Rockwell Diamonds Inc RDIAF

An Uncovered (but Risky) Gem

[knicksman]

Rockwell recently completed a transformation acquisition...and no one seems to care.

In its recently published marketing presentation (on Sedar; dated July 21), the company disclosed that in Remhoogte's first month of operation, Rockwell recovered 869 carats from 106,768m3 of processed gravel, which implied a recovery rate of 0.81cphm. Those figures are in line (even slightly above) the operating rates of mine had prior to the acquisition. Assuming $2,900 per carat and $11.5/m3; that translates into monthly revenues of $2.5 million and expenses of $1.25 million -- or EBITDA of $1.25 million. Annualized, EBITDA is estimated at $15 million. That is in line with the mine's EBITDA of $16 million in FYE Feb.

With assets being realocated from NJK and Saxendrift, I expect processing rates to increase by 50% in 6-9 months, with the company potentially generating EBITDA run-rate close to $25 million.

The market cap is currently $20 million.

On a fully diluted basis, there are 90 million shares. A $10 million raise should add another 50 million shares. Assuming $20 million debt outstanding and a 6x EV/EBITDA valuation -- these shares could very well be worth $1/share.

Note that I have ascribed no value to Saxendrfit, NJK, Wouterspan, and Lanyonvale. 

The next couple of months for RDI...should be very good. Company reports results in early October.