PROGRESS UPDATE ON STRATEGY AND FUTURE PLANS JAMES CAMPBELL, CHIEF - - PowerPoint PPT Presentation
PROGRESS UPDATE ON STRATEGY AND FUTURE PLANS JAMES CAMPBELL, CHIEF EXECUTIVE OFFICER MARCH 2012 2 AGENDA UNIQUE investment proposition Corporate OVERVIEW DIAMOND MARKET fundamentals Progress with top STRATEGIC PRIORITIES CASHFLOW
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2 42.50 carat Type 2a from Saxendrift (May 2011)
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Middle Orange
flawless Sold for $230,000/ct +62% on initial rough sale price
Middle Orange
+50% on initial rough sale price
Middle Orange
Not yet sold Steinmetz Diamond Group (SDG) profit share agreement (>2.8 carat stones)
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<0.3 c/stone #
~1.2 c/stone #
~2.5 c/stone # World Diamond Average
~0.9 c/stone #
Tirisano
(North West Province, RSA)
Klipdam
(Vaal River, RSA) Saxendrift* /Wouterspan/Niewejaarskraal (Middle Orange River, RSA) Small diamonds used in lower price point and pavé jewellery Engagement rings (Bridal-range), mid to high price point jewellery Engagement rings, high price point jewellery
High-end luxury jewellery High Net Worth Individuals Investment Stones
# - Rough stone average sizes 5 * - Before increasing the bottom cut off to 5mm
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Category Volume (m3) Carats Value (USD) millions Feb 28 2011 Probable reserves 4,565,400 22,827 46.3 Indicated resources 34,787,600 675,412 489.6 Inferred resources 82,062,000 828,641 1,141.1 1,677.0
See slide 24 for for detailed 43-101 Mineral Reserves & Resources: At 28 February 2011. Estimates completed by Rockwell’s Manager, Resources, G.A. Norton, (Pr.
Reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), Marshall, an independent qualified person
Sale of parcels to State Diamond Trader
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 F2009 F2010 F2011 F2012
Saxendrift: Average quarterly price per carat
US $/ct Linear (US $/ct)
Recession impact
7 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Saxendrift Klipdam Tirisano % of carats exceeding 2 cts % of revenue exceeding 2cts
Sales and revenue statistics for +2ct rough diamonds
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A leading international diamantaire and specialist in valuation, marketing and sales of rough diamond production from alluvial deposits. Geological, mineral resource management and production experience in alluvial diamond deposits, diamond and coal exploration. Qualified person and Pr.Sci.Nat.
Group Technical Manager Glenn Norton, BSC (Hons) Diamond Marketing & Sales Manager Jeffrey Brenner
Mining and corporate experience with junior and senior mining companies with operations in SA, Australia and
mining Companies.
CFO Gerhard Jacobs, BAcc, MBA Group HR/IR Manager Richard Mhlonto, Nat Dip (HR Management & Development)
Extensive HR & Industrial Relations management experience including
initiatives as well as strategy development and implementation. Seasoned diamond executive with career spanning over 20 years at De Beers and 4 years as Managing Director of African Diamonds plc. FIMMM, C.Eng, C.Sci and Pr.Sci.Nat.
President and CEO James Campbell, BSc (Hons ) ARSM, MBA (Dunelm)
Board of Directors: Mark Bristow (Chairman) Dave Copeland Richard Linnell Willem Jacobs Sandile Zungu Johan van’t Hof >30 yrs in diamonds incl. mgt. roles at Orapa (world’s largest diamond mine) & The Oaks (De Beers’ smallest mine). Operations Manager at Pangea DiamondFields plc from 2007.
