Wrap Text
Financial highlights
Rockwell Diamonds Inc.
(A company incorporated in accordance with the laws of British Columbia, Canada)
(Incorporation number BC0354545)
(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
(“Rockwell” or “the Group”)
Rockwell delivers Q2 bottomline profit
October 15, 2015, Johannesburg, South Africa -Rockwell Diamonds Inc. ("Rockwell" or the "Company")
(TSX:RDI; JSE:RDI) announces results for the three months ended August 31, 2015.
Currency values are presented in Canadian dollars, unless otherwise indicated.
FINANCIAL HIGHLIGHTS
Q2 F2016 Q2 F2015 % Change Q1 F2016 F2015
Total revenue ($m) 21.0 16.9 +32 9.2 68.0
Rough diamond sales ($m) 12.3 14.2 (14) 8.3 56.9
Beneficiation revenue ($m) 8.7 2.7 +277 0.9 11.1
Average price per carat sold (US$) 1,783 1,489 +20 1,432 1,345
Gross profit before amortization and 9.2 1.2 +782 (3.1) (0.8)
depreciation ($m)
Average cash operating cost / m3 (US$) 11.20 13.09 (14) 13.09 11.4
Cash generated from operations ($m) 3.7 1.7 (39) (5.0) 0.7
Profit / (loss) attributable to owners of the 1.2 (1.4) - (6.5) (14)
parent ($m)
Highlights
- Rockwell continued to make progress with its promised restructuring of its business following the recent
acquisition of Remhoogte Holsloot Complex (“RHC”).
- As part of rebuilding its operational footprint in the Middle Orange River (“MOR”) it also continued with the
exploration and feasibility work with a specific focus on the near term potential Wouterspan and Lanyonvale
- A net profit of $1.2 million, driven mainly through the unlocking of value in the beneficiation pipeline as well as
the impact of eliminating operating losses at Niewejaarskraal (“NJK”) following its suspension in April 2015.
- Rockwell’s finance raising was suspended at the end of August due to the downturn in global commodity and
equity markets. The existing acquisition debt provided by key shareholders of US$16.5 million will remain in
place for the immediate future, and the terms are being amended following a shareholder vote on September
23, 2015. This will result in operating cash flows from diamond sales being used to service and repay debt,
which, depending on diamond production and value could dampen the Company’s ability to fast track its
exploration and development projects
- Since May 2015, US$3.8 million of acquisition and convertible debt has been repaid, including the settlement
of the US$2.0 million convertible debenture (issued in June 2011). On September 23, 2015 shareholders
approved the issue of up to 27.29 million three-year warrants in refinancing of the bridging loans and
convertible debentures, and amend the interest rate downward to 10.5%, in the absence of having raised
sufficient equity to settle the acquisition loans.
- First quarter revenue up 24% to $21.0 million, comprising $12.3 million from diamond sales and the balance
from beneficiation revenue.
o Total beneficiation revenue of $8.7 million (US$6.7 million) in Q2, includes $2.7 million (US$2.1
million) being Rockwell’s share of the profit on the sale of polished diamonds during the quarter. In
addition, as at August 31, 2015, Rockwell sold the beneficiation pipeline of goods mined up to
February 2015 for a total of $6.0 million, (US$4.6 million) a portion of which was set off to pay entirely
the US$2.0 million Convertible Loan Agreement with Daboll Consultants Limited (issued in June
2011).
- Average cash costs declined 14% to US$11.20 /m3 notwithstanding lower volumes processed by MOR
operations as a result of mining predominantly Rooikoppie gravels as well as middlings from a previous
operator. The weakness of the South African Rand against the US Dollar also had an impact. Volumes were
lower mainly due to the suspension of operations at NJK.
- The first three months’ production and grade achieved at RHC were on plan. All three acquired processing
plants were in operation by the end of Q2 and had total production volumes ramped up from 90,000m3 per
month in June 2015 to 130,000m3 by the end the end of the quarter.
- Saxendrift grade improved to 0.49 cphm3, offsetting impact of lower volumes of gravel processed due to
processing higher density Rooikoppie material, which has the benefit of lower unit mining costs. Life of mine
has been extended in the short term through ongoing exploration.
- Rockwell continues to work towards building throughput to deliver on the medium term strategic target to
process 500,000m3 of gravels per month from MOR operations to achieve sustainable profitability. However,
progress has been slowed by suspension of operations at NJK and limited capital to implement capacity
upgrades at RHC.
- Priorities for the next six months are as follows:
o Throughput enhancements at RHC to increase monthly volumes to 200,000m3 per month with the
installation of an in field screen which was approved this quarter.
o Continued exploration on contiguous properties at Saxendrift to extend profitable mining operations
whilst completing plans to bring Wouterspan on stream.
o Continued focus on mining and processing efficiencies and cost reductions to deliver lower per unit
costs.
o Manage cash flows to balance working capital requirements whilst servicing debt which now stands at
US$ 20.2 million.
