JOHANNESBURG (miningweekly.com) – JSE- and TSX-listed Rockwell Diamond has concluded four royalty mining contracts allowing small-scale operators to mine certain areas of its Tirisano and Klipdam properties, CEO and president James Campbell said on Friday.
Small-scale owner-managed earthmoving companies would mine 50 000 m3 regions on Rockwell’s Tirisano and Klipdam properties, which the group deemed unsuitable for its high-volume operating model.
Campbell said these areas could still produce revenue for Rockwell, while uplifting and cultivating the growth of local businesses.
The first contractor started production at Tirisano, in the North West province, in August, with another expected to start operations, on another section of the property, early next year.
The Klipdam mine, near Kimberley, would host two of the small operators. The first operation was expected to start next week, while the other would be up and running before the end of this year.
The contract miners would be responsible for the capital outlay and the costs of the mining and processing operations, while Rockwell would supply the land, sell the diamonds on their behalf, retain full responsibility for diamond security and train the operators to ensure compliance with the group’s environmental and health and safety guidelines.
Rockwell would derive a fixed royalty from the diamond sales and beneficiation revenues.
“The introduction of four royalty miners has also derisked our operating structure, as we will participate in a royalty on the sale of diamonds without incurring any operational costs,” said Campbell.
However, he did not reveal the royalty percentage fee or the possible contribution to the company that these smaller mining operations could produce.
The diamond miner hoped to sign another royalty contract and was busy examining options.
Meanwhile, Rockwell recorded a loss of C$2.4-million during the three months to August 2012, compared with a C$3-million first-quarter loss, owing to commissioning costs of C$500 000 and C$1.3-million in lost production at its Tirisano mine.
Tirisano was in operation for the first six weeks of the second quarter, however, production was suspended mid-July as the company reconfigured and implemented the right-sizing plan.
The turnaround strategy, which contributed to a lower operating cost structure and placed the operation on a solid footing, included the retrenchment of 111 miners in July.
Rockwell expected to see improvements at the operation during the third quarter of the 2013 financial year and believed the mine would be back on track by the next financial year.
The group continued to drive the efficiency of mining operations at its Saxendrift mine, near the Middle Orange river, in the Northern Cape, and its Klipdam mine.
Campbell said that good progress was being made on the construction of the new $2-million processing plant at Saxendrift Hill. The project was expected to add a monthly production capacity of 100 000 m3 and produce high-quality gem stones. The plant was expected to be complete by early 2013.
Rockwell had also embarked on initiatives to increase and extend the mine life of its Middle Orange river properties, which Campbell considered “the growth engine of Rockwell”.
“These plans include a drilling campaign and further bulk sampling to define the mineral resources at Saxendrift extension, and the construction of a processing facility at Saxendrift Hill, based on the bulk X-ray technology that was piloted at Saxendrift,” he explained.
Further, Campbell pointed to a corporate turnaround achieving an 8% decrease in cash operating cost per unit mined over the last six months, from a high of $12/m at the end the 2012 financial year, to $8.7/m during the second quarter of the 2013 financial year.
However, mining costs rose 35% year-on-year, reaching C$7-million, owing to higher fuel costs and increased mining volumes.
The company experienced a 37% year-on-year rise in the volumes mined, from 543 750 m3 in the three months to August 2011, to 743 472 m3 in the second quarter of 2012. About 808 468 m3 was mined in the first quarter this year.
The higher volumes pushed year-on-year diamond production up 34%, from 3 611 ct in the corresponding period the year before, to 4 800 ct in the period under review. This was a fall from the 7 234 ct produced during the three months ended May 2012.
Over 5 100 ct were sold in the period to August at an average price of $1 322/ct – an increase from the 3 223 ct sold at an average price of $2 186/ct in the three months to August 2011. Sales in the first quarter of this year reached 6 234 ct at an average price of $944/ct.
Group revenue generated rose marginally from C$7.1-million in the prior quarter, to C$7.4-million in the second quarter. However, this was down from the C$9.2-million recorded in the corresponding period in 2011.