COO Michael Hunt, MSc (Advanced Chemical Engineering)
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Number of shares Shares outstanding 47,942,746 Warrants
2,121,931 Convertible Debt (~$0.56) 3,499,257 Fully Diluted 53,563,934 Top shareholders (% shares in issue) Strategic:
21.3%
8.3%
7.1% Institutional:
6.9%
3.6%
2.6%
1.6% Other:
2.6%
1.2%
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– Driving demand surge – Combined market share predicted to EQUAL US market share of 30% by 2020
– Currently represents 5% of diamond PRODUCTION and 50% of sales VALUE for producers
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Source: PolishedPrices.com Source: Deutsche Bank / Alrosa
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CORPORATE
Board of directors STRENGTHENED Tirisano ACQUISITION closed out Constructive PROGRESS with resolution of BEE matters
FINALIZATION of Midamines legacy issue
Strategic review of project opportunities for EFFECTIVE CAPITAL ALLOCATION
OPERATIONAL REORGANIZATION of senior mine MANAGEMENT teams
Production RAMP-UP COMMENCED at Tirisano after addressing fatal flaws Production STABILIZING at Saxendrift
FINANCIAL
$7.8m RAISED at $0.75 without warrants or other incentives
DISPOSAL of non-core assets generated further $6.4m
Gross PROFIT of $0.5m in Q3 (Impact of Tirisano start up and Midamines)
NET CASH holdings of $10.8m at end of Q3 TECHNOLOGY
Implementation of in-field screen at Saxendrift COMPLETED Proof of concept commissioning of bulk X-ray technology ON TRACK Relocation of CONTAINERIZED RECOVERY from Holpan (on care & maintenance) to Tirisano
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$- $5 $10 $15 $20 $25 Opening cash and cash equivalents Cash Generated by Operations Net changes in working capital Proceeds of Private Placement Proceeds of convertible bond Proceeds from sale of assets Capex: Tirisano, Saxendrift and purchase of mineral property interests Movement in reclamation deposits Other cash flows Closing cash and cash equivalents $m
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MINE PRODUCTION (m3) GRADE (carats/100m3) CASH OPERATING COST/m3 CAPITAL EXPENDITURE REVENUE/CARAT (US$) BUDGET F2012 YTD KLIPDAM At name plate capacity (90 000) Stable $7.32* $10.35 Minimal In line with F2012 YTD SAXENDRIFT Increase to 150 000 with new in- field screen Stable $8.42 $8.35 $400,000 In line with two year average TIRISANO Ramping up to 90,000m3 p.m. 06/2012 Gradual improvement to 1.8 by 06/12 $10.38** $16.84 $750,000 In line with stated prices of $700
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* Change of mining plan ** Ramp-up
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0.0 0.5 1.0 1.5 2.0 2.5 3.0 May 08 Aug 08 Nov 08 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Grade ct/100 m³
Saxendrift Recovered Grade versus Resource Grade
Mine Grade 43101 Grade Budget Grade 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Grade ct/100m³
Klipdam Recovered Grade versus Resource Grade
Mine Grade 43101 Grade Budget Grade
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Adjusted book value / Fair Market Value of Properties using discounted cashflow
Resource properties: $121.9m - $137.3m Adjusted book value: $149.5m - $165.0m
Wouterspan ($47.4m - $54.8m) Tirisano ($17.6m - $20.0m) Klipdam ($3.6m) Holpan ($281,000) Niewejaarskra al ($37.4m - $42.5m) Saxendrift ($15.5m - $16.1m) 30% 30% 40% 10 20 30 40 50 60 70
Weighted market value estimate: $62m
Adjusted book value method Guideline public company method Trading price method Additional details contained in “Additional Information”
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tax and reclamation plus cash (Excludes receivable from BEE partner of C$6.9m)
$m
20 40 60 80 100 120 140 160 180 200 Market capitalization Enterprise value Tangible Net Asset Value (NAV - Mineral property interests) Net Asset Value Value based on budget margin per carat
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Source: Company websites, ThomsonReuters 200 400 600 800 1000 1200 Diamond- corp Firestone Lucara Mountain Province Namakwa Rockwell Diamonds Stellar Trans Hex
Average price/carat sold (US$)
1 2 3 4 5 6 7 Diamond- corp Firestone Lucara Mountain Province Namakwa Rockwell Diamonds Stellar Trans Hex
Price: Tangible Book Value
0% 2% 4% 6% 8% 10% 12% 14% 16% Diamond- corp Firestone Lucara Mountain Province Namakwa Rockwell Diamonds Stellar Trans Hex
Market Cap: Resource value
$- $100 $200 $300 $400 $500 Diamond- corp Firestone Lucara Mountain Province Namakwa Rockwell Diamonds Stellar Trans Hex
Enterprise value ($m)
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Reviewing additional capital requirement to fund expansion with preference for internal cash flows
Projected production based on mine plans in November 2010 preliminary assessments (Tirisano, Wouterspan and Niewejaarskraal) and prefeasibility study (Saxendrift). Refer to Saxendrift resource statement on www.rockwelldiamonds.com 18 * Based on budgeted carat values for 2013 and 2.5% annual price increases
400 000 600 000 800 000
40 000 60 000 80 000 100 000 F2012 F2013 F2014 F2015 F2016 Volume / month (m3) Total carats / year
Production targets
Niewejaarskraal Wouterspan Tirisano Klipdam Saxendrift Total Production / month 50 100 150 200 F2012 F2013 F2014 F2015 F2016 Revenue / year ($m)
Revenue targets*
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2 4 6 8 10 12
Wouterspan Niewejaarskraal Saxendrift Extension Tirisano Expansion
NPV / Capital Expenditure (times)
19 Wouterspan Saxendrift Extension IFS Only Saxendrift Extension Complete Plant Tirisano Expansion R 0 R 100 R 200 R 300 R 400 R 500 R 600 R 700 R 800 R 900 50 100 150 NPV (ZAR millions) Resource Size m3 (millions)
Rockwell Diamonds Inc Capital Development (Bubble Size = Capital Requirement)
Niewejaarskraal Projected production based on mine plans in November 2010 preliminary assessments (Tirisano, Wouterspan and Niewejaarskraal) and prefeasibility study (Saxendrift). Refer to Saxendrift resource statement on www.rockwell diamonds.com.
