VANCOUVER, June 25, 2015 /CNW/ - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI; JSE: RDI) announces its quarterly production and sales update for the three months ended May 31, 2015:

Currency values are presented in Canadian dollars, unless otherwise indicated.

Salient features

• The acquisition of Remhoogte/Holsloot Project and its associated plant and equipment in MOR has been closed: Rockwell assumed control on May 28, 2015, and grades and volumes have been on plan for the first four weeks of operation.
• Rockwell's focus is now on rebuilding the production profile: Rationalization of existing Middle Orange River ("MOR") operations is underway, redeploying assets to newly acquired operations and expediting work on development projects.
• Volumes of gravel processed down 15% at Middle Orange River ("MOR") operations:
  • Saxendrift volumes (including Saxendrift Hill Complex ("SHC") gravels) were up 11%, led by improved plant and mining fleet efficiencies;
  • offset by 72% reduction in volumes at Niewejaarskraal ("NJK") following suspension of operations pending an optimization study of the resource and processing plant.
• Saxendrift carat production up 9% from better volumes with lower grade of 0.48 cphm3.
• MOR carat sales up 3% year-on-year to 3,068 carats. MOR diamond sales (excluding beneficiation) down 13% to US$5.4 million due largely to the mix of goods between the operations, and the timing of sales. Total sales (excluding beneficiation) down 24% to US$6.7 million due to less goods from royalty contractor miners after sale of Tirisano.
• Average carat price up 9% from Company-owned properties, to US$1,432 per carat.
• Inventory of 467 carats (including the remaining royalty contract miners' inventory) carried over into second quarter of fiscal 2016.

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

"The last quarter was very challenging as we managed the closure of some of our operations and worked to complete the Bondeo 140 cc transaction. The key operational metrics of our existing operations in the MOR were down in Q1, as mining at Saxendrift approached the end of its economic life and funding constraints limited capacity at NJK. At Saxendrift, which also processed gravels from SHC, volumes mined and processed increased 30% and 11% respectively but carat production was down 17%. We are now planning for a reduced operation of 130,000m3 per month (from 220,000m3 per month) for the remaining life of mine. Also, in order to stem the losses at NJK, we suspended operations whilst we review the geology and research opportunities to further optimize the processing plant.

"We took over the Remhoogte / Holsloot ("RH/HS") Project from May 28, 2015 where the first three days' production made a nominal Q1 contribution. We have adopted a conservative approach to the roll-out of our integration plan and expect to steadily ramp up the throughput and further rationalize the various business into one operational structure over the current quarter. The grades and volumes processed at the RH/HS Project have been in line with expectations.

"Our team is also focused on advancing our Lanyonvale and Wouterspan development projects with the objective of replacing Saxendrift's production as it reaches the end of its economic life and further increasing our production profile.

"We are also finalizing our plan of action to raise equity funding to repay the bridging loan provided by Diacore and our Chairman, Mark Bristow, that facilitated the closure of the acquisition. Having successfully assumed control of these new operations, we have significantly de-risked the financing aspect of the transaction. We believe that these new projects, together with our exciting development projects, present potential investors with an attractive entry point."

PRODUCTION REVIEW

Volume and carat production for total Company owned properties to May 31, 2015 were as follows:

