Rockwell delivers record quarterly carat production with improved revenue from diamond sales for the sixth successive quarter and announces a new BEE partnership for its Middle Orange River operations
Dec 09, 2013, 08:30 ET
VANCOUVER, Dec. 9, 2013 /CNW/ - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI; JSE: RDI) announces its quarterly production and sales update for the three months ended November 30, 2013:
- Middle Orange River ("MOR") growth strategy makes progress with 111% increase in carat production along with an all-time record quarterly carat production for the Company.
- Total volumes of gravel processed and carat production from Company properties1 increased by 33% and 54% respectively.
- Total carat sales from Company properties improved by 50% with carat sales from MOR operations up by 101%.
- Revenues from diamond sales (excluding beneficiation) increased for the sixth consecutive quarter.
- Sales revenues from own operations (excluding royalty mining) up 97%.
The Company reported a 33% increase in third quarter volumes of gravel processed to 1,034,966m3, of which 763,332m3 was mined from its own Middle Orange River operations2 and the balance from royalty mining contractors operating at Tirisano. Total carat production grew 54%, made up of 5,153 carats from own operations and 3,995 carats from contractors.
Total carat sales from Company properties for the quarter increased 50% to 6,066 carats at an average price of US$1,764 per carat, translating into 45% growth in total revenue to US$10.7 million compared to the prior year's third quarter (excluding beneficiation).
Rockwell's MOR operations delivered a 117% increase in carat sales, which together with a 24% increase in average carat value to US$2,198 from that region translated into a 169% increase in value of sales to US$7.8 million. The value of sales from Tirisano mining contractors amounts to US$2.9 million, of which 12.5% or US$357,500 accrues to the Company.
Volume production from Rockwell's three MOR mines, key to Rockwell's organic growth focus, increased by 65% due to the commissioning of new mining infrastructure at Saxendrift Hill Complex and Niewejaarskraal (currently in ramp up) during the first half of fiscal 2014. The average grade improved 27%, underpinning the substantial improvement in MOR carat production from a year ago.
1 Includes contribution from own operations (mines operated and managed by Rockwell) and royalty mining contractors operating on Company properties.
2 The Company's own operations for the third quarter comprise gravels mined at Saxendrift Extension (processed at Saxendrift), Saxendrift Hill Complex and Niewejaarskraal which is still in production ramp up.
These results confirm Rockwell's strategic focus on its MOR operations, as the Company delivers on milestones towards its mid term target to increase monthly production volumes to 500,000m3 to smooth its production profile and increase the recovery of large diamonds. At the same time, the results of the royalty mining contractor agreements at Tirisano have increased again, with consistent recoveries at this property and enabling the Company to continue assessing the future options of some of its non-core assets.
Commenting on third quarter production and sales James Campbell, CEO and President said:
"We are pleased that our production and sales figures for the third quarter show that our strategy to focus on the Middle Orange River region is bearing fruit. We more than doubled our carat production and sales from these properties while the value of sales increased almost threefold to US$7.8 million and the average price per carat increased 24%. Our total value of sales from Company properties increased 45% to US$10.7 million, showing a sixth consecutive quarter of US dollar denominated growth. Furthermore, the extra ordinary recovery of the five rough diamonds exceeding 115 carats since the end of August 2013, the largest of which was 287 carats, reinforces the merits of this Middle Orange strategy."
"In the past year, we have significantly enhanced our optionality at the greater Saxendrift property (including Saxendrift, Saxendrift Extension and Saxendrift Hill Complex), with our two processing plants at Saxendrift and Saxendrift Hill Complex providing the capacity to process some 240,000m3 per month from multiple mining faces located on the traditional Saxendrift mining area, Saxendrift Extension and Saxendrift Hill Complex. These processing plants achieved a 43% grade uplift in the quarter while carat production and sales increased 94% and 101% respectively."
"The production ramp up at Niewejaarskraal is on track. The next phase of the initial plant commissioning will be completed by the end of January with the installation of an in field screen and rental Bulk X-ray system, bringing monthly volumes to 100,000m3. We have already confirmed the effectiveness of these fit-for-purpose technologies to handle MOR gravels, underpinning our confidence that they will enable us to optimise Niewejaarskraal mining activities. Subsequently we will turn our attention to implementing our Middle Orange River strategy at our other properties, including Wouterspan."
