Diamond market sentiment 'cautiously positive' – Rockwell

11th January 2013

By: Martin Creamer

Creamer Media Editor


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JOHANNESBURG ( – Diamond market sentiment was currently “cautiously positive”, Rockwell Diamond CEO James Campbell told Mining Weekly Online in a video interview to mark the alluvial diamond miner’s presentation of 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 diamond pipeline, which will mean that it will have to be gradually restocked, which would lead to higher rough diamond prices,” Campbell added.

The TSX- and JSE-listed Rockwell is developing Saxendrift Hill, which will mine similar gravels to the immediately adjacent and on-budget Saxendrift mine.

“We’re very excited about this new operation, which is about to start commissioning.”

It will also make use of the bulk X-ray technology, which has been so successfully introduced at the original Saxendrift.

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,” he told Mining Weekly Online.

The Wouterspan prefeasibility study is expected to be completed by the end of February month.

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 turnaround 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 loss-making 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 production 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.

An inventory of 2 704 ct had been carried forward to take advantage of any possible restocking trend.

Rockwell continued focus on increasing monthly production to 10 000 ct within five years through diamond value management at existing operations and re-establishing the resource to secure the pipeline of diamonds for tomorrow.

It achieved gross rough diamond revenues of $7.1-million compared to $7.0-million for second quarter of 2013. A 21% quarter-on-quarter decrease in carats sold to 4 043 offset an increase of 38% in average carat value to US$1 821.

Beneficiation revenues grew to $1.6-million from $440 000 in the second quarter and the beneficiation pipeline of more than 5 500 ct provided positive expectations for continued value-added revenue.

The Saxendrift Complex recorded total diamond sales of $5.9-million, Klipdam had total diamond sales of $982 957 and Tirisano incurred an operating loss of $1-million prior to closure.

Carats sold from the Saxendrift Complex increased by 10% to 1 931 ct at an improved average price of $3 082/ct versus $1 892/ct a year ago.

Of significant benefit was the sale of a 145 ct rough diamond recovered from old Saxendrift recovery tailings, which increased the average price a carat from the bulk X-ray plant to $10 704.

Carats sold from Klipdam declined 25% for the quarter to 1 490 ct carats with a slightly lower average value of $660/ct.

The grade was down 25% quarter-on-quarter as mining migrated out of the high-grade portion of the channel.

Diamond sales from Tirisano totalled 214 ct, significantly under budget.

Including beneficiation revenues of $1.6-million in the third quarter, the company reported total revenue of $8.8-million.

Inventory in the beneficiation joint venture with Steinmetz Diamond Group of more than 5 500 ct, created upside potential for further value-added revenue for Rockwell.

The beneficiation agreement enabled Rockwell to sell rough diamonds, receive 90% of the fair value sales price at sale and receive the remaining 10% through the retail profit.

Rockwell’s total comprehensive C$7.3-million loss included a noncash $2.6-million foreign currency translation charge on the conversion of the rand-denominated assets into Canadian dollars.

Completion of the six-month pilot phase of the bulk X-ray plant project at Saxendrift at the end of October 2012 yielded positive results with the set-up costs being repaid from processing old recovery tailings.

This technology will now become an integral component of future mine developments.

For the third quarter, the bulk X-ray system recovered 633 ct from 30 383 m of old recovery tailings that had previously been processed by another operator using older technologies.

This represented a grade of 2.08 ct per 100 m and included, most notably, a 145 ct clean makeable and gem-colour stone.

A cash-neutral strategy has been taken with regards to care-and-maintenance costs at Tirisano, which included pursuing additional royalty mining contracts for the property.

Edited by Creamer Media Reporter


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