Rockwell Announces Results for Q3 Fiscal 2010
VANCOUVER, Jan. 14 /PRNewswire-FirstCall/ - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX:RDI; JSE:RDI, OTCBB:RDIAF) announces financial results for the three and nine months ended November 30, 2009. Currency values are presented in Canadian dollars unless otherwise indicated.
Rockwell is engaged in alluvial diamond production with focus on the mining and development of alluvial diamond deposits that yield high value gemstones.
In 2010, Rockwell has operated the Holpan, Klipdam, and Saxendrift mines and its fourth operation, the Wouterspan mine, is currently on care and maintenance. The Company has implemented a number of key initiatives at its operations in fiscal 2010 resulting in better mining and processing plant efficiencies, increased production, higher diamond recoveries, lower operating costs, and improved overall operating performance.
The improved operating efficiencies implemented by the Company, in combination with improving diamond prices, resulted in profitable operations in the three months ended November 30, 2009.
Production of exceptional stones
- Three large stones recovered in September/early October: a 122-carat
rounded octahedral stone of light yellow Cape colour with a number of
inclusions; a 120-carat irregular rounded and frosted stone which
appears to be of good white colour and clarity, and a 105-carat high
quality rounded, white stone of excellent clarity at Saxendrift.
- Three high quality coloured diamond recovered in October: a 30.54
carat salmon-pink stone and two intense fancy yellow stones of 35.54
and 36.32 carats were recovered at Saxendrift.
- Three greater than 50-carat stones recovered in November - a 60.8
carat rounded off-white stone at Saxendrift and a 52.4 carat light
yellow octahedral stone of excellent clarity at Holpan.
Increasing diamond prices
- Average price received during the three months ended November 30,
2009 was US$1,269 per carat, a 48% increase over the US$855 per carat
in the previous three month period.
Operating costs improved and stabilizing
- The average operating cash cost for the Company's three operations
over the nine months in fiscal 2010 is US$2.73 per tonne. The average
cost for all the operations including rehabilitation, hire purchase
payments and royalties is US$4.44 per tonne.
Operations Overview
In the three months ended November 30, 2009:
- 7,963.28 (2008: 5,981.25) carats were produced at the Holpan/Klipdam
and Saxendrift operations. 5.3 carats were recovered from the
Wouterspan final recovery plant during auditing and reprocessing of
concentrate material.
- 9,409.94 carats were sold at an average price of US$1,268.83 per
carat.
- Sales of $12.8 million, together with other sales of $0.09 million,
resulted in $12.9 million in revenue.
- Cost of sales of totalled $7.1 million and amortization totalled
$3.3 million.
- An operating profit of $2.5 million was realized for the period.
- Net general and administrative expenses amounted to $1.6 million,
interest amounted to $0.3 million and taxation was $0.05 million.
- A profit of $ 0.5 million or 0.002 cents per share was realized for
the period.
In the nine months ended November 30, 2009:
- 19,920.44 (2008: 16,558.09) carats were produced from operations at
Holpan/Klipdam, Wouterspan and Saxendrift.
- 20,646.13 carats were sold at an average price of US$969.17 per
carat.
- Tender sales of $21.9 million, plus beneficiation profit share of
US$0.5 million and other sales of $0.3 million, resulted in total
revenue of $22.7 million.
- Cost of sales of $16.7 million and amortization of $8.3 million. As a
result, an operating loss of $2.3 million was realized for the
period.
- Net general and administrative expenses amounted to $4.8 million, and
net interest expenses were $1.1 million, offset by a net tax recovery
of $1.6 million. As a result a loss of $6.1 million or $0.026 cents
per share was realized for the period.
Diamonds in inventory at November 30, 2009 totalled 2,800.51 carats.
Production, Sales and Inventory
The following is a comparison of the nine months ended November 30, 2009 with the nine months ended November 30, 2008.
