As you can see from the share price graph (below), Rockwell Diamond shareholders have seen better days, Much better days. But despite the meltdown in its share price as money sucked away from explorers and junior miners after the Financial Crisis,  the company has survived and as you’ll see in this CNBC Africa interview, CEO James Campbell remains optimistic. Although the company improved its bottom line considerably in the year to end February, what cash was left in the bank account drained away, resulting in Rockwell now having to rely on its bank overdraft for funding. But the miner of high quality diamonds does have quite a lot in its favour – prices are buoyant and in chairman Mark Bristow (CEO of Randgold Resources) it gets direction from one of the most respected miners alive. But this is the kind of stock that flourishes during booms and struggles at all other times. Those who have been waiting six years to recover capital from those manic early listing days, could be in for at least as long a wait into the future. – AH Â
ALEC HOGG: Toronto and Johannesburg-listed Rockwell Diamonds has reported full-year 2014 financial results. The company has given us a successful operational turnaround. Its refocus shows that the company is now gaining traction. Joining us in studio here in Johannesburg is James Campbell, CEO and President of Rockwell Diamonds. James, I was going through the numbers. I guess the best place to start is with cash. You had a net cash inflow during the period, so a big turnaround – about seven-and-a-half million Canadian Dollars turnaround, but after investing, you’ve actually gone into the negative on the cash now. For a small company like yours, cash is critically important, I guess. Do you have lines of credit lined up or do you intend making a share issue to keep things (I won’t say afloat) rolling on? Do you have cash coming through?
JAMES CAMPBELL: We have a bank overdraft limit, as many other companies have. We’ve posted our seventh successive quarter of revenue growth and we funded two new mines, using the cash generated by the Saxendrift, which was our flagship mine, so we are confident that the cash being generated by our operations will meet current requirements.
ALEC HOGG: All right, so you’re in a position where you don’t have to start issuing shares because from a shareholder’s perspective, that’s the first thing that jumps out. Is there a rights issue on the horizon?
JAMES CAMPBELL: Alec, we last issued shares three years ago at a premium, to the market. When I came on board, we decided to make do with what we had, rebuild mines with the money we had and the resources we had, to create a stronger platform for growth and a stronger balance sheet. We’re currently quite far down that turnaround.
ALEC HOGG: And it is a turnaround, certainly at the bottom line – a cash turnaround of seven-and-a-half million Canadian Dollars, so I suppose multiply that by round about ten. It looks much better in that instance. The listing in both Toronto and Johannesburg: what’s the thinking behind that?
JAMES CAMPBELL: Three years ago, we were listed on the United States market as well. We dropped that one because it didn’t add any value to the overall company. Most of our shareholders – about 90 percent of them – are Canadian and European-based shareholders and therefore, the TSX listing is very important for them and. The main board listing is also important because it should give investors confidence in terms of our accounts, our resources statements, and the whole regulatory framework.
ALEC HOGG: So you operate mainly in South Africa.
JAMES CAMPBELL: That’s correct Alec, yes.
GUGULETHU MFUPHI: Coming back to Alec’s question with regard to the cash on hand: does this mean that your acquisitive trail has come to an end perhaps?
JAMES CAMPBELL: No, Gugu. It hasn’t. Organic growth strategies to get to half-a-million cubic metres per month of processed gravel. We started at 120 three years ago, and we believe that we’re at 360 now. We believe that we can probably get to 400 or more with the cash and equipment that we have on hand, and we’re currently exploring opportunities to see how we can get to half-a-million. Half a million is a magic number in that it will start to give us quarterly earnings feasibility through the predictable recovery of large, high quality diamonds.
ALEC HOGG: So that’s what you’re focusing on – large, high quality diamonds.
JAMES CAMPBELL: Yes.
ALEC HOGG: What’s the market been like for me – the price?
JAMES CAMPBELL: Alec, the market has actually been very good, indeed. Perhaps I can give you one example. Joint venture partner Diacor, which is one of the world’s largest polishers and cutters of large diamonds sold a 109 carat, a vivid yellow stone. The recently announced it. That was sold six months after it was actually found.
ALEC HOGG: Why is that relevant – six months?
JAMES CAMPBELL: Normally, in order to cut a large stone, put it into the market, and find the right price, takes upwards of a year or more. In fact, we’ve had some stones that have taken over two years to actually sell. This stone, because of its rarity and uniqueness, was sold probably before it was actually finished cutting.
ALEC HOGG: Many people I’m sure, knowing its diamonds…in South Africa, there’s much entrepreneurial activity now in the diamond fields. I have a friend whose a farmer, who farms out in the Limpopo Province and he was telling me about a diamond he’d found, which was 7 carats. I don’t understand exactly, but he said it’s a very rare diamond. What happens in a case like that? It’s twofold here. You’re obviously a company that’s doing it, De Beers is doing it, other mining companies are doing it, but if you have this entrepreneurial flow – farmers finding their own diamonds – and secondly, how do they sell them?
JAMES CAMPBELL: Firstly, it depends on whether the farmer has the mining rights to the property. As you know, the mining rights and surface rights are separate.
ALEC HOGG: Clearly, he does otherwise he would not be discussing this openly.
JAMES CAMPBELL: In order to sell it, he would have to have a diamond dealer’s license. Typically, if he has that diamond dealer’s license, there is Diamond and Jewel City in the south of Johannesburg where there are many reputable auction houses where you can sell your diamond.
ALEC HOGG: So there’s an easy way.
JAMES CAMPBELL: There’s a very easy and transparent way to do that.
ALEC HOGG: Is this not a problem for you guys, that you have more and more competitors coming in now?
JAMES CAMPBELL: We don’t actually see it as competition per se at our level. We see the size of the pie actually growing. The diamond market is growing, the diamond prices are growing and over the past year or so, we’ve had no problems in actually selling our diamonds both at the rough level and through the joint venture, we have with Diacor, through to the polished process as well.
ALEC HOGG: An interesting story…a good story, this Rockwell Diamonds. Thank you James Campbell, for coming into the studio today and updating us. That was James Campbell. He is the Chief Executive and President of Rockwell Diamonds, also giving us a little bit of insight into how the diamond market is developing in this country.
