miningmx.com] — ROCKWELL Diamonds returned to operating profitability in the six months to end-August and reduced its overall loss to C$1m (previous comparable six months – $6.6m loss).
The company made an operating profit of C$1.9m (C$4.75m loss) as revenue from rough diamond sales jumped to C$19.8m (C$9.7m) on the back of recovering rough diamond prices and improved production levels.
CEO John Bristow said the diamond market had continued its recovery to 2008 price levels in the three months to end-August, but pointed out that rough diamond prices had run well ahead of the recovery in polished prices.
He said: “We are experiencing a high rough price paid, while the price of polished stones is taking time to reach these levels.
“Ultimately, while production levels remain low compared to the highs of 2007, the price of polished stones will have to increase and meet prices paid for rough diamonds.
“Although prices for rough diamonds are back to early 2008 and late 2007 levels – without too much speculation as was experienced during 2008 – the downstream supply of diamonds is not as healthy.
“The June to August polished index was flat to showing a slight increase. Stability of rough diamond prices, as well as liquidity, is key to the continued recovery of the diamond industry.’
Bristow highlighted an apparent shift by diamond producers to “multi-pronged marketing – namely tenders and beneficiation’.
He said: “De Beers has announced that sightholders, which were previously excluded, are now allowed to bid at Diamdel tenders. This is a major shift in marketing by the (world’s) largest producer.’
Rockwell’s accumulated losses have now reached C$50m, but Bristow said the company “has sufficient working capital and reserves to maintain operations through breakeven point, and sufficient cash and working capital to fund the continuing losses until then.’
He pointed out that black economic empowerment (BEE) partner African Vanguard Resources (AVR) had failed to meet its financial obligations to Rockwell in a series of transactions.
As of end-August, AVR owed Rockwell about R22m in respect of the “Georgia’ transaction. It also owed a further R10.5m, which is contractually committed to the Van Wyk Diamond Group, as well as R33m in terms of the acquisition of a 26% stake in the Saxendrift mine.
Bristow added: “Rockwell is in ongoing discussions with AVR and, through the assistance of its legal counsel, has engaged the department of mineral resources to address the completion of the BEE participation.’
