Wrap Text
Rockwell Focuses On Operational Turnaround Following Recent Management Changes
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: 7743W103
Rockwell focuses on operational turnaround following recent management changes
__________________________________________________________________________________________
September 22, 2016, 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 August 31, 2016.
Currency values are presented in Canadian dollars, unless otherwise indicated.
Salient features
- Strategy - Immediate focus is being placed on:
o implementation of the new contract for outsourced mining services and sale of the Company’s
earthmoving vehicle (“EMV”) fleet, and transfer of two thirds of the company’s staff. This contract is
structured to externalize risk from variance in mining volumes and equipment availability;
o commissioning of the third and fourth line of the Wouterspan (“WPC”) wet plant during October 2016.
The first two lines are completing commissioning this month;
o review of current mining plan at Remhoogte (“RHC”) to reflect a reduced Rooikoppie resource and
less economic Palaeo gravels;
o shut-down of Saxendrift during September 2016;
o exploration drilling and bulk sampling in the vicinity of WPC;
o develop a resource development strategy for MOR to facilitate good business decisions for future
production expansion or replacement;
o assessing potential kimberlite acquisitions to increase stability in monthly production and cash flow.
This focus is the result of a detailed board review and intervention in late August due to the performance of
RHC and the schedule and cost variances at WPC. The result of the review included a change in certain roles
and continued close monitoring by the board of operations and project performance on a weekly basis.
- Volumes - were down 4% on Q1 2017 and 8% on Q2 2016, due to the planned scaling down of operations at
Saxendrift, which was partly compensated by a 10% increase in volumes processed at RHC.
- Grades - MOR grades were down 7% on Q1 2017 and 8% on Q2 2016, owing to diminished recoveries from
the middlings material at Saxendrift (which was down 13%) and reduced grades at RHC (down 14%).
- Carat sales – 4,849 carats, stable on Q1 2017 and down 9% on Q2 2016.
- Value of sales – decreased 17% from Q1 2017 and 21% from Q2 2016, to US$7.6 million (excluding
beneficiation). Total sales (including royalty contractors’ production but excluding beneficiation) were also down
by 14% on Q1 2017 and 16% on Q2 2017.
- Average price per carat – decline by 16% on Q1 2017 to US$1,560.
- Notable recoveries – thirty-three +20-carat stones were recovered at RHC (22), Saxendrift (10) and WPC (1),
with two stones over 100-cts: 157.99ct and 129.65ct, both from RHC.
- Rough diamond inventory - 700 carats were carried over into the third quarter of fiscal 2017 (including royalty
contract goods).
- Safety - at August 31, 2016, the Company had achieved 174,558 lost time injury free hours (“LTIFH”) at its
MOR operations.
Material developments
- CML Agreement
A five-year mining agreement has been concluded with C-Rock Mining (Proprietary) Limited (“CML”) for the
provision of contract mining services at Rockwell’s Wouterspan mine with a similar agreement to follow for
Remhoogte. This is structured to mitigate the volume and availability risks associated with the Company’s
earthmoving fleet and its uneven operating performance to date. The contract provides for all mining and
associated rehabilitation activities at a fixed fee per unit material delivered at the plant, with adjustments and
where necessary termination for underperformance of the contractor or volume reductions implemented by
the company for business reasons.
- Exploration update
Rockwell has been granted a prospecting right over the Daniel alluvial deposit, a diamondiferous fluvial-
alluvial gravel deposit associated with the adjacent Finsch diamond mine in the Northern Cape Province.
Limited modelling based on percussion drilling by the previous operator has identified extensive
diamondiferous gravels within the palaeo-channel structure. Further work by the company is still required to
assess economic potential.
- Saxendrift Mine
Rockwell’s operations at Saxendrift have been suspended as anticipated following recent economic
performance. Saxendrift has been the mainstay of Rockwell’s production since its acquisition from Trans
Hex. Commercial options on how to deal with this asset consisting of plant and remaining resource are
currently being evaluated, royalty miners and relocation of fixed infrastructure being some of these.
Commenting on second quarter production and sales and the business in general, Tjaart Willemse,
Executive Officer said:
“From my observations to date on the general health of the business and understanding of the main contributors to
its current position, it is clear that the business finds itself in a state of despair for a number of reasons. There has
been a general breakdown in controls over a considerable period of time, non-adherence to the procurement policy,
amongst others, being very prevalent. This, coupled with inadequate work planning and the lack of project front-
end loading has led to a series of financial management concerns and business risks. Blurred lines of accountability,
both within the organisation and between the company and some of its service providers, does not bode well for
proper management and control of the business and a perceived lack of a sense of urgency further exacerbates
the potential for failure.
