Wrap Text
Rockwell delivers revenue increase and lower operating costs in Q3 due to higher volumes processed but lower grades
Rockwell Diamonds Inc.
(A company incorporated in accordance with
the laws of British Columbia, Canada)
(Incorporation number BCO354545)
(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" or "the Group")
Rockwell delivers revenue increase and lower operating costs in Q3 due to higher volumes processed but
lower grades lead to rationalization of Saxendrift Hill Complex and focus on Niewejaarskraal expansion
ahead of acquisition of contiguous MOR alluvial diamond assets, expected to close in April 2015
__________________________________________________________________________________________
January 13, 2015, Johannesburg, South Africa -- Rockwell Diamonds Inc. ("Rockwell" or the "Company")
(TSX:RDI; JSE:RDI) announces results for the three months ended November 30, 2014.
Currency values are presented in Canadian dollars, unless otherwise indicated.
FINANCIAL HIGHLIGHTS
Q3 F2015 Q3 F2014 % Change Q2 F2015 F2014
Total revenue ($m) 18.9 11.9 +59 16.9 45.2
Rough diamond sales ($m) 17.5 11.3 +55 14.2 41.1
Beneficiation revenue ($m) 1.4 0.6 +133 2.7 4.1
Average price per carat sold (US$) 1,267 1,850 (32) 1,489 1,484
Operating profit / (loss) ($m) (3.2) 2.8 - 1.2 6.0
Average cash operating cost / m3 (US$) 11.5 13.5 (15) 10.3 10.4
Cash generated / (used) in operations (2.7) (1.7) - 1.7 2.7
Loss attributable to owners of the parent ($m) (4.8) (0.4) - (1.4) (10.6)
Net Cash and cash equivalents ($m) (0.5) (2.2) - (1.0) (1.8)
Salient features
- The operating result is reflective of a difficult quarter due to the low incidence of large diamonds across all our
operations. Average diamond prices realized from Company owned operations declined 35%.
- The tenth successive quarter of US$-denominated gross diamond revenue growth up 59% to $18.9 million
with rough diamond sales up 55% as a result of a 127% improvement in carat sales.
- Cost reduction initiatives continued, resulting in a reduction of 15% in consolidated average cash operating
costs for the Middle Orange River (“MOR”) operations to US$11.5 per cubic metre, the main drivers being
increased volumes mined (up 60%) and processed (up 29%).
- The announced transaction to acquire certain alluvial diamond properties and associated plant and equipment
contiguous to Rockwell’s existing properties will extend the current operating and resource base and allow
additional rationalization of plant and equipment to lift the overall volumes processed to above the targeted
500,000m3 in the MOR. The assets in question comprise early life mines that are in production and capable
of being enhanced by Rockwell’s management team to deliver immediate operational and financial benefits.
- Focus is on expanding the Niewejaarskraal mine throughput to ensure profitability.
- The remaining resource at Saxendrift Hill Complex (“SHC”) will be processed through the Saxendrift
infrastructure and the processing plant and equipment be utilized as part of the ongoing drive to further
optimize the MOR resources. The result will increase the Company’s throughput.
Commenting on the third quarter financial performance, James Campbell, CEO and President said:
“These results reflected a challenging quarter with a lower incidence of large stones. Despite this we achieved
US$-denominated revenue growth for the tenth successive quarter on the back of an increase in carat sales.
Equally pleasing was the 15% reduction in the cash operating cost per m3. We are mindful that we need to
ensure our ability to profitably process some of the lower grade resources and are committed to further drive
down unit costs, thus the decision to process the remaining Saxendrift Hill Complex (“SHC”) resource through the
Saxendrift plant; and relocate SHC’s assets to the other MOR properties, in particular Niewejaarskraal. In spite of
a $3.2 million operating loss I believe we remain within the statistical variance modeled for MOR alluvial deposits
and this volatility in diamond recoveries is best addressed by lifting our monthly processing capacity above
500,000m3.
“Given the progress we have made in rebuilding Rockwell as a diamond value focused business on the back
enhanced management and operational efficiency, and cost discipline (without external funding), our priority is
now to build on past achievements through our recently announced acquisition which we believe will be the game
changer we have been searching for. The most critical component of being able complete the transaction will be
our ability to raise the required equity within the time frame.”
Financial review:
- Revenue: Gross diamond revenues increased for the tenth successive quarter, to $18.9 million including
beneficiation revenue. Rough diamond sales increased 55% to $17.5 million, led by a 127% improvement in
carat sales to 13,759 carats. The 35% decline in average carat price from Company owned properties is due
to the lower incidence of large diamonds recovered in the quarter.
