Wrap Text
Unaudited Interim Consolidated Financial Statements
For The Period Ended 31 May 2017
Rockwell Diamonds Inc.
(A company incorporated in accordance with the laws of
British Columbia, Canada)
(Incorporation number BC0354545)
(Formerly Rockwell Ventures Inc.)
(South African registration number: 2007/031582/10)
Primary listing: TSX
Secondary listing: JSE
Share code on the JSE Limited: RDI ISIN: CA77434W2022
Share code on the TSX: RDI CUSIP Number: 77434W103
("Rockwell" or "the Group")
17 July 2017
Unaudited interim consolidated financial statements
for the period ended 31 May 2017
Consolidated statements of financial position
As at As at
31 May 28 February
Amounts in Canadian Dollars ('000) 2017 2017
Assets
Non-current assets
Mineral property interests 15 073 15 143
Investment in associates 643 623
Property, plant and equipment 27 523 24 254
Rehabilitation deposits 2 066 1 884
Investment and deposits 153 136
Total non-current assets 45 458 42 040
Current assets
Inventories 929 1 381
Trade and other receivables 1 510 1 569
Cash and cash equivalents 285 1 730
Current assets held for sale 1 540 -
Total current assets 4 264 4 680
Non-current assets held for sale 9 430 10 970
Total assets 59 152 57 690
Equity and liabilities
Equity
Share capital 147 472 147 472
Reserves (14 756) (14 391)
Retained loss (147 114) (144 825)
Total equity (14 398) (11 744)
Liabilities
Non-current liabilities
Loans and borrowings 42 047 -
Rehabilitation obligation 2 707 2 508
Non-current portion of trade and
other payables 961 961
Total non-current liabilities 45 715 3 469
Current liabilities
Loans and borrowings - 38 852
Finance lease obligation 329 511
Trade and other payables 17 875 17 007
Bank overdraft 1 243 1 207
Total current liabilities 19 447 57 577
Non-current liabilities held for
sale 8 388 8 388
Total liabilities 73 550 69 434
Total equity and liabilities 59 152 57 690
Consolidated statements of financial performance
3 months 3 months
ended ended
31 May 31 May
Amounts in Canadian Dollars ('000) 2017 2016
Sale of diamonds - 12 097
Beneficiation income - 369
Cost of sales before amortisation and
depreciation - (9 173)
Gross profit before amortization,
depreciation and rehabilitation - 3 293
Amortization of mineral property
interests (138) (273)
Depreciation of property, plant and
equipment (668) (1 143)
Rehabilitation obligation incurred in
production of inventory (28) (42)
Gross (loss) profit (834) 1 835
Other income 161 54
General, administration and business
development expenses (1 164) (713)
(Loss) profit before net finance costs (1 837) 1 176
Finance income 22 18
Foreign exchange profit on US$ loans 282 65
Finance costs (776) (717)
(Loss) profit after net finance costs (2 309) 542
Share of profit from equity accounted
investments 20 36
(Loss) profit before income tax
recovery (2 289) 578
Income tax recovery - (8)
(Loss) profit for the period (2 289) 570
(Loss) earnings per share
Basic and diluted (loss) earnings per
share (cents) (4.16) 1.04
Consolidated statements of comprehensive income
3 months 3 months
ended ended
31 May 31 May
Amounts in Canadian Dollars ('000) 2017 2016
(Loss) profit for the period (2 289) 570
Other comprehensive income net of
taxation
Items that are or may be reclassified
to profit or loss
Exchange differences on translating
foreign operations (365) (453)
Other comprehensive income for the
three months net of taxation (365) (453)
Total comprehensive (loss) income (2 654) 117
Consolidated statements of changes in equity
Foreign
currency Share-
trans based Total
Amounts in Canadian Share lation payment net
Dollars ('000) capital reserve* reserve** reserves
Balance at 01 March 2016 147 472 (22 706) 9 099 (13 607)
Total comprehensive
income for the period
Profit for the period - - - -
Other comprehensive
income - (453) - (453)
Total comprehensive income
for the period - (453) - (453)
Share-based payment
expense - - 9 9
Total changes - (453) 9 (444)
Balance at 31 May 2016 147 472 (23 159) 9 108 (14 051)
Balance at 01 March 2017 147 472 (23 490) 9 099 (14 391)
Total comprehensive
income for the period
Loss for the period - - - -
Other comprehensive
income - (365) - (365)
Total comprehensive income
for the period - (365) - (365)
Total changes - (365) - (730)
Balance at 31 May 2017 147 472 (23 855) 9 099 (14 756)
Retained Total
loss equity
Balance at 01 March 2016 (130 358) 3 507
Total comprehensive income for
the period
Profit for the period 570 570
Other comprehensive
income - (453)
Total comprehensive income for
the period 570 117
Share-based payment
expense - 9
Total changes 570 126
Balance at 31 May 2016 (129 788) 3 633
Balance at 01 March 2017 (144 825) (11744)
Total comprehensive
income for the period
Loss for the period (2 289) (2 289)
Other comprehensive
income - (365)
Total comprehensive income for
the period (2 289) (2 654)
Total changes (2 289) (3 019)
Balance at 31 May 2017 (147 114) (14 398)
* Currency translation differences arising on the conversion of the
results and financial position of foreign operations from their
functional currency to the Group's presentation currency are
accumulated in the foreign currency translation reserve.
