Wrap Text
Rockwell press release on publication of financial results
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
Rockwell announces results for second quarter fiscal 2013 and
Continued progress with corporate turnaround
Thursday October 11, 2012, Vancouver, BC -- Rockwell Diamonds Inc. ("Rockwell" or the "Company")
(TSX:RDI; JSE:RDI, OTCBB:RDIAF) announces results for the three and six months ended August 31, 2012.
Currency values are presented in Canadian dollars unless otherwise indicated.
Performance Overview
- Quarterly diamond production up 34% year-on-year on the back of a 37% increase in volumes of
gravel processed;
- Quarterly operating profit: $199,852 before amortization, depreciation and corporate overhead:
- Overall reduction of 8% cash operating cost per unit mined to US$8.71/m .
- Mining costs up 35% due to higher fuel costs and increased mining volumes.
- Improved volumes of gravel processed at Saxendrift with average carat price of $2,419.
- Klipdam’s mining volumes and diamond values up but still below expectation.
- Project to re-organize Tirisano processing plant to permit mining of Pit 4 completed and
operations resumed early in third quarter:
- Unit cost per cubic meter mined down 49% to US$9.31 during six weeks production prior
to temporary suspension of activities during re-configuration and implementation phase.
- Recovery of 1,172 carats from bulk sampling at Saxendrift Extension Project.
- Fourth mine under construction at Saxendrift Hill : Capital cost of $2 million and scheduled to
commence in the first quarter of calendar 2013.
- Four royalty mining contracts concluded on Rockwell’s mining properties to generate additional
royalty revenue from diamond sales.
- Second quarter fiscal 2013 loss of $2.4 million after depreciation.
- Net cash balances of $5.4 million.
Rockwell continued to make progress towards its key corporate objectives of increasing its monthly production of
high-quality gemstones to 10,000 carats within five years through its two pronged strategy:
Diamond Value Management:
Optimization projects at the productive mines are delivering better operating results with respective quarterly year-
on-year increases of 26% and 27% in volume mined and processed at the Saxendrift Complex (comprising
Saxendrift Hill is included in the Technical Report on the Saxendrift Alluvial Diamond Mine updated on February 29, 2012
that is available on www.rockwelldiamonds.com
Company Registration No.: 2007/031582/10 www.rockwelldiamonds.com
15th Floor – 1040 West Georgia Street, Vancouver, BC Canada V6E 4H1 Tel: +604 684 6365 Fax: +604 684 8092
Level 0, Wilds view, Isle of Houghton. Cnr. Carse O’Gowrie & Boundary Rd, Houghton Estate, Johannesburg, 2198
PO Box 3011 Houghton, South Africa, 2041 Tel: +27 (0)11 4840 830 Fax: +27 (0)11 481 7247 TSX: RDI OTCBB: RDIAF JSE: RDI
Saxendrift, the Saxendrift Extension Project and the Bulk X-ray system) and Klipdam, respectively. A
reconfiguration to permit mining of Pit 4 at Tirisano, which has higher clay content and better geology, was
initiated that included rationalizing the processing plant and reducing the overhead structure in light of softening
diamond prices particularly in the smaller diamond sizes.
Four royalty mining contracts were concluded on smaller portions of the Klipdam and Tirisano properties that do
not suit Rockwell’s high volume operating model, but that can be economically mined by smaller operators. The
first contractor started in August 2012 with the others commencing during the third quarter. Contractors carry the
full costs of mining and processing operations while Rockwell will derive a fixed royalty from the diamond sales as
well as beneficiation revenues. The Company will retain full responsibility for diamond security.
Re-establishing the Resource - Pipeline of Diamonds for Tomorrow:
Initiatives to increase and extend the mine life of Rockwell’s Middle Orange River properties and its associated
operational footprint have commenced. These plans include a drilling campaign and further bulk sampling to
define the mineral resources at Saxendrift Extension, and the construction of a processing facility at Saxendrift
Hill, based on the Bulk X-ray technology that was piloted at Saxendrift. At Wouterspan, the pre-feasibility study is
progressing.
The Company’s production and sales results for the second quarter of fiscal 2013 were as follows:
Production* Sales and inventories*
Second
Average
quarter Volume Mining Value of Sales Inventories
3 Carats value (US$ /
fiscal (m ) costs ($) Sales (US$) (carats) (carats)
carat)
2013
743,472 4,830 7,204,106 6,804,560 5,147 1,322 797
* Including results from bulk sampling at the Saxendrift Extension Project and Bulk X-ray project at Saxendrift.
