January 14, 2009 Rockwell Announces Fiscal 2009 Results For Three & Nine Months Ending November 30, 2008
ACHIEVES A NET PROFIT OF $4.5 MILLION OR $0.02 CENTS FOR THE QUARTER
January 14, 2009 - Vancouver, BC - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI; JSE: RDI; OTCBB: RDIAF) announces its financial results for the three month and nine month periods ending November 30, 2008. Financial information is stated in Canadian currency unless otherwise indicated.
Rockwell is focused on growth by mining and developing alluvial diamond deposits. The Company has established a significant footprint on alluvial deposits which have consistently yielded high value gemstone diamonds. Plus 2-carat stones comprise more than 65% of the Company's production and are of exceptional quality.
Highlights for three month period ended November 30, 2008 are as follows:
Production of 5,981.25 carats from mining operations; the Company elected to hold 5,619.24 carats in inventory due to its strong cash position;
1,997.94 carats were sold at an average price of US$6,762.76 per carat for revenue of $16.2 million;
Cost of sales and amortization totalled $6.5 million and net general and administrative expenses amounted to $1.9 million, offset by a net tax recovery of $134,035, resulting in:
o An operating profit of $9.5 million.
o A net profit of $4.5 million or $0.02 per share.
In the nine months ending November 30, 2008:
16,558.09 carats were produced, and 11,965.58 carats were sold at an average price of US$2,538.43 per carat yielding revenue from sales of $33.2 million;
Cost of sales and amortization totalled $24 million and net general and administrative expenses amounted to $6.5 million, offset by a net tax recovery of $1.2 million, and the loss on the sale of a discontinued operation of $203,338, resulting in:
o An operating profit of $9.5 million.
o A net profit of $1.4 million or $0.01 per share.
The Company achieved excellent profits in the third quarter of fiscal 2009 and was profitable both at an operational and consolidated level for the nine month period. Equally encouraging was the fact that the cost trend for the three and nine month periods was downward in spite of spiralling cost increases in key mining supplies, utilities and equipment which impacted negatively on local and international mining companies during 2008. The Company also successfully commissioned its fourth operation at Saxendrift and this too was achieved within an overall declining cost trend for the Company.
During the nine month period Rockwell experienced:
the hangover of Eskom power outages and spent approximately $1.5 million of unbudgeted funds purchasing and installing back-up generator sets at its operations;
sharp increases in electrical power costs;
steep increases in diesel, oil and lubricant costs;
strong steel price increases which had an impact on all aspects of the Company's activities;
a labour dispute which resulted in the loss of 35% of budgeted carat production in the second quarter;
wage and other cost increases driven by the strong overall inflationary operating environment in the South African through 2008; and
an unsolicited offer for the Company.
In spite of these challenges, the Company was able to reduce costs in a sustainable manner, open its fourth operation at Saxendrift and achieve overall profitability. To this end, Rockwell's Management and Board of Directors implemented rigorous and regular reviews of all aspects of the business through 2008 to reduce costs through sustainable structural adjustments and increase efficiencies throughout its operations. Among the procedures implemented are:
revision of mining plans and haul road layouts;
a complete review and overhaul of mining methods to substantially reduce the number of pieces of earth moving equipment utilized at each mine;
increases in plant efficiencies by systematic review and improvement of each flow circuit, better repair and maintenance, replacement of costly desanding units with degrit screens and cyclones, and improved electrical power utilization;
review and changes to all non-core activities and contractor arrangements to improve management of such services, outsource certain non-core activities, and sensibly cut costs;
improved and quicker data analysis, information gathering and reporting of financial data; and
proactive changes and improvements to training, HR management, and communication with employees.
All of the changes have provided benefit to the Company and these improvements and other cost savings will continue to be managed and enhanced.
Diamond prices remained robust through the six month period ending August 31, 2008 and in September 2008 the Company recovered a large white 189.6-carat gemstone from the Klipdam mining operation. This stone realized an excellent sale price of approximately US$10.2 million. The Company also benefited through the sale of three exceptional yellow stones which were manufactured in terms of its marketing agreement with the Steinmetz Diamond Group and sold in October 2008.
