Results for Fourth QuarterRockwell Announces Results for Fourth Quarter of Fiscal 2011
VANCOUVER, May 30, 2011 /PRNewswire/ - Rockwell Diamonds Inc. ("Rockwell" orthe "Company") (TSX:RDI.to - News) (JSE: RDI) (OTCBB:RDIAF.ob - News) announces resultsfor the three and twelve months ended February 28, 2011.
Highlights:
- Operating profit of $4.0 million, a turnaround of $7.5 million from a $3.6 million operating loss in 2010
- 43% year-on-year increase in revenue to $42.5 million
- 35% increase in average price to US$1,365 per carat and 2% rise in sales to 27,017 carats
- Production increased 5% to 26,165 carats
- Cash generated by operating activities of $8.9 million compared from $110,694 consumed in fiscal 2010
- Net cash balance increased to $2.9 million from $1.8 million
- Appointment of CEO with extensive track record in the diamond sector
- Strategic review to improve production and enhance operational efficiencies
- Growth plans redefined to capitalize on significant portfolio of alluvial diamond deposits
Financial Overview
(Currency values are presented in Canadian dollars unless otherwiseindicated.)
Rockwell's financial position showed substantial improvements during theyear however its operational performance fell short of internalproduction targets. Total revenue increased 43% and Rockwell achievedan operating profit of $4.0 million from a loss of $3.6 million. Theimproved operational performance also translated into higher cash flowsgenerated by operating activities of $8.9 million.
Fourth quarter ended February 28, 2011
Rockwell reported year-on-year revenue growth of 58% to $11.5 millionfor the fourth quarter, underpinned by the continued improvement indiamond prices. Quarter-on-quarter revenue increased 4%. The Companyproduced 3,711 carats (Q4 2010: 4,996 carats). This represents aquarter-on-quarter decrease of 26% which is due to exceptionally highrainfall and lower grades, particularly at Saxendrift.
Facilitated by higher inventories accumulated at the end of the thirdquarter to take advantage of anticipated stronger seasonal demand,carats sold in the fourth quarter increased 10% year-on-year to 6,453at an average price of US$1,430 per carat (Q4 2010: US$1,154 percarat). The Company reported an operating profit of $755,000 in thequarter under review compared to an operating loss of $2.2 million inthe fourth quarter of fiscal 2010.
Twelve months ended February 28, 2011
Tender sales of $37.8 million were achieved in fiscal 2011. Thebeneficiation profit share agreement delivered further revenue of $4.7million. Accordingly, Rockwell reported a strong increase in totalrevenue to $42.5 million. During fiscal 2011, eight tender sales ofrough diamonds were held, and special diamonds exceeding 10 carats weresold for beneficiation. The average value in fiscal 2011 went up 35% to$1,365 per carat (fiscal 2010: $1,010 per carat) while 27,017 carats(fiscal 2010: 26,533 carats) were sold. Production increased by 5% to26,165 carats (fiscal 2010: 24,916 carats).
A loss of $5.1 million (fiscal 2010: $7.0 million) or
.01 per share(fiscal 2010:
.03) was realized for the year. This improvement ismainly attributable to the higher average diamond price. Diamondinventories at February 28, 2011 totalled 1,057 carats (at February 28,2010: 1,910 carats).
Balance sheet
Rockwell's liquidity continued to improve with net cash holdingsincreasing by $1.1 million to $2.9 million (end of fiscal 2010: $1.8million), after investing $12.4 million to purchase equipment andmineral properties. Debt repayments of $3.3 million rendered theCompany virtually debt free. At February 28, 2011, the Company's cashand cash equivalents increased to $4.8 million (end of fiscal 2010:$2.5 million) with bank indebtedness amounting to $1.8 million (end offiscal 2010:
.7 million).
With current assets amounting to $12.9 million and current liabilitiesof $8.6 million, the Company's current ratio improved to 1.49 times(February 28, 2010: 1.02 times).
