|Rockwell -- Second quarter results 2014
Rockwell announces another set of strong results for the second quarter with revenue up 71% and a corresponding decline in unit operating cash costs of 22%
October 09, 2014, Johannesburg, South Africa -- Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX:RDI; JSE:RDI) announces results for the three months ended August 31, 2014.
Currency values are presented in Canadian dollars, unless otherwise indicated.
- Second quarter revenue up 71% year-on-year to $16.9 million, comprising $14.2 million from diamond sales and beneficiation income of $2.7 million.
- Ninth successive quarter of dollar denominated revenue growth reported.
- Record overall volume of gravel processed and carat production from all Company-owned properties; up 57% and 36% year-on-year, respectively.
- Operating profit before amortization and depreciation of $1.2 million.
- Net loss of $1.5 million compared to first quarter net profit of $0.3 million: Higher revenue and lower unit costs offset by lower beneficiation income and lower grades, resulting in a $3.4 million inventory adjustment to net realizable value.
- Average operating cost per cubic meter down 22% from first quarter to US$10.3, led by earthmoving vehicle ("EMV") renewal plan and increased volumes.
- Net cash flow from operating activities of $2.1 million.
- Inventory of 5,954 carats carried forward (includes 3,034 carats on royalty mining contracts).
- Additional revenue potential underscored by ‘beneficiation pipeline’ of approximately 6,000 carats.
- Royalty mining contracts at Tirisano deliver net royalties of US$523,000.
- Niewejaarskraal achieved 1.5 million lost time injury free hours of operation on September 20, 2014.
- Two-year agreement reached with National Union of Mineworkers ("NUM") for a 9% annual wage increase.
Review of second quarter delivery on strategy
The positive trend pertaining to Rockwell’s operating and financial results extended into the second quarter, as it benefited from its focused strategy to increase its MOR production footprint. Further progress was made towards its mid-term target to increase monthly production volumes of quality gravel processed to 500,000m3. Higher diamond values, better efficiencies and greater economies of scale can be achieved in this region to deliver more consistent quarterly earnings at a more predictable mining cost.
Rockwell maintained its focus on achieving its core medium-term objective of reaching monthly own processing volumes of 500,000m3 in the MOR region. Its three producing operations in the region have a total monthly processing capacity of 340,000m3 comprising Saxendrift (160,000m3 per month at a 5mm bottom cut-off), SHC (80,000m3 per month at a 5mm bottom cut-off) and Niewejaarskraal (100,000m3 per month at a 6mm bottom cut- off). Rockwell is on track to meet its target with the fleet renewal programme at Saxendrift immediately enabling a 20,000m3 per month increase in capacity, while at Niewejaarskraal an upgrade is under development to take its capacity to 120,000m3 per month. The phased implementation of a new plant at Wouterspan, also under review, would bring the Company’s processing capacity to its medium term target.
In addition, Rockwell processes some further 200,000 m3 per month indirectly through royalty contract mining production at Tirisano, bringing the total current production volumes to 560,000 m3 per month on Company-owned properties.
Rockwell reached the following strategic milestones during the second quarter:
- Implementation of the earthmoving vehicle ("EMV") renewal plan at Saxendrift stemmed the volume declines of the previous 12 months, including record volumes processed in July 2014. The mine delivered a 16% quarterly decline in average operating cost due to lower maintenance and increased volumes throughput.
- Management changes at SHC culminated in record volumes of gravel processed in August 2014, with the average unit cost decreasing 45% from the first quarter.
- As throughput at Niewejaarskraal increased, so the grade and average carat value improved, both of which are within target. The unit cost reduced 8% from the first quarter, in line with the higher volumes processed.
- The royalty mining contractor strategy continues to deliver positive returns from properties that Rockwell does not wish to mine, with second quarter value of sales amounting to US$4.2 million, and US$523,000 in royalties accruing to the Company.
The current operational focus areas are as follows:
- Having implemented the EMV renewal plan at Saxendrift, the top priority is to ensure the optimal utilization of the new fleet to increase mining volumes and plant utilization while entrenching the lower maintenance costs through managed mining with the goal of sustainably reducing the per mining cash cost/m3.
- At SHC, maintaining steady state operation at the nameplate capacity is the priority, under the direction of the new mine manager while contiguous exploration work and trial mining is ongoing to increase this resource.
- Similarly at Niewejaarskraal, the goal is to continue operating at design capacity while considering various schemes to fine-tune the plant for increased throughput.
- Across the operations, Rockwell continues to focus on managing its operating costs and volumes processed.
- Having completed the corporate turnaround, led by a strong management team, the Company continues to review prospects to grow and leverage its diamond value chain skills. These include value accretive consolidation opportunities in the southern African diamond sector, all of which are evaluated against a strict set of acquisition criteria.
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