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ROCKWELL DIAMONDS INCORPORATED - Rockwells fourth quarter production and sales update

Release Date: 31/03/2014 14:30
Code(s): RDI     PDF:  
Wrap Text
Rockwell’s fourth quarter production and sales update

Rockwell Diamonds Inc.
(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
("Rockwell")


Rockwell’s fourth quarter production and sales update highlights increased carat production and
sale of 109 carat polished vivid yellow diamond
__________________________________________________________________________________________

March 31, 2014 Vancouver, BC – Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI; JSE: RDI)
announces its quarterly production and sales update for the three months ended February 28, 2014:

                                                                          
The Company’s own internal operations(1) in the Middle Orange River(2) (“MOR”):

-   Average stone size increased by 139% to 4.6 carats from 2.0 carats in the prior year.
-   Continued benefits from MOR growth strategy with 39% increase in carat production from its three mines that
    are now in production in the region.
-   Carat sales from MOR operations grew 76%.
-   Diamond sales revenues from own internal operations (excluding royalty mining) increased by 34% to $8.5
    million.

                             
Company’s total properties (3) :

-   Total volumes of gravel processed and carat production increased by 45% and 74% respectively.


(1) Includes contribution from mines operated and managed by Rockwell. The Company’s own internal operations for the fourth
quarter of fiscal 2014 comprise gravels mined at Saxendrift Extension (processed at Saxendrift), Saxendrift Hill Complex and
Niewejaarskraal. The fiscal 2013 comparative included the production of Saxendrift, Saxendrift Extension, Klipdam (sold at the
end of March 2013) and Tirisano (transferred to royalty mining business model in January 2013).
(2) Middle Orange River operations included the production and sales of Saxendrift (incorporating Saxendrift Extension),
Saxendrift Hill Complex and Niewejaarskraal in the fourth quarter of fiscal 2014 while the prior year comprised of Saxendrift
and Saxendrift Extension only.
(3) Includes contribution from mines operated and managed by Rockwell. The Company’s own operations for the fourth quarter
of fiscal 2014 comprise gravels mined at Saxendrift Extension (processed at Saxendrift), Saxendrift Hill Complex and
Niewejaarskraal. The fiscal 2013 comparative included the production of Saxendrift, Saxendrift Extension, Klipdam (sold at the
end of March 2013) and Tirisano (transferred to royalty mining business model in January 2013).

-  Total carat sales increased by 81%.

Corporate:

-   Revenues from diamond sales (excluding beneficiation) increased to $12.1 million, an increase of 69% in the
    fourth quarter of fiscal 2014.
-   Total carat sales from Company properties for the quarter were up 81% to 9,596 carats, sold at an average
    price of US$1,264 per carat, which is down 7% from a year ago.
-   The Saxendrift Mine reached 1.5 million lost time injury free hours (“LTIFH”) on March 11, 2014.

Analysis:

    -   Total carat production grew 74%, made up of 2,676 carats from own operations and 4,041 carats from
        contractors. The Company reported a 45% increase in fourth quarter volumes of gravel processed to
        897,288m(3) , of which 615,510m(3) was mined from its own MOR operations and the balance from its five
        royalty mining contractors operating at Tirisano.

Rockwell’s MOR operations achieved a 76% increase in carat sales while the average carat value rose 14% to
US$1,978. The value of sales from that region increased 101% to US$8.5 million while the value of sales from
Tirisano mining contractors generated US$3.6 million, of which 12.5% or US$452,270 accrues to the Company.

Volume production from Rockwell’s three MOR mines, forming the cornerstone of Rockwell’s organic growth
strategy, increased by 60% and carat production rose 39% as Saxendrift Hill Complex operated at its nameplate
capacity throughout the quarter and volumes processed at Niewejaarskraal gained momentum, approaching
nameplate capacity of 100,000m(3) per month at quarter end.

Commenting on fourth quarter production and sales James Campbell, CEO and President said:

“Rockwell’s fourth quarter performance shows progress on a number of fronts with the results all pointing in the
right direction and in line with our strategy to focus on the Middle Orange River (‘MOR’). MOR volumes of gravel
processed are up 60% from a year ago on the back of additional throughput from new capacity and this is in spite
of abnormally heavy rainfall as well as service delivery protests that were managed in partnership with local
leaders and regional authorities to minimise the impact on our workers and our operations. This delivered a 39%
increase in carat production with the value per carat up 14%. We now have three mines in production in the MOR,
all of which have multiple mining faces. This has provided us with benefits from production diversification as well
as mining flexibility. During the quarter we continued to focus on the fleet optimization programme to renew our
aging fleet, cost effectively. We are currently reviewing the various financing options that have been presented to
the Company and have started the implementation phase. The consistency of results from the royalty mining
contractor agreements at Tirisano is now enabling the Company to take a measured approach to assessing the
future options of some of its remaining non-core assets. Our objective remains to continue our drive to grow our
own mining and processing capacity to 500 000m(3) per month of quality cubes and increase the recovery of large
diamonds.”