Subsequent to September 2008, the rough diamond market experienced a sharp decrease in trading activity and as a consequence rough diamond prices have fallen in the latter part of 2008. Rockwell sold a few of its larger stones for strong prices in early October but subsequent to that has not sold the greater part of its production from the third quarter, and currently has diamond inventory of 5,619.24 carats. This inventory has been valued on a conservative basis in the Company's financial statements.
As noted above, the Company also expanded its operations to four (from an original three operations) with the re-commissioning of facilities at Saxendrift on the south bank of the Middle Orange River, adjacent to its Wouterspan operation.
Rockwell rapidly advanced production at the new Middle Orange River operations acquired from the Trans Hex Group, beginning with Saxendrift. Aside from the re-commissioning of the existing small scale Saxendrift plant during the second quarter of fiscal year 2009, in November 2008 the Company also pre-commissioned a state of the art, low-cost, high-volume wet Rotary pan plant at Saxendrift. This plant was built and pre-commissioned on budget and on-time in approximately five months and was operating routinely in production mode prior to the extended year-end shutdown beginning at the end of November 2008.
The refurbished Saxendrift, new final recovery facility was commissioned a month ahead of schedule in late September 2008. The new Saxendrift wet plant will add strong growth to the Company's diamond production profile, and yield further operational costs saving.
Financial results for the third quarter were most encouraging with the Company producing a total of 5,981.25 carats for the period. Sales yielded revenues of $16.2 million and the best operating profit produced to date was achieved in the current quarter at $9.5 million. At a consolidated level, a comprehensive profit of $4.5 million was achieved for these three months.
For the nine month period to November 31, 2008, the Company showed an operating profit of $9.5 million and at a consolidated level a profit of $1.4 million. Excellent production rates were achieved during the last three months and this, combined with cost savings implemented by the Company, is expected to again yield reduced operating costs and equivalent positive financial performance once operations re-commence.
The Company ended the third quarter of fiscal 2009 with cash reserves of $6.8 million. These funds are being utilized to provide the Company with flexibility during the extended shutdown period through December and January. The extended shutdown is in response to depressed conditions in the diamond market and to ensure the long term viability of the Company.
In a continuing response to challenging conditions in the financial and diamond market, Rockwell has initiated a process to restructure its Middle Orange River operations so as to save costs and improve efficiencies.
Upon resumption of operations, the Company will focus on ramping up the Saxendrift mining operation while it suspends the Wouterspan operation to reduce costs. The intention in the short to medium term is to fabricate and re-commission a low cost twin 18-foot wet rotary pan plant and replace the older and more costly 12 rotary pan plant at Wouterspan.
President and CEO John Bristow stated
"Rockwell is encouraged by its strong results, cost reductions, and profitability achieved for the three and nine month period to November 30 of fiscal 2009, in spite of the considerable challenges faced by the Company during the overall period. During this time, the Company demonstrated flexibility and ability to rapidly adapt to the challenges of power outages, spiralling electrical, fuel, oil, steel and other costs, industrial action, and an unsolicited offer for the Company. With the publication of these latest results the Company has set itself apart from a number of its peers.
The Company has also taken steps to address depressed conditions in the international diamond market and is closely monitoring conditions and results of rough diamond tenders conducted by other producers. We are addressing the latest challenges, which are driven by turbulence in the banking sector, capital markets, and diamond trade, and are mindful of their impact on the Company's activities and financial performance in the short to medium term."
Results of Operations
Rockwell's interest in the operations is 74%, with the remaining 26% being held by a Black Economic Empowerment consortium.
Production and Sales -- Quarter Comparison
The following is a comparison of the current quarter (ending November 30, 2008) with the quarter ending November 30, 2007.
