CORPORATE UPDATE: DIAMOND VALUE MANAGEMENT

Transcription

1 WE HAVE MADE GOOD PROGRESS WITH OUR IMMEDIATE PRIORITIES TO IMPROVE PRODUCTION. IMPLEMENTATION OF NEW TECHNOLOGIES IS ON TRACK AT SAXENDRIFT AND PRODUCTION HAS STARTED AT TIRISANO. CORPORATE UPDATE: DIAMOND VALUE MANAGEMENT NOVEMBER 2011

2 FORWARD LOOKING STATEMENTS Except for statements of historical fact, this presentation release contains certain "forward-looking information" within the meaning of applicable securities law. Forwardlooking 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 and 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 annual Form 20-F filing with the United States Securities and Exchange Commission and the Company's home jurisdiction filings that are available at This presentation also uses the terms 'indicated resources' and 'inferred resources'. Rockwell Diamonds Inc. advises investors that although these terms are recognized and required by Canadian regulations (under National Instrument Standards of Disclosure for Mineral Projects), the U.S. Securities and Exchange Commission does not recognize them. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. In addition, 'inferred resources' have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except for Preliminary Assessment as defined under Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable. The securities of Rockwell being offered have not been, nor will be, registered under the U.S. Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This information does not constitute an offer or sale of securities in the United States. Prior to making any investment decision, investors should consult a professional advisor.

3 3 AGENDA HIGHLIGHTS of second quarter fiscal 2012 PROGRESS on top strategic priorities Diamond MARKET STRATEGIC progress with DIAMOND VALUE MANAGEMENT initiatives OPERATIONAL progress with DIAMOND VALUE MANAGEMENT initiatives Progress with strategic GROWTH OBJECTIVES OUTLOOK

4 HIGHLIGHTS: SECOND QUARTER FISCAL Beneficiation revenue from joint venture with Steinmetz up 64% to $2.3 million Total revenue of $9.2 million 109% INCREASE in the average diamond price to US$2,186 per carat Mine site operating COSTS DOWN 18% to $5.1 million with stable average total unit cost for all operations Gross profit of $2.7 million, a year-on-year TURNAROUND of $3.9 million NET PROFIT of $2.0 million Production decreased 47% to 3,611 carats chiefly due to the closure of Holpan NET CASH BALANCE of $14.4 million boosted by asset sales and proceeds of convertible loan and capital raising Good progress on short term targets to OPTIMIZE EXISTING OPERATIONS COMPLETION OF TIRISANO acquisition and production of the new mine ramping-up from mid October

5 5 PROGRESS: TOP STRATEGIC PRIORITIES RECAPITALIZATION ON TRACK: $7.8m raised at $0.75, no warrants or other incentives, minimizing dilution of existing shareholders ADDRESSING PRODUCTION CHALLENGES AT SAXENDRIFT: Implementation of in-field front end screen, independent puddle system and installation of bulk x-ray technology TIRISANO ACQUISITION COMPLETED AND MINE UP AND RUNNING: Improvements to address fatal flaws completed and production started ramping-up from mid October SIGNIFICANT REDUCTION IN MINING COSTS: Holpan on care and maintenance and other cost saving measures RATIONALIZING NON-PRODUCTIVE ASSETS: Non-core assets sold for $6.5m and assessing further options to rationalize assets and increase returns RESOLUTION OF BEE MATTERS: Heightened focus to address issues relating to outstanding liabilities and favourable resolution would substantially improve cash position STRENGHTENED BOARD OF DIRECTORS: Chairman: Mark Bristow Independent Director: Johan van t Hof

6 MARKET IN SHORT TERM CONSOLIDATION: ROCKWELL PRICES HAVE TRENDED UP 6 $2 200 $1 700 $1 200 $700 $200 Recession impact US $/ct Linear (US $/ct) STRONG DEMAND for bridal stones, but more conservative stance on investment stones Attendance IMPROVED at most recent FTDH tender Demand remains strong in India and China, especially HIGHER QUALITY GOODS Major producers pulling back supply to STABILIZE MARKET DTC to limit next sight allocation to $300m (down from $440m) Average price UP 35% to US$1,365 per carat in FY2011 Second quarter fiscal 2012 tender average: US$2,186 per carat Sale of parcels to State Diamond Trader

