Rockwell increases carat production and revenue from sales by 46% and 25% respectively in second quarter ending August 31, 2013

VANCOUVER, Sept. 25, 2013 /CNW/ - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI; JSE: RDI) announced second quarter production and sales update.

The Company reported a 26% increase in second quarter volumes of gravel processed to 934,975m³, of which 627,746m³ was mined from its own Middle Orange River ("MOR") operations¹ and the balance from royalty mining contractors operating at Tirisano. Total carat production grew 46%, made up of 3,549 carats from own operations and 3,497 carats from contractors.

Total carat sales from Company properties for the quarter increased 9% to 5,623 carats at an average price of US$1,512 per carat, translating into 25% growth in total revenue to US$8.5 million compared to the previous quarter (excluding beneficiation). At Rockwell's own operations, an 84% improvement in average carat value offset the impact of lower carat sales (down 47% to 2,656 carats largely due to the sale of Klipdam) and accordingly, the Company reported steady diamond sales revenue from its own operations of US$6.6 million (excluding beneficiation). The value of sales from Tirisano mining contractors amounts to US$1.9 million, of which 12.5 % or US$236,600 accrues to the Company.

Production at Saxendrift, comprising traditional Saxendrift and the recently acquired, higher grade Saxendrift Extension gravels, achieved a 41% grade improvement and consistent revenue from rough diamond sales. Sales from the new Saxendrift Hill Complex mine produced an average value of US$3,636 per carat resulting from the sale of several high valued diamonds.

The results are a product of the Company's strategy, of focussing on its MOR operations, which boast higher diamond values. The second quarter performance also demonstrates that the royalty mining contractor initiative, as an interim measure to deliver value whilst assessing the future options of some of our non-core assets, has been a good one.

Commenting on second quarter production and sales James Campbell, CEO and President said:

"We are pleased with our results for the second quarter which reflect the benefits of our transition to focusing on the MOR region and that our royalty mining contractor strategy is gaining momentum as an alternate business initiative when it comes to non-core assets. We reported a 26% increase in total production volumes and a 46% improvement in carat production from all Company properties. US dollar denominated revenue from diamond sales (excluding beneficiation) is up 25% to US$8.5 million, showing a fifth consecutive quarterly increase.

"Although production volumes from our own operations (Saxendrift, Saxendrift Extension and Saxendrift Hill Complex) are down only 16% to 627,746m³ for the quarter including the loss of volume from the sale of Klipdam and closure of Tirisano, the grade at Saxendrift improved 41% after integrating the Saxendrift Extension deposit into Saxendrift's mine plan. We produced 3,549 carats, 25% lower than last year, though with an 84% increase in average price per carat, compensating for lower carat production. Saxendrift Hill Complex came on stream, making up for part of the production shortfall. Once Niewejaarskraal gets to full production, we are positioned to close the remaining production gap, taking us to a total monthly processing capacity of 360,000m³ by the end of 2013 an on track towards our mid-term objective of 500,000m³."

"The average price per carat from own operations increased 84% to US$2,488, providing further validation of our MOR focus. This mitigated the impact of lower carat sales during the production ramp up of our two new mines in the region. Accordingly, we report steady revenue from own operations of US$6.6 million for the second quarter."

"Our royalty mining contracts continue to gain momentum and are performing well. These processed 307,229m³ during the quarter and recovered 3,497 carats. Our 12.5% royalty from these diamond sales amounted to US$236,600. Production volumes are set to increase further in the third quarter as a fifth contract comes on stream at Tirisano and our 50,000m³ per month agreement at Zwemkuil in the MOR starts operations."

Second quarter operational update:

Volume and carat production for the Company's operational mines for the quarter ended August 31, 2013 was as follows:

Diamond sales and revenue for the Company's operations for the quarter ended August 31, 2013 is as follows:

Saxendrift operations:

• Quarterly volumes of gravel processed at the Saxendrift Mine, including a combination of gravels from the traditional mining area and the Saxendrift Extension, decreased by 3% to 462,777m³. The average grade of the material processed increased to 0.55 carats / 100m³ compared to 0.39 carats / 100m³ a year ago due to accessing the higher grade Saxendrift Extension resource. As a result, carat production increased 35% to 2,543 carats, compared to 1,879 carats in the quarter ended August 31, 2012.
• Notable stones recovered at the Saxendrift Mine processing plant (including Saxendrift and Saxendrift Extension gravels) included 42 stones exceeding 10 carats, with the five largest stones weighing 49.45 carats, 56.85 carats, 57,55 carats, 75.70 carats and 116.30 carats.
• Carats sold from the Saxendrift operation increased 14% to 1,937 carats at an average price of US$2,260 per carat, reporting a 3% increase in revenue from diamond sales to US$4.4 million. The 10% decline in average price per carat, was due to the product mix that was sold during the quarter.

Saxendrift Hill Complex:

• The Saxendrift Hill Complex ("SHC") reached its nameplate capacity of 100,000m³ per month in August 2013. During the quarter, 831 carats were recovered from 164,969m³ of gravel processed. These included gravels from the Saxendrift Extension project that were processed at SHC, in parallel with Saxendrift's traditional pan plant to confirm the effectiveness of the Bulk X-ray technology compared to traditional Dense Media Separation ("DMS") and pan plants. The grade achieved at the Bulk X-ray plant was at least 40% higher than the conventional plant, including two rough diamonds exceeding 30 carats.
• Sales from the Saxendrift Hill Complex amounted to 555 carats at an average price of US$3,636 per carat. Revenue from diamond sales from Saxendrift Hill Complex for the period totalled US$2.0 million, exceeding the capital investment cost.
• Notable stones recovered at the Saxendrift Mine processing plant (including Saxendrift Hill Complex and Saxendrift Extension gravels) during the second quarter included 16 stones exceeding 10 carats, including two in the 30 to 40 carat range.

