Dr. John Bristow. Corporate Presentation December 2008 TSX:RDI JSE:RDI OTCBB:RDIAF

Transcription

1 Dr. John Bristow Corporate Presentation December 2008 TSX:RDI JSE:RDI OTCBB:RDIAF

2 Disclaimer This presentation includes certain statements and other information that may be deemed "forward-looking". Other than statements of historical fact all statements in this presentation that address future production, resource potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. 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 forwardlooking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, availability of capital and financing, and general economic, market or business conditions. Forward-looking statements are also based upon management s assumptions regarding the Company s future operations growth prospects, and conditions affecting the mining industry generally. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. For more information on Rockwell, Investors should review Rockwell s annual Form 20-F filing with the United States Securities and Exchange Commission and the Company's home jurisdiction filings that are available at Except to the extent required by la, the Company is under no obligations to update any forward looking statements, contained in this presentation. 2

3 Investment highlights Established Low Cost Producer and Developer 24,000 carats per annum growing to ~68,000 carats per annum by years LOM at current rate of 6.5 million tpa from 3 established mines 22 years LOM with south bank MOR properties US$3-4/t cost base Producer of Exceptionally High Value Diamonds US$1,536/carat in FY2007; US$1,754/carat in FY2008 US$2,466/carat to the end of October 2008 Positive Cashflow at Operations Revenue C$48 million; EBITDA C$7.2 million (12 months ended 28 February 2008) Sufficient expected cashflows from operations, cash on hand and debt facilities to meet expansion profile Acquirer (for Growth) Middle Orange River (MOR) acquisition completed Added new mines; pipeline of brownfields projects; doubles resource Beneficiator Beneficiation and marketing agreement with Steinmetz Diamond Group Cutting/polishing factory in Barkly West Expected to add 5-10% additional margin 3

4 High value producer of rarity, quality and value Selected examples January 2007 to present 107 carats US$ 1.07 million (US$10,000/carat) 110 carats, I/J colour US$ 555,555 (US$5,000/carat) 212 carats, Yellow US$2.44 million (US$11,500/carat) 7.28 carat Flawless Intense Pink US $1.054 million (US$145,000/carat ) carats, Fancy Yellow US$919,880 (US$12,674/carat) carat D colour US $10.3 million (US$54,300/carat ) 4

5 Investment summary Key Stock Information (as at November 24, 2008) Shares Outstanding 238 million 168 million warrants at WAEP of C$0.72 Trading Symbols TSX:RDI JSE:RDI OCTBB: RDIAF Select Financial Data (as at October 31, 2008) Cash and Equivalents C$7.3million Diamond Inventories and Supplies C$4.8 million 52 week trading range TSX C$0.67 C$0.03 Major Institutional Shareholders Pala Investments 18.5% BlackRock Financial 4.9% Peregrine Capital 4.6% QVT Financial 4.0% BAC Fund 3.9% Directors/Mgmt 7.7% 5

6 Management Highly experienced management team supported by strong Board of Directors Dr John Bristow, President & CEO Over 25 years experience, encompassing the exploration, evaluation and mining of kimberlite and alluvial diamond deposits, including 12 years with DeBeers Desmond Morgan, CFO Corporate & mining experience Hennie van Wyk, New Projects Manager Experienced alluvial miner and process plant designer Bruce Cubitt, Mining & Earth Moving Manager Ex-BHPB, experienced open cast miner Jeffrey Brenner, Diamond Marketing & Sales Rough diamond expert Glenn Norton, Mineral Resource Manager Diamond & coal mining experience 6

7 Diamond market dynamics Pre - credit crunch situation (pre-october 2008): Demand outstripping supply De Beers increased prices three times in 2008 Increasing shortage of high value (+2 carat) diamonds +2 caraters: 7% of world production by volume, 45% by value 57% of Rockwell volume and 95% of value for FY carat stones showing increasing investment interest by HNWI s Post - credit crunch situation (post-october 2008): Diamond prices softened notably; weak buying Outside tender prices 20 50% lower than previous sales Overall weakness in market Current Rockwell situation: Reducing reliance on tender Leveraging beneficiated product Managing cashflow Planned December shutdown; manage costs 152 carats, Flawless D colour US $4.3 million (US$28,000/carat ) 7

