Photo by: Bloomberg
VANCOUVER (miningweekly.com) – The future of Canadian alluvial diamond miner Rockwell Diamonds hinges on the timely and successful ramp-up of its now flagship Wouterspan (WPC) operation, in South Africa’s Middle Orange River region, and the completion of the business rescue process implementing the company’s new mining strategy.
Earlier this month, an application to have Rockwell’s three subsidiaries placed under South African business rescue, as opposed to liquidation, was granted by a court in Kimberley.
Erstwhile mining contractor C-Rock Mining (CML) had previously applied to have the three subsidiaries – Rockwell Resources, HC van Wyk Diamonds and Saxendrift Mine – placed in interim liquidation.
The immediate effect of the judgment is that all legal proceedings against the subsidiaries are stayed and that the liquidation process is suspended. Rockwell will also now pursue criminal and civil claims against CML and certain individuals involved in the business of CML.
Progress to achieve its strategic goal of becoming a midtier diamond producer was stumped last year, in part owing to depletion of the Saxendrift resource and the disappointing results after the acquisition of Remhoogte-Holsloot (RHC), and partly owing to the discovery of substantial irregularities by a senior member of management and litigation that resulted from that.
In September last year, the company curtailed operations at two of its mines to prevent further cash burn, turning Rockwell effectively into a single-operation business. These operations have since been disposed of to allow the company to focus on developing long-life operations that meet its investment criteria.
Since recommissioning at WPC started in late August 2016, overall grade and revenue performed according to plan, as did actual recovered grade and the price per carat. The company fingered delays caused by litigation as being the primary reason for higher costs and lower revenue from diamond sales for the fiscal year ended February 28.
At WPC, wet plant construction was completed during the first fiscal quarter of 2018, some eleven months later than originally planned and six months late on the contractually agreed date, and at more than five times the budgeted cost of R15-million.
De-bottlenecking will take place over the next three months to achieve 240 000 m3/m mined by end of August. The company is targeting an ultimate throughput rate of 500 000 m3/m.
Grades have improved 12% during fiscal 2017, and jumped 20% during the fourth fiscal quarter, reflecting higher grades recovered at WPC during commissioning.
The operation also benefited from rising rough prices, up 4% in fiscal 2017 at $1 645/ct, but down 9% year-on-year for the fourth quarter ended February. WPC revenues per carat were $1 888 since commissioning started at the end of August.
For the 12-month period, Rockwell reported a 31% year-on-year decline in rough diamond revenues to C$26.1-million, with the fourth-quarter figure dropping 90% over the same period a year earlier to C$987 000, reflecting the end of mining activities at Saxendrift and RHC. Full-year revenue dropped on the back of a 33% decrease in carat sales from 18 976 ct to 12 789 ct.
Full-year beneficiation revenue earned through the profit share agreement with Diacore also fell 55% to C$4.4-million, mainly owing to lower output.
Despite the company’s legal and operational woes, it managed to narrow the fiscal 2016 net loss attributable to shareholders from C$28.3-milllion to C$14.5-million, boosted in part by the sale of the Saxendrift and RHC mines.
Meanwhile, Rockwell is investigating the potential for bulk sampling at the neighbouring Stofdraai asset at WPC, with delineation pitting in progress.
At February 28, the group had cash and cash equivalents of C$1.7-million, overdrafts of C$1.2-million, and net cash of C$523 000. Trade payables totalled C$9.3-million. The group has raised loans and borrowings of C$12.2-million during the previous 12-month period.
Immediate priorities for 2018 are the ramp-up and debottlenecking of the processing plant at WPC; stabilising the business and bedding down management structures; developing an effective mineral resources strategy; create an effective working relationship with the business rescue practitioners; delivering on the WPC business plan; and creating alternatives to bring other mining and exploration properties to book in the shortest possible time.