Rockwell Announces Results for Fourth Quarter of Fiscal 2011
VANCOUVER, May 30, 2011 /PRNewswire/ – Rockwell Diamonds Inc. (“Rockwell” or
the “Company”) (TSX: RDI) (JSE: RDI) (OTCBB: RDIAF) announces results
for the three and twelve months ended February 28, 2011.
-- Operating profit of $4.0 million, a turnaround of $7.5 million from a $3.6 million operating loss in 2010 -- 43% year-on-year increase in revenue to $42.5 million -- 35% increase in average price to US$1,365 per carat and 2% rise in sales to 27,017 carats -- Production increased 5% to 26,165 carats -- Cash generated by operating activities of $8.9 million compared from $110,694 consumed in fiscal 2010 -- Net cash balance increased to $2.9 million from $1.8 million -- Appointment of CEO with extensive track record in the diamond sector -- Strategic review to improve production and enhance operational efficiencies -- Growth plans redefined to capitalize on significant portfolio of alluvial diamond deposits
(Currency values are presented in Canadian dollars unless otherwise
Rockwell’s financial position showed substantial improvements during the
year however its operational performance fell short of internal
production targets. Total revenue increased 43% and Rockwell achieved
an operating profit of $4.0 million from a loss of $3.6 million. The
improved operational performance also translated into higher cash flows
generated by operating activities of $8.9 million.
Fourth quarter ended February 28, 2011
Rockwell reported year-on-year revenue growth of 58% to $11.5 million
for the fourth quarter, underpinned by the continued improvement in
diamond prices. Quarter-on-quarter revenue increased 4%. The Company
produced 3,711 carats (Q4 2010: 4,996 carats). This represents a
quarter-on-quarter decrease of 26% which is due to exceptionally high
rainfall and lower grades, particularly at Saxendrift.
Facilitated by higher inventories accumulated at the end of the third
quarter to take advantage of anticipated stronger seasonal demand,
carats sold in the fourth quarter increased 10% year-on-year to 6,453
at an average price of US$1,430 per carat (Q4 2010: US$1,154 per
carat). The Company reported an operating profit of $755,000 in the
quarter under review compared to an operating loss of $2.2 million in
the fourth quarter of fiscal 2010.
Twelve months ended February 28, 2011
Tender sales of $37.8 million were achieved in fiscal 2011. The
beneficiation profit share agreement delivered further revenue of $4.7
million. Accordingly, Rockwell reported a strong increase in total
revenue to $42.5 million. During fiscal 2011, eight tender sales of
rough diamonds were held, and special diamonds exceeding 10 carats were
sold for beneficiation. The average value in fiscal 2011 went up 35% to
$1,365 per carat (fiscal 2010: $1,010 per carat) while 27,017 carats
(fiscal 2010: 26,533 carats) were sold. Production increased by 5% to
26,165 carats (fiscal 2010: 24,916 carats).
A loss of $5.1 million (fiscal 2010: $7.0 million) or $0.01 per share
(fiscal 2010: $0.03) was realized for the year. This improvement is
mainly attributable to the higher average diamond price. Diamond
inventories at February 28, 2011 totalled 1,057 carats (at February 28,
2010: 1,910 carats).
Rockwell’s liquidity continued to improve with net cash holdings
increasing by $1.1 million to $2.9 million (end of fiscal 2010: $1.8
million), after investing $12.4 million to purchase equipment and
mineral properties. Debt repayments of $3.3 million rendered the
Company virtually debt free. At February 28, 2011, the Company’s cash
and cash equivalents increased to $4.8 million (end of fiscal 2010:
$2.5 million) with bank indebtedness amounting to $1.8 million (end of
fiscal 2010: $0.7 million).
With current assets amounting to $12.9 million and current liabilities
of $8.6 million, the Company’s current ratio improved to 1.49 times
(February 28, 2010: 1.02 times).