"Our royalty mining contracts delivered another consistent performance in the third quarter, processing 271,634m3 to yield 3,995 carats. Our 12.5% royalty from these diamond sales amounted to US$357,500. Although our operator at Zwemkuil terminated their contract to pursue other opportunities, another operator will commence at the Kwartelspan property in the fourth quarter as well as a sixth royalty miner who will imminently commence operations at Tirisano."
Third quarter operational update:
Volume and carat production for the Company's operational mines for the quarter ended November 30, 2013:
|Operation|| Volumes of gravel processed
|Carats produced|| Average grade (carats /
|Q3 2014||Q3 2013|| %
| Saxendrift Hills
| Total: Own
| Total production on
* "Contractors' mining" refer to independent royalty contractors processing gravel for their own risk and reward. Carats recovered are then sold through the Company's tender process. The Company retains the responsibility for diamond security and sales and receives royalty income of 12.5% on these diamonds sold with the balance of the revenue accruing to the contractors. These carats are excluded from grade calculations.
Diamond sales and revenue for the Company's operations for the quarter ended November 30, 2013:
|Operation||Sales (carats)||Value of Sales (US$)|| Average value (US$ per
|% change||Q3 2014||Q3 2013|| %
| Saxendrift Hills
| Total: Own
|Contractors' carat sales*||2,500||408||513%||2,860,187||352,053||-||1,144||863||33%|
| Total sales from
* "Contractors' carat sales" refer to independent royalty contractors processing gravel for their own risk and reward. Carats recovered are then sold through the Company's tender process. The Company retains the responsibility for diamond security and sales and receives royalty income of 12.5% on these diamonds sold with the balance of the revenue accruing to the contractors. These carats are excluded from average value calculations.
- Quarterly volumes of gravel processed at the Saxendrift Mine, comprising wholly of gravels from the higher-grade Saxendrift Extension, decreased by 13% to 400,610m3. Mining rates were impacted by lower earthmoving availabilities: these are currently being addressed through a detailed earthmoving vehicle ('EMV') fleet optimization assessment. In addition, the processing rate was deliberately kept slightly lower in order to optimise plant efficiencies as a result of the abundance of heavy minerals in this current mining area.
- However, lower volumes were offset by a higher average grade of 0.79 carats / 100m3 compared to 0.53 carats / 100m3 in the prior year and carat production increased 29% to 3,164 carats, compared to 2,444 carats in the quarter ended November 30, 2012.
- Notable stones recovered at the Saxendrift Mine processing plant included 51 stones exceeding 10 carats, with the two largest stones a 287.38-carat commercial (white tinted) and a lower quality 138.20-carat rough diamond.
- Carats sold from the Saxendrift operation increased 34% to 2,210 carats at an average price of US$1,797 per carat, which led to a 36% increase in revenue from diamond sales to US$4.0 million (excluding beneficiation).
Saxendrift Hill Complex:
- The Saxendrift Hill Complex ("SHC") mine, now in full production at a rate of 80,000m3 per month (at a +5mm bottom cut off), delivered a strong third quarter performance with 1,579 carats recovered from 223,827m3 of SHC gravels processed through its Bulk X-ray plant.
- Sales from the Saxendrift Hill Complex amounted to 1,106 carats at an average price of US$3,354 per carat. Revenue from diamond sales from Saxendrift Hill Complex for the period totalled US$3.7 million.
- Notable stones recovered at the Saxendrift Mine processing plant during the third quarter included 22 stones exceeding 10 carats, including a typical Middle Orange yellow rough diamond weighing 169 carats and a lower quality 126.51-carat stone.
- The first phase newly commissioned processing plant was handed over to operations on September 1, 2013 and production ramp up continued throughout the quarter. The throughput for the third quarter amounted to 138,895m3, in line with the current plan for ramp up of the current phase of commissioning.
- Achieved grade for the quarter of 0.30 carats / 100m3 was disappointing and the result of mining an adjacent property while renegotiating the surface rental agreement on the main property, with the recovery of 410 carats for the quarter.
- The second phase of the 100,000m3 per month plant is on track for completion by the end of January 2014 and comprises the installation of an in field screen and Bulk X-ray system.