Following some changes to the team and with the full co-operation of the remaining management and the outgoing
CEO, the board led intervention with myself as the new leader will continue. I am pleased to report some significant
progress has already been made and I hope to be able to update stakeholders in more detail when we release the
quarterly results next month.
In conclusion, I am of the opinion that, with appropriate controls in place and with the right team to execute it,
Rockwell can be turned around to deliver good shareholder value”.
PRODUCTION REVIEW
Volume and carat production for total Company owned properties to August 31, 2016 were as follows:
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
Volumes processed (000m3) 786 837 (6) 865 (9) 3 214
Carats produced (carats) 4 747 5 613 (15) 5 688 (17) 18 984
Grade (carats/100m3) 0.62 0.67 (8) 0.66 (6) 0.59
Figures above include royalty mining contractors. Refer to Appendix 1 for additional information
- RHC: Second quarter volumes fell short due to poor EMV availability and operational performance. This,
combined with a 14% decline in grade compared to Q1 F2017 led to a 5% decline in carats produced. A total
of 3,424 carats were recovered from this property in the quarter, including twenty-two plus 20-carat stones, with
the largest being 158.99ct and 129.66ct. An average stone size of 4.6 ct/stn was achieved at a bottom cut-off
of 5 mm. A detailed re-evaluation of RHC’s business potential will be done in the next weeks.
- Saxendrift: The volume of gravel processed was down 19% from Q1 2017, as the operation approached its
end of economic life. The recovered grade of 0.35 cphm 3 was also down by 13%. Quarterly carat production
declined by 28% to 1,227 carats. Notable recoveries included ten plus 20-carat stones, with the largest being
43.91ct and 42.72ct. An average stone size of 4.04 ct/stn was achieved at 5mm bottom cut-off. The Saxendrift
operation was closed down on 12 September following a cost-benefit analysis.
- WPC: Commissioning of WPC commenced in August 2016, with 12,031m 3 of gravel processed at a recovered
grade of 0.80 cphm3. Carats produced amounted to 96.26 carats, including one stone weighing 27.405ct. An
average stone size of 5.35 ct/stn was achieved at 5mm bottom cut-off. Schedule overrun due to inadequate
granularity in the project plan and lack of a commercial arrangement for building the IFS is a risk. A
comprehensive and detailed review of the project plan and related expenditure flow requirements will take place
on 20 September. Potential for unplanned stoppages and under-delivery of the new plant due to the possibility
of inadequate modelling and understanding of dynamic load impact, and risks associated with structural integrity
and component maintainability needs to be better understood. A reputable alluvial diamond project design and
implementation company was approached to do an external review to understand potential risk and to make
recommendations on mitigating measures, a site visit is planned for late September.
- Royalty contractor mining: No diamonds were recovered in the second quarter by royalty mining contractors,
following the suspension of their operations after a fatal accident at their Saxendrift Hill Complex plant in June
2016. While the company is facilitating the investigation by the DMR, it does not expect any consequences to
its operations as a result.
SALES REVIEW
Diamond sales for total Company-owned properties to August 31, 2016 were as follows:
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
Sales value (US$000’s) 8 062 9 557 (16) 9 347 (14) 28 713
Carats sold 5 167 5 359 (4) 5 191 (0) 18 976
Average price (US$ per
1 560 1 783 (13) 1 801 (13) 1 513
carat)
Figures above include royalty mining contractors’ goods. Refer to Appendix 2 for additional information
- Saxendrift: Diamond sales were down by 11% compared to Q1 2017 at US$2.3 million. A total of 1,337 carats
were sold, down 14% on Q1 2017, at an average value per carat of US$1,757, which was up 4% from Q1 2017.
The marginal value increase is within normal parameters.
- RHC: Diamond sales were down 20% on Q1 2017, at US$5.2 million, from the sale of 3,485 carats (up 5% on
Q1 2017). The recorded average value of RHC goods declined by 24% on Q1 2017, to US$1,486 per carat.
Reduced value resulted from a lack of large stone delivery.