Additional information: Refer to Appendix 1: Detailed production data

• Volumes of gravel processed were down 30% from the prior year, related to the suspension of operations at NJK and closure of SHC, as well as the disposal of Tirisano. This had a corresponding impact on carat production, together with a decline in grade as Tirisano had higher grades at lower per carat average values.
• Saxendrift: The volume of gravel processed was up 46%, including material sourced from SHC. The renewal of the earthmoving ("EMV") fleet in 2014 and optimization of the processing plant delivered sustained benefits allowing processing synergy between the two mining pits into one plant. The reported grade for gravels processed at Saxendrift was 0.48 cphm3 compared to 0.64 cphm3 a year ago but this was up from 0.32 cphm3 in the previous quarter (Q4 F2015). Although carat production declined 17% from the prior year, this was 24% higher quarter on quarter (Q4 F2015 to Q1 F2016), as Saxendrift nears the end of its economic resources, Notable stones recovered during the quarter included 20 stones exceeding 20 carats with four in the 50 to 100 carat range.
• Niewejaarskraal: Mining activities were suspended at the property in April 2015 in order to allow for work to be undertaken on the geological model and plant optimization. As a result, volumes of gravel mined and processed declined 74% and 72% respectively. Having suspended operations, a Section 189 restructuring process is under way.
• Remhoogte/Holsloot ("RH/HS"): First quarter production includes three days' production from RH/HS, as Rockwell took over operations from May 28, 2015. To ensure the seamless integration and roll out of Rockwell's MOR operating model, operations commenced at a monthly throughput of 90,000m3, with a plan to increase this after the integration is completed. The first two processing plants have been in successful operation since takeover, with the third coming into production in mid-June 2015. Volumes and grades achieved since taking over the newly acquired properties have been in line with the historic results.
• Royalty contractor mining: On March 30, 2015, the Company announced the sale of all its interest in Etruscan Diamonds for $6.3 million (ZAR 60 million), which holds the Tirisano Property, to a consortium of royalty mining contractors who immediately took over the operations. Accordingly volumes of gravel processed were down 56% with a 66% reduction in carat production.

SALES REVIEW

Diamond sales for total Company owned-properties to May 31, 2015 were as follows:

Additional information: Refer to Appendix 1: Detailed sales data

• Saxendrift: Diamond sales declined 9% to US$4.3 million (including US$1.6 million from SHC gravels processed at Saxendrift). A total of 2,383 carats were sold (including 1,162 carats from SHC gravels), up 3% year on year, and down 21% from the previous quarter (Q4) as a result of a lower opening inventory at the start of Q1, and the sale of two high value +100 carat stones in Q4 F2015. This corresponds to an average value per carat of US$1,815, down 11% year on year.
• Niewejaarskraal: Diamond sales were down 29% to US$1.1 million for the quarter. The number of carats sold rose 5%, while the average price per carat realized was 33% lower than a year ago at US$1,619 per carat.
• Royalty mining contractors: As a result of the sale of the Tirisano property at the end of March, Contractors' sales were down 57% in carat terms while the average price realized per carat was up 16% to US$781. Accordingly, the value of sales halved to US$1.3 million, of which US$156,444 in royalties accrued to Rockwell.

Rockwell has engaged Dundee Capital Markets to assist it in connection with its expected equity financing for repayment of the bridging loan.

Appendix 1: Volumes and carat production for the Company's owned mines and its royalty mining contractors for the three months ended May 31, 2015 were as follows:

Appendix 2: Sales for each of the Company's own mines and its royalty mining contractors for the three months ended May 31, 2015 were as follows:

* Contractors' mining" refers to independent royalty contractors processing gravel for their own risk and reward on Rockwell owned mineral properties. Carats recovered are then sold through the Company's tender process. The Company retains the responsibility for diamond security and sales and recognize 100% of the revenue on sale. The contractual 87.5% of the sales value, payable to the contractor, is recognized as production costs in the statement of profit and loss.

** Contractors' carats" refers to independent royalty contractors processing gravel for their own risk and reward on Rockwell owned mineral properties. Carats recovered are then sold through the Company's tender process. The Company retains the responsibility for diamond security and sales and recognize 100% of the revenue on sale. The contractual 87.5% of the sales value, payable to the contractor, is recognized as production costs in the statement of profit and loss.

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. Rockwell 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 the lowest unit costs in the industry as a result of implementing state-of-the-art technologies.

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

Rockwell also evaluates consolidation 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.

SOURCE Rockwell Diamonds Inc.