Rockwell Announces Fiscal 2009 Results

    VANCOUVER, June 26 /CNW/ - Rockwell Diamonds Inc. ("Rockwell" or the
"Company") (TSX: RDI; JSE: RDI; OTCBB: RDIAF) announces financial results for
the twelve months ending February 28, 2009. Dollar amounts are in Canadian
currency unless otherwise indicated.
    Rockwell is focused on growth by mining and developing alluvial diamond
deposits. The Company has established a significant presence in alluvial
deposits which have consistently yielded high value gemstone diamonds. Plus
2-carat gemstones comprise more than 65% of the Company's production and are
of exceptional quality.
    During fiscal 2009, Rockwell operated three alluvial diamond mines -
Holpan, Klipdam and Wouterspan - and successfully built and commissioned a new
plant at Saxendrift, bringing its fourth operation into production. The
Company was granted and was ceded the mining right for the Niewejaarskraal
project, located on a high level terrace similar to Saxendrift in the Middle
Orange River area. Niewejaarskraal is a past producer of large gemstones and
has substantial additional mineral resources. Rockwell also acquired some
12,254 hectares in additional prospecting permits, a number of which are
adjacent to its existing operations.
    The diamond market was significantly impacted by the world financial
crisis. In the latter part of the fiscal year, market demand decreased as
retailers resisted committing their limited capital towards polished diamond
inventory. Banks were not lending money to retailers to purchase new stock
until their debt had been reduced. This had an immediate effect on the
retailers' ability to purchase rough diamonds, causing rough diamond prices to
decline, on average, by about 50%.
    In response, Rockwell reviewed all of its operations and took measures to
streamline activities and reduce costs. The Company extended its normal
year-end holiday shutdown from one to two months during the fourth quarter.
The Holpan, Kilpdam and Saxendrift mines resumed operations in early February
2009 but Wouterspan continues to be held on care and maintenance.
    The Company also reviewed its diamond sales procedures. It did not hold
any diamond tenders between November 2008 and February 2009, looking for some
improvement in prices prior to resuming sales. Also during this time, Rockwell
sold some diamonds directly into the market at spot prices.
    According to some market experts, prices for rough diamonds bottomed out
in April 2009 and increased by 15-20% in May. Rockwell began to receive higher
prices in March. The average price per carat received from tender in February
was US$318.32 per carat, which increased to US$531.43 per carat in March and
US$584.69 per carat in May.

                           Results from Operations

    In the twelve months ending February 28, 2009:

    -   17,503.0 carats were produced from operations at Holpan/Klipdam,
        Wouterspan and Saxendrift.

    -   15,320.4 carats were sold at an average price of US$2,159.30 per
        carat, including:

        -   A large white 189.6-carat gemstone recovered from the Klipdam
            mining operation in September 2008 that realized an excellent
            sale price of approximately US$10.2 million.

        -   Three exceptional yellow stones, manufactured under the marketing
            agreement with the Steinmetz Diamond Group, were sold in October

    -   Production losses were experienced in August-September 2008 from an
        industrial action, and as a consequence of the suspension of
        operations through December 2008-January 2009 in response to the
        credit crunch and precipitous decline in diamond prices.

    -   Revenue from sales was $34.6 million.

    -   Operating mining costs were $25.1 million.

    -   General and administrative costs amounted to $7.9 million.

    -   Adjusting for non-cash items, income tax, and the non-controlling
        shareholders interest resulted in a net loss of $13 million or 0.05
        cents per share.

    -   Diamonds in inventory at February 28, 2009 totalled 3,526.19 carats.

    Production and Sales

    The following provides further details of production and sales for the
    fiscal year.

    Operation                  Volume       Carats      Average
                               (cubic                     grade
                               meters)                  (carats
                                                        per 100
    Holpan                    561,583     4,127.40         0.73
    Klipdam                   711,924     7,041.81         0.99
    Wouterspan                552,293     3,897.06         0.71
    Makoenskloof                    -            -            -
    Saxendrift                194,287     2,436.73         1.18
    Total                   2,020,087    17,503.00         0.87

                                        SALES, REVENUE AND INVENTORY
    Operation                   Sales     Value of      Average    Inventory
                              (carats)       Sales        value      (carats)
                                              (US$)    (US$ per
    Holpan                   3,741.08    4,272,511     1,142.05       839.82
    Klipdam                  5,656.97   18,954,292     3,350.61     1,742.31
    Wouterspan               3,640.81    4,698,121     1,290.41       576.85
    Makoenskloof               212.00    1,500,119     7,076.03            -
    Saxendrift               2,069.54    3,656,268     1,766.71       367.21
    Total                   15,320.40   33,081,311     2,159.30     3,526.19
    Rockwell's interest in the operations is 74%, with the remaining 26%
    being held by a Black Economic Empowerment consortium.

