|Rockwell - third quarter performance
- Revenue: The Group reported a 65% decrease in rough diamond revenues at CAD2.4 million (Q3 F2016: CAD6.9 million), due to substantially curtailed diamond production following the suspension of operations. The increase in beneficiation revenue to CAD1.1 million (Q3 F2016: CAD0.2 million) is due to the forward sale of the beneficiation pipeline due to low rough diamond sales. Total revenues decreased by 51% to CAD3.5 million (Q3 F2016: CAD7.1 million).
- Cost of sales before amortization and depreciation decreased to CAD6.9 million (Q3 F2016: CAD12.2 million), mainly due to the cessation of operations at Saxendrift and RHC.
- Production costs: The Group-s consolidated total cost of production for the third quarter at its MOR operations was USCAD22.81 (Q3 F2016: USCAD13.67, Q2 F2017: USCAD12.84) per cubic metre processed. The average total cash cost (including royalty payments) for all the operations for Q3 F2017 amounted to USCAD16.92 per cubic metre processed (Q3 F2016: USCAD12.89; Q2 F2017: USCAD11.54).
- Gross profit before amortization and depreciation: A gross loss of CAD(3.4) million was reported by the Group for Q3 F2017, which compares to a loss of CAD(5.1) million for Q3 F2016 (profit of CAD1.2 million for Q2 F2017). MOR carats sold were down 51% compared to the previous year, and MOR revenue per carat increased marginally to USCAD1,368 (Q3 F2016: USCAD1,328; Q2 F2017 USCAD1,560), Average MOR grades were up 57% during Q3 F2017 to 0.75 carats per 100m 3 of gravel processed compared to last year and up 21% on Q2 F2017, reflecting the higher grades during commissioning at Wouterspan in the quarter.
- Loss attributable to owners of the parent of CAD(5.5) million (Q3 F2016: CAD(9.3) million loss, Q2 F2017 CAD(0.6) million loss) reflecting the drop in revenue due to the cessation of operations at Saxendrift mine and RHC.
- Net cash position: At November 30, 2016 the Group had a net cash position of CAD(0.978) million (Q3 F2016: CAD(1.401) million).
- Middle Orange River (-MOR-) operating performance: Volumes processed at Rockwell-s MOR
operations during the quarter were down 78% year-on-year at 0.17 million m3 (Q3 F2016: 0.80 million m3). MOR volumes mined were also down 78% year-on-year at 0.18 million m3 (Q3 F2016: 0.82 million m3). The substantial decrease in volumes mined and processed compared to the previous year and quarter reflects the impact of the cessation of operations at Saxendrift and RHC during September 2016.
The Hong Kong show indicated renewed interest after a very quiet summer. Prices remained stable at the show due to sellers- resistance to sell below rough prices. Polished prices remained under pressure in the subsequent months. The Indian Government-s scrapping of high denomination notes caused a liquidity issue and affected both the polished and rough markets. Retail sales in USA showed improvement and sentiment was higher. China also showed possible improvement after dismal results throughout the year.
Rough diamond demand during September was strong, and on the increase ahead of Diwali, the Festive season and Chinese New Year, while rough diamond demand decreased during November. During this quarter De Beers held three sights amounting to USCAD640 million, USCAD485 million and USCAD470 million, the last being the smallest sight of the year in line with historical selling trends. Other producers followed suit with increased sales during September and reducing volumes sold during the following months, with some companies, including De Beers, holding back smaller diamonds due to the Indian governments demonetisation and subsequent reduced demand. Prices remained stable with little to no changes and expectation is for prices to remain stable in the fourth quarter.
Outlook and priorities
Rockwell is presently engaged in a business repositioning exercise, and although some significant milestones have been achieved, continued focus will be placed on:
- Further reduction of off-mine costs;
- Driving cash operating costs down to ZAR100/m3 and less;
- Commissioning of complete WPC wet plant and installation of infield screening capacity by early Q1 F2018;
- Ramping up WPC production to 200,000m 3 per month by Q1 F2018;
- Supplementing WPC production after relocation of Holsloot plant to Stofdraai, to achieve 260,000m3 per month in Q2 F2018;
- Seeking ways to expand production towards the longer term target of 500,000m 3 per month;
- Building a resource development strategy for Rockwell to facilitate future production expansion and/or replacement;
- Continuing to rationalise non-core assets and related liabilities;
- Building on its recent successes, and empowering its employees to own them.
Rockwell will host a telephone conference call on 24 January 2017 at 09:00 a.m. Eastern Time (15:00 p.m. Johannesburg / 14:00 p.m. London) to discuss these results. The conference call may be accessed as follows:
Canada and USA (Toll-Free) - 1 855 481 5362
South Africa (Toll-Free) - 0 800 200 648
South Africa - Johannesburg - 011 535 3600
South Africa - Cape Town - 021 819 0900
UK (Toll-Free) - 0808 162 4061
Other Countries (Intl Toll) - +27 11 535 3600
Other countries - Alternate - +27 10 201 6800
The conference call will be archived for later playback until midnight (ET) January 30, 2017 and can be
accessed by dialling the relevant number in the table below and using the pass code 10000276#.
The audio webcast will be available for download on the Company's website: www.rockwelldiamonds.com.
South Africa (Telkom) - 011 305 2030
Canada and USA (Toll Free) - 1 855 481 5363
Other Countries (Intl Toll) - +27 11 305 2030
UK (Toll-Free) - 0 808 234 6771
For further details, see Rockwell-s complete financial results and Management Discussion and Analysis posted on the website and on the Company's profile at www.sedar.com. These include additional details on production, sales and revenues for the quarter, as well as comparative results for fiscal 2015.
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