Rockwell to close Jhb head office, cull workforce

JOHANNESBURG (miningweekly.com) – Emerging from a year in which it continued to battle underwhelming diamond recovery, grade and volumes, junior diamond miner Rockwell Diamonds has announced plans to shut its Johannesburg-based head office and embark on retrenchments, informing the market on Thursday that it had already issued its employees with Section 189 notices.

The news followed an in-depth strategic and operational review of the business to assess its strategic direction, including its commitment to processing 500 000 m3 a month from its Middle Orange River (MOR) operations, to place the business on a sustainable footing.

“It has been challenging to achieve financial viability, growth and profitability,
which have directly impacted the company’s human capital requirements and sustainability.

“Accordingly a decision has been taken to restructure the workforce company-wide,” it said in a statement.

The planned restructuring would result in a simplification of operational reporting structures, with mine management directly accountable for mine operations and reporting to the CEO, who will be based full-time in the MOR.

The closure of the  Johannesburg office, including the transfer of Rockwell’s key senior executives to MOR on a full-time basis, was expected to realise yearly cost-savings of R7.9-million.

Additional outcomes of the strategic review was the decision to close company-directed operations at Saxendrift by February as a result of lower grades associated with processing old dumps during the third quarter, which were expected to be depleted at fiscal year-end.

Rockwell had, meanwhile, entered into two three-year royalty mining contracts, the first of which started operations at Saxendrift in December, with the second due to start mining in February.

The company was assessing further royalty proposals to continue to generate further value from the Saxendrift property.

All diamonds recovered by royalty miners at Saxendrift would be sold by the company through its sales system and 10% of gross sales would be retained by the company as a royalty.

“Current estimates of tailings dumps and other areas of possible processing interest, show in excess of three years of low-grade gravels, which can be processed with little or no mining or stripping cost. This means that smaller, low-cost royalty miners can be commercial at grades as low as 0.3 ct per 100 m3,” the miner held.

Rockwell also continued to finalise the recommissioning of the Wouterspan operation early this year at an envisaged capital cost of R43-million, with the redeployment of existing processing and mining equipment from Saxendrift, Niewejaarskraal and Remhoogte enabling the construction of a 200 000 m3 a month operation.

The plant design included an in-field screen, with three gravel streams to process coarse, mid and fine materials, providing optionality to adapt the processing profile to evolving market pricing trends.

Exploration on the extensive land package held by the company would, meanwhile, be doubled, with a view to identifying further royalty mining opportunities and to prioritise the development of near-term projects.

Reporting on its third-quarter performance, Rockwell noted that gravel processed at the MOR operation was 5% down quarter-on-quarter, while Saxendrift posted consistent grade, year-on-year.

The Remhoogte-Holsloot Complex (RHC), however, recorded a grade of 0.64 ct per 100 m3 on much lower volumes, compared with 0.9 ct per 100 m3 in the previous quarter.

Recent production had produced grades that were “significantly” higher, the company noted.

MOR carat sales were down 28% quarter-on-quarter to 3 823 ct, and the value of these goods declined 48% to $5-million.

The average carat price realised from the company’s MOR projects declined by 28% quarter-on-quarter, to $1 295/ct, reflecting general market weakness and sub-threshold processing volumes for the recovery of larger stones at RHC.

The company carried rough diamond inventory of 700 ct over into the fourth quarter of the 2016 fiscal year.

Commenting on third-quarter production and sales, CEO and president James Campbell said the performance was driven by continued weakness in global diamond pricing, which negatively impacted the balance sheet and limited the group’s ability to invest in increased processing capacity.

“While we chiefly met our third-quarter production targets, reduced volumes at RHC following a fatality in early September, meant that we did not achieve the one-million-cubic-metre processing volumes generally necessary for the recovery of large stones,” he remarked.

Campbell added that, with the continued support of key shareholders, he remained optimistic that the restructuring exercise would benefit all stakeholders.