Rockwell Announces Net Profit for Second Quarter of Fiscal 2012
VANCOUVER, Oct. 13, 2011 /PRNewswire/ – Rockwell Diamonds Inc. (“Rockwell” or
the “Company”) (TSX: RDI) (JSE: RDI) (OTCBB: RDIAF) announces results
for the three and six months ended August 31, 2011.
Highlights of the quarter ended August 31, 2011
-- Beneficiation revenue from joint venture with Steinmetz up 64% to $2.3 million -- Total revenue of $9.2 million underpinned by a 109% increase in the average diamond price to US$2,186 per carat -- Mine site operating costs down 18% to $5.1 million with average total unit cost for all operations stable at US$10.5 per m3 -- Gross profit of $2.7 million, a year-on-year turnaround of $3.9 million translating into net profit of $2.0 million -- Production decreased 47% to 3,611 carats chiefly due to the closure of Holpan -- Net cash balance of $14.4 million boosted by asset sales and proceeds of convertible loan and capital raising -- Good progress on short term targets to optimize existing operations -- Board of directors strengthened after quarter end with new chairman and non-executive independent director -- Completion of Tirisano acquisition with effect from September 1, 2011 ramping-up to commercial production starting in October 2011
Commenting on Rockwell Diamonds, Mr James Campbell, CEO and president of
Rockwell Diamonds said:
“It is particularly rewarding that Rockwell reported a net profit of
$2.0 million for the second quarter, underpinned by strong cash flows
from its operations. This reflects an improvement of $9.1 million from
the comparable quarter in fiscal 2011. It shows that by focusing and
delivering on our strategic imperatives to optimize our current
operations and sustainably increasing our production profile, our
operations have the potential to deliver strong returns for
“We have made good progress with the immediate priorities of the new
leadership team. We are on track with the implementation of proven
technologies to improve production at Saxendrift and at Tirisano, where
we are ready to start production in the next few weeks. We have also
successfully recapitalized the Company and raised sufficient capital
for our immediate investment requirements, supplemented by the $6.5
million proceeds from the sale of non-productive assets in July 2011.
As a result, we were able to minimize the dilution of existing Rockwell
Rockwell is advancing towards its goals of ramping up production by
optimizing its productive mines to deliver better returns through lower
unit costs and sustainably enhancing the mining and metallurgical
processes to increase the recovery of diamonds.
The new leadership team has made sound progress with the priorities
which were identified in June 2011 to improve the performance of the
Company and the culture of diamond value management is becoming
entrenched across the operations:
-- A recapitalization process was initiated to fund investments at Tirisano and Saxendrift as well as initial planning for the new Wouterspan plant. Rockwell raised $7.8 million through a private placement of shares at $0.75, which was at a premium to the market price and minimized the dilution of existing shareholders. No warrants or other incentives were offered in the fund raising. -- The production challenges at Saxendrift are being addressed with the implementation of the new Bivitec front end screen, an independent puddle system to improve pan plant efficiencies and the imminent installation of bulk x-ray technology. Diamond production has started showing early indications of improvement after additional mine faces were opened. -- The Tirisano acquisition has been completed and improvements have been made to address issues identified during a plant review in June 2011. The plant is currently in an advanced state of commissioning and production is planned during October 2011. -- Having put the lossmaking Holpan mine on care and maintenance in the previous quarter, the Company has realized a significant reduction in its mining costs. The Company continues to pursue other cost saving measures. -- The sale of three non-productive assets in July 2011 generated $6.5 million which is supplementing the capital that was raised during the private placement to fund investments to increase the production profile. Rockwell is assessing further avenues to rationalize its assets and provide greater returns for shareholders. -- The Company has also heightened its focus on resolving the funding issues with its black economic empowerment partners who have significant outstanding liabilities to the Company. A favourable resolution to these negotiations would substantially improve Rockwell's cash position.
From a long-term perspective, once the projects at Saxendrift have been
completed and production has been ramped up at Tirisano, the Company
will review its options to maximize returns by further increasing its
production profile. These include plans to develop the Wouterspan and
Niewejaarskraal mines. Both properties have extensive mineral resources
that have historically been mined with recoveries similar to those at
Saxendrift, in terms of size, quality and average price per carat.