    Production Costs

    The average cash mining cost during the fourth quarter was US$5.08 per
tonne, an increase from US$4.66 per tonne in the quarter ending February 29,
2008. This increase was due to the shutdown of two months during December 2008
and January 2009, and costs associated with retrenchment.

    Average mining cash costs for the first two months (March and April) of
fiscal 2010, which excludes depreciation, rehabilitation and royalties for the
current period were, Klipdam US$2.93 per tonne, Holpan US$2.55 per tonne,
Saxendrift US$2.65 per tonne and the group average of US$2.79 per tonne, which
is well below the Company's target range of US$3-3.50 per tonne. The average
cost for all operations inclusive of rehabilitation, hire purchase payments
and royalties was $4.16 per tonne for the period.
    The reduction in operating costs has been achieved by the implementation
of wide ranging cost cutting and efficiency improvements across the Company.
Commencement of full scale mining at Saxendrift has also assisted in lowering
costs, as has the suspension of the Wouterspan operation which is a higher
cost operation due to the drill and blast nature of mining. As ongoing
implementation of the wide ranging efficiency drive and increased production
targets are achieved production costs will be contained further.

                              Mineral Resources

    Mineral resources were estimated at year end for the Holpan, Klipdam,
    Saxendrift, Wouterspan Niewejaarskraal properties. Highlights include:

    -   Overall mineral resources have largely remained unchanged even after
        mining during the year at Wouterspan, Holpan, Klipdam and Saxendrift;

    -   Mineral resources in the indicated category at Holpan/Klipdam showed
        a 100% increase as a result of confirmatory drilling early in the

    -   At Saxendrift, geological compilation, re-modelling and
        reclassification resulted in a 92% increase in indicated resources
        with only a 45% reduction in inferred resources for a significant net
        overall increase; and

    -   A recompilation of data and re-modelling of mineral resources for the
        Niewejaarskraal project resulted in 42% increase in overall mineral
        resources, although the 30% previously classified as indicated was
        downgraded to the inferred category.

    The Company's Mineral Resources at February 28. 2009 are tabulated below.

        Property                          Category       Volume        Grade
                                                      (millions  (carats per
                                                       of cubic    100 cubic
                                                         meters)      meters)
        Wouterspan                       Indicated        5.026         0.70
                                          Inferred       37.774         0.70
        Holpan                           Indicated        1.137         0.74
                                          Inferred        5.937         0.74
        Klipdam                          Indicated        1.135         0.91
                                          Inferred        2.816         0.91
        Saxendrift                       Indicated        5.063         1.01
                                          Inferred        4.358         0.72
        Niewejaarskraal                   Inferred       20.631         0.84
        Zwemkuil-Mooidraai                Inferred        1.640         0.95
        Kwartelspan                       Inferred        1.385         1.50

    Tania Marshall, Pr.Sci.Nat., an independent Qualified Person, is
responsible for the estimates for Holpan/Klipdam, Wouterspan, Saxendrift and
Niewejaarskraal. Dr Marshall has reviewed the technical information in this
release. Technical Reports by Dr. Marshall and Glenn Norton, Pr.Sci.Nat.,
Rockwell's in-house Qualified Person, have been filed on
    For further details on the mineral resources at Kwartelspan and
Zwemkuil-Mooidraai, see Rockwell News Release dated March 12, 2007. The
Company has not conducted any work on these properties since the 2007

                               Profit and Loss

    During the twelve months ended February 28, 2009, the Company realized
diamond sales of $34.6 million compared to $36.1 million for the nine months
ended February 29, 2008. This decrease was a result of the economic crisis
which has caused diamond prices to collapse, resulting in no sales between
November 2008 and February 2009. Since February 2009, prices have remained
approximately 55% below those achieved prior to November 2008.
    Mining costs were $25.1 million in fiscal 2009 compared with $22.6
million in fiscal 2008. The increase is due to increased operations, including
the Saxendrift mine which was commissioned in February 2009. All commissioning
and retention costs were expensed. As a result of restructuring at the Middle
Orange River operations and suspension of operations at Wouterspan, some 143
employees were retrenched, and short term contracts for some 40 employees were
not renewed. All staff was paid in full during the shutdown period in December
2008 and January 2009.
    Administrative costs were $7.9 million for the year ended February 28,
2009 compared to $7 million incurred for the fiscal nine months ended February
29, 2008. The Company incurred significant legal costs in the third quarter
related to the unsolicited bid by Pala Investments and also had to make
restructuring and retrenchment payments in the last quarter.
    Share based stock compensation amounted to $ 1.8 million as a result of
stock options granted during the years.
    The Company also had net interest payments of $2.0 million.
    Amortization of plant and equipment was $11.3 million compared to $6.5
million in the previous year. Impairments of mineral rights, property, plant
and equipment for the financial year amounted to $2.9 million. Loss of sales
on assets was $0.6 million.
    The overall loss before income tax amounted to $16.9 million. Adjusting
for future income tax recovery of $3.3 million resulted in a net loss after
tax of $13.5 million
    After adjusting for non-controlling shareholders' interests relating to
the Company's Black Economic Empowerment partner of $0.5 million, the
Company's net loss for the year was $13 million or $0.05 per share.  The
fiscal 2009 loss was the result of a combination of factors. The most notable
was the collapse in the world diamond market related to the global economic
downturn and credit crunch, beginning in the fourth quarter of 2008. This
caused a significant decrease in the demand for diamonds and prices fell by
about 50%. Other factors impacting on the Company's revenue and costs included
cost inflation driven by steep increases in oil and steel prices during
mid-2008, and an industrial action which resulted in lost production during
August and September 2008. Higher amortization and impairment costs
contributed to the reported loss.
    At February 28, 2009, the Company had cash of $4.0 million, restricted
cash of $2.7 million and operations had an overdraft balance of $3.5 million,
a net balance of $3.1 million, with available cash of $0.4 million from its
overdraft facility and a working capital of $5.2 million, as compared to cash
and equivalents of $19.6 million and working capital of $26.1 million at
February 29, 2008.
    The Company has implemented restructuring, improved operating
efficiencies, sustainable cost reductions and seen improved employer-employee
relationships following the unionization of the labour force in 2008, and
assuming diamond prices continue to increase through 2009, expects financial
improvements by the end of the financial year.
    Additional details can be found in the Company's Financial Statements and
Management Discussion and Analysis which are filed on