Financial Summary
- Gross diamond revenues of $7.4 million compared to $6.0 million for first quarter of 2013: Quarter-
on-quarter increases of 30% in carats and 40% in average carat value to US$1,322.
- Beneficiation revenues of $0.4 million: Revenue from this source was delayed in second quarter
due to particularly quiet northern hemisphere summer trading activity.
- The ‘beneficiation pipeline’ - comprising almost 5,000 carats yet to be sold by Steinmetz Diamond
Group - includes several notable stones added during the quarter.
- Operating profit before amortization, depreciation and corporate overhead of $199,852.
- The net loss for the quarter totalled $2.4 million
Summary of performance for three months ended August 31, 2012
The financial performance for the second quarter of fiscal 2013 reflects the focus to drive efficient mining
operations at Saxendrift and Klipdam while most of the loss can be attributed to Tirisano where mining activities
were temporarily halted in mid July 2012 to implement the right sizing plan.
3
The Saxendrift Complex recorded total diamond sales of US$4.3 million or revenue/m of US$9.11, compared to
the average mining cash cost/m of US$7.94. Klipdam had total diamond sales of US$2.2 million or revenue/m of
US$10.40, compared to the average mining cash cost/m of US$10.02.
Rockwell’s overall financial performance was, once again, negatively impacted by Tirisano which was in operation
for the first six weeks of the second quarter, expensing commissioning costs of $0.5 million over this period. Lost
production for the remainder of the quarter also had an impact on the Company’s financial performance of $1.3
million.
The Company recorded US$ denominated diamond sales of US$6.8 million, in line with the second quarter of the
previous year. Notable impacts are as follows:
- Klipdam showed increases of 72% and 45%, respectively, in carats sold and revenue from diamond
sales, compared to the previous year. The average revenue per carat of US$869 rose from US$550 in
the previous three months of the current fiscal year due to recent mining in the paleaochannel unit that
yields larger, higher quality diamonds.
- Carats sold from the Saxendrift Complex increased by 7% to 1,869 carats but achieved a lower average
price of US$2,326 per carat compared to US$3,186 a year ago.
- Diamond sales from Tirisano totaled 776 carats and generated revenue of US$282,808.
Including beneficiation revenues that amounted to $0.4 million, the Company reported total revenue of $7.4
million. The decline in beneficiation revenue is due to a seasonal slowdown in trading during summer in the
northern hemisphere.
Mining costs increased 35% year-on-year to $7.0 million and resulted in the Company’s decision to reconfigure
Tirisano. The annual increase primarily reflects the upward pressure of higher fuel costs and the 23% increase in
the volume of gravel processed.
The unit costs/m for all three operational mines was as follows:
Second quarter Quarterly
Comments
fiscal 2013 change (%)
Higher earthmoving requirements due to mining the
Klipdam US$10.02 +7%
paleaochannel to produce higher quality diamonds
Increased transport costs associated with transporting the
bulk sample at Saxendrift Extension Project 4km to
Saxendrift US$7.94 +14%
processing plant, dampening impact of higher throughput
volumes
Temporary cessation of mining activities from July 2012 to
Tirisano US$9.31 -49%
implement right sizing plan
Rockwell recorded a total comprehensive loss of $4.2 million, including a non cash $1.8 million foreign currency
translation charge on the conversion of the Rand denominated assets into Canadian dollars, resulting from a
3.2% depreciation of the South African Rand against the Canadian dollar.
At August 31, 2012, the Company had cash and cash equivalents of $5.4 million. The operations are currently
generating sufficient cash to cover cash operating costs but not corporate overheads or amortization.
Operational Summary
- 4,830 carats produced and 5,147 carats sold at average price of US$1,322 per carat.
- Saxendrift maintaining profitable production profile: Better mining efficiencies and attention to in-
pit screening.
- Preliminary bulk-sample extracted from Saxendrift Extension Project yielded encouraging results:
Better understanding of diamond grade and value.
Construction of Saxendrift Hill in progress: Two year life of mine with higher average carat values
than current Saxendrift value.
Klipdam still underperforming: Slightly improved due to mining palaeochannel and 27% increase
in mining volumes.
The Tirisano right sizing in ramp up phase: Significantly reduced overhead implemented to halt
cash losses.