Rockwell has new order mining rights on both properties.
Based on the outcome of the bulk x-ray technology being implemented at
Saxendrift, similar solutions will be considered at these mines in the
future. The timing of these projects will be predicated on the
availability of funding. The preference is to use internal cash flows,
but these may need to be supplemented by external capital.
(Currency values are presented in Canadian dollars unless otherwise
Rockwell’s financial performance continued to improve in the second
quarter of fiscal 2012. Operating costs declined by 18% to $5.1 million
(Q2 fiscal 2011: $6.3 million). As a result, the Company showed a
year-on-year improvement of $3.9 million and $2.1 million in gross
profit and operating profit to $2.7 million (Q2 fiscal 2011: loss of
$1.2 million) and $87,325 (Q2 fiscal 2011: loss of $2.1 million)
The Company reported revenue of $9.2 million for the quarter (Q2 fiscal
2011: $11.4 million). While it continued to benefit from the improving
diamond market, the lower inventories available for sale during the
quarter impacted diamond sales. Carats sold in the second quarter
amounted to 3,223, which were sold at a significantly higher average
price of US$2,186 per carat (Q2 fiscal 2011: US$1,048 per carat).
Value from the Company’s beneficiation joint venture (“JV”) continued to
grow with revenue of $2.3 million (Q2 fiscal 2011: $1.4 million). The
increase was due to the combined effect of increased volumes of
polished and certified diamonds in the JV, strong demand for polished
stones and the high quality of diamonds recovered during the quarter.
At August 31, 2011, the Company had net cash holdings of $14.4 million
(August 31, 2010 – $ 1.3 million). It also had working capital of $13.7
million compared to $7.1 million at August 31, 2010. With current
assets amounting to $22.4 million and current liabilities of $8.7
million, the Company’s current ratio improved to 2.58 (August 31, 2010:
___________________________________________________________________ | |Production |Sales and inventories | |_________|____________________________|____________________________| | | | |Average | |Average| | | |Volume (m3)|Carats|grade |Sales |value |Inventories| | | | |(carats /|(carats)|(US$ / |(carats) | | | | |100 m3) | |carat) | | |_________|___________|______|_________|________|_______|___________| |Q2 2012 |543,750 |3,611 |0.66 |3,223 |2,186 |1,093 | |_________|___________|______|_________|________|_______|___________| |Year-year|-45% |-47% |-3% |-65% |109% |-42% | |change | | | | | | | |_________|___________|______|_________|________|_______|___________|
Mining volume declined 45% to 543,750 m(3) (Q2 fiscal 2011: 990,248 m(3)). The closure of operations at Holpan was the chief reason for the
decrease. Although volumes at Saxendrift declined by 10%, its diamond
recoveries were ahead of internal targets for the quarter. Production
at Klipdam was impacted by challenges in the front end section of the
The Company produced 3,611 carats (Q2 fiscal 2011: 6,800 carats). This
year-on-year decrease of 47% is largely due to the closure of Holpan in
May 2011 and production issues at Klipdam. Although there were
production challenges at Saxendrift, it recovered a number of notable
stones during the quarter. Its production was boosted with the windfall
daily production of 373 carats on August 2, 2011, which represents half
of its monthly budgeted carat production. Tangible progress is being
made to resolve production issues at both mines in support of the
diamond value management strategy and mining at Tirisano will make a
meaningful contribution to the production profile.
Klipdam and Holpan
Mining at Klipdam migrated from the paleao channel to the Rooikoppie
gravels where diamonds of a similar grade and value can be recovered at
a lower unit cost due to less intensive earthmoving equipment
requirements with the potential to increase the life of this mine
beyond one year.
Klipdam’s production for the quarter declined by 17% due to intermittent
front end throughput constraints caused by high clay content of the
material. Short term solutions have been implemented while in the
longer term, a redesign of the front end is under consideration. A
total of 1,456 carats from Klipdam were sold in the second quarter at
an average value of US $1,030 per carat and although less carats were
available for tender, the average price per carat improved as a result
of a higher average stone size and the stronger diamond market.
