Rockwell Announces Results for First Quarter of Fiscal 2012

VANCOUVER, Aug. 11, 2011 /CNW/ --
VANCOUVER, Aug. 11, 2011 /CNW/ - Rockwell Diamonds Inc. ('Rockwell' or
the 'Company') (TSX:RDI) (JSE:RDI) (OTCBB:RDIAF) announces results for
the three months ended May 31, 2011.

Highlights:

    --  Beneficiation revenue from joint venture with Steinmetz trebled
        to $943,842
    --  Stable total revenue of $8.5 million
    --  Continued diamond price strength with average price increasing
        marginally to US$1,631 per carat
    --  19% reduction in general and administration expenses
    --  Gross profit of $0.5 million and operating loss of $1.2 million
    --  Production decreased 40% to 4,428 carats due to unseasonal rain
    --  Net cash inflow from operating activities of $1.9 million, a
        year-on-year turnaround of $3.0 million
    --  Net cash balance of $3.0 million after capital investments of
        $2.0 million
    --  Focus on optimizing existing operations and prioritizing
        initiatives to commission pipeline of high potential projects
    --  Executive team further bolstered with new CEO, COO and
        additional diamond metallurgy skills
    --  Finalization of Section 11 cession for Tirisano by Department
        of Mineral Resources (DMR) post quarter end

Financial Overview

(Currency values are presented in Canadian dollars unless otherwise
indicated.)

Rockwell posted an improved financial performance for the first quarter
of fiscal 2012. The general and administrative expenses declined by 19%
to $1.8 million (Q1 2011: $2.2 million) and the Company continued to
generate cash as reflected by the net cash inflow from operating
activities of $1.9 million (Q1 2011: net cash outflow of $1.0 million).
Rockwell preserved its net cash balances at $3.0 million, after making
capital investments of $2.2 million at the Tirisano project.

The Company delivered stable revenue of $8.5 million for the quarter,
underpinned by diamond prices which continued to strengthen. However,
revenue growth was limited by lower inventories available for sale
during the quarter as well as disappointing production due to legacy
issues at the operations which were exacerbated by the unseasonably
long rainy season. Carats sold in the first quarter decreased 3%
year-on-year to 4,779 at a marginally higher average price of US$1,631
per carat (Q1 2011: US$1,611 per carat). The beneficiation joint
venture continued to grow during the quarter, generating revenue of
$943,842 (Q1 2011: $289,010).

The Company reported a gross profit for the quarter of $502,716 (Q1
2011: $2.5 million). An operating loss of $1.2 million compares to an
operating profit of $329,776 in the comparable period of the previous
fiscal year, mainly due to the $2.9 million inventory movement recorded
in 2010.

The Company produced 4,428 carats (Q1 2011: 7,368 carats). This
year-on-year decrease of 40% is the result of the rainy season, which
extended well into the second quarter, and production issues that
persisted at Saxendrift, all of which are being addressed with the
diamond value management strategy. The closure of the Holpan operation
in May 2011 also had an impact.

With current assets amounting to $12.4 million and current liabilities
of $9.0 million, the Company's current ratio improved to 1.13 (May 31,
2010: 0.74).

Operational Overview

 _____________________________________________________________________
|         |            Production    |        Sales and inventories   |
|_________|__________________________|________________________________|
|         |        |        | Average|         |        |             |
|         |        |        | grade  |  Sales  | Average|             |
|         | Volume | Carats |(carats |         | value  | Inventories |
|         |(m(3))  |        |   /    |(carats) | (US$ / |  (carats)   |
|         |        |        | 100 m  |         | carat) |             |
|         |        |        |  (3))  |         |        |             |
|_________|________|________|________|_________|________|_____________|
|Q1 2012  |593,164 |  4,428 |   0.75 |   4,779 |  1,631 |       706   |
|_________|________|________|________|_________|________|_____________|
|Year-year|   -22% |   -40% |   -23% |    -3%  |    1%  |      -84%   |
|change   |        |        |        |         |        |             |
|_________|________|________|________|_________|________|_____________|

The production of the Company decreased by 22% to 593,164 cubic metres
(May 31, 2010: 756,476 cubic metres) which was below internal targets.
The decline was due to the closure of operations at Holpan, high levels
of precipitation which extended beyond the normal rainy season and
impacted overall productivity. Volume production at the Saxendrift
operation was stable for the quarter.

The Company continued to focus on reducing mining costs across its
operations, but unit costs were impacted by the lower volumes. The
average operating cash cost for the Company's productive operations was
US$10.48 per cubic metre.

Holpan and Klipdam

At the time that the Holpan mine was placed on care and maintenance in
May 2011, a process to consolidate its resources with those of Klipdam
was initiated to extend the remaining combined life of mine. Processing
at the Holpan DMS plant was immediately stopped, the plant was sold
and, where possible, the staff was redeployed to other local mining
sites.

Mining and processing efficiencies were impacted by the high clay
content in the Rooikoppie gravel related to the prolonged rainy reason.
Material for the Klipdam plant was primarily sourced from the palaeo
channel, where mitigation measures to address the impact of higher
rainfall have started to pay off. However, processing of damp gravels
continued to impact the plant processes.

