Rockwell’s revenue up 31%

Rockwell Diamonds (TSX: RDI) has seen some improvements in the first quarter of its fiscal 2014, after refocusing on its Middle Orange River diamond projects in South Africa’s Northern Cape province, with revenue soaring 31% to US$6.6 million, excluding contractors and beneficiation income.

To improve its bottom line, the diamond producer sold its unprofitable Klipdam mine for US$2.7 million in March and placed its Tirisano mine on care and maintenance at the end of 2012. Contract mining continues at Tirisano.

But with these two mines out of the way, the company is transitioning its efforts to the Saxendrift mine and its newly commissioned Saxendrift Hill complex in the Middle Orange River.

During the quarter ended May 31, 2013, Rockwell produced 2,840 carats from 656,313 cubic metres of gravel, excluding production from royalty contractors. This compares to the same period in fiscal 2013, when it generated 6,116 carats from 808,468 cubic metres. That’s a 54% decline in carats and a 19% drop in processing volume.

On a consolidated basis, including contractors, total diamond production dropped 33% to 4,824 carats, while volume processed increased 11% to 893,833 cubic metres from the year earlier.

Given the lower production — largely resulting from selling Klipdam and reduced mining at Tirisano — Rockwell saw carats sold from its own operations drop 38% to 3,257 carats, from 5,229 carats in the comparable quarter. 

Despite the shortfall in carats, the sale of several large stones helped more than double the average price per carat to US$2,018 per carat from US$962 per carat earlier, driving up revenue 31% to US$6.6 million from US$5 million.

On a consolidated basis, including contract mining, diamond sales were 4,987 carats averaging US$1,534 per carat, with total revenue coming in at US$7.6 million. This compares to 6,234 total carats averaging US$944 per carat for US$5.9 million a year ago. This translates to total revenue increasing 29%, despite carat sales dropping 20%.

During the period, Rockwell unearthed 44 high-quality gems exceeding 10 carats. Thirty of these stones came from the Saxendrift mine. Saxendrift also yielded four diamonds larger than 10 carats.

The company says that “these stones were channelled into the company’s beneficiation joint venture with Steinmetz Diamonds (SD), which delivers value-added future revenues to Rockwell for stones larger than 2.8 carats that have been polished and sold by SD.”

Commenting on the quarterly results, London-based analyst Ryan Long at Northland Capital Partners says the “production figures were positive, as Rockwell implemented its strategy of refocusing on its Middle Orange River projects.”

The producer also has several other development projects in the region, including Niewejaarskraal, which is due to come online soon.

“The Saxendrift Hill mine is performing within our FY14 expectations, and with the Niewejaarskraal mine expected to be at full production within three months, Rockwell Diamonds is making progress and gaining traction,” Long adds. He has a “buy” on the stock and a 36¢ price target. 

At press time, Rockwell shares traded for 20¢ apiece. It has a 52-week range of 11¢ to 40¢, and a $9.8-million market capitalization.