Holpan remained closed, having been placed on care and maintenance
during the previous quarter.
Diamond recoveries improved, and are moving towards the potential
production levels which were initially estimated for the mine. At the
start of the quarter, production at one of the four streams was
intermittently non-operational due to scrubber drive failures. However,
particularly good production was achieved in August 2011 from the
multiple mine faces which were opened and despite the persistent high
sand content in the gravels as well as the absence of a suitable
front-end at the plant.
A total of 1,880 carats were recovered from 379,483 m(3) of gravel, representing stable carat production even though volumes
declined 10% from the second quarter of fiscal 2011. This suggests that
the focus on quality tons is starting to bear fruit. Carats sold
amounted to 1,740 in the second quarter with the average price
increasing 90% year-on-year to US$3,186 per carat. The sale of several
exceptional stones compensated for the lower carats sold with total
proceeds increasing by 45% to $5.5 million (Q2 fiscal 2012: $3.8
The fit-for-purpose Bivitec front end in-field screen designed to
process wet and sticky ores at the required processing rates will be
commissioned on schedule towards the end of October 2011. An
independent puddle system is being implemented to improve the pan
plant’s performance and better control the diamond concentration
The board has approved the installation of a high throughput bulk x-ray
plant to concentrate and recover diamonds in a single cost effective
and secure manner. This technology will be piloted and tested at
Saxendrift. Improved diamond recoveries are predicted and the results
will be evaluated with a view to deploying similar solutions in new
processing plants that are planned at Wouterspan and/or Niewejaarskraal
and Rockwell’s other Middle Orange properties.
Progress on Tirisano acquisition
The Tirisano Mine acquisition was completed with effect from September
1, 2011 on a going concern basis, although the operation has been on a
care and maintenance arrangement for two years. Final Acceptance and
Release documents were signed on October 7, 2011 pursuant to all the
conditions precedent being met (including the mineral property transfer
approval and the Industrial Development Corporation’s commitment to
consolidate the Company’s debt finance with deferred payment terms).
A third condition to the transaction has been the commitment of the
local Mogopa community to its continued partnership with the Company
through its support and involvement. This is a key business requirement
in order to resume and build a sustainable mining operation at
The purchase consideration of ZAR33.5 million ($4.65 million) is funded
-- Internal funding - care and maintenance advances / net debt and working capital movements amounting to ZAR14.5 million ($2.01 million); and -- Equity funding - the issue of 2.6 million Rockwell Diamonds Inc ordinary shares to settle the balance of ZAR19.0 million ($2.64 million). The effective share price was established in September 2010, determining the number of shares to be issued.
The Company has established a resource model, mine plan, mining fleet,
processing plant and final recovery capacity on site over the past
eighteen months to progress to commercial production. The mine has a
current production capacity of 90,000 m(3) per month. During the quarter, the Company addressed issues with the
front end and recovery which were revealed during the plant review in
June 2011. The fully containerized Holpan recovery plant was relocated
to Tirisano and a barrel screen from Wouterspan has been installed to
double the front end capacity as an interim solution.
During the next six months, the focus will turn to optimising mining and
plant efficiencies including the development of long term solutions for
the front end. Work will also continue on concept designs to increase
the plant’s capacity.
Tirisano is of strategic importance to Rockwell’s long term growth
objectives. The quality and price per carat of the stones recovered at
Tirisano during the commissioning and recovery testing phase are
encouraging as these exceeded what was achieved by the mine’s previous
Prices for both rough and polished diamonds increased in June and July
2011 as a result of price speculation among traders who purchased rough
stones into inventory in anticipation of subsequent price increases.
Producers increased their prices to benefit from the premiums that
their clients were willing to pay and rough diamond prices reached
all-time highs in July 2011.
The gap between the cost of rough diamonds and polished prices persisted
as polished price increases continued to lag rough diamond prices.
Downstream retailers resisted these increases and trade slowed markedly
in July 2011 before the summer vacation due to their reluctance to hold
expensive inventory over this period.