Klipdam is addressing its production shortfall by installing a second barrel screen and continuing to focus on
improving mining fleet availabilities. Diamond production increased 31% year-on-year while mining at the
paleaochannel led to slight improvements in diamond sizes and quality produced. Two royalty mining contracts
will commence in the third quarter with an initial term of two years.
The Saxendrift Complex recorded a a 6% increase in diamond production. Transporting the bulk sampling
volumes from the Saxendrift Extension Project to the Saxendrift processing plant led to slightly higher costs due
to more intensive earthmoving requirements. The Bulk X-ray plant achieved a grade of 2.5 carats / 100 m from
processing 4,808 m of tailings material.
The focus at Tirisano was on implementing the board-approved strategy to mine Pit 4, which has better known
geology, yet presents clay rich soils that required a retooling of the plant. Mining operations were put on hold in
mid July 2012 and work concentrated on reconfiguring the processing plant to cope with the higher clay content.
Operations resumed as planned by the end of September 2012, with the ramp up towards the monthly nameplate
capacity of 50,000 m . The new wet front end, designed to separate the clay from the gravels in Pit 4, has been
integrated into the new processing configuration. The rationalization included a retrenchment of 111 people, that
also contributed to a lower operating cost structure and placed the operation on a sounder footing. Two royalty
mining contracts have also been concluded for the mine, with the first commencing in mid September.
Outlook
The longer-term supply and demand fundamentals for gem quality investment stones, comprising the majority of
Rockwell’s production, remains positive. Although the market has experienced price declines for smaller
diamonds, the +2 carat segment of the market that represents some 80% of Rockwell’s production, is expected to
be price stable for the remainder of the year. The joint venture with Steinmetz Diamond Group provides Rockwell
with the ongoing opportunity to participate in pricing movements in both rough and polished diamonds, especially
for its larger, gem quality diamonds that are becoming rarer and are in high demand for investment purposes.
Diamond value management priorities for the third quarter are as follows:
- Saxendrift Complex: Continued focus on meeting production targets and extending the life of mine
through further bulk sampling at the Saxendrift Extension Project and commissioning the new Saxendrift
Hill mine.
- Tirisano: Completing the ramp up of right sized operation and mining an area of the property that is better
understood.
- Klipdam: Focus on meeting production targets and optimizing earthmoving availabilities.
Management remains confident that, with ongoing operational improvements and strategic projects to enhance
the recovery of diamonds, reductions in unit costs as production increases, and the long-term positive
fundamentals for diamond prices and demand, the Company’s financial performance should start to show
sustainable improvements. Decisive action was taken to right size the mining operations at the Tirisano Mine in
order to halt the cash losses there in light of the current weakening in the smaller diamond segments. Thus the
mine’s drain on the Company’s resources was reduced and a platform for possible positive returns was provided.
Commenting on the second quarter performance of Rockwell, James Campbell, CEO and president of
Rockwell Diamonds said:
“Our implementation of the corporate turnaround continues to take shape as evidenced by the consistent
downward trend of our cash operating cost over the last six months, from a high point of $12.0/m at the end of
fiscal 2012 to $8.7/ m for the three months to August 31, 2012. Over the same timeframe, we delivered increased
revenue from diamond sales, from $6.0 million at the end of fiscal 2012 to $6.9 million against the backdrop of
weaker diamond demand as a result of our high quality production profile. Saxendrift, through its focus on mining
efficiencies and by paying close scrutiny to in-pit screening, is achieving good margins. At Klipdam, moving the
mining to the paleaochannel has benefited the economics of the mine. We took decisive action to right size
Tirisano in order to halt the cash losses in light of the current weakening in the smaller diamond segments, and
reduce its drain on our resources. The introduction of four royalty miners has also derisked our operating
structure, as we will participate in a royalty on the sale of diamonds without incurring any operational costs.”
Looking forward, Campbell added that: “We have three key strategic priorities for the remainder of the fiscal year,
firstly to bed down the new processing plant at Tirisano and fine tune the mining operations to deliver the benefits
of the lower overhead structure. Secondly, we will maintain our focus on the Middle Orange region, which is the
growth engine of Rockwell. We are making progress with the pre-feasibility at Wouterspan, based on the new
technologies that we have implemented at Saxendrift. Construction of the new processing plant as Saxendrift Hill
is on schedule and will provide additional monthly production capacity of 100,000m for a low capital investment
of about $2 million, to produce the high quality gem stones for which the region is recognized. Our final strategic
focus area is the ongoing evaluation of consolidation opportunities to leverage our production profile.”
