Wrap Text
Rockwell annouces first quarter results for period ended 31 May 2013
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 TSXV: RDI CUSIP Number: 77434W103
Share code on the OTCBB: RDIAF
(“Rockwell”)
ROCKWELL’S RESULTS FOR FIRST QUARTER FISCAL 2014: EARLY BENEFITS OF
FOCUS ON MIDDLE ORANGE RIVER REGION AND FURTHER REVISION TO $2
MILLION CONVERTIBLE LOAN
July 12, 2013, Vancouver, BC -- Rockwell Diamonds Inc. ("Rockwell" or
the "Company") (TSX:RDI; JSE:RDI) announces results for the three
months ended May 31, 2013 and that it has executed Addendum No 2 with
its principal shareholder, Daboll Consultants Ltd., to revise their
June 2, 2011 convertible loan agreement in one further respect
(“Loan”).
First quarter fiscal 2014 results
Currency values are presented in Canadian dollars, unless otherwise
indicated.
Salient features of first quarter:
- Strong year-on-year revenue growth of 27 percent for first quarter:
Total revenue of $9.0 million, comprising $7.8 million from diamond
sales and beneficiation income of $1.2 million, up 29 percent and 19
percent, respectively.
- Overall volume of gravel processed and diamond production from own
operations (excluding royalty mining contractors) down 19 percent and
54 percent year-on-year respectively: Due to placing lossmaking
Tirisano on care and maintenance (December 2012) and sale of Klipdam
(end March 2013), marginally offset by production of royalty mining
contractors.
- Net cash holdings of $0.3 million: Reduction mainly due to cash
used in working capital reduction and investment in new capacity.
- Inventory of 1,085 carats carried forward (includes 370 carats on
royalty mining contracts).
- Royalty mining contractors gaining momentum with three contracts in
place at Tirisano: 1,984 carats produced and 1,730 carats sold at
average price of US$623 per carat (Rockwell’s royalty amounting to
$134,749) and set to increase with new contracts concluded.
- The ‘beneficiation pipeline’ of more than 4,900 carats provides
continued value-added revenue potential.
- Net loss for the quarter narrowed to $1.2 million compared to a
loss of $3.0 million in the prior year.
Commenting on the first quarter performance of Rockwell, James
Campbell, CEO and President said:
“Rockwell reported a first quarter operating profit before
amortization and depreciation of $1.1 million, having exited
lossmaking operations at Tirisano and Klipdam. Furthermore, our first
quarter results are beginning to show the impact of evolving our
strategy to refocus on our Middle Orange River properties, which
typically yield higher valued diamonds. Rough diamond production and
carats sold from our own operations declined by 54 percent and 38
percent, respectively, as a result of eliminating Tirisano and
Klipdam. However, the 109 percent increase in average price per carat
from our own operations is a direct consequence of transitioning our
production profile to the Middle Orange River region. The increased
average value per carat compensated for the decline in carats sold.
Revenue from diamond sales, together with our share of the revenues
from our royalty mining contractors’ production, enabled us to post
positive revenue growth. Moreover, we benefited from stronger
beneficiation income during the quarter. Also noteworthy is that we
delivered a fifth consecutive quarter of revenue growth in US$-
denominated terms, which is the base currency for all our diamond
sales.”
“By the end of the first quarter, we had fully dealt with the
lossmaking operations at Tirisano and Klipdam. More specifically and
in line with plan, the royalty mining contractors at Tirisano are
covering the care and maintenance costs and, in doing so, finally
eliminated the drain on Rockwell’s resources. We are now positioned
to achieve the financial benefits of the turnaround, which should be
reflected in our results by the end of fiscal 2014. We are confident
that Rockwell is now better positioned to start showing sustainable
improvements, with our flagship Saxendrift operation running
optimally and our new operations at the Saxendrift Hills Complex and
Niewejaarskraal coming on stream.”
Review of first quarter delivery on strategy
The performance of Rockwell for the first quarter reflects the
current status of delivery towards the Company’s strategy to grow its
production footprint in the Middle Orange River region that offers
higher diamond values, better efficiencies and greater economies of
scale. The mid-term target is to increase monthly production volumes
of gravel processed to 500,000m3 in order to achieve better quarterly
earnings visibility. Accordingly, the Company is focusing its capital
and resources on the development of its portfolio of properties in
the region where it has a track record of positive cash generation.
Delivery highlights of the first quarter results in relation to the
Company’s Middle Orange River focused growth strategy are as follows:
- Average carat value from own operations improved 109 percent to
US$2,018 per carat: 70 percent of carats sold (excluding royalty
mining contractors) were recovered from the Middle Orange River
region versus 39 percent a year ago.
- Year-on-year revenue growth of 27 percent: Higher average carat
value from own operations offset 38 percent decrease in carats sold.
- Operating profit before amortization and depreciation was $1.1
million: Cash drain from lossmaking operations at Tirisano and
Klipdam eliminated.