The correction in the world’s financial markets in August 2011 coincided
with the reopening of diamond markets after the summer vacation and
price had corrected by between 10% and 15% at month end, reverting to
April and May 2011 levels. During September 2011, they remained
constant at the Hong Kong Diamond Show and De Beers’ sight.
Rockwell focused its sales on larger diamonds through its beneficiation
JV which benefits from Steinmetz’s ability to manufacture to achieve
value of polished product. The Company had anticipated the short term
price consolidation that occurred in August 2011 and products were not
sold at a discount to drive sales.
Large stones produced by both operations during the second quarter were
-- Klipdam produced 14 stones exceeding 10 carats; and -- Saxendrift produced 32 stones weighing more than 10 carats, of which 11 stones exceeded 20 carats
These stones were channeled into the Company’s beneficiation JV with the
Steinmetz Diamond Group which delivers value added revenues for
Rockwell’s stones that exceed 2.8 carats.
During the quarter the high quality stones sold through the
beneficiation joint venture with Steinmetz Diamond Group, included the
-- a 128.67 carat perfect sawable; fancy yellow with high clarity stone; -- a 21.52 carat gem quality; clean D/E color stone; -- a 33.51 carat octahedral, clean, H/I colored stone; and -- a 179.95 carat makeable, clean brown colored stone.
Reflecting the turmoil which has affected global financial markets since
the end of the second quarter, diamond prices softened slightly and
given the economic outlook, a quick recovery is unlikely. However, the
long term supply and demand fundamentals, driven by substantial uptake
of diamonds from China and India and a gradual reduction in supply,
should continue to support prices.
The recent volatility of the Rand against the US$ could also affect
pricing, although this is not currently viewed as a significant risk.
However, it does have an impact on input costs including fuel, though
this is less significant than the additional revenue from diamond sales
which are denominated in US$.
From a production perspective, the operations are focused on meeting
their production targets in the third quarter of fiscal 2012,
especially with the imminent rainy season. Saxendrift has started
benefiting from initiatives to improve the quality of its plant
processes, although the new front-end screen which will be completed at
the end of October 2011, will only contribute to production in the last
few weeks of the third quarter. The focus of the management team has
now turned to Klipdam in order to unlock similar improvements there.
Commercial production will start at Tirisano during October 2011.
The Company is at an advanced stage of discussions with the relevant
unions in relation to the 2011/2012 wage negotiations as well as the
proposed introduction of continuous operations and is optimistic that a
mutually beneficial solution will be reached in this regard.
Rockwell will host a telephone conference call on Friday, October 14 at
10:00 a.m. Eastern Time (4:00 p.m. Johannesburg) to discuss these
results. The conference call may be accessed as follows:
___________________________________________ |Country |Access Number | |___________________________|_______________| |Canada (Toll-Free) |1 866 605 3852 | |___________________________|_______________| |USA (Toll-Free) |1 800 860 2442 | |___________________________|_______________| |UK (Toll-Free) |0 800 917 7042 | |___________________________|_______________| |South Africa (Toll-Free) |0 800 200 648 | |___________________________|_______________| |Other Countries (Intl Toll)|+27 11 535 3600| |___________________________|_______________|
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 19, 2011 and can be accessed by dialling the relevant
number in the table below and using the pass code 18917#.
___________________________________________ |Country |Access Number | |___________________________|_______________| |South Africa (Telkom) |011 305 2030 | |___________________________|_______________| |USA and Canada (Toll) |1 412 317 0088 | |___________________________|_______________| |Other Countries (Intl Toll)|+27 11 305 2030| |___________________________|_______________| |UK (Toll-Free) |0 808 234 6771 | |___________________________|_______________|
For further details, see the 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 2010.
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 mining
company. The Company has three existing operations, which it is
progressively optimizing, two development projects and a pipeline of
earlier stage properties with future development potential. Rockwell
has completed the acquisition of the Tirisano property with effect from
September 1, 2011.
Rockwell also evaluates merger and acquisition opportunities which have
the potential to expand its mineral resources and production profile
and would 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 and 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
annual Form 20-F filing with the United States Securities and Exchange
Commission www.sec.com and the Company’s home jurisdiction filings that are available at www.sedar.com.
SOURCE Rockwell Diamonds Inc.