Appendix 1: Volumes and carat production for the Company’s owned mines and its royalty mining contractors for
the three months ended August 31, 2016 were as follows:
Volume Mined
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
(000m3)
Saxendrift Complex 438 479 (9) 536 (18) 2 249
NJK - - - - - 104
RHC 389 355 10 399 (2) 943
WPC 27 - 100 - 100 -
Total RDI 854 834 2 935 (9) 3 296
Volume Processed
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
(000m3)
Saxendrift Complex 350 446 (22) 430 (19) 1 980
NJK - - - - - 63
RHC 398 377 6 361 10 908
WPC 12 - 100 - 100 -
Total RDI 760 823 (8) 791 (4) 2 951
Contractors’ mining* 26 15 73 74 (64) 263
Grand Total 786 837 (6) 865 (9) 3 214
Carats produced
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
(carats)
Saxendrift Complex 1 227 2 168 (43) 1 705 (28) 8 335
NJK - - - - - 431
RHC 3 424 3 405 1 3 596 (5) 8 056
WPC 96 - 100 - 100 -
Total RDI 4 747 5 573 (15) 5 301 (10) 16 822
Contractors’ mining* - 40 (100) 398 (100) 2 162
Grand Total 4 747 5 613 (15) 5 688 (17) 18 984
Grade
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
(carats/100m3)
Saxendrift Complex 0.35 0.49 (29) 0.40 (13) 0.42
NJK - - - - - 0.69
RHC 0.86 0.90 (4) 1.00 (14) 0.89
WPC 0.80 - 100 - - -
Total RDI 0.62 0.68 (9) 0.67 (7) 0.57
Contractors’ mining* - 0.28 (100) 0.52 (100) 0.82
Grand Total 0.62 0.67 (7) 0.66 (6) 0.59
* “Contractors’ mining” refers to independent royalty contractors processing gravel for their own risk and reward on Rockwell
owned mineral properties. Carats recovered are then sold through the Company’s tender process. The Company retains the
responsibility for diamond security and sales and recognises 100% of the revenue on sale. The contractual 89.5% of the sales
value, payable to the contractor, is recognised as production costs in the statement of profit and loss.
Appendix 2: Sales for each of the Company’s own mines and its royalty mining contractors for the three months ended
August 31, 2016 were as follows:
Carats Sold Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
Saxendrift Complex 1 337 2 279 (41) 1 557 (14) 8 478
NJK - - - - - 685
RHC 3 485 3052 14 3 323 5 7 791
WPC 27 - 100 - 100 -
Total MOR 4 849 5 331 (9) 4 880 (1) 16 954
Contractors’ carats** 318 28 1034 311 2 2 022
Grand total 5 167 5 359 (4) 5 191 (0) 18 976
Value of sales
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
(US$000s)
Saxendrift Complex 2 350 5 365 (56) 2 637 (11) 14 435
NJK - - - - - 1 109
RHC 5 177 4 184 24 6 459 (20) 11 339
WPC 37 - 100 - 100 -
Total MOR 7 563 9 549 (21) 9 096 (17) 26 883
Contractors’ carats** 499 8 6138 251 99 1 830
Grand total 8 062 9 557 (16) 9 347 (14) 28 713
Average Price
Q2 F2017 Q2 F2016 % Change Q1 F2017 % Change F2016
(US$/carat)
Saxendrift Complex 1 757 2354 (25) 1694 4 1703
NJK - - - - - 1619
RHC 1 486 1371 8 1944 (24) 1455
WPC 1 336 - 100 - 100 -
Total MOR 1 560 1 791 (13) 1864 (16) 1586
Contractors’ carats** 1 571 301 422 806 95 905
Grand total 1 560 1 783 (13) 1801 (13) 1513
** “Contractors’ carats” refers to independent royalty contractors processing gravel for their own risk and reward on Rockwell owned
mineral properties. Carats recovered are then sold through the Company’s tender process. The Company retains the responsibility
for diamond security and sales and recognises 100% of the revenue on sale. The contractual 89.5% of the sales value, payable to
the contractor, is recognised as production costs in the statement of profit and loss.
For further information on Rockwell and its operations in South Africa, please contact
Tjaart Willemse Executive Officer +27 (0)83 4071063
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. The Company also
evaluates consolidation opportunities that have the potential to expand its mineral resources and production profile and
provide accretive value to the Company.
Rockwell is known for producing large, high quality gemstones comprising a major portion of its diamond recoveries.
This is enhanced through a beneficiation joint venture that enables Rockwell to participate in the profits on the sale of
the polished and certain re-traded diamonds, which are not beneficiated.
Rockwell has set a strategic goal to become a mid-tier rough diamond production company. In pursuit of this goal the
Company has embarked on a strategy to grow its Middle Orange River (MOR) operational base and minimise production
and recovery volatility by setting a medium term target to process 500,000m3 of gravels per month from its MOR
operations.
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 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: 23/09/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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