Annual Operational Overview
|
Production |
Sales and inventories |
|
Volume
(m3) |
Carats |
Average grade
(carats / 100 m3) |
Sales
(carats) |
Average value
(US$ / carat) |
Inventories
(carats) |
| Fiscal 2011 |
3,386,872 |
26,165 |
0.77 |
27,017 |
1,365 |
1,087 |
| Year-year change |
16% |
5% |
-9% |
2% |
35% |
-45% |
The production of the Company increased by 16% to 3,386,872 cubic metres(February 28, 2010: 2,918,097 cubic metres) which was below internaltargets. Delays in commissioning the in-pit de-sanding plant atSaxendrift and heavy floods in January 2011, followed by sustained highlevels of precipitation during the rainy season impacted overallproductivity. Saxendrift delivered a 19% increase in production and261,214 cubic metres were processed at the Klipdam Extension bulksampling project.
The Company continued to drive down unit costs across its operations,with the average operating cash cost decreasing to US$7.91 per cubicmeter in fiscal 2011 compared to US$10.40 per cubic meter in theprevious year. The decline is attributable to higher throughput and wasachieved despite increased input costs, such as fuel, oil andelectricity.
Holpan and Klipdam
The Holpan operation was faced with significant challenges resultingfrom heavy and unseasonal rainfall during the fourth quarter. Theresource became saturated, which decreased the plant's throughput andput upward pressure on unit costs. The mine was unprofitable in thefourth quarter. Rockwell entered into negotiations with the recognizedtrade union (National Union of Mineworkers) to implement full calendaroperations (continuous operations) but an agreement was not reached.
The Klipdam mine also encountered challenges related to rainfall. Theimpact was mitigated by increasing the ore extraction from the palaeochannel that is less impacted by moisture, but production still came inbelow expectation. Klipdam continued to recover high quality gemstones, which had not yet been sold at the financial reporting date.
The adjacent Holpan and Klipdam operations are being reviewed bymanagement with a view to rationalizing the operations. The Holpanoperation was placed on care and maintenance in May 2011. Both mines'resources will be processed through the Klipdam plant at a lower cost.This should also result in a longer life of mine.
Saxendrift
The annual production volume increased 19% but carats recovered declined24% because of dilution from large sand lenses in the current area ofproduction. However, the value of carats produced remained constant,confirming that the resource continues to deliver high qualitygemstones.
The technical challenges associated with the in-pit de-sanding plantpersisted, and were exacerbated by the wet operating conditionsthroughout the fourth quarter. Rockwell, in conjunction with externalconsultants, is developing a strategy to resolve the problems.
Initiatives at Saxendrift forming part of the strategic review includemodifying the in-pit screening plant, adjustments in the rotary panplant and optimising the ore mass balance. The benefits are expected tobecome meaningful from the third quarter of fiscal 2012.
Progress on Tirisano acquisition
Two conditions remain to close out the agreement to acquire the Tirisanomine operation, namely obtaining the Section-11 consent which includescession by the Department of Mineral Resources and restructuring seniordebt initially provided by the Industrial Development Corporation ofSouth Africa Limited for the development of the Tirisano Mine.
A high volume (180,000 cubic metres / month) four stream productionfacility is being completely rebuilt at the site. It will becommissioned later than initially envisaged as improvements andextensions were made to the initial plans. Commercial production willcommence upon completion of the remaining conditions precedent.
The first stream started operating in April 2011 and is being fine-tunedby processing the ore dumps left on the mine by the previous operators.The second stream was completed four weeks later and the remaining twostreams are scheduled for commissioning at the end of September 2011.On completion, the high volume plant is expected to benefit the companyby smoothing its production profile.
In line with the strategic review, Rockwell plans to complete a newdetailed mine plan in the second quarter of fiscal 2012, assisted byconsultants who will use the completed SRK geotechnical study.
Wouterspan
The strategic assessment of Wouterspan (put on care and maintenance inFebruary 2009) continued and a review of the proposed new plant designby external consultants is in progress. A high volume low costproduction plant with a capacity of 340,000 cubic metres / month iscurrently envisaged. Funding for the plant is planned through thecapital markets and Rockwell is evaluating the use of contractors tomine the deposit.
