Rockwell Diamonds Inc. Sees Drop in Revenues in Q2

(IDEX Online) – Rockwell Diamonds Inc reported that revenue from rough diamond sales fell 14% in the three months ended August 31 to $10.6 million chiefly due to reductions in grade and diamond values realized at RHC and Saxendrift.

It was also caused by a 67% drop in beneficiation revenue to $2.8 million.

Total revenues decreased by 36% to $13.4 million reflecting the benefit of early settlement of the entire beneficiation pipeline in the prior year. 

Commenting on the second quarter financial performance, Tjaart Willemse, Executive Officer, said: “Rockwell has seen some significant challenges during the first half, and notably so during the second quarter of the 2017 fiscal year, both in production volumes and ore quality which resulted in lower than planned diamond revenues. This, combined with a reduction in projected economic large volume resources, especially at our Remhoogte-Holsloot operation, has had an adverse impact on future economic outlook when compared to the same period in the previous fiscal year. Going forward it will not be business as usual.

"Our results for the second quarter of fiscal 2017 reflect the decrease in available economic ore volumes and grades at RHC under our large volume business model, with the added disadvantage of having realized lower than planned diamond prices.

"The mining contract, which was signed late August 2016, was fully implemented on September 1. Certain measures have been put in place to manage the transition period.

"Wouterspan has had some good recoveries during September, however, at current low production capacity prior to full commissioning of all four streams in November, profitability remains under pressure. The immediate aim is to complete the plant without further delay and to install additional temporary in field screening capacity to assist the mine in achieving nameplate capacity in advance of completion of the permanent in-field screening facility.

"A comprehensive sensitivity analysis was done for RHC to determine economics against fluctuations in grade, volume, diamond revenue, exchange rate, and variable and fixed cost components based on the company’s large volume business model. The outcome of this exercise underpinned the company’s decision on the future of the Remhoogte operation. Mining at RHC was suspended at the end of September as it was found not to be sustainable under the current Rockwell business model. It is, however, worth noting that the mine may be operated profitably under a different cost and lower monthly volume structure.

"The Saxendrift mine was suspended as well during September due to depletion of economic resources under our business model. This was in line with the mine plan and has been anticipated for some months. Our senior management team has already and will be undergoing changes in the months ahead, following the resignation of the CEO, James Campbell, in September and that of the CFO, John Shelton for personal reasons, in October."