VANCOUVER, July 12, 2012 /CNW/ - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI) (JSE: RDI) announces results for the three months ended May 31, 2012. Currency values are presented in Canadian dollars unless otherwise indicated.
- Operating profit for the quarter before amortization and depreciation of $195,258. Includes Tirisano ramp up expense of $2.5 million during the quarter
- Volume production targets achieved at Saxendrift
- Increased carats and significant decrease in per unit costs at Klipdam
- Weakened low end diamond market triggers adjustment to mine plan at Tirisano to counter impact of lower prices:
- Right sizing of production and updated mine plan to second pit being implemented to improve grades, reduce stripping ratio and hence lower operating costs
- Without compromising long term growth of major pit with known resources but high overburden
- In-field screen and bulk x-ray pilot projects at Saxendrift delivered anticipated diamond recovery benefits
- Progress made with Jasper acquisition (extension of Saxendrift property): Became unconditional and closed on May 31 2012 and mine plan work has started
- Five year strategic growth objective of 10,000 carats per month kept intact
- First quarter fiscal 2013 loss of $3.0 million after depreciation
- Net cash balances of $7.3 million
In line with the 2011 strategic review, Rockwell continued to make progress towards its key corporate objective of increasing production of high-quality gemstones to 10,000 carats per month within five years through its two pronged strategy of employing diamond value management and creating a pipeline of diamond production for tomorrow.
• Diamond Value Management:
Optimization projects at the productive mines included efficiency initiatives and improving metallurgical processes. The tangible benefits are evidenced by the respective year-on-year increases for the first quarter of 26% and 51% in carat production at Saxendrift and Klipdam, respectively. At Tirisano, carat production more than doubled; however expected revenue was not achieved due to smaller than average diamond stone sizes and weakening global prices in this category. In order to address this, the Company altered the mine plan on the property to recover resources closer to the surface, and avoiding high stripping ratios until markets recover.
• Diamonds for Tomorrow:
Based on the experience at Saxendrift and Klipdam, the Company continues to develop its high potential projects in the Middle Orange River region based on successful specific fit-for-purpose technologies. These include the new in-field screen, the proof of concept bulk x-ray and single particle sorter plant both at Saxendrift, which have yielded the positive results in the quarter. The third project, a new wet front end at Tirisano, is in the final stages of commissioning and will be the core of a planned simplified production plant. The aim is to deploy similar technologies to increase the Company's production from its properties that are located adjacent to the Saxendrift Mine including the Jasper Project, Wouterspan and other parts of the Saxendrift Mine property.
The Company's production and sales results for the first quarter of fiscal 2013 were as follows:
|Production*||Sales and inventories*|
| Value of
value (US$ /
* Including results from proof of concept bulk x-ray project at Saxendrift.
- Gross diamond revenues of $7.1 million: Lower average per carat market prices for diamonds mined at Tirisano and Klipdam were offset by a one-time sale of 1,005 carats recovered from bulk x-ray plant at Saxendrift resulting in an additional revenue of $857,000
- Beneficiation revenues increased 9% year-on-year to $1.0 million
- Operating profit before amortization and depreciation of $195,258, inclusive of Tirisano ramp up costs amounting to $2.5 million
- The net loss for the quarter totalled $3.0 million
Summary of performance for three months ended May 31, 2012
The financial performance of Rockwell for the first quarter of fiscal 2013 reflects its transition to better mining performance and enhancing mine and resource life. The performance of Saxendrift continued to improve as the diamond value management initiatives were implemented, supported by stable diamond prices in the +2 carat segment of the market that represents the majority of its production. Rockwell's overall financial performance continues to be affected by the Tirisano start up, where the financial performance was lower than budget due to all ramp up costs being fully expensed and to the decline in diamond prices at the smaller end of the size spectrum.
The Company recorded US$ denominated diamond sales of US$5.9 million, reflecting a decrease of 24% over the previous first quarter due to a number of factors:
- The unprofitable Holpan mine was put on care and maintenance (in May 2011) and the loss of production and diamonds recovered affected overall first quarter revenue.
- Tirisano generated revenue of $313,712 from the sale of 1,007 carats produced during the quarter, the result of lower carat prices and the recovery of smaller diamonds. Lower prices have been experienced due to the recent softening in the diamond market particularly in the smaller diamond sizes such as those recovered at Tirisano during the quarter.
- Diamonds recovered from Saxendrift tailings, using the proof of concept bulk x-ray project that was commissioned in April 2012, totaled 1,005 carats. These were sold at an average value per carat of US$853, generating revenue of $857,000.
