Rockwell Diamonds reports a loss

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Rockwell Diamonds (RDI) has reported a loss of Can$3.034m after depreciation for the three months ended May 2012.

That follows a loss of $1.206m reported a year ago.

In the first quarter of financial 2012‚ the Canada-based company reported an operating profit before amortisation and depreciation of $195‚258 from an operating profit of $2.531m the previous year.

The results include the Tirisano ramp-up expense of $2.5m during the quarter.

Rockwell recorded a total comprehensive loss of $8.4m‚ which was largely the result of the 9% depreciation of the rand against the Canadian dollar. This led to a noncash $5.3m foreign currency translation charge on the conversion of the rand-denominated assets into Canadian dollars.

A total of 7‚234 carats were produced and 6‚234 carats sold at an average price of US$944 per carat.

Mining costs increased 16% for the period to $6.9m‚ reflecting the 36% increase in the quarterly volume of gravel processed‚ however a reduction in unit costs for all three operational mines was achieved.

CEO James Campbell said that during the first quarter the company continued to entrench its diamond value management principles into its operations and the performance of Saxendrift and Klipdam was now tracking much closer to its expectations.

“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 maximise the value of the asset at Klipdam by investigating our options‚” he said.

Regarding Tirisano‚ Campbell said Rockwell management had 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 affected 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 twofold strategy to reduce the operating cost structure of Tirisano and simultaneously adjust the mine plan without prejudicing the long-term growth prospects.”

The company said it continued to make progress towards its key objective of increasing production of high-quality gemstones to 10‚000 carats a month within five years‚ through its two-pronged strategy of diamond value management and creating a pipeline of future diamond production.

Rockwell said it continued 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 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 adjacent to Saxendrift‚ including the Jasper Project and Wouterspan.

The group said the longer-term supply and demand fundamentals for gem-quality investment stones‚ which form the majority of Rockwell’s production‚ remained positive. Although the market had experienced price declines of 20% for diamonds weighing less than 1.5 carats‚ such as those recovered this quarter at Tirisano‚ the +2 carat segment of the market — which represents about 80% of Rockwell production — is expected to be price-stable for the rest of the year.

The joint venture with Steinmetz Diamond Group enables Rockwell to continue participating in pricing movements in both rough and polished diamonds‚ especially for its larger‚ gem-quality diamonds‚ which are becoming rarer and are in high demand for investment purposes.

During the second quarter Saxendrift will focus on meeting production targets by continuously optimising the mine plan and extending the life of the mine. The management team is implementing a number of initiatives to address the risk of declining grades.

Tirisano will focus on implementing the mine plan adjustment strategy. At Klipdam‚ the focus will remain on mining the palaeo channel unit to increase average carat value. - I-Net Bridge


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