Annual Operational Overview
___________________________________________________________________ | |Production | Sales and inventories| |___________|__________________________|____________________________| | | | |Average | |Average| | | |Volume |Carats|grade |Sales |value |Inventories| | |(m3) | |(carats /|(carats)|(US$ / |(carats) | | | | |100 m3) | |carat) | | |___________|_________|______|_________|________|_______|___________| |Fiscal 2011|3,386,872|26,165|0.77 |27,017 |1,365 |1,087 | |___________|_________|______|_________|________|_______|___________| |Year-year |16% |5% |-9% |2% |35% |-45% | |change | | | | | | | |___________|_________|______|_________|________|_______|___________|
The production of the Company increased by 16% to 3,386,872 cubic metres
(February 28, 2010: 2,918,097 cubic metres) which was below internal
targets. Delays in commissioning the in-pit de-sanding plant at
Saxendrift and heavy floods in January 2011, followed by sustained high
levels of precipitation during the rainy season impacted overall
productivity. Saxendrift delivered a 19% increase in production and
261,214 cubic metres were processed at the Klipdam Extension bulk
The Company continued to drive down unit costs across its operations,
with the average operating cash cost decreasing to US$7.91 per cubic
meter in fiscal 2011 compared to US$10.40 per cubic meter in the
previous year. The decline is attributable to higher throughput and was
achieved despite increased input costs, such as fuel, oil and
Holpan and Klipdam
The Holpan operation was faced with significant challenges resulting
from heavy and unseasonal rainfall during the fourth quarter. The
resource became saturated, which decreased the plant’s throughput and
put upward pressure on unit costs. The mine was unprofitable in the
fourth quarter. Rockwell entered into negotiations with the recognized
trade union (National Union of Mineworkers) to implement full calendar
operations (continuous operations) but an agreement was not reached.
The Klipdam mine also encountered challenges related to rainfall. The
impact was mitigated by increasing the ore extraction from the palaeo
channel that is less impacted by moisture, but production still came in
below expectation. Klipdam continued to recover high quality gem
stones, which had not yet been sold at the financial reporting date.
The adjacent Holpan and Klipdam operations are being reviewed by
management with a view to rationalizing the operations. The Holpan
operation was placed on care and maintenance in May 2011. Both mines’
resources will be processed through the Klipdam plant at a lower cost.
This should also result in a longer life of mine.
The annual production volume increased 19% but carats recovered declined
24% because of dilution from large sand lenses in the current area of
production. However, the value of carats produced remained constant,
confirming that the resource continues to deliver high quality
The technical challenges associated with the in-pit de-sanding plant
persisted, and were exacerbated by the wet operating conditions
throughout the fourth quarter. Rockwell, in conjunction with external
consultants, is developing a strategy to resolve the problems.
Initiatives at Saxendrift forming part of the strategic review include
modifying the in-pit screening plant, adjustments in the rotary pan
plant and optimising the ore mass balance. The benefits are expected to
become meaningful from the third quarter of fiscal 2012.
Progress on Tirisano acquisition
Two conditions remain to close out the agreement to acquire the Tirisano
mine operation, namely obtaining the Section-11 consent which includes
cession by the Department of Mineral Resources and restructuring senior
debt initially provided by the Industrial Development Corporation of
South Africa Limited for the development of the Tirisano Mine.
A high volume (180,000 cubic metres / month) four stream production
facility is being completely rebuilt at the site. It will be
commissioned later than initially envisaged as improvements and
extensions were made to the initial plans. Commercial production will
commence upon completion of the remaining conditions precedent.
The first stream started operating in April 2011 and is being fine-tuned
by processing the ore dumps left on the mine by the previous operators.
The second stream was completed four weeks later and the remaining two
streams are scheduled for commissioning at the end of September 2011.
On completion, the high volume plant is expected to benefit the company
by smoothing its production profile.
In line with the strategic review, Rockwell plans to complete a new
detailed mine plan in the second quarter of fiscal 2012, assisted by
consultants who will use the completed SRK geotechnical study.
