine operation resident in Blue Gum Diamonds (Pty) Ltd.
This interest is held by Mogopa Minerals (Pty) Ltd through Mogopa Blue Gum (Pty) Ltd. As the landowner, surface rentals are paid to the
Trust, while business and support services are paid to Mogopa Minerals for shareholder relations and related services.
All the above named loans are unsecured, interest free and have no fixed terms of repayment and are therefore disclosed as current.
(g) Liberty Lane Trading 167 (Pty) Ltd ("Liberty Lane") is the BEE partner of the Saxendrift property and has certain directors in common
with the Group. In terms of the sale of shares and claims agreement, Liberty Lane made a partial payment towards shares to be issued in
terms of this agreement. The agreement specifies for the shares in Saxendrift only to be issued once Liberty Lane has made full payment
of the purchase considration in terms of the agreement. As the payment was made towards the issue of shares in terms of the agreement the
balance of payments received to date has been classified as non-current. Refer to Note 27.
(h) A short term loan was advanced by Dr. D.M. Bristow, a non-executive director of the Group, to Etruscan Limited (previous owner of
the Tirisano Mine operations), in order to make critical creditor payments and to proceed with capital orders on Tirisano in 2009.
The loan is convertible into equity. 466,667 Shares of the Company were issued during Q1 2013 in settlement of the capital portion
of the loan. The loan was fully settled during Q1 2013.
Amounts in Canadian Dollars 3 months 6 months 3 months 6 months
ended ended ended ended
31 August 31 August 31 August 31 August
2012 2012 2011 2011
18. Cash generated from operations
(Loss) profit before taxation (2 819 616) (6 469 959) 92 062 (1 052 278)
Adjustments for:
Depreciation and amortisation 1 935 787 3 833 147 1 820 096 3 847 888
(Profit) loss on sale of assets (335 464) (379 949) 129 202 129 202
Share of loss (profit) from equity accounted investment 8 074 (18 666) (67 562) (82 435)
Finance income (159 894) (229 087) (69 006) (176 267)
Finance costs 186 301 377 285 131 831 240 943
Net reclamation obligation (15 718) 480 152 91 927 168 071
Share-based payment expense 87 311 212 419 - 128 300
Changes in working capital:
Inventories 219 890 (821 053) (1 837 577) (1 840 341)
Trade and other receivables 1 284 066 2 197 415 2 916 464 5 230 617
Trade and other payables 232 078 (188 767) 1 947 554 474 247
622 815 (1 007 063) 5 154 991 7 067 947
19. Tax paid
Balance at beginning of the period 41 901 - (245 774) (245 228)
Current tax for the period recognised in profit or loss - - (2 000) -
Balance at end of the period (40 623) (40 623) 261 142 261 142
1 278 (40 623) 13 368 15 914
20. Asset and liability acquisition
In June 2012, the Group completed the acquisition of 100% of the share capital in Jasper Mining (Pty) Ltd. The total
consideration paid by the Group for shares was satisfied as follows:
(a) $0.8 million to be used in settlement of Jasper Mining (Pty) Ltd creditors.
The acquisition was accounted as the acquisition of assets and liabilities as the acquisition did not meet the criteria for an
acquired business in terms of IFRS 3: Business Combinations.
The Jasper Mine property is contiguous to Rockwell's Saxendrift Mine and has the potential to extend the life of Saxendrift Mine
with limited new investment.
The following summarises the assets and liabilities acquired:
Amounts in Canadian Dollars
3 months 6 months 3 months 6 months
ended ended ended ended
31 August 31 August 31 August 31 August
2012 2012 2011 2011
Mineral properties 2 009 239 2 009 239 - -
Cash and cash equivalents 2 680 2 680 - -
Trade and other payables (1 019 054) (1 019 054) - -
Reclamation obligation (204 413) (204 413) - -
Total identifiable net assets 788 452 788 452 - -
Non-controlling interest - - - -
Total acquisition price 788 452 788 452 - -
Purchase consideration
Cash paid 788 452 788 452 - -
21. Revenue
Sale of diamonds 6 964 374 13 035 396 6 941 206 14 502 903
Beneficiation income 439 584 1 466 745 2 264 712 3 208 554
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7 403 958 14 502 141 9 205 918 17 711 457
Beneficiation income represents profit share on value add (cut and polish), arising through the Group's beneficiation agreement with
the Steinmetz Diamond Group. The Group is entitled to 50% of the profits from the sale of the polished diamonds produced by the Group
and sold through this channel. The beneficiation income is recognised on the date the Steinmetz Diamond Group notifies the Group of
the succesful sale of the diamonds to third parties.
