Rockwell streamlines its corporate structure, returns to Wouterspan, bolsters processing capacity at Holsloot and Remhoogte and looks to future value opportunities

VANCOUVER, April 25, 2016 /CNW/ - Rockwell Diamonds Inc. ("Rockwell" or the "Company") (TSX: RDI; JSE: RDI) announces its quarterly production and sales update for the three months ended February 29, 2016:

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

Salient features

• Strategy - Rockwell continues to pursue its medium term target to process 500,000m³ of gravel per month in the Middle Orange River ("MOR"). The imminent end of Company directed mining at Saxendrift has necessitated that an official restructuring process be initiated in terms of Section 189 of the South African Labour Relations Act. The approved recommissioning of operations at Wouterspan is expected to absorb a large proportion of the Saxendrift workforce and equipment. The construction and commissioning of additional in-field screening capacity at the Remhoogte - Holsloot Complex ("RHC") is on track and are designed to increase processing capacity at RHC up to 180,000m³ of gravel per month.
• Volumes – MOR gravel processed was 1% down quarter-on-quarter due to lower production volumes at RHC and Saxendrift during the rainy season and over the December closure. These were chiefly offset by higher contractor production volumes. Gravels processed were 40% down year-on-year owing to the changed operational profile, with new production from RHC only partly compensating for the drop in volumes following the sale of Tirisano, the suspension of activities at Niewejaarskraal and the depletion of resources at Saxendrift.
• Grade – overall, grades were up both quarter-on-quarter and year-on-year. RHC recorded significantly higher grades of 1.12 cphm³, compared to 0.64 cphm³ in the previous quarter, but on slightly lower volumes.
• MOR carat sales were up 22% quarter-on-quarter to 4,925 carats, and the value of these goods increased 34% to US$7.1 million (excluding beneficiation).
• Average carat price realized from the Company's MOR projects improved by 9% quarter-on-quarter, to US$1,448 per carat.
• Rough diamond inventory - 490 carats (including royalty contract miners' inventory) were carried over into the first quarter of fiscal year 2017.
• Operational focus remains on addressing throughput bottlenecks and a review of mining efficiencies, costs and reliability of the fleet.
• Safety – Rockwell continues to strive for zero harm on all of its operations. At the end of the fourth quarter the Company had achieved 379,162 lost time injury free hours ("LTIFH") at its MOR operations.

STRATEGIC REVIEW

During the fourth quarter of fiscal year 2016 the Company implemented a number of the decisions that had arisen from the strategic and operational review of the business conducted in late 2015. Specifically, the following steps have been taken:

• Saxendrift operations – Company directed operations continue to wind down; a change in the operational parameters has allowed closure to be postponed beyond the planned end of February to May 2016.
• Saxendrift royalty mining contracts - the second of the three-year royalty mining contracts entered into by the Company commenced post February 2016. The Company is assessing further royalty proposals to continue to extract further value from the Saxendrift property. All diamonds recovered by royalty miners at Saxendrift will be sold by the Company through its sales system and 10% of gross sales will be retained by the Company as a royalty.
• Start-up of Wouterspan - the recommissioning of Wouterspan and redeployment of existing processing and mining equipment from other operations began early in 2017FY Q1 as planned. Work on the construction of the processing plant is on schedule to deliver a plant and IFS capable of processing 200,000m³ per month by September 2016, with ramp-up commencing late May 2016. A second phase, to further increase the plant throughput to 400,000 m³, is under consideration.
• Exploration is advancing on the neighbouring properties surrounding Wouterspan, where 4,300 hectares have been mapped, 1,700 pits have been dug and a further potential 2,200 pits will be dug.
• Detailed pitting and drilling to outline the gravel extent on Remhoogte and Holsloot continues.
• Closure of Head Office - Rockwell's Johannesburg corporate office has been closed, staffing reduced and key senior Company executives have relocated to the MOR on a full-time basis.
• Corporate structure - operational reporting structures have been streamlined; mine management is now directly accountable for all mine operations, reporting to the CEO who is based full-time in the MOR.

