JOHANNESBURG (miningweekly.com) – Loss-making alluvial diamond junior Rockwell will recommission its impressive rebuilt Tirisano diamond plant near Ventersdorp in March, which will boost crucial volumes and help to smooth out the company’s currently variable cash flow cycle.
Rockwell COO Graham Chamberlain and Rockwell CFO Gerhard Jacobs tell Mining Weekly Online that a portion of the company’s fixed costs will be lowered once it ratchets up from being a three-operation company to being a four-operation one.
“We’ve got Tirisano coming on board,” says Chamberlain of the March restart of the “bridal” diamond operation in North West province, which Rockwell acquired from Etruscan Diamonds for R33,5-million in shares nearly a year ago.
Rockwell, which is resuming mining in Tirisano’s shallow ore regions before developing the water-filled 400 m long and 64 m deep openpit, sufered a loss of $1,4-million in the three months to November 30.
It says that it has sufficient working capital and reserves to maintain operations through breakeven point and sufficient cash and working capital to fund the continuing losses until then.
The rebuilding of the R17,7-million first phase of Tirisano’s modified plant is expected to set a new benchmark for the alluvial diamond-mining sector and capital requirements for the second phase are being calculated.
The Ventersdorp orebody has a consistent grade and average stone size, which complements the company’s alluvial Vaal river and the Orange river deposits, where there are large nugget effects.
“You will go for a month in the Vaal and Orange areas at depressed grade, and then you will have a super elevated grade at a later time,” Chamberlain explains to Mining Weekly Online.
“Tirisano’s consistent production should smooth things out for us, particularly from a cash flow point of view. We’re entering into a phase of being debt free, and we’re in a position to grow,” he says, pointing to not only Tirisano, which will begin producing imminently, but also the Wouterspan project.
The planned capital raising may now be under different structures.
“Whether it will be more or less than the $30-million will be made at the appropriate time,” Chamberlain says.
Dr John Bristow, who quit suddenly as CEO late last year, will continue to provide input in a nonexecutive role doing special assignments. Meanwhile, a search is on to find his successor, Rockwell chairperson David Copeland says.
Strategies have also had to be put in place to deal with issues at Rockwell’s three longer-standing Saxendrift, Holpan and Klipdam operations.
Heavy rains have, however, put a dampener on the proactive establishment of Saxendrift’s de-sanding plant, which was meant to mitigate the negative impact of having to move into an area of higher sand content.
The plan was for the de-sanding plant to remove the inhibiting higher sand content, but its introduction ran into the fall 105 mm of rain in 24 hours.
Output in the current quarter to end-February, also hit by the December/January holiday recess, will thus be lower.
But a rough diamond inventory on hand will help to boost revenue.
The transfer of ownership of Tirisano to Rockwell is progressing “reasonably well”, says Chamberlain, adding that he sees no further need for concern following positive communication with the Department of Mineral Resources.
“We don’t envisage any further hiccups.”
Rockwell reported a 3% quarter-on-quarter revenue to $11,1-million for the three months to November 30.
The average price achieved in the third quarter of fiscal 2011 was $1 566/ct compared with $1 048/ct in the previous three-month period, and the operating profit at $1,8-million compared with the operating loss of $614 000 in the second quarter.
On a fiscal year-to-date basis, both carat production and prices received have increased.
Rockwell produced 22 519 carats of diamonds in the nine months to November 20, compared with 19 920 ct produced during the same period in the previous year.
Four tender sales of rough diamonds have been held, and regular sales of special diamonds exceeding ten carats were sold for beneficiation.
The higher price trend for better quality stones continued, particularly for diamonds with good colour and clarity.
The average price achieved over the nine months of fiscal 2011 of $1 345 a carat, well up on the $969 a carat received in the previous year.
Rockwell recovered eight large gemstones from its Holpan, Klipdam and Saxendrift operations in the three months to November 30, bringing the total number of plus 50-carat stones recovered in its current fiscal year to nineteen.
These stones, sold into the company's joint venture with Steinmetz group, will provide additional profit-sharing revenue once polished and sold.
Flawless Diamond Trading House, owned 20% by Rockwell, provides the sales platform.
Flawless is integrating a diamond-cleaning technology first that is expected to enhance the appearance of rough diamonds presented for sale.
The recovery of the international diamond market gained momentum with prices continuing to trend towards 2008 levels and jewellery retail sales have been higher than the expectations of major retailers, the company says.
These sales will support a reduction in polished inventory and, consequently, could fuel the trade of rough diamonds.
The price recovery of rough diamonds has outpaced polished stones, as a result of high polished inventory levels, however, polished prices improved in November 2010, particularly in the three-to-four-carat range, and creating optimism that the fundamentals are in place for polished stone prices to close the gap with rough diamonds.
The improved prices of rough diamonds have contributed to the improving performance of Rockwell, which is increasing production volumes to meet perceived shortages in the secondary market.
A total of 8 404 ct were productions at the Holpan, Klipdam and Saxendrift operations and the Klipdam Extension bulk sampling project in the period, up from 7 963 ct in the corresponding quarter last year.
Tender sales of $10-million plus $800 000 of returns from the beneficiation profit share resulted in diamond revenues of $10,8-million compared with $12,9-million for the previous corresponding period.