** Equity settled share-based payment transactions
are accumulated in the share-based payment reserve.
Consolidated statements of cash flows
3 months 3 months
ended ended
31 May 31 May
Amounts in Canadian Dollars ('000) 2017 2016
Cash flows from operating activities
Cash receipts from customers 79 11 838
Cash refunded from (paid to) suppliers
and employees 986 (9 779)
Cash generated from operations 1 065 2 059
Finance income 22 18
Finance costs (657) (692)
Net cash inflow from operating
activities 430 1 385
Cash flows from investing activities
Purchase of property, plant and
equipment (3 856) (1 737)
Proceeds from sale of property, plant
and equipment 149 215
Increase in investments and deposits (207) (112)
Increase in rehabilitation deposits (16) (18)
Repayment of loan from buyers of
subsidiary - 1 712
Net cash (outflow) inflow from
investing activities (3 930) 60
Cash flows from financing activities
Advances from loans and borrowings 2 311 1 296
Repayment of loans and borrowings - (1 362)
Repayment of finance lease obligations (290) (170)
Advances from related party loan
(financing) - 35
Net cash inflow (outflow) from
financing activities 2 021 (201)
Net movement in cash and cash
equivalents for the period (1 479) 1 244
Cash and cash equivalents at the
beginning of the period 523 (1 332)
Effect of exchange rate movement on
cash balances (2) -
Total cash and cash equivalents at end
of the period (958) (88)
Accounting treatment of operating subsidiaries
IFRS 10 requires that a Company consolidate investee entities where:
- an investor controls an investee, and when it is exposed, or has
rights, to variable returns from its involvement with the investee;
and
- has the ability to affect those returns through its power over the
investee.
Traditionally, equity shareholdings of 51% or more have been clear
circumstances of control and exposure to variable returns, requiring
consolidation in the presentation of financial statements. As the
Company owns between 74% and 100% of the operating subsidiaries, it
has consolidated such entities in its previous financial statements.
With the appointment of business rescue practitioners, whose role it
is to run the affairs of the subsidiaries (but not the Company), and
to present a business plan by 30 September 2017, the question of
control as required by IFRS 10 was considered by the Company.
In assessing this, the Company considered that:
i. it remains the majority shareholder with rights to variable returns;
ii. has provided a business plan to the business rescue practitioners at
the time of appointment and continues to work very closely with them to
delineate and refine it;
iii. has the status of the largest creditor of the subsidiaries and
has to vote in favour of the business plan thus holding a constructive
veto; and
iv. has been the only funder of further investments when required,
providing a forum for discussion and control over the direction of
such investment.
Accordingly, the Company has determined that the loss of shareholder
control by virtue of the business rescue proceedings has been
sufficiently replaced by creditor rights and continuing funder
involvement, such that the Company has not lost sufficient control
to fail the consolidation test. Accordingly, the Company has
consolidated the three operating subsidiaries in the quarter, and
will continue to consider its ability to control its exposure to
varying returns as the business rescue process evolves.
(Loss) earnings per share
3 months 3 months
ended ended
31 May 31 May
Amounts in Canadian Dollars ('000) 2017 2016
Basic and diluted (loss) earnings
per share
Cents per share (4.16) 1.04
Basic (loss) earnings per share was
calculated based on a weighted
average number of common shares of
54 983 244 for the three months
ended 31 May 2017 (three months ended
31 May 2016: 54 983 244).
Reconciliation of (loss) earnings for
the period to basic (loss) earnings
(Loss) profit for the period (2 289) 570
At 31 May 2017 and 31 May 2016 the impact
of share-based payment options
and warrants were excluded from the
weighted average number of shares,
for the purpose of the diluted (loss)
earnings per share calculation,
as the effect would have been anti-dilutive.