Fourth quarter operational update:

Volume and carat production for the Company’s operational mines for the quarter ended February 28, 2014:

                                   Volumes of gravel processed                                                     Average grade (carats / 100
             Operation                                                                  Carats produced                       
                                               (m(3))                                                                           m(3))
                                                                    %               Q4         Q4        %                     Q4        %
                                   Q4 2014          Q4 2013                                                        Q4 2014
                                                                  change           2014       2013     change                 2013     change
    Klipdam                              -          227,361            -             -       1,133         -          -       0.50        -
    Saxendrift                     273,418          383,770         -29%           1,594     1,929      -17%        0.58      0.50      16%
    Saxendrift Hill Complex        179,479             -               -            681        -           -        0.38        -         -
    Tirisano                             -           1,823             -             -         39          -          -       2.14        -
    Niewejaarskraal                162,613             -               -            401        -           -        0.25        -         -
    Total: Own operations          615,510          612,954           0%           2,676     3,101      -14%        0.43      0.51      -14%
    Contractors’ mining*           281,778          -               -              4,041      727      456%         1.43        -         -
    Saxendrift tailings                  -           6,592             -             -         26          -          -         -         -
    Total production on
    Company Properties             897,288          619,546           45%          6,717     3,854      74%         0.75      0.62      20%


*     “Contractors’ mining” refer to independent royalty contractors processing gravel for their own risk and reward. Carats
      recovered are then sold through the Company’s tender process. The Company retains the responsibility for diamond
      security and sales and receives royalty income of 12.5% on these diamonds sold with the balance of the revenue accruing
      to the contractors.



Diamond sales and revenue for the Company’s operations for the quarter ended February 28, 2014:

                                                                                                                     Average value (US$ per
    Operation                            Sales (carats)                            Value of Sales (US$)
                                                                                                                             carat)
                                  Q4          Q4             %                                            %           Q4      Q4        %
                                                                           Q4 2014          Q4 2013
                                 2014        2013          change                                       change       2014    2013    change
    Klipdam                        -         1,574           -                 -           1,915,053        -          -      1,217      -
    Saxendrift                   2,764       2,440          13%            6,039,694       4,239,923       42%       2,185    1,738     26%
    Saxendrift Hill
    Complex                      1,154          -             -            1,987,045           -               -     1,722      -         -
    
    Tirisano                      -           291             -                -            196,590            -       -       676        -
    Niewejaarskraal              385           -              -             482,976            -               -     1,254      -         -
    Total: Own
    operations                   4,303       4,305          0%             8,509,715       6,351,566       34%       1,978    1,475     34%
    
    Contractors’ carat
    sales*                       5,293        581          811%            3,618,164        403,818       796%        695       -         -
   
    Saxendrift tailings           -           422             -                -            436,882            -     1,035      -         -
    Total    sales      from
    Company properties           9,596       5,308          81%            12,127,879      7,192,266       69%       1,264    1,355     -7%
    

-   "Contractors’ carat sales” refer to independent royalty contractors processing gravel for their own risk and reward. Carats
    recovered are then sold through the Company’s tender process. The Company retains the responsibility for diamond
    security and sales and receives royalty income of 12.5% on these diamonds sold with the balance of the revenue accruing
    to the contractors.



Saxendrift Operations:
                                                                                                                                 
-   At the Saxendrift Mine, quarterly volumes of gravel processed were down 29% year-on-year to 273,418m(3)
    comprising entirely of gravels from the higher-grade Saxendrift Extension. The drop was due to the combined
    impact of longer haulage distances as well as earthmoving vehicle availability due to the aging equipment
    fleet at Saxendrift. These are now being pro-actively addressed through the fleet optimization programme that
    is in the implementation phase. Service delivery protests in the nearby town of Douglas also impacted
    volumes in the fourth quarter.                                                                                  
-   The mine achieved a 16% increase in average grade to 0.58 carats per 100m(3) , however, this was not
    sufficient to offset the lower volumes and as a result, carats produced declined 17% from the prior year, to
    1,594 carats.
-   Carats sold from the Saxendrift operation increased by 13% to 2,764 carats at an average price of US$2,185,
    26% higher than in the comparable prior period. Accordingly, the mine produced a 42% increase in revenue
    from diamond sales to US$6.0 million (excluding beneficiation).
-   Notable stones recovered at the Saxendrift Mine processing plant included 29 rough diamonds exceeding 10
    carats, including most notably a 64.72-carat and a 67.12-carat stone.