Production
Operation
3 months ending November 30, 2008
3 months ending November 30, 2007
Volume
(cubic
meters)
Carats
Average grade (carats per 100
cubic meters)
Volume
(cubic meters)
Carats
Average grade
(carats per 100
cubic meters)
Holpan
155,759
1290.42
0.83
232,930
1,673.29
0.72
Klipdam
239,245
2,288.88
0.96
142,534
1,256.06
0.88
Wouterspan
189,224
1,568.00
0.83
341,099
2,016.54
0.59
Makoenskloof
-
-
-
136,154
633.28
0.47
Saxendrift
83,632
833.95
1.00
-
-
-
Total
667,860
5,981.25
0.90
852,717
5,579.17
0.65
Sales, Revenue and Inventory
Operation
3 months ending November 30, 2008
3 months ending November 30, 2007
Sales
(carats)
Value of
Sales
(US$)
Average
value
(US$ per
carat)
Inventory (carats)
Sales
(carats)
Value of
Sales
(US$)
Average
value
(US$ per
carat)
Inventory
(carats)
Holpan
268.43
487,127
1,814.73
1,287.79
2,683.94
2,437,250
908.09
372.00
Klipdam
912.42
11,035,293
12,094.53
2,050.74
2,044.82
1,076,732
526.57
382.94
Wouterspan
313.40
681,760
2,175.37
1,529.26
2,511.57
4,975,788
1,981.15
496.53
Makoenskloof
-
-
-
-
787.93
3,808,122
4,833.07
82.65
Saxendrift
503.69
1,307,412
2,595.67
751.45
-
-
-
-
Total
1,997.94
13,511,592
6,762.76
5,619.24
8,028.26
12,297,892
1,531.83
1,334.12
Production and Sales -- Nine Month Comparison
The following is a comparison of the nine months of fiscal 2009 (ending November 30, 2008) with the nine months ending November 30, 2007.
Production
Operation
9 months ending November 30, 2008
9 months ending November 30, 2007
Volume
(cubic
meters)
Carats
Average grade
(carats per 100
cubic meters)
Volume
(cubic
meters)
Carats
Average grade
(carats per 100
cubic meters)
Holpan
512,510
3,869.78
0.76
904,862
6,272.18
0.69
Klipdam
668,674
6,520.90
0.98
599,001
5,256.51
0.88
Wouterspan
552,293
3,896.42
0.71
980,387
6,228.27
0.64
Makoenskloof
-
-
-
199,263
857.81
0.43
Saxendrift
175,441
2,270.99
1.23
-
-
-
Total
1,908,918
16,558.09
0.87
2,683,513
18,614.77
0.69
Sales, Revenue and Inventory
Operation
9 months ending November 30, 2008
9 months ending November 30, 2007
Sales
(carats)
Value of
Sales
(US$)
Average
value
(US$
per carat)
Inventory
(carats)
Sales
(carats)
Value of
Sales
(US$)
Average
value
(US$
per
carat)
Inventory
(carats)
Holpan
2,946.42
3,958,748
1,343.58
1,287.79
6,331.00
7,590,633
1,199.96
372.00
Klipdam
4,825.13
18,779,616
3,892.04
2,050.74
5,134.22
7,402,845
1,442.86
382.94
Wouterspan
2,673.86
4,360,884
1,630.93
1,529.26
5,978.55
12,121,715
2,027.53
496.53
Makoenskloof
-
-
-
-
894.85
5,577,090
6,232.62
82.65
Saxendrift
1,520.17
3,274,483
2.154.02
751.45
-
-
-
-
Total
11,965.58
30,373,731
2,538.43
5,619.24
18,338.62
32,692,283
1,782.70
1,334.12
Production Costs
The average operating cost during the quarter was US$4.09 per tonne (excluding Saxendrift, which is currently in a ramp-up phase, it is US$8.80), an increase from US$3.80 per tonne in the quarter ending November 30, 2007.
The average operating cost over nine months was US$4.41 per tonne (excluding Saxendrift, which is currently in a ramp-up phase, it is US$9.15), an increase from US$3.69 per tonne in the nine months ending November 30, 2007.
Additional details can be found in the Company's Financial Statements and Management's Discussion and Analysis which are filed on www.sedar.com.
For further information, please contact Investor Services at (604) 684-6365 or within North America at 1-800-667-2114.
John Bristow President and CEO
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