- Carats sold from Saxendrift increased 12% year on year (up 10% quarter on quarter), but a lower average price per carat of US$1,727 was achieved due to the sale of fewer large, high value stones which is a staistical effect.
- Klipdam achieved a 20% increase in carats sold, as a result of mining the Rooikoppie unit. The average revenue per carat of US$550 was in line with the previous quarter, resulting from the finer diamond distribution in the previously mined Rooikoppie unit that also has a lower cost of mining.
Total revenue for the Company was $7.1 million, including a 9% increase in beneficiation revenues with the Steinmetz Diamond Group ("SDG") to $1.0 million.
Mining costs increased 16% for the period to $6.9 million, reflecting the 36% increase in the quarterly volume of gravel processed, however a reduction in unit costs/m3 for all three operational mines was achieved as follows:
|First quarter fiscal 2013||Quarter on quarter decrease in unit costs|
Rockwell recorded a total comprehensive loss of $8.4 million, which was largely the result of the 9% depreciation of the South African Rand against the Canadian dollar. This led to a non cash $5.3 million foreign currency translation charge on the conversion of the Rand denominated assets into Canadian dollars.
At May 31, 2012, the Company had cash and cash equivalents of $10.5 million with net cash holdings of $7.3 million after bank loan. These funds are considered sufficient to fund the Company's short-term working capital and capital expenditure requirements including exploration and mine plan development at Jasper Mine.
- 7,234 carats produced and 6,234 carats sold at average price of US$944 per carat
- Continued progress with strategic turnaround projects including fine tuning of in field screen and further testing of pilot bulk x-ray implementation at Saxendrift
- Wet front end at Tirisano nearing completion
- Review of Tirisano mine plan and adjustments implemented due to recovery of smaller sized stones resulting in lower diamond revenue per carat
- Notwithstanding Tirisano high ramp up costs, overall reduction of 10% in operating cash cost at the Company's three operational mines to US$9.48/m3
Volumes of gravel processed in the first quarter increased 56% year on year, with a 74% improvement in carat production from the three operational mines over the same period to 6,116 carats. Budgeted carat recoveries were exceeded due to the bulk x-ray proof of concept plant introduced earlier in the year.
Klipdam achieved a 20% increase in volumes processed, largely a result of the conversion to continuous operations ("contops") in January 2012 and a simplification of the front end production plant. Saxendrift implemented contops as well, and the optimization of the in field screen further entrenched the diamond value management practices. The mine achieved its production targets with a 39% year-on-year increase in volumes and a 12% reduction in unit costs, underpinned by the in field screen that enabled increased throughput and also partially mitigated the impact of increased sand content of the ore bodies being mined. The 26% increase in carats produced fell slightly short of expectations even though the mine continued to recover large diamonds, including four stones weighing between 50 carats and 100 carats. This trend continued into the second quarter with the recovery of a high quality 96 carat yellow diamond early in July 2012, providing evidence that the diamond value management principles are now in effect at Saxendrift.
Although Tirisano increased its production volumes by the end of the first quarter, mining was limited to a less clay-rich area, in the absence of a wet front end processing capability, which resulted in a smaller average diamond size. The commissioning of a wet front end, which will enable mining of higher grade gravels with a higher clay content, is nearing completion. Carat recovery more than doubled from the previous quarter, however the revenue and profit contribution from the mine fell short of expectations, as a the recovery of smaller rough diamonds resulted in lower revenue per carats due to significant industry wide pricing pressure in the smaller sized diamonds.
The Board approved an investigation initiated at the beginning of July 2012, to reconsider the mine plan at Tirisano. This includes strategies to alter the mining activity to Pit 4, which will reduce stripping ratios, and recover diamonds of a grade more in keeping with current market appetites. This plan will also reduce the mine's fixed cost structure and include retrenchments. The current processing plant will be temporarily placed on care and maintenance while the newly commissioned wet front end will be part of a simplified processing plant using existing equipment. Further technical studies will be conducted to confirm current estimates of the resource, and this will include additional independent investigations by expert persons.
The longer-term supply and demand fundamentals for gem quality investment stones, comprising the majority of Rockwell's production, remains positive. Although the market has experienced price declines of some 20% for diamonds weighing less than 1.5 carats, such as those recovered this quarter at Tirisano, the +2 carat segment of the market that represents some 80% of Rockwell's production, is expected to be price stable for the remainder of the year. The joint venture with Steinmetz Diamond Group provides Rockwell with the ongoing opportunity to participate in pricing movements in both rough and polished diamonds, especially for its larger, gem quality diamonds that are becoming rarer and are in high demand for investment purposes.