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– LOCAL BENEFICIATION: 85% of diamonds in South Africa – Provided STARTUP CAPITAL and mentorship for construction and brickmaking factory
– ONE MILLION LTI FREE hour record at Saxendrift
– Total of 79 new jobs created with conversion to CONTOPS in Northern Cape
– Supporting LOCAL ORGANIZATIONS focused on under privileged children, education and feeding schemes for elderly
land is mined
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– Ramp up of TIRISANO to full production – RESOLVE issues with BEE shareholding and funding – Further progress with IMPLEMENTATION of bulk X-ray technology at Saxendrift
– Long term FUNDAMENTALS underpinned by uptake from CHINA and INDIA and REDUCING SUPPLY – PRICES and DEMAND expected to INCREASE to June 2012 – Rockwell’s BALANCE SHEET provides working capital for short to medium term plans – Ongoing REVIEW of potential CORPORATE ACTIONS for growth – Continue ADDING value through BENEFICIATION joint venture with Steinmetz – Deliver on operational priorities to start seeing FINANCIAL BENEFITS
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Except for statements of historical fact, this presentation 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
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 and 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 annual Form 20-F filing with the United States Securities and Exchange Commission www.sec.com and the Company's home jurisdiction filings that are available at www.sedar.com. This presentation also uses the terms 'indicated resources' and 'inferred resources'. Rockwell Diamonds Inc. advises investors that although these terms are recognized and required by Canadian regulations (under National Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S. Securities and Exchange Commission does not recognize them. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. In addition, 'inferred resources' have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility
inferred resource exists, or is economically or legally mineable. The securities of Rockwell being offered have not been, nor will be, registered under the U.S. Securities Act and may not be offered or sold within the United States or to,
an offer or sale of securities in the United States. Prior to making any investment decision, investors should consult a professional advisor.
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PROPERTY CATEGORY VOLUME (M3) GRADE VALUE (USD/CT) NOV 30 2010 FEB 28 2011* (CT/100M3) 43-101 FY2011 SAXENDRIFT/ KWARTELSPAN Probable* 4,859,900 4,565,400 0.5 $2,029 $2, 003 Indicated 1,774,600 NC 0.66 Inferred 5,986,000 NC 0.56 KLIPDAM Indicated 2,091,200 1,907,900 1.21 $1,049 $1,119 Inferred 949,000 NC HOLPAN Indicated 517,800 395,000 0.95 $1,229 $1,202 Inferred 527,000 NC ERF 404 Indicated 404,700 NC 0.63 $986 Inferred 127,000 NC RIETPUTS Inferred 782,000 735,000 0.76 $788 $974 WOUTERSPAN Indicated 5,025,500 NC 0.7 $2,029 Inferred 37,774,000 NC NIEWEJAARSKRAAL Inferred 20,630,000 NC 0.84 $2,029 TIRISANO** Indicated 25,279,900 NC 2.37 $606 Inferred 15,334,000 NC
Estimates done at November 30, 2010 and reconciled to February 28, 2011 by including material removed by trial mining and bulk sampling in Q4 FY2011. NC : no change Value: average value of the sales of diamonds during sampling. * Saxendrift probable mineral reserves are exclusive from the indicated mineral resources. ** Tirisano acquisition not yet complete as the mining rights have not yet been ceded to Rockwell. Rockwell also holds the Zwemkuil Project (incl. Zwemkuil, Mooidraai and Holsloot properties), which was reviewed in fiscal 2011. This is a significant exploration target, but to date there has not been sufficient work done to estimate mineral resources
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Wouterspan, Tirisano and Niewejaarskraal: 25.36% to 28.96% Klipdam, Holpan and Saxendraft: 22.36% to 24.96%
February 28, 2011
Adjusted book value method using discounted cashflow Operation Value range Fair Market Value2 Wouterspan3 $47.4m - $54.8m Tirisano3 $17.6m - $20.0m Klipdam3 $3.6m Holpan3 $281,000 Niewejaarskraal3 $37.4m - $42.5m Saxendrift3 $15.5m - $16.1m Resource properties $121.9m - $137.3m Adjusted book value4 $149.5m - $165.0m Valuation method Midpoint of fair market value ($m) Weighting Value ($m) Weighting Value ($m) Trading price method5 25.28 40% 10.11 40% 10.1 Guideline public company method6 15.80 30% 4.74 25% 3.95 Adjusted book value method 157.25 30% 47.18 35% 55.04 Total 62.00 69.10
10 and 90 days preceding the valuation date
average dollar value per enterprise value of reserves and resources to eight peer group companies