PROGRESS UPDATE ON STRATEGY AND FUTURE PLANS JAMES CAMPBELL JUNE 2012
2 STOP PRESS! STEINMETZ FOREVERMARK JUBILEE PINK • • Saxendrift diamond selected for display at the TOWER OF LONDON as part of Queens Diamond Jubilee • The cushion cut, pink-brown diamonds weighing 35.60 carats, was cut from a 179.60 carat rough diamond that was sold into the Company’s BENEFICIATION joint venture with Steinmetz Diamond Group (“SDG” ) FOCUS ON DIAMOND VALUE MANAGEMENT
3 AGENDA • WHO IS ROCKWELL? – Beneficiation and Rough Diamond Production – Operations and Resources – Team First diamonds recovered from bulk x-ray machine at Saxendrift – Capital structure and shareholding • PROGRESS UPDATE – Performance overview – Strategic review – Progress with turnaround – Investments and Technology Projects – Valuation Gap WAY FORWARD • – Operational targets – Growth objectives – Diamond sector fundamentals – Priorities and outlook FOCUS ON DIAMOND VALUE MANAGEMENT
4 WHO IS ROCKWELL?
5 BENEFICIATION JOINT VENTURE: SIGNIFICANT VALUE ADD BENEFICIATION ROUGH POLISHED VALUE ADD 105 ct Type II 35 ct D color internally + 62 % on initial rough flawless A, Middle sale price Sold for $230,000/ct Orange 212 ct yellow, + 50 % on initial rough 102 ct vivid yellow Middle Orange sale price 128 ct yellow, 81 ct vivid yellow Not yet sold Middle Orange Steinmetz Diamond Group (SDG) profit share agreement (>2.8 carat stones) • MARKET RELATED PRICES for diamonds sold into JV + 50% profit share • Realized revenue of $7.8m in F2012 • ± 25% of revenue from beneficiation, expected to increase FOCUS ON DIAMOND VALUE MANAGEMENT
6 ROCKWELL ROUGH DIAMOND PRODUCTION: AVERAGE US$/CARAT World Diamond Average Small diamonds used in lower $90/carat price point and pavé jewellery <0.3 c/stone # Tirisano Engagement rings (Bridal-range), (North West Province, RSA) mid to high price point jewellery $700/carat ~0.9 c/stone # Klipdam (Vaal River, RSA) Engagement rings, high price point $1,100 /carat jewellery ~1.2 c/stone # Saxendrift* /Wouterspan/Niewejaarskraal High-end luxury jewellery (Middle Orange River, RSA) High Net Worth Individuals $2,000/carat Investment Stones ~2.5 c/stone # # - Rough stone average sizes * - Before increasing the bottom cut off to 5mm FOCUS ON DIAMOND VALUE MANAGEMENT
7 ROCKWELL OPERATIONS AND PROJECT LOCALITIES: NORTHERN CAPE AND NORTH WEST PROVINCES, SOUTH AFRICA FOCUS ON DIAMOND VALUE MANAGEMENT
8 EXTENSIVE DEPOSITS TO BENEFIT FROM DIAMOND FUNDAMENTALS Volume (m 3 ) See www.rockwelldiamonds.com for detailed 43-101 Mineral Carats Value (USD) Category Reserves & Resources: At 28 February 2011. millions Feb 28 2011 Estimates completed by Rockwell’s Manager, Resources, G.A. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company. Probable reserves 4,565,400 22,827 46.3 Reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), Marshall, an independent qualified person Indicated resources 34,787,600 675,412 489.6 1,141.1 Inferred resources 82,062,000 828,641 1,677.0 Processing capacity 43-101 value Operation Carats per month Life of Mine (years) (m 3 p.m. ) (US$ per carat) Middle Orange River: 150,000 750 2,029 5 Saxendrift Vaal River: Klipdam : 90,000 Klipdam : 850 Klipdam : 1,229 Klipdam : 2 Holpan* and Klipdam Ventersdorp: 90,000 1,400 606 18 Tirisano FOCUS ON DIAMOND VALUE MANAGEMENT
9 LEADERSHIP TEAM WITH CREDENTIALS TO DELIVER VALUE Board of Directors: Group Technical Mark Bristow (Chairman) CFO Manager Dave Copeland Gerhard Jacobs, Glenn Norton, BAcc, MBA Richard Linnell BSC (Hons) Willem Jacobs Sandile Zungu Mining and corporate experience with Geological, mineral resource Johan van’t Hof management and production junior and senior mining companies with Stephen Dietrich experience in alluvial diamond deposits, operations in SA, Australia and Canada. Knowledge of public listed mining diamond and coal exploration. Qualified person and Pr.Sci.Nat. Companies. President and CEO COO Diamond Marketing & Sales James Campbell, Michael Hunt, Manager BSc (Hons ) ARSM, MSc (Advanced Chemical Jeffrey Brenner MBA (Dunelm) Engineering) >30 yrs in diamonds incl. mgt. roles at Seasoned diamond executive with A leading international diamantaire and Orapa (world’s largest diamond mine) & career spanning over 20 years at De specialist in valuation, marketing and The