- Sales from Niewejaarskraal amounted to 250 carats with total revenue of US$158,070 at an average price of US$632 per carat. Carat values are expected to improve and reflect the higher carat values that characterise the MOR as the volumes processed at the mine increase.
- Notable stones recovered at Niewejaarskraal during the third quarter included four stones exceeding 10 carats.
Royalty Mining Contractors
- The royalty mining contractors operating on the Tirisano property delivered another consistent performance in the third quarter with total volumes of gravel processed amounting to 271,634m3 yielding 3,995 carats. Of these, 2,500 carats were sold, with total proceeds of US$2.9 million at an average price per carat of US$1,144.
- The royalty mining contractor agreement at Zwemkuil ceased during the quarter as the operator opted to pursue another opportunity elsewhere. However a new agreement was signed at Kwartelspan to commence in the fourth quarter of fiscal 2014 while a sixth operator commenced mining at Tirisano.
Rockwell concludes new BEE partnership for its Middle Orange operations
Rockwell Diamonds Inc. also announces that it has concluded an agreement with a well established black investment company ("new BEE partner"), to acquire a 30% equity stake in the Company's Middle Orange operations3, replacing Africa Vanguard Resources ("AVR") as its BEE partner in the region, as required by South African law, under the Black Economic Empowerment ('BEE') legislative provisions, subject to some conditions precedent.
As announced in March 2012, the Company agreed to unwind its agreement with AVR and subsequently entered into discussions with other groupings that indicated their interest to partner with Rockwell in a value creating transaction. These discussions culminated in the agreement with its new BEE partner, which was established in the early 1990's and has a successful investment track record in both listed and unlisted entities in sectors including mining, diamonds and related services whose investment approach is to engage with its investee companies at a strategic level to unlock value. The identity of the new BEE partner will be communicated to the market once the conditions precedent, including the Section 102 transfer, have been finalized.
Under the terms of the agreements and subject to the fulfillment of the suspensive conditions, Rockwell's new BEE partner will acquire 30% of Rockwell's Middle Orange River operations. The total acquisition consideration of ZAR72.6 million (US$7.3 million) will be paid in two tranches with an initial payment of R17.3 million ($1.7 million) which will be settled once the various regulatory approvals have been achieved. A vendor loan has been raised for the balance of the purchase price, to be settled on or before February 28, 2018 at a fixed interest rate of 9.0% per annum.
3 Northern Cape operations comprise the Saxendrift, Saxendrift Hill Complex, Saxendrift Extension and Niewejaarskraal mines as well as the Wouterspan project, among others.
Commenting on the new BEE partnership James Campbell, CEO and President said:
"We are delighted to have concluded an agreement with new BEE partners who share our vision and strategic objectives. We are confident that we will forge a partnership that will add value to our business going forward and therefore generate positive returns for our shareholders," said James Campbell, CEO, Rockwell. "The key criteria for Rockwell were to find partners with experience in the South African mining sector, which could also fund their share of future developments in the Middle Orange River region, which is our current organic growth focus. The 24% up-front payment for the 30% stake will strengthen our balance sheet and be deployed in consolidating our operations in the Middle Orange River region."
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 production company. The Company's flagship mine is the Saxendrift Mine, in the Middle Orange River. It has recently built two new internally funded mines in the Middle Orange river region, namely the Saxendrift Hill Complex, which came into production in the first quarter of fiscal 2014 and the Niewejaarskraal Mine which is in production ramp up. Rockwell also has a development project and a pipeline of earlier stage properties with future development potential. The operations are based on high throughput processing capability and Saxendrift has among the lowest unit costs in the industry as a result of implementing fit for purpose technologies.
The Company is known for producing large, high quality gemstone comprising a major portion of its diamond recoveries that is enhanced through a beneficiation joint venture that enables it to participate in the profits on the sale of the polished diamonds.
Rockwell also evaluates merger and acquisition opportunities which have the potential to expand its mineral resources and production profile and to 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 as 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.
SOURCE: Rockwell Diamonds Inc.
For further information:
For further information on Rockwell and its operations in South Africa, please contact
+27 (0)83 457 3724
+27 (0)83 307 7587
Share this article