JOHANNESBURG (miningweekly.com) − TSX- and JSE-listed Rockwell Diamonds on Thursday reported that its indirect subsidiary, Durnpike Investments, was ordered to pay $1.2-million to mining concession holder Midamines, following a dispute in which $48-million was claimed in royalties for access to the Kwango River project in the Democratic Republic of Congo (DRC).

Rockwell said it had entered into an agreement with Midamines, the holder of the exploitation permit on the Kwango River project, in 2006. It was agreed that Midamines would act as independent contractor to manage and carry out exploration activities and, potentially, mining activities in a certain portion of the concession area, while Durnpike would make minimum royalty payments to Midamines, in return for procuring and facilitating access to the project site.

The yearly royalty payments amounted to a minimum of $1.2-million, starting on December 31, 2007.

However, during the first quarter of 2008, the agreement was amended, giving Durnpike access to the entire concession area, as opposed to the limited contract area for a consideration of $0.6-million and Midamines waived its right to payment of the first royalty payment on December 31, 2007.

During 2008, Durnpike cancelled the agreement as a result of breach of material provisions thereof, and a dispute arose in relation to the company’s entitlement to do so. The dispute was referred to arbitration. Midamines claimed the payment of the final amount of $41.1-million, while reserving the right to increase the claim to $68.1-million.

Durnpike instituted a counter-claim in the final amount of approximately $6.6-million for equipment, start-up and acquisition costs and possible lost earnings.

“While management was disappointed at the outcome of the arbitration, having vigorously argued against the claims made by Midamines and robustly defended its position throughout the hearings, the Rockwell board is supporting the decision to conclude the matter in line with the findings,” Rockwell CEO James Campbell said in a statement.

“The settlement amount that had been prescribed by the agreement is a small fraction of Midamines’ total claim of $48.0-million, plus interest since 2008. It would not materially impact the company’s capacity to progress with our strategic growth projects. Having reached a conclusion on this process, which demanded significant management time and attention, our executive team can now focus on implementing its diamond value-management initiatives.

“Our primary focus is now on implementing a number of projects which we have initiated to continue improving the performance of our operations,” Campbell said.

This included the company’s announcement that it had started production at its Tirisano mine in the North West province, after its R33.5-million acquisition was completed on September 1.

The company reported it expected to ramp up production to full capacity at 90 000 m3 by the end of October, and have implemented continuous operations since the mine started.

The issues revealed in a review of the plant in June had been fully addressed, and the Holpan mine’s containerised recovery plant has been relocated to Tirisano, and would provide a completely hands-off proven recovery process. In addition, the barrel screen from the company’s Wouterspan project (both the Holpan and Wouterspan projects are currently on care and maintenance) had been installed to double the front-end capacity as an interim solution, the company said in a statement.

The miner would now focus on fine-tuning mining and plant efficiencies and continue to develop long-term solutions for the front-end processing, as well as working on concept designs to increase the plant’s capacity.

Meanwhile, the Tirisano mine was expected to contribute positively to the socioeconomics of the Ventersdorp area. A total of 208 full-time jobs and 17 contractor positions had been created, 60% of which are from the local Mogopa community that has a 26% holding in the mine as required by South Africa’s black-economic empowerment laws.

Eleven women are employed on the mine and would be trained as machinery operators.

Rockwell said it had carried out significant work relating to the safety measures at the mine to comply with the Mine Health & Safety Act.

Further, the company said the quality and price of the stones recovered at Tirisano during the commissioning and recovery testing phase were encouraging, and exceeded that which was achieved by the mine's previous operators. All carats recovered would be graded and sold at the company’s next diamond tender early in November.

The Tirisano mine’s gravels have a grade that is about five times higher than those at its properties in the Northern Cape and the spatial distribution of the diamonds was far more consistent. “The characteristics of the property can be likened to an alluvial kimberlite in terms of the hour glass shape of the deposit and features of the in-situ diamonds,” the miner said.

“Having completed the testing phase, we are confident that the historically higher grades and more consistent diamond distribution at Tirisano will make a positive impact on the company’s objective to ramp up production. With a life-of-mine of about 30 years at the current production capacity, we are confident that our investment in commissioning this new plant will create long-term value for all our stakeholders,” Campbell said.

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