|Rockwell - financial highlights
Rockwell announced results for the three months ended August 31, 2015.
- Rockwell continued to make progress with its promised restructuring of its business following the recent acquisition of Remhoogte Holsloot Complex (“RHC”).
- As part of rebuilding its operational footprint in the Middle Orange River (“MOR”) it also continued with the exploration and feasibility work with a specific focus on the near term potential Wouterspan and Lanyonvale
- A net profit of CAD1.2 million, driven mainly through the unlocking of value in the beneficiation pipeline as well as the impact of eliminating operating losses at Niewejaarskraal (“NJK”) following its suspension in April 2015.
- Rockwell’s finance raising was suspended at the end of August due to the downturn in global commodity and equity markets. The existing acquisition debt provided by key shareholders of USD16.5 million will remain in place for the immediate future, and the terms are being amended following a shareholder vote on September 23, 2015. This will result in operating cash flows from diamond sales being used to service and repay debt, which, depending on diamond production and value could dampen the Company’s ability to fast track its exploration and development projects
- Since May 2015, USD3.8 million of acquisition and convertible debt has been repaid, including the settlement of the USD2.0 million convertible debenture (issued in June 2011). On September 23, 2015 shareholders approved the issue of up to 27.29 million three-year warrants in refinancing of the bridging loans and convertible debentures, and amend the interest rate downward to 10.5%, in the absence of having raised sufficient equity to settle the acquisition loans.
- First quarter revenue up 24% to CAD21.0 million, comprising CAD12.3 million from diamond sales and the balance from beneficiation revenue.
o Total beneficiation revenue of CAD8.7 million (USD6.7 million) in Q2, includes CAD2.7 million (USD2.1 million) being Rockwell’s share of the profit on the sale of polished diamonds during the quarter. In addition, as at August 31, 2015, Rockwell sold the beneficiation pipeline of goods mined up to February 2015 for a total of CAD6.0 million, (USD4.6 million) a portion of which was set off to pay entirely the USD2.0 million Convertible Loan Agreement with Daboll Consultants Ltd. (issued in June 2011).
- Average cash costs declined 14% to USD11.20 /m3 notwithstanding lower volumes processed by MOR operations as a result of mining predominantly Rooikoppie gravels as well as middlings from a previous operator. The weakness of the South African Rand against the US Dollar also had an impact. Volumes were lower mainly due to the suspension of operations at NJK.
- The first three months’ production and grade achieved at RHC were on plan. All three acquired processing plants were in operation by the end of Q2 and had total production volumes ramped up from 90 000m3 per month in June 2015 to 130 000m3 by the end the end of the quarter.
- Saxendrift grade improved to 0.49 cphm3, offsetting impact of lower volumes of gravel processed due to processing higher density Rooikoppie material, which has the benefit of lower unit mining costs. Life of mine has been extended in the short term through ongoing exploration.
- Rockwell continues to work towards building throughput to deliver on the medium term strategic target to process 500 000m3 of gravels per month from MOR operations to achieve sustainable profitability. However, progress has been slowed by suspension of operations at NJK and limited capital to implement capacity upgrades at RHC.
- Priorities for the next six months are as follows:
o Throughput enhancements at RHC to increase monthly volumes to 200 000m3 per month with the installation of an in field screen which was approved this quarter.
o Continued exploration on contiguous properties at Saxendrift to extend profitable mining operations whilst completing plans to bring Wouterspan on stream.
o Continued focus on mining and processing efficiencies and cost reductions to deliver lower per unit costs.
o Manage cash flows to balance working capital requirements whilst servicing debt which now stands at USD20.2 million.
The months June to August being the Northern hemisphere summer months are typically the quieter time of any calendar year as the industry has largely re-stocked in advance of the all-important Christmas retail season. The seasonality during this year was exacerbated by a troubled diamond market due a lack of liquidity resulting from scarcity of finance and high inventory levels. Muted retail sales in China and Hong Kong coupled with a struggling global commodity market has not helped the diamond industry.
The polished market is still overstocked and prices of polished have reduced by around 5%. Diamond manufacturers have not been producing and prefer to keep factories closed rather than manufacture expensive rough to subsequently lose money in selling polished. There have been factory closures but the preference in the industry is to avoid retrenchment and retain skills for when markets resumes. The Hong Kong Show at the beginning of September was quiet as expected.
The polished market currently favours buyers. Wholesalers and retailers who have cash are in a position to offer lower prices and retailers purchase only what is required to cover immediate orders. In spite of the challenges, open market rough and polished prices seem to have troughed. Primary rough producers will bring the prices down in line with the market and this should occur over a period of time. The US is now the strongest market and, as we head into the festive season, liquidity should improve through reduced inventories. Price stability is foreseen for the remainder of 2015, and increases only coming through from 2016.
Rockwell remains focused on rebuilding its MOR production profile and delivering further growth opportunities from its project pipeline as well as new business opportunities.
Immediate priorities include:
- Increasing the capacity of RHC to 200 000m3 with the installation of infield screening capacity.
- Addressing working capital and finance repayment obligations.
- Extending operations at Saxendrift for an additional six months, following recent identification of middlings gravels, to the end of fiscal 2016.
- Completion of the exploration programme at Wouterspan in order to assess the feasibility of on this property as a replacement of the operation.
The Company also continues to evaluate new projects and value accretive consolidation opportunities to meet its strategy to become a mid tier diamond producer.
Rockwell will host a telephone conference call on October 19, 2015 at 09:00 a.m. Eastern Time (15:00 p.m. Johannesburg / 14:00 p.m. London) to discuss these results.
Click here for original article
|Click here for full news archive for this company
|Closing price data source: JSE Ltd. All other statistics calculated by ProfileData.