Rockwell sales slide as it reforms corporate structure

TORONTO (miningweekly.com) – South Africa-focused diamond producer Rockwell Diamonds has seen a 45% year-on-year decline in the sales value of its precious gems to $7.13-million during the fourth quarter ended February 29, the company reported on Monday.

During the period, carats sold declined by 42% year-on-year to 4 025 ct from all of the company-owned properties, while the average price declined 6% in the 12-month period to about $1 448/ct.

"After a very difficult operating period, the fourth-quarter performance showed positive signs of recovery in spite of the continued overall weakness in global diamond pricing. MOR [Middle Orange River] carat sales were down 42% year-on-year, but encouragingly 22% higher than in the third quarter at 4 925 ct. The value of MOR sales was up 34% on the previous quarter at $7.1-million, but down 45% on the equivalent quarter last year,” stated president and CEO James Campbell.

During the fourth quarter of fiscal year 2016, Vancouver-based Rockwell implemented a number of the decisions that resulted from a strategic and operational review of the business, conducted in late 2015.

As a result, the Saxendrift operations continued to wind down; however, a change in the operational parameters had allowed the closure to be postponed beyond the planned end of February to May, the company advised. Rockwell had also signed the second three-year royalty mining contract at Saxendrift, which started subsequent to the end of the fourth quarter.

TSX- and JSE-listed Rockwell stated that it was assessing other royalty proposals in an effort to continue to extract further value from the Saxendrift property. All diamonds recovered by royalty miners at Saxendrift would be sold by the company through its sales system, with Rockwell retaining a royalty of 10% on gross sales.

RENEWED FOCUS
Further, Rockwell advised that operations had returned to its Wouterspan operation, with the recommissioning and redeployment of existing processing and mining equipment from other operations having started in the current period. Work on the construction of the processing plant was reported to be on schedule to deliver a plant and in-field screen (IFS) capable of processing 200 000 m³/m by September, with ramp-up starting late May.

A second phase, to further increase the plant throughput to 400 000 m³, was being considered.

According to Rockwell, exploration was advancing on the neighbouring properties surrounding Wouterspan, where 4 300 ha had been mapped, 1 700 pits had been dug and a further potential 2 200 pits were being planned.

Meanwhile, detailed pitting and drilling to outline the gravel extent on Remhoogte and Holsloot continued.

“Following the acquisition of the two operations and in spite of the constraints that continue to limit our ability to invest, we were able to construct and commission two IFS facilities at Holsloot and Remhoogte which, along with the implementation of our revised earthmoving vehicle strategy, should increase throughput capability to a sustainable 180 000 m³/m,” Campbell said.

In efforts to reduce overhead costs, Rockwell had closed its Johannesburg-based head office, having reduced staffing and relocated key senior executives to the MOR on a full-time basis. The operational reporting structures had been streamlined, with mine management now directly accountable for all mine operations, reporting to the CEO who was also based full-time in the MOR, the company advised.

“As we strive for a safe and sustainable monthly processing target of 500 000 m³, our search for new value opportunities continues, with exploration activities gaining momentum during the quarter. The recent streamlining of corporate structures is expected to deliver tangible cost saving benefits in the short term. Albeit challenging, the restructuring decision was one which we felt compelled to take in order to deliver greater value to our stakeholders,” Campbell advised.

The company’s TSX-listed stock on Monday jumped 41%, or C$0.04 a share, to close at C$0.12 apiece.