Diamond Market
Both rough and polished diamonds prices improved during the 2010calendar year with prices enjoying support from strong retail demandfor diamonds in the second half of 2010. In the fourth quarter pricesreached the record 2008 levels. The growth in the Indian and Chinesedomestic markets has led to an increase in market share at the retailconsumer level.
Rockwell recovered 38 stones exceeding 10 carats in size during thefourth quarter of fiscal 2011. These stones were sold into theCompany's joint venture with Steinmetz Diamond Group and once sold aspolished goods, will provide additional profit share revenue to theCompany.
Strategy
During the fourth quarter, a strategic review was conducted and Rockwellclearly aligned its corporate objectives with the associateddeliverables to increase its production profile. As such, the Companywill continue to focus on optimizing its productive mines to deliverbetter returns. There are two specific areas of focus:
- To continue driving down unit costs by achieving design plant throughput rates and improving both utilization and availability; and
- To pursue sustainable improvement of metallurgical processes, improving the recovery of diamonds and increasing revenue.
The Company has evaluated a number of options to leverage its productionprofile through further development of its assets and selected twoprojects with the highest projected returns:
- Rockwell will embark on the second phase of the Tirisano development, being an excavation and conveyor system providing access to the southern ore body with works commencing after the plant has been fully commissioned.
- The simultaneous construction of a high volume production plant at Wouterspan.
In order to fund these developments, the Company will seek additionalfinancing in the capital markets.
Outlook
The fundamentals for the diamond market are strong, with robust demandand pricing. Rockwell is positioned to benefit from these positivefundamentals with inventories of 1,057 carats.
Production at all operations in the first quarter of fiscal 2012 wasimpacted by factors including abnormally high precipitation levelsduring the 2010/2011 rainy season in the Northern Cape Province. Theimpact was the most severe at Holpan.
Decisive action is being taken to enhance plant efficiency and tomaximize recovery rates at all mines. This includes engaging theservices of a world-renowned diamond metallurgist to technically andeconomically assess plant processes at all the mines, includingTirisano. The analysis and subsequent optimization measures areexpected to start yielding benefits in the second half of fiscal 2012.
With ongoing operational improvements to enhance the recovery ofdiamonds, reductions in operating costs, and the increasing prices anddemand for diamonds, the positive trend of the Company's financialperformance over the last four quarters should be sustainable in fiscal2012.
Commenting on Rockwell Diamonds, Mr David Copeland, Chairman of RockwellDiamonds said:
"During the last six months, Rockwell has made enormous progress inrepositioning itself to ramp up its production profile. Our team ofalluvial diamond geology, mining and processing experts is unique inthat they have skills across the value chain from exploration toprocessing and recovery. It was recently strengthened with theappointment of our new CEO to lead the execution on our strategy."
"Earlier this year, we completed a thorough strategic review to map theway forward for our Company. Our focus is on implementing this strategyto unlock the inherent value in the Company. We will do this byoptimising output from our producing assets to continue improving theCompany's financial performance. We will also leverage our assets bydeveloping high volume production plants on our dormant mines. Theoutlook for Rockwell Diamonds is underpinned by strong fundamentals inthe diamond market."
Conference Call:
Rockwell will host a telephone conference call on Tuesday, May 31 at10:00 a.m. Eastern Time (7:00 a.m. Pacific; 4:00 p.m.Johannesburg) todiscuss these results. The conference call may be accessed as follows:
| Country |
Access Number |
| 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'swebsite: www.rockwelldiamonds.com. The conference call will be archived for later playback untilmidnight (ET) June 3, 2011 and can be accessed by dialing the relevantnumber in the table below and using the pass code 17768#.
| Country |
Access Number |
| 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 andManagement Discussion and Analysis posted on the website and on theCompany's profile at www.sedar.com. These include additional details on production, sales and revenues forthe quarter, as well as comparative results for fiscal 2010.
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