Rockwell's board approves plan to reduce Klipdam Mine's operating cost structure and improve performance

VANCOUVER, Oct. 31, 2012 /CNW/ - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI; JSE: RDI;) announces a restructuring of the Klipdam Mine operations aimed at reducing the operating costs and improving its overall performance.

While the remaining mine life of Klipdam Mine is three years (in terms of currently defined resources) and the mine has a long and profitable history of operations, over the past two years its financial performance has been negatively impacted by high unit costs, as well as poor earthmoving and plant availabilities. A number of management interventions have taken place, including the appointment of several mine managers and changing the mine plan to incorporate extraction of more paleaochannel gravels as well as various changes to the processing plant. Although Klipdam has recently produced sporadic monthly positive cash flows, its cumulative loss making performance has persisted, impacting on the overall performance of the Company.

Management has over the last year actively evaluated a number of alternatives to maximize the economic value of this asset, culminating in a multi-faceted rightsizing proposal that has been approved by the board of directors. The management team will be restructured, and in-house mining will be replaced by the appointment of a reputable mining contractor. Although the changeover to a contract mining operation will entail retrenchments, the impact could be reduced as the contract miner will require local skills.

Through a transparent tender process, Rockwell concluded a three-year contract mining agreement with CML Operations, a privately-owned contract miner that was established in 2000 and has worked in a number of different commodities across the industry spectrum from junior miners to blue chip companies. In addition to the mining contract, a sale agreement has also been entered into to divest of Klipdam's earthmoving fleet at book value over a two-year period. This will further reduce the cost base while the mining contract should lead to higher mining efficiencies and thus lower unit costs.

Minor adjustments to the processing plant will also form part of the right sizing plan, but the overall monthly capacity of the mine will remain unchanged at 100,000m³, providing sufficient resource for the contract mining term.

"The appointment of a contract miner at Rockwell represents a step change in our operating model. This significant development should enable us to focus on our core competencies, being the identification and proving of quality diamond resources and the concomitant recovery and marketing of high value, gem quality diamonds. Going forward, a similar approach will be adopted at the Saxendrift Hill Mine which is currently under construction. We are particularly excited with this development in the mining environment, complementing the new technologies that we have recently successfully implemented in the processing environment at our operations.  All this provides Rockwell with a blueprint for our future operations." explained James Campbell, CEO of Rockwell Diamonds.

Mr Campbell concluded: "Leveraging the company's balance sheet through the sale of Klipdam's earth moving equipment will also provide additional cash flow advantages over and above the expected efficiencies planned through contract mining and we look forward to partnering with CML Operations in this strategic approach to Rockwell's operations."

The Company has also announced the resignation of Michael Hunt, Chief Operating Officer ("COO") with effect from October 28, 2012. The board of directors and management team thank him for his contributions during his tenure. There are no plans to replace the COO role in the short-term. The mine managers and senior project manager will report directly to the CEO with the balance of the COO's role being allocated among Rockwell's Executive Management team.

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 has three existing operations, which it is progressively optimizing, two development projects and a pipeline of earlier stage properties with future development potential.

Rockwell also evaluates merger and acquisition opportunities which have the potential to expand its mineral resources and production profile and 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 of 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.

SOURCE Rockwell Diamonds Inc.