Rockwell Diamonds has posted strong 2014 results, for the period ended 28 February 2014. Rockwell has reported significant increases in revenue and operating profits on the back of delivering two new mines as part of its focused Middle Orange River Strategy. Rockwell currently holds a market cap of R176 million, trading at a PE ratio of 15.59, Rockwell’s shares have shot up by 64.5% on the year albeit from a lower base.
Features of Fiscal 2014:
(Currency values are presented in Canadian dollars, unless otherwise indicated)
- Revenue increased 39% year-on-year to $45.2 million, comprising $41.1 million from diamond sales and beneficiation income of $4.1 million.
- Overall volume of gravel processed and carat production from all Company-owned properties up 28% and 27% year-on-year, respectively.
- Operating profit before amortisation and depreciation of $6.0 million, up from $1.1 million in prior year.
- General and administration expenses declined 29% to $4.4 million.
- Cash and cash equivalents of $1.3 million after capital investments of $8.7 million in new processing capacity.
- Net cash flow from operating activities of $2.6 million, before investment in new plant.
- Inventory of 2,752 carats carried forward (includes 1,181 carats on royalty mining contracts).
- The current ‘beneficiation pipeline’ of more than 6,000 carats provides additional future revenue potential.
- Returns from royalty mining contracts deliver net royalties of $1.2 million from five Tirisano contracts and Zwemkuil contract (ceased in third quarter).
- Net loss for the year narrowed to $10.4 million compared to a loss of $13.8 million in the prior year, after non cash charges of $10.1 million for foreign exchange and depreciation.
James Campbell, CEO and President said, “Our fiscal 2014 results are beginning to reflect the operational turnaround of the Company and its core focus on the Middle Orange River (“MOR”) Region of South Africa. Our revenue increased 39% year-on-year to $45.1 million, underpinned by a 52% increase in diamond sales. These improvements have been consistent each quarter over the last two years, as we have now reported seven consecutive quarters of dollar denominated revenue growth. Rockwell reported an operating margin before amortization and depreciation of $6.0 million, compared to $1.1 million in the prior year. Economies of scale as a result of operating exclusively in the MOR also emerged, as production costs for the year increased 25% to $39.2 million, against the 52% improvement in the value of diamond sales. We believe that the implementation of our earthmoving vehicle upgrade programme should unlock further benefits as we improve the fleet overall utilization to match our production capacity and renew the equipment to lower our maintenance expenses while improving availabilities. Equally pleasing is the positive cash flow from normal operations of $3.7 million (prior to working capital movements).
Looking forward, we remain firmly focussed on our medium term target to process 500,000m3 per month of quality gravels. We are conducting contiguous exploration of existing resources at the Saxendrift Extension property to increase the current life of mine, further leveraging our invested mining infrastructure at Saxendrift. We also have a focused exploration and trial mining programme at SHC to maximise the resource potential and develop contiguous areas. Mining at Niewejaarskraal, where the processing rate approached the monthly nameplate capacity of 100,000m3 at fiscal year-end, is aimed at upgrading the inferred resource to the indicated level. At the same time, we continue to review our options to bring the Wouterspan property to fruition, with a preference for an internally funded and phased approach.”
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