JOHANNESBURG (miningweekly.com) – TSX-listed Rockwell Diamonds has closed the second quarter of its 2012 financial year with a net profit of C$2-million, CEO James Campbell reported on Friday.

This compares with a loss of C$1.2-million in the same quarter last year.

Campbell said the profit was achieved on the back of revenue of C$9.2-million, underpinned by the average diamond price doubling to $2 186/ct. Efforts to optimise operations had also been successful, resulting in mine site operating costs being reduced by 18% to C$5.1-million, to reach an average cost of C$10.5/m3 of earth mined.

The company, which operates alluvial mines in South Africa, has a cash balance of C$14.4-million, which was boosted by asset sales and proceeds of a convertible loan and capital raising.

“Having brought our existing operations onto a better footing, Rockwell is now poised for significant organic growth through the continued optimisation of its operations, as well as gradually bringing on line our other new order mining rights and resources, particularly Wouterspan and Nuwejaarskraal and other properties on Middle Orange River,” Campbell told Mining Weekly Online.

The company also this week completed the acquisition of the Tirisano mine in the North West, which it sees as key to its long-term growth.

Campbell reported that it had seen a 10% to 13% softening of diamond prices, despite demand fundamentals remaining strong in the difficult global economic climate.

“We have found that larger diamonds are less vulnerable to volatile prices, buoying Rockwell in turbulent markets owing to about 80% of the diamonds produced in the company’s Middle Orange River properties being about 10 mm in size and of high quality,” he said.

The company beneficiates about 80% of its stones locally, through a joint venture with Steinmetz. Its revenue from beneficiation increased by 62% to C$2.3-million in the quarter.

Commenting on the continuous talk of nationalisation in South Africa, Campbell said that it was equal to “floating balloons”, stressing that it was not official policy. “Besides, the minerals in South Africa are already nationalised, mining companies merely lease it from the government,” he pointed out.

Rockwell said it enjoyed the active partnership of two black economic-empowerment (BEE) partners, namely with the Mogopa community near Ventersdorp which is the BEE partner at its Tirisano project.

However, the company is embroiled in a spat with African Vanguard Resources (AVR), its BEE partner on the Northern Cape properties. Rockwell is seeking to obtain the balance of the shareholder funds AVR still owed. “A favourable resolution to these negotiations would substantially improve Rockwell's cash position,” the company said.

During the quarter, Rockwell initiated a recapitalisation process to fund investments at Tirisano and Saxendrift, as well as initial planning for the new Wouterspan plant.

The miner raised C$7.8-million through a private placement of shares at C$0.75 and generated C$6.35-million by selling three nonproductive assets in July.

Production challenges at Saxendrift were being addressed with the implementation of the new Bivitec front-end screen, an independent puddle system to improve pan plant efficiencies and the imminent installation of bulk X-ray technology. Diamond production had started showing early indications of improvement after additional mine faces were opened.

Having put the loss-making Holpan mine on care and maintenance in the previous quarter, the company has realised a significant reduction in its mining costs.

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