7 7 ROCKWELL CONTINUES TO PRODUCE NOTABLE STONES During the second quarter of fiscal 2012 Klipdam produced: 14 STONES exceeding 10 carats Saxendrift produced: 32 STONES weighing more than 10 carats, of which 11 stones exceeded 20 carats High quality stones sold through the Steinmetz JV: a CARAT perfect sawable; fancy yellow with high clarity stone a CARAT gem quality; clean D/E color stone a CARAT octahedral, clean, H/I colored stone a CARAT makeable, clean brown colored stone Saxendrift July 2011: 128 carat yellow and carat D color

8 8 RECENT PRODUCTION: LARGE QUANTITIES OF HIGH QUALITY STONES

9 STRATEGIC PROGRESS WITH DIAMOND VALUE MANAGEMENT INITIATIVES

10 Grade, cphc Recovered Grade, cpht 10 KNOW YOUR PLANT, PEOPLE, TECHNOLOGY Resource KNOWLEDGE MINE the Geology DIAGNOSE expected recovery grades KNOW your plant, KNOW your technology and KNOW your people SET STANDARDS and criteria, then MAINTAIN them RECONCILE diamond recoveries? Did we get what was expected? Culture of continuous MONITORING, EVALUATION and IMPROVEMENT SPLIT PLANT DESIGN to satisfy immediate Rockwell business needs and long term market driver If you can model the recovered grade variation, you can maximize it But, this requires matching people s actions to standards Grade Model Date (Months) Spot Grades Average Grade Plus Minus Cubes per Day

11 Percent per Size Fraction, % 11 A MINING/PROCESSING BUSINESS STRATEGY AN ECONOMIC APPROACH TO DIAMOND RECOVERY BUSINESS #1: Should not impede Business #2, unless there is a real market driver BUSINESS #2: The immediate basis of the company 70% 60% 50% 40% 30% 20% 10% Carats Revenue 0% Recovered Diamond Size, mm

12 OPERATIONAL PROGRESS WITH DIAMOND VALUE MANAGEMENT INITIATIVES

13 ROCKWELL OPERATIONS AND PROJECT LOCALITIES: NORTHERN CAPE AND NORTH WEST PROVINCES, SOUTH AFRICA Producing mine 2. Newly commissioned mine 3. On care and maintenance 4. Completed bulk sampling project N Botswana Zimbabwe Project hubs in historic alluvial diamond provinces; production since 1860 s and 1920 s 1:VENTERSDORP Tirisano 2 Lower Orange River Springbok Namibia Koa River Valley Prieska Douglas Middle Orange River Bloemhof Vaal River Kimberley Bloemfontein Riet River Pretoria Johannesburg Ventersdorp Lesotho Swaziland Vaal River RSA Kilometres 2:VAAL RIVER Holpan 3 + Klipdam 1 Klipdam-Extension 4 3:MIDDLE ORANGE RIVER Wouterspan 3 Saxendrift 1 Niewejaarskraal 3

14 14 ROCKWELL: GEOLOGICAL MODELS SAXENDRIFT & KLIPDAM GEOLOGY (NB. Different sources) TIRISANO GEOLOGY

15 SAXENDRIFT: DIAMOND RECOVERIES IMPROVING FOCUS ON QUALITY TONS STARTING TO BEAR FRUIT: Stable carat recoveries with a 11% reduction in production volume 90% INCREASE* IN AVERAGE PRICE PER CARAT: 1,740 carats sold at average price of US$3,186 per carat SEVERAL EXCEPTIONAL STONES SOLD: Total proceeds increased* 45% to $5.5 million ADDRESSING PRODUCTION CHALLENGES: Resolved scrubber drive failures at one of four streams in July 2011 Opened multiple mine faces Production improved despite persistent high sand content and absence of suitable front-end PROGRESS WITH PLANT UPGRADES: Fit-for-purpose in-field front end in-field screen being commissioned Implemented independent puddle system to improve performance Installation of high throughput bulk x-ray plant to concentrate and recover diamonds in a single stage, cost effective and secure manner * Year-one-year change for second quarter of fiscal 2012 ** See website for Mineral Reserves & Resources: At 28 February Estimates completed by Rockwell s Manager, Resources, G.A. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company. Reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), Marshall, an independent qualified person. Probable reserves (grade)** Indicated resources (grade)** Inferred resources (grade)** Processing capacity (m 3 /month) 4,565,400 (0.5) 1,774,600 (0.66) 5,986,000 (0.56) 130,000 Carats/month 536 Value per (US$/carat)** Life of Mine (years) 2,