The strategic assessment of Wouterspan (put on care and maintenance in
February 2009) continued and a review of the proposed new plant design
by external consultants is in progress. A high volume low cost
production plant with a capacity of 340,000 cubic metres / month is
currently envisaged. Funding for the plant is planned through the
capital markets and Rockwell is evaluating the use of contractors to
mine the deposit.
Both rough and polished diamonds prices improved during the 2010
calendar year with prices enjoying support from strong retail demand
for diamonds in the second half of 2010. In the fourth quarter prices
reached the record 2008 levels. The growth in the Indian and Chinese
domestic markets has led to an increase in market share at the retail
Rockwell recovered 38 stones exceeding 10 carats in size during the
fourth quarter of fiscal 2011. These stones were sold into the
Company’s joint venture with Steinmetz Diamond Group and once sold as
polished goods, will provide additional profit share revenue to the
During the fourth quarter, a strategic review was conducted and Rockwell
clearly aligned its corporate objectives with the associated
deliverables to increase its production profile. As such, the Company
will continue to focus on optimizing its productive mines to deliver
better returns. There are two specific areas of focus:
-- To continue driving down unit costs by achieving design plant throughput rates and improving both utilization and availability; and -- To pursue sustainable improvement of metallurgical processes, improving the recovery of diamonds and increasing revenue.
The Company has evaluated a number of options to leverage its production
profile through further development of its assets and selected two
projects with the highest projected returns:
-- Rockwell will embark on the second phase of the Tirisano development, being an excavation and conveyor system providing access to the southern ore body with works commencing after the plant has been fully commissioned. -- The simultaneous construction of a high volume production plant at Wouterspan.
In order to fund these developments, the Company will seek additional
financing in the capital markets.
The fundamentals for the diamond market are strong, with robust demand
and pricing. Rockwell is positioned to benefit from these positive
fundamentals with inventories of 1,057 carats.
Production at all operations in the first quarter of fiscal 2012 was
impacted by factors including abnormally high precipitation levels
during the 2010/2011 rainy season in the Northern Cape Province. The
impact was the most severe at Holpan.
Decisive action is being taken to enhance plant efficiency and to
maximize recovery rates at all mines. This includes engaging the
services of a world-renowned diamond metallurgist to technically and
economically assess plant processes at all the mines, including
Tirisano. The analysis and subsequent optimization measures are
expected to start yielding benefits in the second half of fiscal 2012.
With ongoing operational improvements to enhance the recovery of
diamonds, reductions in operating costs, and the increasing prices and
demand for diamonds, the positive trend of the Company’s financial
performance over the last four quarters should be sustainable in fiscal
Commenting on Rockwell Diamonds, Mr David Copeland, Chairman of Rockwell
“During the last six months, Rockwell has made enormous progress in
repositioning itself to ramp up its production profile. Our team of
alluvial diamond geology, mining and processing experts is unique in
that they have skills across the value chain from exploration to
processing and recovery. It was recently strengthened with the
appointment of our new CEO to lead the execution on our strategy.”
“Earlier this year, we completed a thorough strategic review to map the
way forward for our Company. Our focus is on implementing this strategy
to unlock the inherent value in the Company. We will do this by
optimising output from our producing assets to continue improving the
Company’s financial performance. We will also leverage our assets by
developing high volume production plants on our dormant mines. The
outlook for Rockwell Diamonds is underpinned by strong fundamentals in
the diamond market.”
Rockwell will host a telephone conference call on Tuesday, May 31 at
10:00 a.m. Eastern Time (7:00 a.m. Pacific; 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) June 3, 2011 and can be accessed by dialing the relevant
number in the table below and using the pass code 17768#.
___________________________________________ |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 optimising, two development projects and a pipeline of
other projects with future development potential. Rockwell is also at
an advanced stage of completing the acquisition of an additional
Rockwell continually evaluates merger and acquisition opportunities
which have the potential to expand its mineral resources and to develop
additional production that would provide accretive value to the
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.