Looking forward into the second quarter, Klipdam has begun to focus on
the processing of quality material and the efficient recovery of
diamonds under the leadership of new management team in support of the
diamond value management approach.

Saxendrift

Production volumes at Saxendrift were maintained but the persistence of
sand lenses impacted efficiencies in the recovery of diamonds. Although
the recovered grade declined by 42%, the mine continued to generate
high quality stones as reflected in the average value per carat that
increased by 10% to US$2,686.

The in-pit desanding plant continued to be ineffective and, based on the
findings of an independent review of the mine's processing plant, the
Board approved the replacement of the current vibrating screen with
fit-for-purpose technology which should enable the processing of wet
and sticky ores to converge towards the required processing rates.
Other initiatives are also being evaluated to improve plant efficiency.

Progress on Tirisano acquisition

The last conditions precedent for the Tirisano acquisition have been
fulfilled. The senior debt which was provided by the Industrial
Development Corporation was restructured in July 2011 and the Section
11 cession approval from the DMR was received early in August 2011.
Rockwell is now in a position to complete the transaction and take
effective ownership of the mining rights.

A plant review was undertaken at Tirisano, resulting in recommendations
to improve the processing plant which is currently under construction.
The commissioning schedule was modified and the first two production
streams of the plant will now go into production at the end of the
third quarter of 2011 ramping up to a monthly capacity of 90,000 cubic
metres.

Our metallurgists are currently reviewing the flow diagrams for the new
front end and the Company plans to complete construction early in
fiscal 2013, depending on the availability of capital. The remaining
two lines will be redesigned to implement processing technologies which
support Rockwell's diamond value management strategy, commencing within
three months of production commencing.

Diamond Market

The industry is currently characterized by strong consumer demand for
diamonds which is accelerating price increases of both polished and
rough stones. Initially prices for small diamonds accelerated more
quickly following the 2008 market downturn but larger sizes have
recently caught up. The strength of the market was recently confirmed
with De Beers' latest market allocation that occurred in the second
week of May when prices increased by 15% across the board.

With respect to Rockwell's product, prices have continued to improve in
calendar 2011, although the rate of increases did not match the levels
experienced at the end of 2010. Overall prices increased 5% at the most
recent sale. Demand in specific categories of stones has started to
gather momentum as these are increasingly perceived as offering value
for money. Rockwell has a natural price hedge on its production of
larger diamonds which are sold into the Steinmetz Diamond Group
beneficiation joint venture.

Strategy Overview

During the quarter, Rockwell focused on entrenching the programmes
identified in an earlier strategic review to increase the production
profile. The top goals are to optimize the Company's productive mines
in order to deliver better returns by continuing to drive down unit
costs and to sustainably enhance the metallurgical processes to
increase the recovery of diamonds and, therefore, revenue.

With regard to making investments to increase its production profile,
the new management team has reviewed its investment priorities.
Rockwell will complete the implementation of new in-field screens at
the Saxendrift operation and the Tirisano mine project before embarking
on its plans to develop the Wouterspan and Niewejaarskraal mines. Both
of these properties have extensive mineral deposits which have
historically been mined with recoveries similar to those at Saxendrift,
in terms of size, quality and average price per carat. New high volume
processing plants are planned, incorporating the latest technologies in
diamond recovery that have been shown to be significantly more
efficient than traditional DMS and pan plant configurations. The timing
of these new developments will be predicated on the availability of
funding with a preference for using internal cashflow; however, these
may need to be supplemented by external capital.

The strategic review also included an investigation to ensure that all
equipment and properties were being fully utilized. Three major assets
that were not generating adequate returns have been sold post
quarter-end for a total of $6.5 million. The proceeds from these sales
have been allocated to the new capital projects and will supplement
other capital currently being raised. This reduces the total quantity
of external funds required and limits dilution to the immediate benefit
of all shareholders.

In relation to enhancing capital allocation in the Company, Rockwell
continues to review all aspects of the business to ensure that its
assets are optimally utilized. This could potentially include further
sales of underutilized assets.

Recapitalization Plan

In June, the Company announced a strategic refinancing plan including a
$2 million convertible bridge loan from Daboll Consultants Ltd., an
affiliate of the Steinmetz Diamond Group. This was the first step in
the planned recapitalization whereby the Company is raising capital in
a combination of potential private, shareholder and public placements
to make the required investments to increase the production profile to
10,000 carats per month within five years. The proceeds from the
placement will be invested in plant improvements at Saxendrift, the
ongoing development of the Tirisano mine as well as preliminary work on
a new plant at Wouterspan.

Daboll Consultants Ltd also subscribed for shares amounting to $5
million as part of the current private placement at a price of $0.75
per share. The combined annual general and special shareholders'
meeting to approve the transaction is scheduled for September 9, 2011.

Share consolidation

On July 11, 2011, a consolidation of the authorized and issued ordinary
share capital of Rockwell became effective on the basis of 1 share for
every 15 shares held. The consolidation was aimed at reducing the large
number of issued and unissued shares in Rockwell and increasing the
price per share at which ordinary shares in Rockwell are traded on the
TSX and the JSE Limited.