8 Rockwell historical diamond prices $4,000 $3,500 $3,000 $2,500 Significant upward trend in prices for Rockwell production $2,000 $1,500 $1,000 $500 $0 Mar- 06 Apr- 06 May- 06 Jun- 06 Jul-06 Aug- 06 Sep- 06 Oct- 06 Nov- 06 Jan- 07 Feb- 07 Mar- 07 May- 07 Jun- 07 Jul-07 Aug- 07 Oct- 07 Nov- 07 Dec- 07 Jan- 08 Feb- 08 Apr- 08 May- 08 MOR Avg Carat Value Holpan/KlipdamAvg Carat Value Total Trailing Twelve Months Avg Carat Value 8

9 Rough diamond price increases Significant segmentation exists in rough diamond market % Increase >$2,000/ct Rockwell production is primarily from alluvial mining operations 95% of revenue from >+2 ct stones >$1,200/ct $75/ct <$20/ct Middle Orange River Proto Vaal River Source: historical production and company estimates Market Average Indian Goods Cutting and polishing industry in India, south-east Asia consumes smaller size goods 9

10 Benefits of alluvial mining Alluvial mining Low capital costs (~US$25 m) Mobile plant and equipment Low operating cost (~US$3-4 per tonne) Quick start-up (~3-6 months) Kimberlite pipe mining High capex (~US$150m) Fixed plant and equipment High opex (~US$11-20 per tonne) Long lead time (+18 months) Rapid cash flow Examples TransHex Group, Gem Diamonds Ltd, Vaaldiam Resources Ltd, SDM (Angola, private) Examples Ekati, Harry Winston/Diavik Mine, Gem Diamonds Ltd., African Diamonds (AK6) 10

11 Project locations Northern Cape Province, South Africa: Excellent Infrastructure Projects located on major road/rail systems Close proximity of operations flexibility to centralize management, optimise use of equipment and human resources 11

12 Holpan and Klipdam Vaal River operations (owned 74% RDI) 12

13 Middle Orange River Operations (MOR) (owned 74% RDI) Note: Acquisition of Trans Hex Middle Orange River Operations concluded April

14 Resources Significant growth ~290% pa Holpan Klipdam Wouterspan South Bank MORO Inferred Indicated Inferred Indicated Inferred Indicated million m 3 million m 3 million m 3 million m 3 million m 3 million m 3 million tonnes million tonnes million tonnes million tonnes million tonnes million tonnes Source: NI reports filed on SEDAR Conversion of m 3 to million tonnes - Holpan and Klipdam SG = Wouterspan and the South Bank MORO SG =

15 Vaal River mines Holpan Klipdam Added screening capacity FY ,600 cts at average sales Price US$ 1,201 per carat Operating cost US$ 3.20 per tonne Q ,662 cts at average sales Price US$1,581 per carat Operating cost US$ 3.01 per tonne Added screening capacity, new highvolume scrubber and upgraded Pan-plant FY 2008 Sales Price US$ 1,230 per carat Operating cost US$ 3.20 per tonne Q ,014 cts at average sales Price US$1,216 per carat Operating cost US$3.01 per tonne 15

16 MOR strategy Short Term Optimization of existing mining fleet; deployment of surplus equipment to Saxendrift; minimised start-up capex and costs Redeployed excess employees from Wouterspan to commission and operate Saxendrift Commissioning of final recovery plant (Sept. 2008) and new wet plant at Saxendrift (November 2008) on schedule Wouterspan B equipment purchased and commissioning scheduled for Q1 CY 2009 Near Term Saxendrift to provide centralised management and final recovery from adjacent brownfield sites Modernise and add modular rotary pan plants at Niewejaarskraal with processing capacity of 350,000 tpm Medium Term Build modular rotary pan plants at Remghoote with processing capacity of 350,000 tpm 16

