results from Rockwell Diamonds show the Toronto and JSE-listed diamond junior is grinding its way towards bottom-line profitability as production from its three alluvial mines on the Orange River is steadily ratcheted up.
According to CEO James Campbell, the quarter ended
November 30 was the sixth consecutive quarter showing growth in dollar
revenues and the second consecutive quarter showing a gross profit after
amortisation and depreciation.
Rockwell is still recording
bottom-line losses but these are coming down fast. The company reported a
total comprehensive loss for the period of $60,000 (November quarter
2012 — $7.3m loss) and a total comprehensive loss of $8.1m for the nine
months to end-November compared with a loss of $19.8m for the comparable
period of 2012.
The next critical target is reaching full
production of 100,000m³ of diamond-bearing gravels treated by the
Niewejaarskraal mine, which is "on track for completion by the end of
Mr Campbell says that is crucial because it will
take total production from Rockwell’s three mines on the middle Orange
River to 360,000m³ of gravel treated a month — at which point the
company should show a bottom-line profit.
After that, the
strategic objective is to push for a production level of 500,000m³ a
month, equivalent to 1.5-million cubic metres a quarter.
"Our production records from the middle Orange River indicate you can
expect to recover one diamond larger than 100 carats from every
1.5-million cubic metres of gravel treated.
"So, if we are
processing 1.5-million cubic metres every quarter then I would expect to
recover these stones on a more regular basis, which is going to improve
Rockwell has had a recent run of good
fortune, recovering five such stones since August with the largest
weighing in at 287 carats. That helped trigger a 60% jump in the share
price to as high as 450c during September, from which the stock has
eased to about 330c. That is still treble the 12-month low of 110c at
which Rockwell sat last May but — to put this in perspective — the
shares traded as high as R40 in 2008 before the diamond market collapsed
and Rockwell ran into a string of operating problems.
the state of the market, Mr Campbell said jewellery trading levels were
disappointing over the festive trading season with lower sales volumes
combined with some price discounting on polished diamond prices. He said
that December was traditionally a period of slow rough diamond sales,
which was then followed by increased demand in January and February.
anticipation of this, Rockwell held back an inventory of 5,590 carats
to be sold over the next two months and utilised $2.2m of its overdraft
facilities to do so. The overdraft was repaid from sales receipts last
Rockwell is also due to receive an upfront capital inflow
of R17.3m from its new black economic empowerment (BEE) partner to
replace African Vanguard Resources. Mr Campbell has declined to name the
new BEE partner until the final conditions precedent to the deal are