Basic and diluted headline (loss) earnings
per share
Cents per share (3.95) 0.67
Reconciliation between basic (loss)
earnings and headline (loss) earnings
Basic (loss) earnings attributable to
owners of the Group (2 289) 570
Adjusted for:
Loss (profit) on disposal of
property, plant and equipment and mineral
properties 117 (200)
Headline (loss) profit attributable
to owners of the Group (2 172) 370
None of the adjustments to headline (loss) profit had any tax impact.
The basic and diluted headline (loss) earnings per share disclosure is
provided based on the listing requirements of the Johannesburg Stock
Exchange (Group's secondary listing). The disclosure of basic and
diluted headline (loss) earnings per share is provided in accordance
with Circular 2/2013 as issued by the South African Institute of
Chartered Accountants.Headline (loss) earnings represents the basic
(loss) earnings attributable to the owners of the Group excluding
certain remeasurements.
At 31 May 2017 and 31 May 2016 the impact of share-based payment
options and warrants were excluded from the weighted average number
of shares, for the purpose of the diluted headline (loss) earnings
per share calculation, as the effect would have been anti-dilutive.
Cash and cash equivalents
As at As at
31 May 28 February
Amounts in Canadian Dollars ('000) 2017 2017
Cash and cash equivalents consist of:
Bank balances 285 1 730
Bank overdraft (1 243) (1 207)
(958) 523
Current assets 285 1 730
Current liabilities (1 243) (1 207)
(958) 523
The Group has an overdraft facility in the amount of ZAR12.0 million
($1.2 million) available for its operations which was fully utilised
at 31 May 2017 and 28 February 2017. This facility carries interest at
prime rate (currently 10.5% per annum) plus 5.0%.
The guarantees/warranties for this overdraft facility at 31 May 2017
and 28 February 2017 were as follows:
Provided on account of HC van Diamonds Wyk Limited
- Unlimited suretyship by Rockwell Resources RSA Proprietary Limited
- Unlimited pledge on call deposit with value ZAR 12.9 million
($1.3million) held by HC van Wyk Diamonds Limited
- Cession of investments policies that lapsed prior to 28 February 2017.
Provided on account of Saxendrift Mine Proprietary Limited
- Suretyship restricted to ZAR 31 million ($3.1million) by HC van Wyk
Diamonds Limited
- Suretyship restricted to ZAR 31 million ($3.1million) by Rockwell
Resources RSA Proprietary Limited
- Suretyship restricted to ZAR 38 million ($3.9million) by Rockwell
Diamonds Incorporated.
- Unrestricted cession of book trade receivables.
- Special and general notarial bond to the value of ZAR 40.0 million
($ 4.1 million) over generally all moveable property and specifically
the Niewejaarskraal Plant and IFS Screen.
- Cession of an investment policy with value ZAR 2.6 million
($ 0.3 million)
This facility lapsed on 2 February 2017 and is in the process of
condonation as a result of the business rescue process.
Non-current assets and liabilities held for sale On 22 December 2016
the Company announced that it had entered into a purchase and sale
agreement with Nelesco 318 Proprietary Limited for certain mining
rights, land, plant and equipment and the assumption of certain
rehabilitation obligations for a cash consideration of ZAR 45 million
($ 4.3 million), which included the transfer of 84 employees,
including successor employer obligations. This transaction included
the transfer of the issued share capital of the subsidiary Pioneer
Minerals Proprietary Limited.
Payment was structured in three tranches of which ZAR 20 million
($ 1.9 million) was received during January 2017 settling the plant
and equipment disposed of, the second receipt is ZAR 15 million
($ 1.4 million) and is due on transfer of the Saxendrift land in
the name of Nelesco 318 Proprietary Limited, the balance of
ZAR 10.0 million ($ 0.95 million) is due upon the completion
and consent of certain contracts, the Section 11 transfer
approval and execution by the Department of Mineral Resources
as well as the Takeover Regulation Panel of South Africa.
The assets, transferred which are subject to regulatory approval
and execution indicated above, with their corresponding
rehabilitation obligations will only transfer on legal transfer
of ownership land, are disclosed as assets and liabilities
held for sale.
At May 2017 the disposal group was stated at the impaired
carrying amount being the lower of carrying amount or fair
value less costs to sell.
