Klaus are you still holding ?

By: Liezel Hill

9th September 2010

Updated 6 hours ago

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TORONTO (miningweekly.com) – Vancouver-based Rockwell Diamonds, which mines high-value gems from alluvial mines in South Africa, will start up two additional operations over the next 18 months or so, in an effort to boost production levels and add more consistency to output and revenue.

The company currently produces around 2 500 and 3 000 ct/m, but expects a significant bump up in production next year.

“We really need to grow that, to become a bigger, more profitable company,” CEO John Bristow said in an interview in Toronto.

“Our business is all about creating critical mass and scale.”

Rockwell is in the process of buying a 74% stake in the Tirisano project, in South Africa's Ventersdorp region, and will accelerate development and commissioning at the operation as soon as all the legalities have been sorted out.

The company is waiting for approval of the mineral rights transfer, from South Africa's Department of Mineral Resources, which it expects in the next couple of months. Bristow said the recent freeze on prospecting licences in the country will not affect the process.

The idea is to move quickly on Tirisano because although the diamonds are lower value, the high-grade resource will help improve the company's carat production consistency.

Rockwell's existing Northern Cape operations – the Holpan, Klipdam and Saxendrift mines - turn up large, valuable stones but can make revenue flows difficult to predict.

The company will add spare equipment from its Northern Cape operations to Tirisano, and expects to spend about $2,5-million to $3-million to reconstruct and recommission the plant there.

“We want to have about 1 500 extra carats per month by our financial year end (end February) out of Tirisano,” Bristow said.

The next step up in production will come from Rockwell's mothballed Wouterspan mine, back in the Northern Cape.

The company is re-engineering the plant at Wouterspan to increase volumes and lowe costs but opted to delay the project and bring Tirisano forward instead, given that the revenue from the two operations will likely be similar but the price tag for Tirisano is much lower.

Precommissioning at the Wouterspan plant, which will cost about $14-million, should begin around June 2011, and the operation start off at some 800 ct/m, Bristow said.

The Wouterspan resource, while lower grade and therefore less predictable than Tirisano, contains much higher-value stones.

“It's top end, it's $2 000/ct, really exceptional stuff,” Bristow said.

In the longer term, Rockwell is targeting output of 10 000 ct/m, which it aims to achieve in the next five or six years by developing its own properties.

The company will look at expansions at both Wouterspan and Tirisano, and also plans to build a new mine at Niewejaarskraal -also exceptionally high value stones - in the Middle Orange River.

MARKET

The market for Rockwell's rough diamonds, which fell off sharply in late 2008, has essentially recovered to pre-downturn levels, said marketing and sales manager Jeffrey Brenner.
Buyers of rough diamonds still have an issue getting credit from banks though, in the wake of the financial crisis, and cash deals are happening more and more regularly, he commented.

China and India remain key to the rebound in demand and prices for rough diamonds, and although there have been come improvements in the US, credit remains an issue for rough diamond processors.

Rockwell has forecast an average realised price of around $1 500/ct on average for its diamonds in the long term, and Bristow commented that the estimate looks “spot on” for now