Amounts in Canadian Dollars 3 months 6 months 3 months 6 months
ended ended ended ended
31 August 31 August 31 August 31 August
2012 2012 2011 2011
22. Results before net finance costs
Results before net finance costs for the period is stated after
accounting for the following:
(Profit) loss on sale of property, plant and equipment (335 464) (379 949) 129 202 129 202
Depreciation on property, plant and equipment 1 715 753 3 359 706 1 526 118 3 352 167
Amortisation on mineral property interests 220 034 473 441 293 978 495 721
Salaries and wages 464 029 921 788 469 196 959 464
Share based payment expense 87 311 212 419 - 128 300
23. Finance income
Bank 76 213 145 406 69 006 176 267
Fair value adjustments on other financial assets 83 681 83 681 - -
159 894 229 087 69 006 176 267
24. Finance costs
Capital leases obligation 38 713 81 214 64 096 92 219
Bank 147 588 296 071 67 735 148 724
186 301 377 285 131 831 240 943
25. Tax recovery (expense)
Major components of the tax income
Current tax
Local income tax - current period - - (2 000) -
Deferred tax
Movement in deferred tax balance recognised through profit
and loss 408 533 1 024 970 996 364 932 364
408 533 1 024 970 994 364 932 364
26. (Loss) earnings per share
Basic and diluted (loss) earnings per share
Basic (loss) earnings per share
Cents per share (0,04) (0,09) 0,04 0,01
Basic (loss) earnings per share was calculated based on a weighted
average number of ordinary shares of 48 409 413 for the 3
months ended 31 August 2012 (3 months ended 31 August 2011: 35 492 571)
and for the 6 months ended 31 August 2012
48 290 210 (6 months ended 31 August 2011: 35 492 571).
Reconciliation of (loss) earnings for the year to basic
(loss) earnings
(Loss) profit for the period (2 411 083) (5 444 989) 1 086 426 (119 914)
Adjusted for:
Loss attributable to non-controlling interest 393 872 1 303 095 177 520 467 662
Basic loss attributable to owners of the Group (2 017 211) (4 141 894) 1 263 946 347 748
Diluted (loss) earnings per share is equal to loss per share
because there are no dilutive potential ordinary shares in issue.
At 31 August 2012 and 31 August 2011 the impact of share-based
payment options were excluded from the weighted average number
of shares as the effect would have been anti-dilutive.
Basic and diluted headline loss per share
Headline (loss) earnings per share (cents) (0,05) (0,09) 0,04 0,01
Reconciliation between basic loss and headline loss
Basic (loss) profit attributable to owners of the Group (2 017 211) (4 141 894) 1 263 946 347 748
Adjusted for:
(Profit) loss on disposal of property, plant and equipment (335 464) (379 949) 129 200 129 200
Headline (loss) profit attributable to owners of the Group (2 352 675) (4 521 843) 1 393 146 476 948
27. Contingencies
Amounts in Canadian Dollars
Cash and cash equivalents
The Group has an overdraft facility in the amount of ZAR28.0 million ($3.3 million) available for its operations. This facility has
an interest cost of prime (currently 8.5% per annum) plus 0.6%. The security for the ZAR28.0 million consists of 2 covering bonds
(First Lien) of ZAR10.0 million ($1.2 million) each over moveable assets and property of the farm Holpan.
HC van Wyk Diamonds Ltd, Klipdam Mining Company Ltd, Saxendrift Mine (Pty) Ltd held guarantees with the bank towards
Eskom (Electricity Provider) of ZAR4,856,100 ($571,306) and the Department of Minerals and Resources (DMR) of
ZAR21,367,228 ($2,513,792) towards rehabilitation expenses.
28. Subsequent events
The directors are not aware of any matter or circumstance arising since the end of the period.
12 October 2012
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
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