17 MOR mines - Wouterspan Operating since 2005 Significant Life of Mine from 77 Mt of Inferred Resource and 11 Mt Indicated Resource Expanding production through introduction of larger equipment Commission Wouterspan B plant (Q1 CY 09) to increase production from 200,000 tpm to 350,000 tpm FY ,019 cts at average sales price US$ 2,292/ct Operating cost of mine - US$ 4.22 per tonne Capex US$13.2 m Q ,267 cts at average sales price US$1,582/ct Operating cost of mine - US$4.36 per tonne 17

18 MOR mines Saxendrift (the present) Transfer of ownership April 2008 New Final recovery plant commissioned Operating 4 x Rotary-pan plant Currently producing ~60,000 tpm Approximately 1,000 cts sold year to date at average price of US$1,944 per carat Construction of new large volume Rotary-pan wetplant well advanced Commissioning November 2008 Initial capacity of 250,000 tpm increasing to 380,000 tpm long term 18

19 Saxendrift New wet rotary-pan plant Screening trommels Screened stockpile pad Feeder bins and scrubbers (x4) Scrubbers to Pans conveyors with magnetic scalpers 19

20 Saxendrift New wet rotary-pan plant 18-foot Rotary-pans x4 Reduced operating cost (fewer electrical motors + operators, lower maintenance + repairs) Stand-alone units with scrubbers and magnetic scalpers Modern electronic control circuitry with density controls Final Recovery X-ray Flowsort + Optical Sorter for large stones up to 70mm approx 400 cts) 20 tonnes per hour capacity Secure hands off facility 20

21 Beneficiation and Marketing Multi Faceted strategy to diversify marketing and sales process, reduce reliance on tenders New legislation (eg. 10% beneficiation, State Diamond Trader) reducing margins Manufacturing and marketing agreement with Steinmetz Diamond Group for selected special stones Leveraging unique diamond production; adding value Establishing cutting and polishing facility to beneficiate 2 5 carat product range Premium added to diamond sales value Expected additional 5-10% of sales value in gross margin Competitive sealed tender process Provides monthly cashflow 102 carat, Vivid Yellow 21

22 Beneficiation - Adding value Rockwell Production (rough diamonds) 72c Grade/Colour Yellow Finished Product (cut and polished) 25c vivid yellow, 4c fancy yellow 212c Yellow 102c vivid yellow, 23c fancy yellow 35c Vivid Yellow Two matching 10c vivid yellows 96c 32c 107c Fancy Yellow D color Yellow 52.05c fancy yellow 14.57c yellow 8.27c IF 3.1cD, VS c intense fancy yellow 7.19c cape yellow 46c White In factory 69c D color In factory 21c D color In factory Value added to Rockwell Sold 10% Sold 102c 50% 80% Sold 17% >50%* >40%* *Conservative estimates Note: Value created from marketing agreement with Steinmetz Diamond Group 22

23 Building Value - Update Saxendrift Achieving circa 60,000 tpm from re-commissioned existing plant First two diamond sales achieved US$1,944 per carat New high-volume Wet Rotary Pan-plant progressing well On-time and on-budget; commissioning in November 2008 New final-recovery already operational Important component of Company s expansion: additional 250,000 tpm, ramping up to 380,000 tpm long term Wouterspan Wouterspan improved production in Q Power constraints being addressed Plant commissioning planned for by CY Q increasing production from 200,000 tpm to 350,000 tpm Holpan and Klipdam Low cost operations; higher diamond prices than budgeted 189 ct white and 1.13 ct blue flawless stones from Klipdam carat D colour US $10.3 million 23

24 Building Value - Update Management Re-alignment Expansion underway with additions of new operations eg. Saxendrift and significant new project pipeline eg. Saxendrift Wet plant, Wouterspan B, other brown-fields expansions Separation of Operational and Project Management roles Hennie van Wyk, New Projects Manager Experienced alluvial miner and process plant designer Bruce Cubitt, Mining & Earth Moving Manager, recently appointed Ex-BHPB, experienced open cast miner Wage negotiations-industrial Action (July-August 2008) Positive resolution of IR matters; resumed operations 3 September 2008 Settled wage negotiations and related work stoppages 13.5% increase; neutral overall cost impact Redeployed existing employees to Saxendrift Headcount reduced from over 700 to approximately 630 in past 12 months Right-sizing of operations and services on-going 24