- Good quality production at Saxendrift: 56 percent increase in value
of diamond sales year-on-year despite 4 percent decline in carat
production.
- Ongoing production ramp up at Saxendrift Hill Complex1 with recovery
of 269 carats and first diamond sale of 130 carats: Capital
investment of developing the Saxendrift Hill Complex processing
facility paid off from proceeds of May and June 2013 tender sales.
- Wet commissioning of Niewejaarskraal conducted early in second
quarter: On track for first production within three months of re-
activation proposal being tabled to Board using the proceeds of the
Klipdam sale.
- The results of the preliminary economic assessment for Wouterspan
showed viable economics and the Company is currently reviewing
options to bring this asset to account.
Notable impacts of first quarter production compared to the
comparable prior year period are as follows:
- New royalty mining contract introduced at Zwemkuil: Not suited to
Rockwell’s high volume operating model.
First Quarter Performance Summary
The Company’s overall production and sales results excluding royalty
mining contractors for the quarter are:
Production Sales and inventories
Average
Productio Value of value
Volume Sales Inventories
Carats n costs Sales (US$
(m3) (carats) (carats)
($) (US$) per
carat)
656,313 2,840 6,982,069 6,573,991 3,257 2,018 715
First quarter processed gravel volumes from own operations declined
by 19 percent to 656,313m3 year-on-year while diamond production was
54 percent lower at 2,840 carats, both results exclusive of
contractors. The reduction in carat production is mainly the result
of the operations at Tirisano being placed on care and maintenance in
December 2012 and the sale of Klipdam at the end of March 2013.
Volume Change Carats Change Notable impacts
(m3) (percent) (percent)
Saxendrift 461,184 2 2,036 -4 Grade within anticipated range
for the mine.
Excellent recoveries in April
2013: Nine + 20 carat stones,
including four +50 carat stones.
Saxendrift 129,427 - 269 - Lower grade block mined in line
Hill Complex with strategy to mine two-year
resource on a block basis.
Several high quality diamonds
recovered.
Klipdam 65,702 -72 535 -81 Production declined due to sale
of mine at end March 2013
Contractors* 237,520 - 1,984 - Three royalty mining contractors
operated at Tirisano property.
The Company’s reported revenue from diamond sales (before
beneficiation) increased 29 percent year-on-year to $7.8 million.
Reported revenue includes the Company’s 12.5 percent royalty from the
sale of royalty mining contractors’ rough diamond production. The
average carat value (own operations) rose 109 percent, reflecting the
transition of Rockwell’s focus towards its Middle Orange River
properties. In the quarter under review, 70 percent of carats sold
were recovered from the Middle Orange River region (Saxendrift and
the newly commissioned Saxendrift Hill Complex Mine), compared to a
year ago. Importantly, there was a concomitant increase in average
value per carat.
Notable impacts of first quarter sales compared to the comparable
prior year period are as follows:
Carats Change Revenue Change Price Change Notable
(percentage) (US$m) (percentage) per (percentage) impacts
carat
(US$)
Saxendrift 2,148 5 5.5 56 2,553 48 Sale of a
number of
large, high
quality
stones
Saxendrift 130 - 0.5 - 3,668 - Positive
Hill Complex impact of
selling a
large high
quality
diamond
Klipdam 895 -59 0.6 -53 636 16 Decision to
sell mine
at end
March 2013
Tirisano 83 -92 0.0 -87 505 62 Sale of
remaining
inventory
of rough
diamonds
Contractors* 1,730 - 1.1 - 623 - Royalty
mining
contractors
increased
from two to
three at
Tirisano
* Contractors refers to carats from gravel processed by independent
royalty contractors and sold through the Company’s tender process.
During the first quarter, the average total cash cost (including
rehabilitation and depreciation) for all the operations, increased to
US$12.62/m3 from a total cash cost of US$10.95/m3 in the comparative
period of 2013. This increase is attributable to higher unit costs
during the ramp up phase at Saxendrift Hill Complex and higher fuel
and maintenance costs at Saxendrift.
Average cash operating costs and revenues for Rockwell’s own
operations during the period are:
Revenue/m3 Mining Comments
(US$) cash
cost/m3
(US$)
Saxendrift US$11.89 US$9.6 Improved unit revenue offset
by higher mining cash cost per
unit (due to increased
maintenance expenses).
Saxendrift Hill US$3.68 US$11.6 Low production and carat sales
Complex during ramp up phase.
The sale of the remaining 83 carats in Tirisano’s inventory generated
total proceeds of US$41,943. These diamonds, together with the
Company’s royalty of US$134,749 from contractors’ total diamond
sales, were used to offset the Tirisano care and maintenance costs.
Normal operations produced a stable cash flow position (prior to
working capital movements). Adjusting for pay down of payables and
collection of receivables, working capital movements and investing
activities and creating new capacity at Niewejaarskraal (Fiscal year
to date - $1.6 million), resulted in a net cash outflow for the
period of $2.4 million.
