[miningmx.com] – ROCKWELL Diamonds, the Toronto- and JSE- listed
diamond producer, said it would restructure Tirisano, an asset situated 150km west
of Johannesburg in the North West province. The process would involve
decommissioning an existing diamond processing plant and “substantial
retrenchments’.
Tirisano’s mining operations would also be shifted to a higher grade, higher diamond
value pit, said James Campbell, CEO of Rockwell Diamonds. He was commenting
following the release of the company’s second-quarter operating and financial
results, in which it posted a $8m net loss that includes the effects of a currency
conversion. Shares in Rockwell Diamonds were unchanged on the JSE at
R3.40/share.
“Tirisano has a complicated diamond plant that is not fit for purpose. So we’re
putting it on care and maintenance and commissioning a simpler [wet front end]
processing plant,’ Campbell said. Mining would be shifted to Pit 4, where there was
greater confidence that diamond yields would be higher, and margin-enhancing.
Campbell declined to detail the number of retrenchemnts. “We have embarked on a
Section 189 process, but the retrenchments will be substantial,’ he said. Tirisano,
which Rockwell bought in 2011, employs some 220 people.
Rockwell Diamonds has two other operating assets: Saxendrift and Klipdam which,
combined with Tirisano, yielded first-quarter production of 7,234 carats. About 80%
of this production is sold into the high quality gemstones of 2.5 carats and above.
However, the company’s strategic aim is to lift production to an ambitious 30,000
carats per quarter (10,000 carats/month) by means of bringing additional mines into
production and lifting diamond recoveries and efficiencies. The company is due to
complete a prefeasibility study into its 10-year life of mine Wouterspan project
before the calendar year-end, and recently acquired a property called Jasper, which
serves as an extension to its Saxendrift mine.
Crucially, Rockwell is relatively “cash strapped’, says Campbell. This perhaps
explains the low tolerance for non-contributing assets. Campbell closed Rockwell’s
Holpan mine last year just into his tenure as CEO. Prior to that, Rockwell endured a
difficult period of shareholder in-fighting distracting management from operations.
Just over a year in the position, Campbell said he was satisfied with progress, but
added that access to cash was critical ahead of an expected improvement in the
diamond market. Current market conditions are shaped by Eurozone economic
distress and continued signs that China’s economy is slowing (evidence by its second
quarter GDP growth of 7.8% today). There had been a 20% to 30% “drop-off’ in the
lower value diamond market, whereas the higher end was relatively inelastic.
Campbell said the company would eventually have to raise cash through shares or
debt “at some stage’, but added the company was under no obligation to set about
this immediately given the growth written into the Jasper acquisition. Net cash was
$7.3m as of end-quarter.
