JSE-and TSX-listed diamond producer Rockwell Diamonds has advised that it has reached an agreement to sell the Klipdam Mine and associated properties for a total cash consideration of R23 million, bringing the total proceeds from the sale of this asset to R48 million, including the sale of the earth moving equipment in October 2012.Rockwell Diamonds explained that the proceeds will be reinvested in bringing the Niewejaarskraal Mine into production and progressing its strategy of growing its operating footprint in the Middle Orange River region of South Africa. The company has a strong track record in operating successful mines in this region which typically yields large, high valued diamonds. The right sizing project that was initiated at Klipdam in October 2012 led to the expected unit cost reductions and increased volume throughputs, however the operation is not considered to be a core asset. Consequently, the company has accepted an unsolicited cash offer to sell the mine to a private alluvial diamond miner. The purchase consideration of R23 million is payable in three tranches. Klipdam Mine has a remaining life of two years, based on current resources. We accepted the offer for this mine, as opposed to investing further resources to extend its projected mine life through additional exploration, because our analyses projected higher long-term returns from Rockwells Middle Orange River properties which have better grades and diamond values than Klipdam and yield high-value, gem-quality diamonds, said Rockwell Diamonds CEO James Campbell. Rockwell Diamonds said that the first payment of R10 million was received upon signature of the sale agreement, while the rest of the purchase price will be paid in eight monthly instalments of R1 million each, with R5 million to be paid upon receipt of Section 11 approval from the Department of Minerals Resources (DMR).
The company explained that under the terms of the agreement, Rockwell will retain ownership of certain items of plant and machinery that will be redeployed mainly to the Niewejaarskraal Mine.Further, Rockwell revealed that a proposal to take the Niewejaarskraal Mine out of care and maintenance has been approved by the board of directors, with a total capital budget of R20.1 million that is comprised mainly of labour and earthworks. According to Rockwell, the project entails bringing the Dense Media Separation (DMS) plant at Niewejaarskraal Mine back into operation. The DMS production will be supplemented through the addition of four 16-ft rotary pans from the Tirisano mine in addition to using equipment from Klipdam that was not part of the sale. Meanwhile, trial mining operations are expected to come on stream after a six-month implementation phase with a six-month ramp up to a monthly processing capacity of 115 000 m3. During the design phase, Rockwell said that its management considered deploying the same bulk X-ray technology that has been installed at other Rockwell operations but this would have taken one year to implement at Niewejaarskraal. The company opted to re-commission the existing DMS plant and install the 16-ft Rotary pans – a lower cost option which has the added advantage of a shorter implementation period. The Niewejaarskraal development is another important milestone towards delivering on our stated objective of growing monthly production volumes to 500 000 m3 from our existing inventory of properties in the Middle Orange River region. With three productive mines, namely Saxendrift, the Saxendrift Hill Complex which is in the production ramp-up phase, to be followed by Niewejaarskraal, we expect to reach three quarters of this target. The Niewejaarskraal deposit average grade is 0.74 carats or 100 m3, and so has the potential to produce higher recovery grades than Saxendrift, with the added benefit of slightly better projected average carat values. Our plans for Niewejaarskraal also make use of the existing production plant and equipment without placing undue pressure on our capital resources. We believe our track record in the Middle Orange River region positions us to start delivering positive net returns by the end of fiscal 2014, stated Campbell.