- Production Costs: The consolidated average cash operating cost at the Company’s three operations, was
US$11.5 per cubic metre. The average total cash cost for all operations (including rehabilitation and royalty
payments) for the period amounted to US$12.2 per cubic meter, down 35% from a year ago.
- Cash cost of sales: The cash cost of sales increased to $22.1 million, commensurate with the higher carat
sales. This was led by increased mining output at Niewejaarskraal and the royalty mining contractors at
Tirisano while the inventory movement also had an impact.
- Net cash position: At November 30, 2014 Rockwell had net cash and cash equivalents of ($0.5 million),
having recorded a net movement in cash and cash equivalents of $0.4 million including the receipt of $2.3
million in respect of convertible debenture and loans.
- Middle Orange River (“MOR”) operating performance: A total of 1.4 million m3 was mined from Rockwell’s
MOR operations, up 60% from the prior year, facilitated by the ongoing optimization of our screening
operations and the earthmoving vehicle (“EMV”) fleet through the renewal plan. Volumes of gravel processed
increased 29% to 1.0 million m3 with the inclusion of Niewejaarskraal.
Market update
Global rough diamond sales slowed in the third quarter, with lower pricing resulting from high inventories in the
pipeline and a liquidity squeeze in the industry. Two De Beers Group Sightholder Sales Sights held during the
period saw relatively less goods supplied at stable prices, except in certain categories. In the polished diamond
market, discounting was evidenced, particularly in India, where the industry is experiencing liquidity constraints.
Retail demand was sluggish with retailers limiting purchases to meet immediate requirements and buying on
extended credit terms. Discounting is expected to enhance sales volumes to reduce inventories and improve
liquidity. Demand for exceptional fancy colored goods continues to improve with record prices achieved for blue,
red and pink diamonds.
Discounting of polished goods is anticipated to persist into the fourth quarter to support December sales,
supporting demand in the final weeks of F2015 as factories restock polished inventories ahead of the Chinese
New Year and Valentine’s Day, both of which are in February.
Strategy including growth projects and priorities
Rockwell’s ongoing exploration activities aim to increase production from its MOR properties, and extend the mine
lives. These include contiguous exploration of existing resources at the Saxendrift Extension property. Through
trial mining, the Niewejaarskraal inferred resource will be upgraded. The Company continues to review options to
bring the Wouterspan property into production on a phased approach, following the completion of a preliminary
economic assessment in May 2014.
Fourth quarter operational and corporate priorities are as follows:
- Managing operating costs while increasing volumes processed across all operations.
- Maintaining the higher volumes of gravel mined and processed at Saxendrift while sustainably reducing the
mining cash cost/m3.
- SHC was designed for an 18-month mine life, which expired at the end of 2014. To optimize the remaining
resource, Rockwell has decided to process the remaining resource at the Saxendrift plant. The EMV fleet is
being moved to Niewejaarskraal to ramp up production and the processing plant will be reallocated in due
course.
- At Niewejaarskraal, the focus is on enhancing the operating economics of the property by further ramping up
throughput.
- Closing the acquisition of the contiguous MOR alluvial properties and mining capabilities, is a top priority as
these will enhance Rockwell’s MOR operating base through scale.
Conference Call:
Rockwell will host a telephone conference call on Wednesday, January 14, 2015 at 09:00 a.m. Eastern Time
(16:00 p.m. Johannesburg) to discuss these results. The conference call may be accessed as follows:
Country Access Number
Canada and USA (Toll-Free) 1 855 481 5362
South Africa (Toll-Free) 0 800 200 648
South Africa – Johannesburg 011 535 3600
South Africa – Cape Town 021 819 0900
UK (Toll-Free) 0808 162 4061
Other Countries (Intl Toll) +27 11 535 3600
Other countries – Alternate +27 10 201 6800
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) January 19, 2015 and can be accessed by
dialling the relevant number in the table below and using the pass code 33790#.
Country Access Number
South Africa (Telkom) 011 305 2030
Canada and USA (Toll Free) 1 855 481 5363
Other Countries (Intl Toll) +27 11 305 2030
UK (Toll-Free) 0 808 234 6771
For further details, see 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 2014
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
MOR. It has recently built two new internally funded mines in the MOR 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 consolidation 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 the transaction and the ability of each party to satisfy the conditions precedent
in a timely manner or at all, 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.
Date: 14/01/2015 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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