[miningmx.com] — Canadian-based Rockwell Diamonds on Monday reported quarter-on-quarter revenue growth of 44% to Can $16.4m for the three months ended November 2010, underpinned by the strong recovery in diamond prices.
The average price achieved in the third quarter of fiscal 2011 was US$1 566 per carat compared to US$1 048 per carat in the previous three month period.
Rockwell reported an operating profit of Can $1.8m in the quarter under review compared to an operating loss of Can $614 000 in the second quarter.
Rockwell is focused on the mining and development of alluvial diamond deposits that yield high value gemstones. During the third fiscal quarter of 2011, it continued to operate three mines – Holpan, Klipdam and Saxendrift – and a bulk sampling evaluation programme on the Klipdam Extension property, which is near to the Klipdam operation. All of these operations are located in the Northern Cape Province area of South Africa.
On a fiscal year-to-date basis, both carat production and prices received have increased. In the nine months to November 2010, Rockwell produced 22,519 carats of diamonds compared to 19,920 carats produced during the same period in the previous year.
Four tender sales of rough diamonds have been held and regular sales of special diamonds exceeding 10 carats were sold for beneficiation.
Rockwell said it continued to experience a positive trend in prices for its better quality stones, particularly for diamonds with good color and clarity. The average price achieved over the nine months of fiscal 2011 is US$1 345 per carat, a significant increase from the US$969 per carat received in the previous year.
Rockwell has an excellent pipeline of other alluvial diamond projects, and progressed with assessing the potential of the advanced-stage projects for development. It also continues to consider merger and acquisition opportunities in order to expand its mineral resources, and add to its production profile.
During the third quarter of fiscal 2011, Rockwell recovered eight large gemstones from its Holpan, Klipdam and Saxendrift operations, bringing the total number of plus 50-carat stones recovered in its current fiscal year to nineteen.
In addition to recovering several high quality white and fancy yellow coloured gemstones, it also produced an 83-carat sawable diamond, with a slight yellow tint with a small spot, an 84-carat industrial quality diamond, a 63-carat sawable, white diamond with a few spots throughout the stone, a 50-carat makeable shape, clean D color diamond and a 72-carat makeable shape, clean H colour diamond.
These stones were sold into the company’s joint venture with Steinmetz Diamond Group. Once manufactured and sold as polished goods, they will provide additional profit share revenue to the company.
Rockwell said the recovery of the international diamond market gained momentum with prices continuing to trend towards 2008 levels and jewellery retail sales have been higher than expectations of major retailers. These sales will support a reduction in polished inventory and, consequently, could fuel the trade of rough diamonds.
The price recovery of rough diamonds has outpaced polished stones, as a result of high polished inventory levels. However, polished prices improved in November 2010, particularly in the 3- to 4-carat range, and creating optimism that the fundamentals are in place for polished stone prices to close the gap with rough diamonds.
The improved prices of rough diamonds have contributed to the improving performance Rockwell which is increasing production volumes to meet perceived shortages in the secondary market.
Early in fiscal 2011, Rockwell announced that it had embarked on a process to purchase 74% of Etruscan Diamonds’ Blue Gum diamond operation in the Ventersdorp region of South Africa, for an amount not exceeding R33.5m payable in Rockwell shares.
The Blue Gum Project hosts the Tirisano alluvial diamond deposit. According to an October 2009 estimate, the mineral resources comprise 25 million cubic meters (indicated) with a grade of 2.37 carats/100 cubic meters and 15 million cubic meters (inferred) with a grade of 2.37 carats/100 cubic meter.
With its 0.9 carat average stone size and consistent grades, the mine’s production is ideally suited to the bridal market and is expected to help create more regular quarterly production volumes for the company.
Completion of the acquisition is subject to the South African mining ministry consent, which is well advanced, securities regulatory approvals (including TSX) and electric power negotiations. The company is also making excellent progress with the engineering and fabrication of a new, low-cost processing plant and implementation of a new mine plan. Completion is targeted for early fiscal 2012.
David Copeland, Chairperson of Rockwell Diamonds, said underpinned by its portfolio of three operational alluvial diamond mines as well as a strong pipeline of advanced alluvial diamond projects for future development, Rockwell is well positioned to benefit from the continued recovery in the diamond market.
“The company also continues to leverage its low cost operations by optimising and increasing the production capacity of its mines to deliver sustainable production growth and unit cost benefits in line with its long term growth objectives,” he said.