16 SAXENDRIFT: NEW IN-FIELD SCREEN 16 FIT-FOR-PURPOSE IN-FIELD DABMAR BIVITEC SCREEN: 3.0m x 8.0m designed to process wet and sticky ores at the required processing rates Commissioning in process: target completion mid-november Will actively mitigate sand lense issue Capital cost $

17 SAXENDRIFT: BOUREVESTNIK X-RAY SORTERS 17 HIGH THROUGHPUT SORTER AND SINGLE PARTICLE SORTER: Concentrates and recovers diamonds in one single stage, efficient, cost effective and secure step Identifies rare Type II diamonds Commissioning by end March 2012 Capital cost $1.5m

18 TIRISANO: NOW IN COMMERCIAL PRODUCTION 18 FOCUS ON RAMPING UP TO FULL CAPACITY: Production has ramped-up to the full capacity of 90,000 m 3 MAXMISING UTLISATION OF THE MINING ASSETS: Continuous operations ( contops ) implemented since start up FATAL FLAWS RESOLVED: Relocation of Holpan s containerized recovery provides hands-off, proven recovery process Wouterspan barrel screen installed to double front end capacity as interim solution NEXT SIX MONTHS: Fine tuning mining and plant efficiencies and continuing to develop long term solutions for the front end processing Working on concept designs to increase plant s capacity ENCOURAGING QUALITY AND PRICE OF STONES RECOVERED: Historically higher grades and more consistent diamond distribution will have positive impact on production profile * Year-one-year change for second quarter of fiscal 2012 ** See website for Mineral Reserves & Resources: At 28 February Estimates completed by Rockwell s Manager, Resources, G.A. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company. Reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), Marshall, an independent qualified person. Probable reserves (grade) Indicated resources (grade) Inferred resources (grade) Processing capacity (m 3 /month) ,279,900 (2.37) 15,334,000 (2.37) 90,000 Carats/month 1,296 Value per (US$/carat) Life of Mine (years)

19 19 TIRISANO: CURRENT FRONT END ISSUE: Capacity of c.45,000m 3 per month Will struggle achieving capacity when ore is damp or wet

20 TIRISANO: NEW FRONT END 20 INTERIM SOLUTION: Front end relocated from Wouterspan (on care & maintenance) Additional 45,000m 3 per month capacity

21 TIRISANO: CONTAINERIZED RECOVERY 21 OLD RECOVERY WAS A FATAL FLAW Containerised front-end moved from Holpan Efficient and proven recovery processes Hands-off

22 TIRISANO: GENERAL PLANT AND MINING FACES 22 GEOLOGICAL MODEL AND MINE PLAN DEVELOPED: with the assistance of external consultants

23 KLIPDAM: PLAN TO EXTEND LIFE OF MINE 23 INTERIM SOLUTIONS TO ADDRESS PRODUCTION CHALLENGES: High clay content caused intermittent throughput constraints Production for quarter down 17% Short term solutions implemented Redesign of front end under consideration CONTINUED IMPROVEMENT OF AVERAGE PRICE PER CARAT: 1,456 carats sold at average value of US $1,030 per carat Improvement due to higher average stone size and stronger market INITIATIVES TO LOWER COST OF OPERATIONS: Mining migrated to Rooikoppie containing diamonds of similar grade and value Lower unit cost due to less intensive earthmoving equipment requirements Potential to increase the life of mine FOCUS ON OPTIMIZATION AND PLANT EFFICIENCIES: Development of long term solutions for front end Continue work on concept designs to increase plant s capacity * Year-one-year change for second quarter of fiscal 2012 ** See website for Mineral Reserves & Resources: At 28 February Estimates completed by Rockwell s Manager, Resources, G.A. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company. Reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), Marshall, an independent qualified person. Probable reserves (grade) Indicated resources (grade) Inferred resources (grade) Processing capacity (m 3 /month) - - 1,907,900 (1.21) 949,000 (1.21) 90,000 Carats/month 810 Value per (US$/carat) Life of Mine (years) 1,229 2

