Cautious optimism is returning to the diamond market after tough conditions prevailed for the most part of last year.
Diamond market sentiment is currently “cautiously positive” is the view of Rockwell Diamonds CEO James Campbell, who was speaking to Mining Weekly in a video interview to mark the alluvial diamond miner’s presentation of lossmaking third-quarter results.
Early indications are that diamond sales in North America over the Christmas period – which are pivotal to the diamond market – were up on the year before.
Rockwell’s own diamond tenders have also been attracting considerably more attention than was the case for most of last year.
“We’re looking forward to a more stable operating environment and a slightly increasing diamond price,” said Campbell, who will this month open the new Saxendrift Hill diamond mine.
“What we’ve also seen in the market slightly upstream from the retailers is a destocking in the dia- mond pipeline, which will mean that it will have to be gradually restocked, which would lead to higher rough diamond prices.”
The TSX- and JSE-listed Rockwell is developing Saxendrift Hill, which will mine similar gravels to the immediately adjacent and on-budget Saxendrift mine.
It will also make use of the bulk X-ray technology, which has been so successfully introduced at the original Saxendrift mine.
Saxendrift Hill, which has been built for under $2-million (R17.4-million), is expected to have a rapid payback.
Rockwell is already planning a similar style of operation at its Nuwejaarskraal property.
A prefeasibility project stage will be entered once the already drawn-up conceptual plans have been board approved.
Campbell was unsure, however, whether it would be possible to deliver the conceptualised Nuwejaarskraal project at the same sub- $2-million price as Saxendrift Hill made use of considerable existing infrastructure.
“Our final bit of blue sky is our very large Wouterspan property where we are looking to build a 500 000 t a month operation.”
The Wouterspan prefeasibility study is expected to be completed by the end of February.
One of Campbell’s goals in the Middle Orange River, which consists of Saxendrift, Saxendrift Hill, Nuwejaarskraal and Wouterspan, is to achieve an output of 500 000 m3 a month and the regular recovery of the larger 100-ct-plus diamonds.
Suffering a net third-quarter loss of C$4.7-million (R41.4-million) and a comprehensive loss of C$7.3-million (R64.3-million) in the three and nine months ended November 30 last year, Campbell said he expected Rockwell to be back in the black from the start of its new financial year.
Rockwell reported that it had C$3.1-million (R27-million) cash on hand and that its operations were currently generating sufficient cash to cover cash operating costs but not corporate overheads or amortisation.
Optimistic that the market was positioned to increase by a few percentage points in 2013, Rockwell had started the fourth quarter with 2 704 ct in its inventory, positioning it to take advantage of any possible restocking trend.
The board had been strengthened with the appointment of seasoned mining campaigner Rick Menell.
Of the three existing operations, Saxendrift was the only good performer, with Klipdam and the now closed Tirisano losing.
“At an operational level, we have faced down challenges head-on to ensure that we complete the turn- around of our underperforming assets,” Campbell said.
The Saxendrift mine operated smoothly in the quarter, at budgeted costs and anticipated grades and bulk sampling is improving the understanding of the Saxendrift extension, but the 37% higher overall production costs remain the big bugbear.
A fixed-price contractor had been appointed at the lossmaking Klipdam and a detailed metallurgical and geological study was under way at Tirisano to design a fit-for-purpose plant to improve the dormant mine’s potential future performance.
The Jasper project had been acquired to leverage returns from the Middle Orange River properties.
The bulk X-ray plant at Saxendrift continued to perform well, with recovery of 633 ct and sale of 284 ct at an average price of $10 704/ct.
The sale of 408 ct from initial production of royalty mining contracts yielded total revenue of $352 055 of which 12.5% accrued to Rockwell, free of any associated production costs.
Quarterly diamond produc- tion was up 12% year-on-year, supported by a 6% increase in volumes of gravel processed.
The company achieved an operating margin of $950 293 before amortisation, depreciation and corporate overhead and its revenue from diamond sales before beneficiation rose 23% year-on-year to $7.1-million.
Production costs were up 37% on the second quarter owing to higher maintenance, fuel and continuous operations costs.
Cash operating cost per cubic metre mined increased 6% to $10.81 from a year ago.
An improved average sales price of $1 821/ct year-on-year was obtained.