[miningmx.com] — ROCKWELL Diamonds held net cash of C$14.4m at the end of August after managing to almost break even in the six months to end-August (six months to end-August 2010: C$3.2m loss).
At end-August 2010 net cash on hand had amounted to just C$1.3m. The improvement in Rockwell’s liquidity reflects the sale of surplus equipment which brought in C$6.4m, plus the scaled-down fund raising programme implemented by new CEO James Campbell which raised C$7.8m.
Campbell told Miningmx on Friday the funds now on hand would be used to complete the work on the first phase of the Tirisano mine and also to install the new plant equipment needed at Saxendrift, which included bulk X-ray equipment.
According to the Rockwell interim report, the Tirisano plant is in an advanced state of commissioning with production planned to start during October.
At Saxendrift, diamond recoveries “have improved and are moving towards the potential production levels which were initially estimated for the mine”.
Once production from both these mines was running consistently to plan, Campbell said Rockwell would look at the next expansion projects and that may require Rockwell to raise external capital once more.
“We will ascertain which will be the most value accretive project for Rockwell – the phase two expansion of Tirisano or the development of Wouterspan,” said Campbell. “We would look to make that decision during the first quarter of next year.”
A factor which could have a huge impact on Rockwell’s funding situation would be reaching a settlement with BEE partner African Vanguard Resources (AVR) over the R52m which AVR owes Rockwell.
Campbell flagged this as a top priority for the company in a strategic review released in mid-September when he said that “getting those outstanding funds paid over by AVR is now at the top of my priority list”.
AVR executive Sandile Zungu had told the Rockwell board in late 2009 that AVR “was unable to make outstanding payments to complete its financial obligations”.
Asked for an update on this Campbell said “I am working closely with Sandile on the issue and making positive progress. I hope to conclude the matter very shortly but I cannot give you a time line.”
Turning to the diamond market, Campbell said Rockwell “had anticipated the short-term price consolidation that occurred in August 2011 and products were not sold at a discount to drive sales.
“Given the economic outlook, a quick recovery is unlikely. However, the long-term supply and demand fundamentals, driven by substantial uptake from China and India and a gradual reduction in supply, should continue to support prices.”
He added rough diamond prices had reached all-time highs in July before correcting between 10% and 15% which took them back to price levels that rule during April/May this year.
Rockwell’s primary listing is on the TSX where the stock rose 5% to C$0.58 when the results were released in Canada on Thursday, but that’s still well below the 12-month high of C$1.05.