Conference Call:
Rockwell will host a telephone conference call on Friday, October 12, 2012 at 10:00 a.m. Eastern Time (4:00 p.m.
Johannesburg) to discuss these results. The conference call may be accessed as follows:
Country Access Number
Canada (Toll-Free) 1 866 605 3852
USA (Toll) 412 858 4600
USA (Toll-Free) 1 800 860 2442
South Africa (Toll-Free) 0 800 200 648
South Africa - Durban 031 812 7600
South Africa - Johannesburg 011 535 3600
South Africa - Johannesburg Alternate 010 201 6616
UK (Toll-Free) 0808 162 4061
UK Alternative (Toll-Free) 0 800 917 7042
Australia (Toll-Free) 1 800 350 100
Other Countries (Intl Toll) +27 11 535 3600
A transcript of the audio webcast will be available on the Company's website: www.rockwelldiamonds.com. The
conference call will be archived for later playback until midnight (ET) October 17, 2012 and can be accessed by
dialling the relevant number in the table below and using the pass code 22373#.
Country Access Number
South Africa (Telkom) 011 305 2030
USA and Canada (Toll) 1 412 317 0088
Other Countries (Intl Toll) +27 11 305 2030
UK (Toll-Free) 0 808 234 6771
For further details, see the Rockwell’s complete financial results and Management Discussion and Analysis
posted on the website and on the Company's profile at www.sedar.com. These include additional details on
production, sales and revenues for the quarter, as well as comparative results for fiscal 2012.
For further information on Rockwell and its operations in South Africa, please contact
James Campbell CEO and President +27 (0)83 457 3724
Stéphanie Leclercq Investor Relations +27 (0)83 307 7587
About Rockwell Diamonds:
Rockwell is engaged in the business of developing and operating alluvial diamond mines, with the aim of becoming a mid-tier
diamond mining company. The Company has three existing operations, namely Saxendrift, Klipdam and Tirisano. It is
currently constructing a fourth mine, Saxendrift Hill, which is an expansion of the Saxendrift mine and will go into production by
March 2013. The recent acquisition of the Jasper Project has provided further potential to leverage returns from the Middle
Orange River properties.
The Company has two future development projects at Wouterspan and Niewejaarskraal and a pipeline of other projects with
further future development potential. Rockwell’s operations and projects are all located in the Republic of South Africa.
In addition to its project work, Rockwell continues to evaluate merger and acquisition opportunities which may have the
potential to expand its mineral resources and provide new opportunities to develop the additional production that would
provide accretive value to the Group.
The Group is establishing a track record of producing large gem quality diamonds, which comprise a significant proportion of
its production profile. The diamonds recovered from Rockwell’s mines are frequently acquired for investment purposes. The
Group has a beneficiation agreement in place which enables it to sell rough diamonds, receive 90% of the fair value sales
price at sale and receive the remaining 10% through, and participate in, the retail profit on the sale of its +2.8 carat sized
stones after polishing and finishing.
No regulatory authority has approved or disapproved the information contained in this news release.
Forward Looking Statements
Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable
securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe",
"anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Although the Company
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 uncertainties and costs related to
exploration and development activities, such as those related to determining whether mineral resources exist on a property; uncertainties
related to expected production rates, timing of production and cash and total costs of production and milling; uncertainties related to the ability
to obtain necessary licenses, permits, electricity, surface rights and title for development projects; operating and technical difficulties in
connection with mining development activities; uncertainties related to the accuracy of our mineral resource estimates and our estimates of
future production and future cash and total costs of production and diminishing quantities or grades of mineral resources; uncertainties related
to unexpected judicial or regulatory procedures or changes in, and the effects of, the laws, regulations and government policies affecting our
mining operations; changes in general economic conditions, the financial markets and the demand and market price for mineral commodities
such as and diesel fuel, steel, concrete, electricity, and other forms of energy, mining equipment, and fluctuations in exchange rates,
particularly with respect to the value of the US dollar, Canadian dollar and South African Rand; changes in accounting policies and methods
that we use to report our financial condition, including uncertainties associated with critical accounting assumptions and estimates;
environmental issues and liabilities associated with mining and processing; geopolitical uncertainty and political and economic instability in
countries in which we operate; and labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in
markets in which we operate our mines, or environmental hazards, industrial accidents or other events or occurrences, including third party
interference that interrupt operation of our mines or development projects.
Johannesburg
12 October 2012
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
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