Growth projects
The Company is making tangible progress towards its objective to
increase and extend the mine life of Rockwell’s Middle Orange River
properties:
- The internally-funded development of the Saxendrift Hill Complex
mine, which commenced operations in March 2013, is expected to reach
nameplate capacity of 100,000m3 in the second quarter.
- Resource definition at the Saxendrift Extension was finalized, with
the results planned to be published in an updated NI 43-101 technical
report during the second quarter. The mine plan at Saxendrift has now
incorporated the Saxendrift Extension, and is expected to extend the
life of the 160,000m3 per month processing facility at Saxendrift.
- The internally funded construction of the first phase of the
Niewejaarskraal processing plant was completed within three months of
obtaining board approval. The Niewejaarskraal mine is currently in
ramp up towards its nameplate production capacity of 100,000m3 per
month.
- The preliminary economic assessment for Wouterspan, completed
during the quarter, demonstrated positive project economics. The
Company is currently reviewing options to bring this asset to
account.
In addition to its growth strategy for the Middle Orange River
region, early in fiscal 2013 Rockwell embarked on a secondary
strategy to introduce royalty mining contracts on properties that it
does not wish to mine due to scale or other reasons. During the
quarter, two additional contracts were awarded at Tirisano, which are
set to increase monthly production volumes to 150,000m3 by the end of
calendar 2013. A further contract for Rockwell’s Zwemkuil property,
also located in the Middle Orange River region, has been finalized
and projected monthly volumes of 50,000m3 will commence in the second
quarter.
In order to supplement its considerable in situ diamond inventory,
the Company continues to evaluate value accretive consolidation
opportunities in the southern African diamond sector. A strict set of
criteria are applied to evaluate the potential of acquisitions in
order to leverage the Company’s production profile towards its goal
to become a mid-tier diamond producer.
Market Outlook
Rough diamond prices showed a few a percentage point decline at the
end of May 2013, after having improved earlier in the calendar year.
As a result of Northern hemisphere summer vacations and the limited
availability of credit in the industry, expectations for rough
diamond prices in the second quarter are muted. Overall polished
prices are expected to remain stable, showing increases in certain
sectors but declines in areas with lower demand.
Rockwell has carried over an inventory of 1,085 carats into the
second quarter of fiscal 2014 which, together with a beneficiation
pipeline comprising some 4,996 carats, provides further potential for
valued-added downstream revenues. Rockwell continues to beneficiate
the vast majority of its diamonds in South Africa and due to the
recovery of prices for some special diamonds during the first quarter
of fiscal 2014, the beneficiation revenue trend is expected to
continue in line with past results.
Rockwell’s priority for the second quarter of fiscal 2014 is to
continue to manage operating costs. At Saxendrift, the second quarter
mine plan comprises a combination of gravels from the traditional
(Brakfontein) mining area as well as the Saxendrift Extension that
will be processed at Saxendrift to optimize the life of the mine.
Completing the ramp up at the Saxendrift Hill Complex and bringing
Niewejaarskraal on stream are top priorities for the Company, with
the overall monthly processing capacity at the three operational
mines in the Middle Orange River region projected to be 360,000m3 by
the end of the calendar year.
Addendum No 2 revising convertible loan agreement with Daboll
Consultants Ltd.
Rockwell announces that it has under the first Addendum announced
June 26, 2013, the Loan repayment date was extended by two years to
June 2, 2015 and the conversion right was amended so that the Loan
was to be convertible at the prevailing market price of the Company’s
shares with a floor price of C$0.16 per share (maximum 12,235,686
shares). Under Addendum No 2, it was agreed that the Loan may only be
exercised during the final three weeks of its two-year remaining
term, from June 5 to June 26, 2015 and subject to the same floor
price. The Loan remains subject to the restriction that it may be
converted into no more than 10 percent of the Company’s share capital
as of the date of conversion unless a larger number of shares has
been authorized by a prior vote of disinterested Rockwell
shareholders.
Rockwell is seeking such approval at its July 26, 2013 annual and
special shareholders meeting with details of the transaction
described in its information circular on file at www.sedar.com.
Conference Call:
Rockwell will host a telephone conference call on Monday, July 15,
2013 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) 1 855 669 9657
USA (Toll) 1 412 317 6060
USA (Toll-Free) 1 866 652 5200
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 6800
UK (Toll-Free) 0808 162 4061
UK Alternative (Toll-Free) 0 800 917 7042
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) July 18, 2013 and can
be accessed by dialling the relevant number in the table below and
using the pass code 24976#.
Country Access Number
South Africa (Telkom) 011 305 2030
USA and Canada (Toll) 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 percent of the fair value sales price at sale
and receive the remaining 10 percent 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.
For further information on Rockwell, Investors should review the
Company’s home jurisdiction filings that are available at
www.sedar.com.
12 July 2013
Johannesburg
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
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