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PRODUCTION
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9 months ended 9 months ended
November 30, 2009 November 30, 2008
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Opera- Volume Average Volume Average
tion (cubic Carats grade (cubic Carats grade
meters) (carats per meters) (carats per
100 cubic 100 cubic
meters) meters)
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Holpan 653,992 4,913.61 0.75 512,510 3,869.78 0.76
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Klipdam 737,369 7,945.42 1.08 668,674 6,520.90 0.98
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Wouter-
span 0 14.08 0.00 552,293 3,896.42 0.71
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Saxen-
drift 905,582 7,047.33 0.78 175,441 2,270.99 1.29
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Total 2,296,943 19,920.44 0.86 1,908,918 16,558.09 0.87
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SALES, REVENUE AND INVENTORY
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9 months ended November 30, 2009
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Operation Sales Value of Average Inventory
(carats) Sales value (carats)
(US$) (US$ per
carat)
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Holpan 5,252.96 2,052,602 390.75 501.73
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Klipdam 8,634.08 5,109,645 591.80 1,053.65
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Wouterspan 589.68 280,187 475.15 0.00
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Saxendrift 6,169.41 12,567,081 2,037.00 1,245.13
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Total 20,646.13 20,009,515 969.17 2,800.51
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9 months ended November 30, 2008
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Operation Sales Value of Average Inventory
(carats) Sales value (carats)
(US$) (US$ per
carat)
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Holpan 2,946.42 3,958,748 1,343.58 1,287.79
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Klipdam 4,825.13 18,779,616 3,892.04 2,050.74
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Wouterspan 2,673.86 4,360,884 1,630.93 1,529.26
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Saxendrift 1,520.17 3,274,483 2.154.02 751.45
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Total 11,965.58 30,373,731 2,538.43 5,619.24
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* Included in the Klipdam sales are 322.02 carats at $122,973 from
Windsorton, a prospecting right
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INVENTORY (carats)
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Operation Rough Production Rough Rough
Diamond Diamond Diamond
Inventory Sales Inventory
Beginning End of
of Period Period
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Holpan 841.08 4,913.61 5,252.96 501.73
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Klipdam 1,742.31 7,945.42 8,634.08 1,053.68
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Wouterspan 575.60 14.08 589.68 0.00
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Saxendrift 367.21 7,047.33 6,169.41 1,245.13
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Total 3,526.20 19,920.44 20,646.13 2,800.51
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* Included in the Klipdam inventory are 199.89 carats from Windsorton,
a prospecting right
Profit and Loss
The Company realized a loss of $6.1 million for the nine month period ended November 30, 2009 compared to a loss of $1.5 million for the comparable period in the prior year. The loss was due weakness of diamond prices through the first two quarters of fiscal 2010. Though prices remained weak during this period, there has been an overall improvement in prices of about 49% from the initial sharp fall in the last quarter of fiscal 2009. During the nine months ended November 30, 2009, the Company realized rough diamond sales of $22.4 million compared to $33.4 million for the comparable period in the prior year.
As noted above, the credit crunch and ensuing recession resulted in prices falling sharply in late calendar 2008 (fourth quarter of fiscal 2009). Sales prices achieved in the Company's first fiscal quarter of 2010 were below the cost of production; however, prices achieved in the second quarter covered the cost of production but were not sufficient to cover fixed overheads in full and lease payments. As the Company was required to maintain liquidity, sales were made below production cost. In July and August (second quarter fiscal 2010), cash inflows from sales exceeded outflows from operating expenses, though overall inflows were not sufficient to cover the full costs of the lease payments on a limited amount of earth moving equipment which resulted in the Company invoking the payment deferral with Komatfin, which ended on the November 1. Income generated in November has been sufficient to cover all the third quarter costs and significant arrear creditors, including ZAR11.4 million ($1.6 million) for outstanding royalties. The November income resulted in a third quarter operating profit.
Mining costs for the nine months ended November 30, 2009 amounted to $16.7 million (nine months ended November 30, 2008 - $15.9 million), which excludes amortization and depletion charges of $8.3 million (nine months ended November 30, 2008 - $8.1 million).
