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DIAMONDS – 2
 
Rockwell Diamonds targets profitable steady state by year-end
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20th January 2012
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Alluvial diamond mining is known as a hit-and-miss, up-and-down business on which grade prediction is elusive, if not impossible.

But tools have been developed that allow alluvial miners to achieve a semblance of grade prediction.

Four geological metrics are modelled on mining faces and the use of these enablers is allowing the TSX- and JSE-listed Rockwell Diamonds to exceed its carat targets consistently.

With performance at Rockwell’s operations continuing to improve and legacy issues being gradually whittled away, hopes are rising that the alluvial diamond miner will enter a sustained phase of profitable steady state from the latter part of 2012.

The company’s quarter-on-quarter carat output was up in the latest quarter, even after the closure of the Holpan mine, and the need now is for the continually strengthening performance to drop down to the income statement.

While a paper-thin gross third-quarter profit of C$0.6-million was achieved in the latest quarter, the books reflect a $2.1-million loss, caused mainly by the full capitalisation impact of the Tirisano project being absorbed on ramp-up and the vagaries of modern-day exchange rate volatility.

As Rockwell looks to average diamond values continuing above $800/ct, growth options are looming large on the horizon, which embrace the possible development of either Wouterspan, Nuwejaarskraal or Saxendrift Extension, or a doubling of Tirisano.

“Those four present a wealth of opportunity for a tiny company like Rockwell,” CEO James Campbell tells Mining Weekly.

The best of the four will be presented to the board for go-ahead, with much depending on the success of the bulk X-ray machine, which will form the cornerstone of the feasibility studies for Wouterspan and Nuwejaarskraal, which are currently based mainly on large-scale pan plant technology.

The machine has arrived in South Africa for installation at Saxendrift and is expected to bring in lower operating, power, water and labour costs, with increased recovery and security.

The chosen project will be financed internally or by going to the market.

Expanding Wouterspan and Nuwejaarskraal will require significant capital and Rockwell wants to demonstrate more consistent performance before going to the market for large sums.

“We’re very mindful that Rockwell shareholders have been through a very tough time and I am reluctant to dilute them further just to expand the company,” Campbell confides to Mining Weekly.

Wouterspan’s six mining and prospecting rights have been consolidated, providing significant upside to extend the mining potential of the property.

Tender sales in the latest quarter totalled C$6-million and the beneficiation profit share arrangement with the Steinmetz group added another C$2.3-million ($734 000 last year), taking overall diamond revenue to C$8.3-million in the three months to November 30.

The C$1.2-million one-off Midamines legal settlement takes known legacy issues out of the way and payment by black economic-empowerment (BEE) partner African Vanguard Resources for 26% of the Middle Orange River properties would add R50-million plus interest to the balance sheet.

There are no issues with the Mogopa community BEE at Tirisano, which obtained finance from the State-owned Industrial Development Corporation to fund its R26-million preferential-share-based investment in the Ventersdorp operation.

At Saxendrift, the new in-field screen has resulted in budgeted volume throughputs being exceeded.

The new screen is designed to ensure that the mine can achieve more than 130 000 m3 of head feed a month.

Owing to Saxendrift’s bottom cutoff being increased since early December to 5 mm, Campbell anticipates that the operation will yield above the current $2 000/ct level.

Klipdam suffered a Q3 dollar-per-carat deterioration, not as a result of a softer market, but because of poorer-quality stones.

It is expected to improve towards the budgeted $1 000/ct diamond values as grade and carat recovery rise.

Mining costs at Klipdam, a mine coming to the end of its natural life, are down 20% and the focus will be on increasing the dollar-per-carat level at the same grade and the same lower mining cost.

With Tirisano under new operational management, the bridal diamond resource is expected to hit its budget from March.

A total of 5 334 ct was produced in the latest quarter at the three operations and 5 376 ct was sold at an average price of $1 109/ct.

While Rockwell has recorded a C$2-million third-quarter loss, its comprehensive loss is C$10.7-million.

“This is entirely an accounting artefact of the exchange-rate differences,” Campbell explains.

Last year was the exact opposite when, in the corresponding three months to November 30, a $9.5-million positive exchange-rate difference enabled the com- pany to end up with an $8.7-million profit, despite suffering a loss for the period.

Edited by: Martin Zhuwakinyu

 

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