25 Cost management strategies Pre-October 2008, credit crunch: Focused on containing costs at all points On-going reviews of mine plans, haul-way layouts, plant locations, rehabilitation sequencing In-pit screening where feasible (particularly in the dry winter period) Dynamic stockpile management Rationalization and optimization of mining fleet 1/3 rd of Wouterspan fleet moved to Saxendrift swap Klipdam 50 tonner rigids for Saxendrift ADT fleet New processing plants High volume, modular constructions with improved efficiencies E.g. Saxendrift Wet Plant, and Wouterspan B 25

26 Cash and cost management strategies Credit crunch situation: Monitoring diamond market and tender sales on weekly basis to assess buying levels, prices, market sentiment Managing cash-flow robustly Planned December shut-down to reduce costs Undertake repairs and maintenance for January start-up Reviewing capital expenditure programmes Review of all contractual arrangements to reduce costs On-going review of profitability of individual operations Implement appropriate plan for

27 Adding Value - New projects Primary focus advanced, high-value alluvial brown-field diamond projects Middle Orange River (MOR) area E.g. Niewejaarskraal, Kwartelspan, Zwemkuil, Remhoogte 19 new prospecting permits in RSA; 15 in MOR area, 4 in Holpan and Klipdam area Field mapping and low-cost evaluation work on-going Identified additional properties and resources adjacent to Holpan and Klipdam Intention to extend LOM of these operations Maximize use of existing infrastructure Conducting geological investigations of properties Negotiating options to secure 27

28 Acquisition strategy Identify private and listed opportunities which meet following criteria: Focus on alluvial producers or near term producers not exploration companies Accretive in terms of overall value add Spread risk Country, political and regulatory risk Geological and technical risk Spread overheads and create management and operational synergies Leverage management and operational skills to achieve improvements geological control, earth moving and plant optimization, and manage costs Add production Provide expanded marketing and sales mix Focus on high value gemstones diamonds (+US$150 per carat) Enhance Corporate Structure Increase market capitalization Broaden shareholder base Increase stock liquidity 28

29 Current resources profile RESOURCES PROFILE Saxendrift & South Bank MOR Wouterspan Holpan and Klipdam Inferred Resources (million tonnes) Indicated Resources (million tonnes) Grade cpht Ave. Diamond Value (US$/carat) (FY 2008) 1, ,292 1,217 Revenue per Tonne (US$) In Situ Value ($m) With more than 160 million tonnes of inferred resource and 30 million tonnes of indicated resource, the in-situ value of resource is ~ US $1.4 billion. Rockwell has an in-situ diamond value of approximately US $1.1 billion for its 74% holding. * 1 Saxendrift sales year to date Source: NI reports filed on SEDAR except diamond value for Saxendrift and South Bank MOR which is based upon sales to date for FY 2009 Conversion of m 3 to million tonnes - Holpan and Klipdam SG = Wouterspan and the South Bank MORO SG =

30 Target production profile Carats Target Production - Carats per year by Mines 80,000 70,000 60,000 Carats 50,000 40,000 30,000 20,000 10, Holpan Klipdam Wouterspan Saxendrift/MORO FY Feb Carats 23,000 26,700 53,000 70,500 70,000 70,400 *Assumptions Additional operations at Saxendrift & South Bank Middle Orange River Operations Niewejaarskraal FY 2010 and Remhoogte FY

31 Investment summary Proven track record in developing and operating alluvial diamond mines Established producer with increasing production profile Focus on high-value alluvial diamond production New Saxendrift high-volume plant on-time, on-budget Expanding existing operations; reducing costs Beneficiation adding value Identified potential acquisition targets to meeting value enhancing criteria Proactively addressing the challenges of the credit crunch Two matching 10carat vivid yellows 31