JOHANNESBURG (miningweekly.com) – TSX- and JSE-listed Rockwell Diamonds has agreed to sell its Klipdam mine and associated properties to a private alluvial diamond miner for a total cash consideration of R23-million.
In addition to the earnings from the sale of the operation’s earthmoving equipment in October, this brought the total proceeds from the sale of this asset to R48-million.
The funds would be reinvested in the Niewejaarskraal mine production strategy and growing Rockwell’s operating footprint in the Middle Orange River region.
Despite the start of contract mining at Klipdam in October, which the company said resulted in unit cost reductions and increased volume throughputs, the operation was not considered a “core asset” and was, therefore, disposed of.
The purchase consideration of R23-million was payable in three tranches, with the first payment of R10-million received upon signature of the sale agreement, the balance paid in eight monthly installments of R1-million each, and R5-million to be paid upon receipt of Section 11 approval from the Department of Mineral Resources.
Under the terms of the agreement, Rockwell would retain ownership of certain items of plant and machinery that would be redeployed, chiefly to Niewejaarskraal mine.
Elaborating on the rationale for the transaction, Rockwell CEO James Campbell said the company decided to accept the offer for Klipdam rather than invest further resources to extend its projected mine life through additional exploration.
“This decision was driven by our analysis, which projects higher long-term returns from the Middle Orange River properties, which have better grades and diamond values than Klipdam and yield high-value, gem-quality diamonds,” he commented on Monday.
Meanwhile, a proposal to remove the Niewejaarskraal mine from care and maintenance had been approved by the board, with a total capital budget of R20.1-million for labour and earthworks.
The project entailed returning the mine’s dense media separation (DMS) plant to the operation, which would be supplemented by the addition of four 16-foot rotary pans from the Tirisano mine and equipment from Klipdam that was not sold.
Trial mining operations were expected to start after a six-month implementation phase with a six-month ramp-up to a monthly processing capacity of 115 000 m3.
During the design phase, management considered deploying the same bulk X-ray technology that had been installed at other Rockwell operations, but this would have taken a year to implement at Niewejaarskraal.
“Therefore, we decided to recommission the existing DMS plant and install the rotary pans – a lower cost option, which had the added advantage of a shorter implementation period,” Campbell said.
The production team from Klipdam would be relocated to Niewejaarskraal to operate the pan and DMS plant, as would the current Klipdam contract miner CML Operations.
As part of the design phase, the company evaluated the potential for a second phase of commissioning to increase the capacity of Niewejaarskraal to 200 000 m3.
This option would be revisited once the initial phase had been bedded down.
“The Niewejaarskraal development is another important milestone towards delivering on our stated objective of growing monthly production volumes to 500 000 m3 from our existing inventory of properties in the Middle Orange River region,” noted Campbell.
“With three productive mines, namely Saxendrift, the Saxendrift Hill Complex – currently in the production ramp-up phase – and Niewejaarskraal, we expect to reach three-quarters of this target.”
The Niewejaarskraal deposit’s average grade was 0.74 ct/100 m3 and had the potential to produce higher recovery grades than Saxendrift, with the added benefit of slightly better projected average carat values.
“We believe our track record in the Middle Orange River region positions us to start delivering positive net returns by the end of fiscal 2014,” Campbell concluded.