Exploration expenses (excluding stock-based compensation) decreased to $93,985 for the nine months ended November 30, 2009 compared to $367,170 for the same period in the prior year. This decrease is due to less engineering activities and property assessment fees performed during the nine month period ended November 30, 2009 on South African diamond properties.
Administrative costs for the nine months ended November 30, 2009 decreased to $2.3 million from $2.5 million incurred for the same period in the prior year, primarily the result of controlling costs and reducing overheads. Travel and conference expenses amounted to $152,474 for the nine months ended November 30, 2009 compared to $458,782 for the same period in the previous year. Legal, accounting and audit expenses for the nine months ended November 30, 2009 amounted to $884,124 compared to $1,454,927 incurred for the same period in the prior year. The Company has experienced significant legal costs due to the unsolicited bid by Pala and the capital raising exercise.
Stock-based compensation decreased to $146,444 for the nine months ending November 30, 2009 in comparison to $1,557,517 for the same period in the previous year.
Interest expenses were $1,221,402 for the nine months ended November 30, 2009, compared to $1,939,516 for the nine months ended November 30, 2008. These charges were incurred due to the use of the credit facility to maintain working capital and the deferred lease payments.
Additional details can be found in the Company's Financial Statements and Management's Discussion and Analysis which are filed on www.sedar.com.
Private Placement and Rights Offering
Further to its news release of January 6, 2010, Rockwell has closed a second round of its private placement, which was oversubscribed and resulted in the receipt of approximately $8.6 million in total. These funds were raised through the issue of a total of 132.8 million new shares at share price of $0.065.
Due to the success of the private placement and the intervening holiday period, the Company's rights offering was delayed slightly so that the private placement could close. The Company expects to file the final rights offering circular Canadian securities regulatory authorities in all of the provinces and territories of Canada and with the Toronto and Johannesburg stock exchanges shortly, following which the Company will be in a position to provide a timetable for the implementation and closing of the rights offering. Completion of at least $3.1 million of this rights offering is guaranteed by Daboll Consultants, which is associated with the Steinmetz Diamond Group.
Plans Moving Forward
Rockwell's priority is to maintain flexibility and resourcefulness to overcome the challenges of the world economic crisis and the concomitant significant decline in international diamond prices. In this respect the Company continues to manage costs, leverage diamond sales, and increase production to maximize revenues at its operations.
Through the success of its private placement, and the support of its new long term investors such as Godia Capital and existing shareholders, Rockwell expects to raise up to $14.7 million through the combined private placement and rights offering. Proceeds from the combined fund raising will be utilized to strengthen the Company's balance sheet, settle short term debt, and undertake further production improvements and cost saving measures at existing operations. Given the improvements in diamond prices, the Company also plans to use a portion of the proceeds to upgrade and re-commission the plant at Wouterspan in the last quarter of fiscal 2010.
President and CEO John Bristow commented, "Rockwell is well positioned to benefit from further increases in diamond prices. The Company has implemented significant improvements to operating and costs structures in all parts of its business, and management believes that these provide the foundation on which to proceed with growth and expansion plans."
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The Company will host a telephone conference call on Monday January 18 at 10:00 a.m. Eastern Time (7:00 a.m. Pacific; 5:00 p.m. Johannesburg) to discuss these results. The conference call may be accessed by dialing (888) 282-4591 (toll free) or 719-457-2637 (toll) in North America, 0 800 980 989 (toll free) in the United Kingdom and 0 808 101 1147 (toll free) in South Africa. A live and archived audio webcast will also be available at on the Company's website at www.rockwelldiamonds.com.
The conference call will be archived for later playback until midnight (ET) January 24, 2010 and can be accessed by dialing (888) 203-1112 (toll free) in North America or (719) 457-0820 (toll) and using the pass code 2475528.
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John Bristow
President and CEO
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 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 annual Form 20-F filing with the United States Securities and Exchange Commission www.sec.com and the Company's home jurisdiction filings that are available at www.sedar.com. The Company undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law.
SOURCE Rockwell Diamonds Inc.
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