Miner juggles debt and growth

ROCKWELL Diamonds faces the tough balancing act of paying down $20m in debt while tending to its growth ambitions in a cash-constrained environment.

Rockwell’s share price has almost halved, falling on Wednesday to R1.06 from R2 on trade of just 1,682 shares, giving it a market capitalisation of R57.8m, less than quarter of its debt of $20.2m, or R264.6m.

Rockwell mines alluvial diamonds in an area called the Middle Orange River near Prieska in the Northern Cape and recently bought a fresh deposit called the Remhoogte Holsloot Complex to underpin and grow production.

Remhoogte throughput was raised from 90,000m³ to 130,000m³ a month by the end of the August quarter and the intention is to further raise capacity to 200,000m³ in the next six months.

The intention is to extract more large diamonds to feed into a beneficiation pipeline that was an important source of revenue in the August quarter and one that allowed Rockwell to repay a $2m convertible loan note, which would have been dilutive for shareholders.

Rockwell tapped into its future revenue streams in the beneficiation pipeline by selling forward $6m worth of diamonds yet to be cut and polished. Under its beneficiation agreement, Rockwell sells good-quality rough diamonds and then benefits from sharing the profits on the sale of processed stones.

Compared with the same quarter a year earlier, Rockwell reported a 32% increase in August quarter revenue to C$21m, which was boosted by income from the beneficiation stream of its business.

Rough diamond sales fell 14% to C$12m. Total beneficiation revenue tripled to C$8.7m.

“While it is positive that both our Middle Orange River operations are cash-positive, we are faced with the ongoing challenge of balancing our ongoing working capital requirements and at the same time servicing the debt that allowed us to close on the Remhoogte Holsloot Complex acquisition, without compromising on our future growth potential and exploration objectives,” said CEO James Campbell.

Rockwell tapped into its future revenue streams … selling forward $6m worth of diamonds to be cut polished