                      Plans for the 2010 Financial Year

    Rockwell will aggressively pursue its strategy of efficiency, growth by
production and brownfields development, and assessment of additional
beneficiation capabilities during fiscal 2010. It will continue on-going
optimization of its three operating mines.

    The Company will also closely monitor the diamond market. As prices
    improve, it plans to:

        -  Re-construct and commission the diamond recovery and processing
           plants at the Niewejaarskraal;

        -  Re-initiate evaluation, through drilling and sampling, and
           opportunities for expansion of its existing mineral properties;

        -  Re-construct and modernize the plant and re-open the Wouterspan
           operation, which has a history of producing high quality

        -  Assess the viability of other diamond projects in its
           extensive portfolio of mineral rights holdings, and

         - Consider new acquisitions.

    Subsequent event

    Greg Radke and Terence Janes have resigned from the Board of Rockwell.

    Rockwell Diamonds Inc. has released the results for the year ended
    February 28, 2009 (Fiscal 2009) today and will host a telephone
    conference call on Thursday July 2 at 10:00 AM Eastern Time (7:00 AM
    Pacific; 16:00 Johannesburg) to discuss these results. The conference
    call may be accessed by dialing 888-461-2021 (toll free) or 719-325-2139
    (toll) in North America, 080 09 82089 (toll free) in South Africa or 0
    800 404 7656 (toll Free in the United Kingdom). A live and archived audio
    webcast will also be available at

    The conference call will be archived for later playback until July 9,
    2009 and can be accessed by dialing 888-203-1112 (toll free) or
    719-457-0820 (toll) and using the passcode 7784063.

    John Bristow
    President and CEO

           No regulatory authority has approved or disapproved the
                 information contained in this news release.

    Forward Looking Statement

    This release includes certain statements that may be deemed
"forward-looking statements". Other than statements of historical fact all
statements in this release that address future production, reserve or resource
potential, exploration drilling, exploitation activities and events or
developments that Rockwell expects are forward-looking statements. Although
Rockwell 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 market prices, exploitation and exploration successes,
changes in and the effect of government policies regarding mining and natural
resource exploration and exploitation, availability of capital and financing,
and general economic, market or business conditions. Investors are cautioned
that any such statements are not guarantees of future performance and those
actual results or developments may differ materially from those projected in
the forward-looking statements. For more information on Rockwell, Investors
should review Rockwell's annual Form 20-F filing with the United States
Securities and Exchange Commission and Rockwell's home
jurisdiction filings that are available at

    Information Concerning Estimates of Indicated and Inferred Resources

    This news release also uses the terms 'indicated resources' and 'inferred
resources'. Rockwell Diamonds Inc advises investors that although these terms
are recognized and required by Canadian regulations (under National Instrument
43-101 Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize them. Investors are cautioned not to
assume that any part or all of the mineral deposits in these categories will
ever be converted into reserves. In addition, 'inferred resources' have a
great amount of uncertainty as to their existence, and economic and legal
feasibility. It cannot be assumed that all or any part of an Inferred Mineral
Resource will ever be upgraded to a higher category. Under Canadian rules,
estimates of Inferred Mineral Resources may not form the basis of feasibility
or pre-feasibility studies, or economic studies except for Preliminary
Assessment as defined under 43-101. Investors are cautioned not to assume that
part or all of an inferred resource exists, or is economically or legally

For further information:

For further information: please visit or
contact Investor Services at (604) 684-6365 or within North America at

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