Niewejaarskraal:

• Production commissioning of the first phase of the new plant started during July 2013, some ten weeks after the project was approved. The new plant incorporates elements of the existing DMS plant that had been on care and maintenance at Niewejaarskraal since 2007. Total commissioning volumes in July and August 2013 amounted to 48,512m³, which was behind plan as a result of commissioning processes that were subsequently resolved. The plant did, however, achieve instantaneous nameplate capacity of 200 tph. A total of 175 carats were recovered during this period.
• During this production ramp up phase, reported grades were lower than anticipated due to a greater variability in the Rooikoppie particle size distribution than was outlined in the previous operators' sampling reports. However, the plant efficiency was confirmed by reprocessing plant tailings through the Bulk X-ray system. The next phase of commissioning, entailing a mix of Palaeo and Rooikoppie gravels, commenced in the third week of August when the first blast was carried out to access the main Palaeo deposit that is expected to be the mainstay of operations at Niewejaarskraal.
• The plant was handed over to the operational team on September 1, 2013 and is on track to be operating at nameplate production by the end of 2013.
• Sales of the first diamonds produced at Niewejaarskraal amounted to 111 carats with total revenue of $184,979 at an average price of US$1,666 per carat.
• Notable stones recovered at Niewejaarskraal during the second quarter included three stones exceeding 10 carats.

Royalty Mining Contractors

• The royalty mining strategy continued to show validating results during the quarter with four royalty mining contractors operating on the Tirisano property, and a fifth contract on track to commence operations during September 2013. In addition, a contract with projected monthly volumes of 50,000m³ started at Rockwell's Zwemkuil property in the Middle Orange River region in the second quarter.
• A total of 3,497 carats were recovered from 307,229m³ of gravel processed from all contacts. Of these, 2,967 carats were sold, generating total proceeds of $1.9 million of which 12.5% or US$236,600 accrues to Rockwell.

Subsequent event:

On September 17, 2013, the Company announced that it had recovered four rough diamonds each exceeding 100 carats in weight from its operations in the MOR region in the previous three weeks, of which two are typical MOR yellow stones and the others of a poorer quality.

Two stones weighing 116 carats (as included in section on Saxendrift operations above) and 138 carats were recovered at the Saxendrift processing plant from gravels originating from the Saxendrift Extension pit. In addition, a 126-carat stone and a 169-carat stone were recovered from a mining area that has recently been opened up at the Saxendrift Hill Complex ("SHC"). The recently commissioned SHC plant utilizes Bourevestnik X-ray technology in both the concentration and recovery areas.

These stones will be sold into the beneficiation joint venture with Steinmetz Diamonds at market value. Rockwell will also participate equally in the value uplift once these stones have been polished and sold.

About Rockwell Diamonds:

Rockwell is engaged in the business of operating and developing alluvial diamond deposits, with a goal to become a mid-tier diamond production company. The Company's flagship mine is the Saxendrift Mine, in the Middle Orange River. It has recently built two new internally funded mines in the Middle Orange river region, namely the Saxendrift Hill Complex, which came into production in the first quarter of fiscal 2014 and the Niewejaarskraal Mine which is being commissioned. Rockwell also has a development project and a pipeline of earlier stage properties with future development potential. The operations are based on high throughput processing capability and Saxendrift has among the lowest unit costs in the industry as a result of implementing fit for purpose technologies.

The Company is known for producing large, high quality gemstone comprising a major portion of its diamond recoveries that is enhanced through a beneficiation joint venture that enables it to participate in the profits on the sale of the polished diamonds.

Rockwell also evaluates merger and acquisition opportunities which have the potential to expand its mineral resources and production profile and to provide accretive value to the Company.

No regulatory authority has approved or disapproved the information contained in this news release.

Forward Looking Statements

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

Factors that could cause actual results to differ materially from those in forward-looking statements include uncertainties and costs related to exploration and development activities, such as those related to determining whether mineral resources exist on a property; uncertainties related to expected production rates, timing of production and cash and total costs of production and milling; uncertainties related to the ability to obtain necessary licenses, permits, electricity, surface rights and title for development projects; operating and technical difficulties in connection with mining development activities; uncertainties related to the accuracy of our mineral resource estimates and our estimates of future production and future cash and total costs of production and diminishing quantities or grades if mineral resources; uncertainties related to unexpected judicial or regulatory procedures or changes in, and the effects of, the laws, regulations and government policies affecting our mining operations; changes in general economic conditions, the financial markets and the demand and market price for mineral commodities such as diesel fuel, steel, concrete, electricity, and other forms of energy, mining equipment, and fluctuations in exchange rates, particularly with respect to the value of the US dollar, Canadian dollar and South African Rand; changes in accounting policies and methods that we use to report our financial condition, including uncertainties associated with critical accounting assumptions and estimates; environmental issues and liabilities associated with mining and processing; geopolitical uncertainty and political and economic instability in countries in which we operate; and labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in markets in which we operate our mines, or environmental hazards, industrial accidents or other events or occurrences, including third party interference that interrupt operation of our mines or development projects.

For further information on Rockwell, Investors should review Rockwell's home jurisdiction filings that are available at www.sedar.com.

¹ The Company's own operations for the second quarter comprise gravels mined at Saxendrift, Saxendrift Extension and Saxendrift Hill Complex and processed at Saxendrift and Saxendrift Hill Complex. Going forward these will include Niewejaarskraal that is currently in production ramp up.

SOURCE Rockwell Diamonds Inc.