Canada-based alluvial miner Rockwell Diamonds has reported a C$5.5-million net loss for the third quarter ended November 30, owing to litigation and the suspension of mining operations in South Africa’s Northern Cape.

The TSX- and JSE-listed company said last week that rough diamond revenues declined by 65% year-on-year to C$2.4-million, and 77% compared with the previous quarter, owing to suspended operations and delays at the Wouterspan development as a result of litigation. Total revenue decreased by 51% year-on-year to C$3.5-million.

On September 12, 2016, a decision was taken to suspend the Remhoogte-Holsloot Complex (RHC) indefinitely, as it did not fit the realigned business model. Also during September, Rockwell decided to suspend operations at Saxendrift because all economic ore had been depleted. This asset is currently being disposed of along with the RHC mine and some other unattractive mining and prospecting rights.

Vancouver-based Rockwell stated last week that litigation brought by its former contractor, C-Rock Mining Limited (CML), had delayed the construction schedule at its Wouterspan plant construction project (WPC), which is being undertaken in three phases.

The CML litigation has resulted in Rockwell temporarily losing possession of its Wouterspan project, Saxendrift, Saxendrift Hill Complex, Niewejaarskraal operation, RHC and Holsloot assets on November 7. However, a December 6 judgment dismissed the spoliation application by CML with cost, returning the assets to the company. Rockwell reported that when it returned to the site, it noticed that equipment had been tampered with, or damaged, in apparent acts of sabotage. Repairs are currently under way and are expected to be completed this month.

The company is proceeding with further legal and criminal steps against the former contractor, while some of its subsidiaries face a liquidation bid by CML.

Rockwell also revealed that a forensic review of the company’s dealings under previous management resulted in “significant irregularities” found regarding the conduct of one former senior executive. The company said it was considering further investigations of this former employee, particularly the entering into contracts without knowledge or authority from the board, the provision of maintenance services by CML, and other billing practices. In the interim, the company has initiated action against the former employee to recover certain amounts paid on severance.

Meanwhile, Rockwell reported that, since regaining possession of its plant and equipment, production in the first section of the Wouterspan wet plant had been ongoing and construction of the second section had started in late December.

Rockwell said these delays had an adverse impact on the company’s repositioning plan, but management was in the process of finalising and implementing mitigation measures.

The company will now retain and operate its own mining fleet and operations have subsequently started. Rockwell is working with its major equipment financier, Eqstra, to restructure the commercial arrangements regarding its leased fleet.

The first tranches of a recent $8- million financing have been paid over and the repositioning plan for Rockwell is being implemented. Major milestones are the commissioning of the complete WPC wet plant by the middle of March, and the fixed infield screening facility by end of April.