Oaks (De Beers’ smallest mine). Beers and 4 years as Managing sales of rough diamond production from Operations Manager at Pangea Director of African Diamonds plc. DiamondFields plc from 2007. alluvial deposits. FIMMM, C.Eng, C.Sci and Pr.Sci.Nat. Group HR/IR Manager Corporate Development Richard Mhlonto, Stéphanie Leclercq Nat Dip (HR Management BSc, CFA Dr Kurt Petersen, & Development) Ph.D. (Stellenbosch) Extensive HR & Industrial Relations >12 yrs in investor relations and management experience including corporate development. Worked as a Expert in economic diamond metallurgy. organizational and structural design Contracted to Rockwell for fiscal 2012. sell side analyst and in-house IRO initiatives as well as strategy across industry sectors. development and implementation. FOCUS ON DIAMOND VALUE MANAGEMENT
10 CAPITAL STRUCTURE AND SHAREHOLDING Top shareholders (% shares in issue) Number of shares Strategic: Shares outstanding 47,942,746 • Daboll (Steinmetz) 21.3% • Godia Capital 8.3% Warrants - • Middle East Investors 7.1% Options ($0.90-9.45) 2,121,931 Institutional: Convertible Debt (~$0.56) 3,499,257 Conus Partners 6.9% • Fully Diluted 53,563,934 • Earth Resources (ERIG) 3.6% • Craton Capital 2.6% • Wells Capital 1.6% Other: Etruscan 2.6% • • Mark Bristow 1.2% FOCUS ON DIAMOND VALUE MANAGEMENT
PROGRESS UPDATE
12 FISCAL 2012 PERFORMANCE OVERVIEW Substantial progress with REPOSITIONING of Rockwell by new management • Beneficiation continues to add value: 64% INCREASE in beneficiation revenues to $7.8m • Saxendrift performance trending up: Direct result of DIAMOND VALUE MANAGEMENT strategy • – 26% INCREASE in rough diamond sales to US$17.5m with 22% increase in average carat value • Long term production asset BROUGHT ON STREAM : Tirisano mine ramp up making progress – One time cost of ramp up of $6.7m charged to earnings • Operating profit of $7.3m: Mining costs DOWN 4% despite impact of Tirisano costs Net loss of $13.7m: Impact of STRATEGIC DECISIONS place Rockwell on a SOLID FOOTING • with cleaner balance sheet – Flow through to financials as mines continue to improve production with lower unit costs – Midamines settlement and associated costs ($1.5m) and asset impairment ($4.9m) CONTOPS implemented in January 2012 at Saxendrift and Klipdam • • Net cash balances of $9.9M preserved to fund growth Investments positioned Rockwell to deliver further IMPROVEMENTS and pursue GROWTH OPPORTUNITIES • in fiscal 2013 FOCUS ON DIAMOND VALUE MANAGEMENT
13 STRATEGIC REVIEW CATALYZED CORPORATE TURNAROUND • STRATEGIC REVIEW initiated after management changes in December 2010 To achieve key CORPORATE OBJECTIVE : increasing annual production of • high-quality gemstones to 120,000 carats in 5 yrs • TURNAROUND commenced with appointment of new management team in June 2011 – CEO + COO with >50 years joint diamond experience – DIAMOND VALUE MANAGEMENT : Brought focus on quality and embedding new work culture throughout operations Comprehensive OVERHAUL of business focused on • – Optimizing the productive mines to deliver better returns – Driving down costs – Improving metallurgical processes – Focus on recovery of diamonds as part of diamond value management • Next phase: LEVERAGE PRODUCTION PROFILE by developing asset inventory + possible M&A opportunities FOCUS ON DIAMOND VALUE MANAGEMENT
14 PROGRESS ON STRATEGIC REVIEW • Understanding of GEOLOGY found to be rigorous with NI 43 101 reports on all properties Production issues in plant environment addressed through increased focus on DIAMOND PROCESSING • METALLURGY • SAXENDRIFT : Completion of new FIT FOR PURPOSE in field screen and bulk x-ray pilot project – ON SCHEDULE : Delivering positive recovery performance and results – New process technologies: BLUEPRINT for future mine development KLIPDAM : Economics for remaining LOM improved • – Mine plan adjusted to Rooikoppie with less intense earthmoving requirements TIRISANO : Ramp up in progress • – Short term impact on profitability: $6.7m = Full operating and ramp up costs expensed • HOLPAN : Put on care and maintenance in May 2011 – Was delivering marginal results and reaching end of LOM – Options to bring this asset to account under consideration FOCUS ON DIAMOND VALUE MANAGEMENT
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