JSE- and TSX-listed Rockwell Diamonds has a plan to increase output sharply over the next five years, from the current 2 500 ct/m to 10 000 ct/m, CEO John Bristow said last week.

The company, which mines high-value diamonds from alluvial mines in South Africa, announced that it had agreed to buy another asset, Etruscan Diamonds’ Blue Gum project, in the Ventersdorp area of South Africa.

“We are very aggressively looking to grow Rockwell and we have looked at several assets in the past year or two,” Bristow said in an interview.

“This is a good one: it’s got a very well-studied, delineated resource and it’s a logical fit.”

The deposit contains white diamonds, in the one-to-ten-carat range, “which fits perfectly into the growing Chinese market”, he said.

Rockwell produces high-value diamonds from three alluvial mines in South Africa – Holpan, Klipdam and Saxendrift – and has a fourth operation, Wouterspan, on care and maintenance.

Bristow said the company planned to ramp up output from the existing assets to 4 000 ct/m over the rest of 2010, including the restarting of Wouterspan later in the year.

“And then, by late this year, early next year, we’ll have the Etruscan project fully on stream, and that would add another 1 500 ct/m to 2 000 ct/m, taking us to the 6 000-ct/m level,” he said.

The balance of the 10 000-ct/t target will come from developing brownfield assets Rockwell has in the middle Orange river, the potential to double output at Blue Gum, as well as possibly more acquisitions.

“We are looking at one or two other assets in the vicinity of our existing projects and in the Etruscan area as well to add to the stable,” Bristow said.

Rockwell announced that it had signed a term sheet in which it offered to pay a maxi- mum of R33,5-million (about C$4,65-mil-lion) for 74% of the Blue Gum project, in shares valued at 6,8 Canadian cents each.

The company would also assume certain “nonmaterial property maintenance obligations” effective immediately and other financial obligations when the deal was completed, it said.

The other 26% of the asset is owned by black economic-empowerment partners.

Blue Gum

The Blue Gum project is on care and maintenance, after Etruscan halted operations when demand and prices for rough diamonds plunged in late 2008.

Rockwell is assessing the best way to ecommission the existing rotary pan plant at the project, and is relooking at potential adjustments to the mine plan, Bristow said.

“We’ve got some ideas about how to get the mine side of things working again at relatively low cost.

“And we are also fortunate in that we have spare earthmoving equipment, so we’ve got enough kit to take to Ventersdorp without having to go out to buy earthmoving equipment,” he said.

The deal is still subject to a number of conditions, including the transfer of the mineral rights from Etruscan to Rockwell and agreements to secure power supply from State utility Eskom.

But Bristow said he was not expecting problems on either front.

“We’ve got Eskom lined up already; we just needed to make sure that there was spare capacity on the grid in that area. But that is effectively done.”

Once operations resumed at the mine, the next target would be to double production, for which Rockwell would likely have to raise more equity finance, he said.

“We are obviously mindful of dilution . . . but we’ve got a fairly aggressive growth plan to give ourselves more revenue, more profitability.

“So, at some point, when we come to doubling the production, we would need to access more funds to do that.”

He did not say how much the firm might be looking to raise.

Diamond Market

The diamond market was “resilient” in the first few months of 2010, despite two large sales by senior producer De Beers, Bristow commented.

“They obviously helped us all last year by cutting their production in half, but they’ve come back to the market this year.

“And the market hasn’t taken that badly. . . there seems to be a strong underpin,” he commented.

Rockwell had seen prices rise across the board, and expected the market to remain “solid” for the remainder of the year.

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