24 KLIPDAM MINING 24

25 PROGRESS WITH STRATEGIC GROWTH INITIATIVES

26 FUNDING CONSIDERATIONS 26 NET PROCEEDS OF PRIVATE PLACEMENT: $7.7m + $6.5m raised from sale of non-core assets Applied to Saxendrift and Tirisano RESOLUTION OF BEE MATTER WITH AVR prioritised and if resolved could substantially improve cash balances REVIEWING INVESTMENT OPTIONS Maximize capital allocation Evaluate timing and options to fund new projects

27 Total carats/year Volume / month (m 3 ) GROWTH PLAN: CREATE CRITICAL MASS AND SCALE Proposed 5 year volume production per month Tirisano Wouterspan Tirisano Niewejaarskraal Wouterspan Tirisano Niewejaarskraal Wouterspan Tirisano Tirisano Klipdam Klipdam Klipdam Saxendrift Saxendrift Saxendrift Saxendrift Saxendrift F2012 F2013 F2014 F2015 F Reviewing additional capital requirement to fund expansion with preference for internal cash flows Projected production based on mine plans in November 2010 preliminary assessments (Tirisano, Wouterspan and Niewejaarskraal) and prefeasibility study (Saxendrift). Refer to Saxendrift resource statement on slide 14.

28 NPV (ZAR millions) REVIEW OF INVESTMENT OPTIONS: VALUE CREATION POTENTIAL NPV / Capital Expenditure (times) R 900 Rockwell Diamonds Inc Capital Development (Bubble Size = Capital Requirement) Niewejaarskraal 10 R 800 R 700 Wouterspan 8 6 R 600 R 500 R 400 Saxendrift Extension IFS Only Tirisano Expansion 4 R R 200 R 100 Saxendrift Extension Complete Plant 0 R 0 Wouterspan Niewejaarskraal Saxendrift Tirisano Extension Expansion Resource Size m 3 (millions) Projected production based on mine plans in November 2010 preliminary assessments (Tirisano, Wouterspan and Niewejaarskraal) and prefeasibility study (Saxendrift). Refer to Saxendrift resource statement on slide 14.

29 29 DASHBOARD: OPERATIONAL STATUS PROPERTY PRODUCTION CAPITAL PROJECTS TIMING / PRIORITY STATUS Saxendrift Improving towards anticipated levels In-field screen and bulk x-ray projects Projects on track Tirisano Commissioned and in production Reviewing options to increase capacity Conceptual plans being produced Klipdam Focus on plant efficiencies in second half Minimal New mine manager appointed Wouterspan Care & maintenance Reviewing return potential Depending on funding and IRR s Niewejaarskraal Care & maintenance Reviewing return potential Depending on funding and IRR s

30 OUTLOOK FOR SECOND HALF OF FISCAL DIAMOND MARKET CONSOLIDATING: Quick recovery from current weakness unlikely due to uncertain financial markets POSITIVE LONG TERM SUPPLY: DEMAND FUNDAMENTALS INTACT: Substantial uptake of diamonds from China and India and gradual reduction in supply IMPACT OF RECENT ZAR / USD VOLATILITY: Not a significant risk as impact on input costs offset by additional revenue from diamond sales OPERATIONS FOCUSED ON MEETING PRODUCTION TARGETS IN Q3: Saxendrift starting to benefit from initiatives to improve quality of its plant processes Mining and metallurgical focus at Klipdam to unlock similar improvements Commercial production at Tirisano PURSUING FURTHER LABOUR OPTIMIZATION: Continued negotiations to introduce continuous operations with benefit of further job creation