As at As at
31 May 28 February
Amounts in Canadian Dollars ('000) 2017 2017
Assets and liabilities
Assets held for sale
Mineral property interests being
Remhoogte, Holsloot and Saxendrift 10 970 10 083
Rehabilitation deposits - 1 129
10 970 11 212
Liabilities held for sale
Provision for rehabilitation relating
to Remhoogte, Holsloot and Saxendrift (8 388) (8 388)
(8 388) (8 388)
Net non-current assets held for sale 2 582 2 824
Outstanding consideration (2 582) (2 582)
Net loss on remeasurement at fair
value less cost to sell - 242
Loss realized on sale of plant and
equipment - 4 950
Net loss on Nelesco transaction - 5 192
Loans and borrowings
As at As at
31 May 28 February
Amounts in Canadian Dollars ('000) 2017 2017
Held at amortized cost
Credit facilities 42 047 38 852
Bridging loans, to fund the Bondeo acquisition, were obtained
from Diacore (via Ascot Diamonds Proprietary Limited) ($20.4 million)
and Emerald Holdings Limited ($1.8 million) in order to meet the
transaction financing requirements for the acquisition of
Bondeo 140 cc.
The initial term of the two loans were for a period of three
months ("First Period"), extendable for a further month if the
Company called a shareholder meeting to approve any required amendments
to the loan; Interest was payable at Libor plus a margin of 15% per
annum for the first period of three months. There were no broker's
or similar fees associated with these two transactions.
The Company renegotiated these loans during Q2 2016, and upon
shareholders' approval on 23 September 2015, two new loans
commencing on 1 October 2015, were issued, each with the following terms:
- A term of 24 months from 1 October 2015.
- Interest payable every 6 months at US - 6 month Libor rate plus
a margin of 15%.
- To be repaid through a sweep mechanism linked to sales revenues
(currently up to 7.5% on diamond sales and up to 50% on beneficiation
income). paid prorata to Diacore and Emerald in proportion to the
ratio of the original two loan principal balances.
- The issue of three year share warrants to Diacore (18,863,402) and
Emerald (2,351,838) at a strike price of 20 cents per share.
During the year ended 28 February 2017, the Company also arranged
for further financing in the amount of USD $8M on the same terms and
conditions as the loans noted above. Diacore committed to advance
a further US$4M, and Emerald and an unrelated investor committed
to advance a further US$2M each. At 31 May 2017 US$0.2M was yet
to be received.
During the quarter ended 31 May 2017 Emerald and Diacor advanced a further
US$0.9M. Both the 2016 and 2017 loans are subject to inter-creditor
arrangements which provide for priority repayment and preferential debt
settlement, with an extention of the due date to 1 October 2018.
The total loan amounts are secured by a first security charge over movable
assets and cession of shares in subsidiary companies.
As at As at
31 May 28 February
Amounts in Canadian Dollars ('000) 2017 2017
Non-current liabilities
At amortized cost 42 047 -
Current liabilities
At amortized cost - 38 852
42 047 38 852
Corporate information
Registered office – South Africa:
Level 1, Wilds View, Isle of Houghton, Corner Carse O'Gowrie and
Boundary Roads, Houghton Estate, Johannesburg 2198
PO Box 3011, Houghton 2041, South Africa
Telephone: +27 11 484 0830 Facsimile: +27 86 262 2838
Corporate address – Canada:
2900–550 Burrard Street, Vancouver, British Columbia, Canada V6C 0A3
Telephone: +1 604 631 3131 Facsimile: +1 604 631 3232
Toll Free: 1 866 635 3131
JSE sponsor: PSG Capital
First Floor, Building 8 Inanda Greens Business Park, 54 Wierda Road West,
Wierda Valley, Sandton 2196 International broker: Northland Capital
Partners Limited 60 Gresham
Street, London, EC2V 7BB United Kingdom
Auditors: KPMG Inc Chartered Accountants
KPMG Crescent, 85 Empire Road, Parktown 2193, South Africa
Transfer agents - South Africa:
Computershare Investor Services Proprietary Limited
(Registration number 2004/0036471/07)
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Transfer agents - Canada: Computershare Investor Services Inc.
3rd Floor, 510 Burrard Street, Vancouver, British Columbia, Canada V6C 3B9
Lawyers - South Africa: Brink Falcon Hume Inc Attorneys
Second Floor, 8 Melville Road, Illovo, Sandton 2196, South Africa
Lawyers - Canada: Fasken Martineau DuMoulin LLP 333 Bay Street, Suite 2400,
Bay Adelaide Centre, Toronto, Ontario, Canada, M5H 2T6
Date: 18/07/2017 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