Outlook

Although carat production in June and July 2011 was disappointing, the
strong production of diamonds in the last two weeks should enable the
Company's performance for the second quarter to at least match the
results for the same period in fiscal 2011.

In particular a number of exceptionally large, high quality stones
including three diamonds weighing 180, 128 and 94 carats as well as
several stones of between 20 and 50 carats have recently been recovered
at Saxendrift. This should enable the mine to deliver on its budget for
the quarter. At Klipdam, a process to optimize volume throughputs to
the plant has begun and there are early indications that it will lead
to improved diamond recovery.

Inflationary pressure on mining expenses, particularly in relation to
fuel, power and labor, is an area which Rockwell is monitoring closely
in addition to its overhead expenses in order to achieve further cost
reductions. The efficiency initiatives encompassing the diamond value
management approach are being aggressively implemented at the
operations and are expected to start paying off in the third quarter of
fiscal 2012.

Another critical aspect of the Company's turnaround at Saxendrift and
Klipdam is the proposed introduction of continuous operations at these
mines and management continues to negotiate with the DMR and relevant
unions in this regard.

The fundamentals for the diamond market remain strong, underpinned by
growing demand from China and India. While prices increased by some 50%
in the calendar year to date, the Company anticipates that the market
could see more normalized increases as it enters a short period of
consolidation. Nevertheless, with the recovery of several exception
diamonds in the second quarter, the Company anticipates strong revenues
from its beneficiation joint venture arrangement.

Commenting on Rockwell Diamonds, Mr. James Campbell, CEO and president
of Rockwell Diamonds said:

'The results for the first quarter demonstrate that although production
was under pressure, the underlying financial health of Rockwell
continued to improve. This is evidenced by the 19% reduction in
overhead costs, the positive cash inflows from operations and the fact
that we maintained our net cash balances at $3.0 million after making
further investments to increase our future production. In the last
eight weeks, we have taken decisive action to address the areas of
underperformance in our operations. I believe that as a result of these
actions, we will start to see the further financial benefits from
improved efficiencies and recoveries.'

'We have the makings of a successful mid-tier diamond mining company.
Having invested significant time and effort to fully understand our
resources, we recently bolstered our diamond metallurgy skills to make
sure that we leverage the full value of these resources. Our pipeline
of high potential projects can be leveraged to deliver our targeted
monthly production of 10,000 carats within five years. Diamond value
management underscores all our activities, and this philosophy extends
to all our capital investments. Our first priority will be to
commission the Tirisano mine and implement an effective front-end
screen at Saxendrift. Once these have been fully bedded down, we will
turn our attention to securing the required capital resources and
constructing the processing plants at Wouterspan and Niewejaarskraal,
deploying the latest proven technologies to maximize the value created
from these properties.'

Conference Call:

Rockwell will host a telephone conference call on Friday, August 12 at
09:00 a.m. Eastern Time (3:00 p.m. Johannesburg) to discuss these
results. The conference call may be accessed as follows:

 ____________________________________________________________
|Country                              |Access Number         |
|_____________________________________|______________________|
|Canada (Toll-Free)                   |1 866 605 3852        |
|_____________________________________|______________________|
|USA (Toll-Free)                      |1 800 860 2442        |
|_____________________________________|______________________|
|UK (Toll-Free)                       |0 800 917 7042        |
|_____________________________________|______________________|
|South Africa (Toll-Free)             |0 800 200 648         |
|_____________________________________|______________________|
|Other Countries (Intl Toll)          | 27 11 535 3600       |
|_____________________________________|______________________|

A transcript of the audio webcast will be available on the Company's
website: www.rockwelldiamonds.com. The conference call will be archived for later playback until midnight
(ET) August 15, 2011 and can be accessed by dialing the relevant number
in the table below and using the pass code 17768#.

 _______________________________________________________________
|Country                              |Access Number            |
|_____________________________________|_________________________|
|South Africa (Telkom)                |011 305 2030             |
|_____________________________________|_________________________|
|USA and Canada (Toll)                |1 412 317 0088           |
|_____________________________________|_________________________|
|Other Countries (Intl Toll)          | 27 11 305 2030          |
|_____________________________________|_________________________|
|UK (Toll-Free)                       |0 808 234 6771           |
|_____________________________________|_________________________|

For further details, see the Rockwell's complete financial results and
Management Discussion and Analysis posted on the website and on the
Company's profile at www.sedar.com. These include additional details on production, sales and revenues for
the quarter, as well as comparative results for fiscal 2010.

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 mining
company.  The Company has three existing operations, which it is
progressively optimising, two development projects and a pipeline of
other projects with future development potential. Rockwell is also at
an advanced stage of completing the acquisition of an additional
development property.

Rockwell continually evaluates merger and acquisition opportunities
which have the potential to expand its mineral resources and to develop
additional production that would 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 and 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
annual Form 20-F filing with the United States Securities and Exchange
Commission www.sec.gov and the Company's home jurisdiction filings that are available at www.sedar.com.

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on Rockwell and its operations in South Africa, please contact