Rockwell Diamonds (RDI-T) has seen some improvements in its first quarter of fiscal 2014 after refocusing on its Middle Orange River diamond projects in South Africa’s Northern Cape Province, with revenue soaring 31% to US$6.6 million, excluding contractors and beneficiation income.
The South African diamond producer determined to improve its bottom line sold its unprofitable Klipdam mine for US$2.7 million this March and placed its Tirisano mine on care and maintenance at the end of 2012. However, contract mining is ongoing at Tirisano.
With those two mines out of the way, it’s transitioning its efforts to the Saxendrift mine and its newly commissioned Saxendrift Hill complex in the Middle Orange River.
During the period ended May 31, 2013, Rockwell produced 2,840 ct from 656,313 m3 of gravel, excluding production from royalty contractors. This compares to the same period in fiscal 2013 where it generated 6,116 ct from 808,468 m3, representing a 54% decline in ct and a 19% drop in processing volume.
On a consolidated basis, including contractors, total diamond production dropped 33% to 4,824 ct, while volume processed increased 11% to 893,833 m3 from the year earlier.
Given the lower production, largely resulting from the Klipdam sale and the reduced mining at Tirisano, Rockwell saw carats sold from its own operations drop 38% to 3,257 ct from 5,229 ct in the comparable quarter.
Despite the shortfall in carats, the sale of several large stones helped more than double the average price per carat to US$2,018 per carat from US$962 per carat earlier, driving up revenue 31% to US$6.6 million from US$5 million.
On a consolidated basis, including contract mining, diamond sales were 4,987 ct averaging US$1,534 per carat, with total revenue coming in at US$7.6 million. This compares to 6,234 total carats averaging US$944 per carat for US$5.9 million, a year ago. That translates to total revenue increasing 29% despite sales dropping 20%.
During the period, Rockwell discovered 44 high quality gems exceeding 10 ct from its operations. Thirty of those stones came from the Saxendrift mine, with the three largest weighing 52.91 ct, 59.50 ct and 72.41 ct. It adds the Saxendrift Hill complex generated four diamonds larger than 10 ct, including a 53.16-ct stone.
“These stones were channelled into the company’s beneficiation joint venture with Steinmetz Diamonds (SD), which delivers value-added future revenues to Rockwell for stones larger than 2.8 ct that have been polished and sold by SD,” the company explains.
Commenting on the quarterly results, London-based analyst Ryan Long at Northland Capital Partners says the “production figures were positive as Rockwell implemented its strategy of refocusing on its Middle Orange River projects.”
The producer also has several other development projects in the region, including Niewejaarskraal, due to come on-line soon.
“The Saxendrift Hill mine is performing within our FY14 expectations and with the Niewejaarskraal mine expected to be at full production within three months, Rockwell Diamonds is making positive progress and gaining traction,” Long adds. He has a “buy” on the stock and price target of 36¢.
On the quarterly results, Rockwell dropped nearly 6% to close July 8 at 17¢. It has a 52-week range of 11¢ to 44¢ and a market capitalization of $8.3 million.
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