Commenting on the second quarter financial performance, James Campbell, CEO and President said:
“We are pleased with Rockwell’s Q2 operational and financial performance, with Saxendrift delivering higher
grades despite its diminishing mine life and RHC performing according to our expectations. Strong operational
cash flows enabled us to repay US$3.8 million of acquisition and convertible debt. We also enjoyed an uptick in
beneficiation income, including the forward sale of our beneficiation pipeline to February 2015 for a total of
US$4.6 million, a portion of which was applied to reduce our gearing.
“Whilst it is positive that both our MOR operations are cash positive, we are faced with the ongoing challenge of
balancing our ongoing working capital requirements and at the same time servicing the debt that allowed us to
close on the RHC acquisition, without compromising on our future growth potential and exploration objectives. We
remain focused on our exploration objectives, which are key to delivering new value accretive operations from our
existing property portfolio that have long mine lives while we continue to evaluate consolidation opportunities that
can also deliver value.”
Financial review:
- Revenue: Gross rough diamond revenues were $21.0 million (Q2 F2015: $16.9 million), a 24% increase over
last year. This was due to higher beneficiation revenue received of $8.7 million (US$6.7 million), offsetting the
value of goods previously sourced from contractors at Tirisano (following disposal of that asset in Q1). MOR
sourced carats sold were up 40% on the prior year with revenue from these operations increasing 6% from
the prior year in US$ terms.
- Production Costs: Production costs increased 2% from $12.2 million last year to $12.5 million (excluding
Tirisano contractor mining operations), mainly due to incremental lease costs for EMV and mobile screens at
RHC. On a unit basis the average cash cost for all operations for Q2 F2016, declined 14% to US$11.20 per
cubic metre processed (Q2 F2015: US$13.09). This was due to mining Rooikoppie gravels and middlings
from a previous operator, which are associated with a lower cost. The weakness of the South African Rand
against the US Dollar also had an impact.
- Cost of sales before amortization and depreciation was flat, year on year, at $11.8 million in respect of
MOR sourced goods.
- Gross profit before amortization and depreciation: A gross profit before depreciation and amortisation of
$9.2 million was reported by the Group for Q2 2016, compared to a profit of $1.2 million for Q2 2015.
- Cashflows: The group generated cash flow from operating activities of $3.7 million in the quarter (Q2 F2015
$2.0 million).
- Net cash position: At August 31, 2015 the Group had negative net cash and cash equivalents of $2.4 million
(Q2 F2015: negative net cash and cash equivalents of $1.0 million), having recorded a net cash outflow of
$1.1 million after accounting for US$$3.8 million in debt paydown.
Market update
The months June to August being the Northern hemisphere summer months are typically the quieter time of any
calendar year as the industry has largely re-stocked in advance of the all-important Christmas retail season. The
seasonality during this year was exacerbated by a troubled diamond market due a lack of liquidity resulting from
scarcity of finance and high inventory levels. Muted retail sales in China and Hong Kong coupled with a struggling
global commodity market has not helped the diamond industry.
The polished market is still overstocked and prices of polished have reduced by around 5%. Diamond
manufacturers have not been producing and prefer to keep factories closed rather than manufacture expensive
rough to subsequently lose money in selling polished. There have been factory closures but the preference in the
industry is to avoid retrenchment and retain skills for when markets resumes. The Hong Kong Show at the
beginning of September was quiet as expected.
The polished market currently favours buyers. Wholesalers and retailers who have cash are in a position to offer
lower prices and retailers purchase only what is required to cover immediate orders. In spite of the challenges,
open market rough and polished prices seem to have troughed. Primary rough producers will bring the prices
down in line with the market and this should occur over a period of time. The US is now the strongest market and,
as we head into the festive season, liquidity should improve through reduced inventories. Price stability is
foreseen for the remainder of 2015, and increases only coming through from 2016.
Outlook
Rockwell remains focused on rebuilding its MOR production profile and delivering further growth opportunities
from its project pipeline as well as new business opportunities.
Immediate priorities include:
- Increasing the capacity of RHC to 200,000m3 with the installation of infield screening capacity.
- Addressing working capital and finance repayment obligations.
- Extending operations at Saxendrift for an additional six months, following recent identification of middlings
gravels, to the end of fiscal 2016.
- Completion of the exploration programme at Wouterspan in order to assess the feasibility of on this
property as a replacement of the operation.
The Company also continues to evaluate new projects and value accretive consolidation opportunities to meet its
strategy to become a mid tier diamond producer.
Conference Call:
Rockwell will host a telephone conference call on October 19, 2015 at 09:00 a.m. Eastern Time (15:00 p.m.
Johannesburg / 14:00 p.m. London) 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) October 22, 2015 and can be accessed by
dialling the relevant number in the table below and using the pass code 39268#.
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. Rockwell also has a development project and a pipeline of
earlier stage properties with future development potential. The operations are based on a strategy of throughput
processing and technology. Rockwell continuously strives to be the lowest cost producer in the industry.
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.
Rockwell’s common shares trade on the Toronto Stock Exchange and the JSE Limited under the symbol “RDI”.
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: 16/10/2015 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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