The priorities of the Company's mines for the second quarter are as follows:
- Saxendrift: Focus on meeting production targets by continuously optimizing the mine plan and extending the life of mine. The management team is implementing a number of initiatives to address the risk of declining grades.
- Tirisano: Focus on implementing the mine plan adjustment strategy.
- Klipdam: Focus on mining the palaeo channel unit to increase average carat value.
The proof of concept bulk x-ray system is working well and management anticipates increasing the utilization of this plant from two shifts per day to four shifts per day by the beginning of August 2012. The objective is to use this additional capacity to process more tailings and surface Rooikoppie (deflated gravel). The bulk x-ray will also be used in bulk sampling mode for other properties, commencing with the newly acquired Jasper Project.
The Company is gaining increasing confidence that Saxendrift's new in-field screen technology and the bulk x-ray technology should lead to a sustainable long-term improvement in diamond recoveries in the Company's operations. The results will be evaluated with a view to deploying similar solutions in new processing plants that are planned at Wouterspan and/or Niewejaarskraal as well as Rockwell's earlier stage Middle Orange River area properties.
Improving production from Rockwell's properties that are located adjacent to the Saxendrift Mine is now the Company's focus. This includes the additional resources acquired as part of the Jasper Project purchase, which became unconditional at the end of May 2012. Plans are also in progress to evaluate the potential of extending mining operations to other parts of the Saxendrift Mine property with the objective of extending the life of this operational footprint. The prefeasibility study for Wouterspan has commenced and is scheduled for completion by year end.
Commenting on the first quarter performance of Rockwell, James Campbell, CEO and president of Rockwell Diamonds said:
"During the first quarter of fiscal 2013, we continued to entrench our diamond value management principles into our operations and the performance of Saxendrift and Klipdam is tracking much closer to our expectations now. Accordingly, Saxendrift delivered a much improved performance with a 39% increase in volume production and 26% increase in carats. Klipdam is showing early signs that it is benefiting from the appointment of a full time Mine Manager, with a 20% increase in production and its carat production up 51% from a year ago. These assets, however, will be reaching the end of their mine lives soon and we are actively pursuing strategies to extend the economic life of Saxendrift, with the acquisition of Jasper and by developing other parts of the properties. We are also looking to maximize the value of the asset at Klipdam by investigating our options."
With regard to Tirisano, Campbell explained that: "Rockwell's management has spent significant time and effort working with the mine management team to bring this asset in line with the overall performance of our other mines. In the first quarter, ramp up costs negatively affected Rockwell's overall financial performance. Its revenue was also impacted by a finer than budgeted average diamond distribution, the prices of which were under significant pressure globally. At the beginning of July 2012, we very quickly took note of these market conditions and adopted a prudent approach to reposition the mine plan in the light of current economic circumstances. This included developing a two-fold strategy to reduce the operating cost structure of Tirisano and simultaneously adjust the mine plan without prejudicing the long term growth prospects."
Rockwell will host a telephone conference call on Friday, July 13, 2012 at 10:00 a.m. Eastern Time (4:00 p.m. Johannesburg) to discuss these results. The conference call may be accessed as follows:
|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) July 18, 2012 and can be accessed by dialling the relevant number in the table below and using the pass code 21369#.
|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 2012.
About Rockwell Diamonds:
Rockwell is engaged in the business of developing and operating alluvial diamond mines, to become a mid-tier diamond mining company. The Company has three existing operations, namely Saxendrift, Klipdam and Tirisano, which it is progressively optimizing. It also has two development projects -Wouterspan and Niewejaarskraal- and a pipeline of other projects with future development potential. Rockwell's operations and projects are all located in the Republic of South Africa.
In addition to its project work, Rockwell continues to evaluate merger and acquisition opportunities which have the potential to expand its mineral resources and provide new opportunities to develop the additional production that would provide accretive value to the Company.
The Company has an established track record of producing large gem quality diamonds; these comprise a significant proportion of its production profile. The diamonds recovered from Rockwell's mines are frequently acquired for investment purposes. The Company has a beneficiation joint venture which enables it to participate in the profit on the sale of its +2.8 carat sized stones after they have been polished.
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 of 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 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 home jurisdiction filings that are available at www.sedar.com.
For further information:
For further information on Rockwell and its operations in South Africa, please contact
James Campbell CEO and President +27 (0)83 457 3724
Stéphanie Leclercq Investor Relations +27 (0)83 307 7587