The Company-wide Section 189 consultation process has come to an end early in Q1 FY2017, with formal notices soon to be served to affected employees. Every effort has been made to redeploy employees wherever possible and mitigate the impact of retrenchments.

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

"After a very difficult operating period the fourth quarter performance showed positive signs of recovery in spite of the continued overall weakness in global diamond pricing. MOR carat sales were down 42% year-on-year, but encouragingly 22% higher than in the third quarter at 4,925 carats. The value of MOR sales was up 34% on the previous quarter at US$7.1 million but down 45% on the equivalent quarter last year. The team at Saxendrift have done well to extend the operations there.

"The improvement in operating performance comes on the back of a period of lower than expected grades and overall sales values from Holsloot and Remhoogte. Following the acquisition of the two operations and in spite of the constraints that continue to limit our ability to invest, we were able to construct and commission two in-field screening facilities at Holsloot and Remhoogte, which along with the implementation of our revised EMV strategy should increase throughput capability to a sustainable 180,000m³ per month. The recommissioning of a 200,000m³ operation at Wouterspan, which is making good progress, is another significant achievement which in time will more than replace Saxendrift and absorb many of the skills and equipment from there as well.

As we strive for a safe and sustainable monthly processing target of 500,000m³, our search for new value opportunities continues, with exploration activities gaining momentum during the quarter. The recent streamlining of corporate structures is expected to deliver tangible cost saving benefits in the short term. Albeit challenging, the restructuring decision was one which we felt compelled to take in order to deliver greater value to our stakeholders."

PRODUCTION REVIEW

Volume and carat production for total Company owned properties to February 29, 2016 were as follows:

Refer to Appendix 1 for additional information

• RHC: This recently acquired operation contributed to a 25% grade improvement in the MOR. Fourth quarter volumes processed were down 7% from the third quarter, while grade improved by 75% to 1.12 cphm³. A total of 2,854 carats were recovered in the quarter (including 12 plus 20-carat stones). An average stone size of 4.17 ct/stn was achieved at a bottom cut-off of 5 mm.
• Saxendrift: The volume of gravel processed was down 5% from the third quarter, whilst the reported grade of 0.33 cphm³ was down 18% from 0.40 cphm³ in the third quarter. Quarterly carat production dropped by 22% to 1,584 carats. Notable recoveries included 9 plus 20-carat stones. An average stone size of 4.69ct/stn was achieved at 5mm bottom cut-off.
• Royalty contractor mining: A total of 276 carats were recovered in Q4 by royalty mining contractors processing Wouterspan recovery tailings and Saxendrift BHC tailings. Recoveries featured 3 stones above 20 carats, including a 73-carat stone.

SALES REVIEW

Diamond sales for total Company-owned properties to February 29, 2016 were as follows:

Refer to Appendix 2 for additional information

• Saxendrift: Diamond sales declined 71% year-on-year to US$2.6 million. A total of 1,820 carats were sold, down 9% quarter-on-quarter, and corresponding to an average value per carat of US$1,456, up 39% from the third quarter. The substantial value increase can be ascribed to the change in composition of the middlings, with better quality gravels being mined.
• RHC: Diamond sales amounted to US$4.3 million for the quarter from the sale of 2,912 carats. The recorded average value per carat was US$1,475 per carat, down 6% from the third quarter. This remains below historical values due to a combination of the processing of sub-threshold volumes for the recovery of larger diamonds, as well as lower global diamond prices.

Appendix 1:

Volumes and carat production for the Company's owned mines and its royalty mining contractors for the three months ended February 29, 2016 were as follows:

Appendix 2: Sales for each of the Company's own mines and its royalty mining contractors for the three months ended February 29, 2016 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 recognises 100% of the revenue on sale. The contractual 89.5% of the sales value, payable to the contractor, is recognised 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 recognises 100% of the revenue on sale. The contractual 89.5% of the sales value, payable to the contractor, is recognised 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 Company's 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 has a reputation for producing large, high quality gemstones comprising a major portion of its diamond recoveries, which are enhanced through a beneficiation joint venture enabling it to participate in the profits in the downstream sale of the polished diamonds.

Rockwell also evaluates consolidation opportunities that 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.