Dual-listed diamond producer Rockwell Diamonds posted a Q4 loss of CA$3.6 million.

The company said the loss was a result of impairments at Tirisano and Klipdam amounting to CA$5.4 million, noting that these impairments were considered necessary as part of Rockwell’s corporate turnaround.

Further, the company said with diamond sales of US$196 590, Tirisano reported a Q4 operating loss of some CA$1 million, of which expenses incurred during the quarter related to phasing out owner operations and additional labour costs during the retrenchment process ahead of concluding the royalty mining agreements.

Nonetheless, Rockwell reported 19% year-on-year revenue growth from diamond sales before beneficiation to US$7.2 million, underpinned by a 55% increase in carat sales from its operations in South Africa’s Middle Orange River region that are key to its production growth strategy.

The company pointed out that although total carats sold were down 8% year-on-year to 5 308 carats, a better overall product mix led to a 30% increase in average price per carat of US$1 355 per carat.

“Although the fourth quarter was challenging, we have taken decisive action at our lossmaking operations, putting us on a sounder footing for fiscal 2014. We delivered good revenue growth, but our financial performance was impacted by the full costs of retrenchments and care and maintenance processes for Tirisano.  At Klipdam, volumes increased in line with plan, but the recovery of diamonds was disappointing, resulting in a loss. Now that these legacy operational issues have been addressed, we can focus on our cash generative operations in the Middle Orange River region and on building the company,” explained Rockwell Diamond’s CEO and president James Campbell.

Rockwell revealed that having acted to address the operations at Tirisano and Klipdam to stem cash losses, the company is now focusing its available capital and resources to grow the production profile of its properties in the Middle Orange River region.

The company revealed that its flagship Saxendrift Mine is operating effectively and is cash generative, while the Middle Orange River operations are being expanded from this centre of production with the aim of achieving monthly production volumes of 500 000 m.

Rockwell said its growth strategy has gained momentum, with the Saxendrift Hill Complex Mine currently in production ramp, while its processing plant, with 100 000 m3 per month capacity, is based on two bulk X-ray systems that have successfully been piloted at Saxendrift during the fiscal year.

Further, bulk sampling to define the resource at Saxendrift Extension has been completed, with the aim being to integrate the mining of this resource into the existing Saxendrift mine plan, extending the useful life of the existing Saxendrift processing infrastructure by several years.

The company noted that it anticipates a recovery in rough diamond prices of between 5% and 10% for the 2013 calendar year for smaller diamonds. In the market for the larger diamonds that make up most of Rockwell’s production profile, demand continues to outstrip supply.

Rockwell continued to reveal that there has also been increasing attendance at Rockwell’s monthly tenders, and this is interpreted as a positive indicator of rough diamond demand and price.

The company said it has carried over an inventory of 1 248 carats into the first quarter of fiscal 2014, which, together with the beneficiation pipeline that comprises some 4 000 carats, provides further potential for valued-added downstream revenues.

Rockwell explained that its priority for fiscal 2014 is to manage operating costs, while increasing the production profile in the Middle Orange River region, where the company has the expertise and track record to profitably recover large, high-value diamonds.

It expanded that in the first quarter the focus includes completing the production ramp up at the Saxendrift Hill Complex and constructing the new internally-funded production facility at Niewejaarskraal.

At Saxendrift, the first quarter mine plan comprises a combination of gravels from the traditional Brakfontein mining area as well as the Saxendrift Extension that will be processed at Saxendrift to optimise the life of the mine.

“Our priority is to use our skills and financial resources to leverage our production profile from our properties in the Middle Orange River. Rockwell has a considerable inventory of high value diamondiferous resources in the region where we have a proven track record of successful mining. Saxendrift is in a stable state of operation, and our objective is to continue generating positive cash flows until our other operations are up and running.

“The ramp up of production at the Saxendrift Hill Complex is on track and we are making good progress with the construction of the new processing facility at Niewejaarskraal; both of these projects have been funded internally. Once these three mines are in operation, we will have reached the halfway mark of increasing production at our Middle Orange River operations to 500,000m3 per month in the medium term,” concluded Campbell.

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