Saxendrift Hill Complex:

-   The Saxendrift Hill Complex (“SHC”) mine, achieved quarterly volumes of gravel processed amounting to
    179,479m(3) from which a total of 681 carats were recovered during the quarter.
-   Sales from SHC amounted to 1,154 carats at an average price of US$1,722 per carat, generating revenue
    from diamond sales for the period of US$2.0 million.
-   Notable stones recovered at SHC during the fourth quarter included six rough diamonds exceeding 10 carats
    including, most notable being a 50.96 carat rough stone.

Niewejaarskraal:
                                           
-   The production ramp up to 100,000m(3) per month at the Niewejaarskraal Mine was completed towards the end
    of the fourth quarter and included the second phase of the processing plant, comprising the installation of an
    In-Field Screen (‘IFS’) and a rental Bulk X-ray system. The total volume of gravel processed in the fourth
    quarter amounted to 162,613m(3).
-   After a detailed review of the existing geological data, mining commenced according to the new 18-month
    mine plan in mid-February 2014. Two mining faces have been opened up, adjacent to the IFS, and these
    should enable higher productivity and provide optionality in the mine plan. Early indications are that the grade
    is now approaching budget. The mine produced 401 carats during the fourth quarter.
-   Sales from Niewejaarskraal amounted to 385 carats with total revenue of US$482,976 at an average price of
    US$1,254 per carat. The Company remains confident that carat values will continue to improve and reflect the
    higher carat values that characterise the MOR once the mine is consistently running at nameplate capacity.
-   Notable stones recovered at Niewejaarskraal during the fourth quarter included ten plus 10-carat rough
    diamonds.

Royalty Mining Contractors

-   The royalty mining contractors operating on the Tirisano property continue to perform consistently in the
    fourth quarter with total volumes of gravel processed amounting to 281,778m(3) yielding 4,041 carats.
-   Total revenue generated by the contractors from diamond sales amounted to $3.6 million ($452,270 royalty
    income accruing to Rockwell) from the sale of 5,293 carats at an average price of $695 per carat.
-   The royalty mining contractor agreement at Kwartelspan, which commenced in the fourth quarter of fiscal
    2014, is in the process of being converted into a joint venture mining arrangement.


Subsequent event: Sale of rare polished diamond through beneficiation joint venture

-   The Company is pleased to announce that a 109-carat vivid yellow diamond has been polished from the 169-
    carat rough stone which was recovered in September 2013 at the Saxendrift Hill Complex mine. The cushion
    cut diamond has been sold through Rockwell’s beneficiation partnership with Diacore and the Company’s
    profit share will be recognized as beneficiation revenue in the first quarter of fiscal 2015.



For further information on Rockwell and its operations in South Africa, please contact

James Campbell                CEO                                   +27 (0)83 457 3724

Stéphanie Leclercq            Investor Relations                    +27 (0)83 307 7587

David Tosi                    PSG Capital – JSE Sponsor             +27 (0)21 887 9602



About Rockwell Diamonds:

Rockwell is engaged in the business of operating and developing alluvial diamond deposits, with a goal to
become a mid-tier diamond production company. The Company’s flagship mine is the Saxendrift Mine, in the
Middle Orange River. It has recently built two new internally funded mines in the Middle Orange river region,
namely the Saxendrift Hill Complex and the Niewejaarskraal Mine which are both in production. Rockwell also has
a development project and a pipeline of earlier stage properties with future development potential. The operations
are based on high throughput processing capability and Saxendrift has among the lowest unit costs in the industry
as a result of implementing fit for purpose technologies.

The Company is known for producing large, high quality gemstone comprising a major portion of its diamond
recoveries that is enhanced through a beneficiation joint venture that enables it to participate in the profits on the
sale of the polished diamonds.

Rockwell also evaluates merger and acquisition opportunities which have the potential to expand its mineral
resources and production profile and to provide accretive value to the Company.


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 if 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 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 Rockwell's home jurisdiction filings that are available at
www.sedar.com.

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