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RDI
RDI
RDI - Rockwell Diamonds Incorporated - Un-Audited Consolidated Financial
Statements Quarter Ended May 31, 2009
ROCKWELL DIAMONDS INCORPORATED
(A company incorporated in accordance with the laws of British Columbia,
Canada)
(Incorporated number: BC0354545)
(South African registration number: 2007/031582/10)
Share code on the JSE Limited: RDI ISIN: CA77434W1032
Share code on the TSX: RDI CUSIP Number; 77434W103
Share code on the OTCBB: RDIAF
UN-AUDITED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MAY 31, 2009
CONSOLIDATED BALANCE SHEET
(Expressed in Canadian Dollars)
May 31, February 28,
2009 2009
$ $
(unaudited)
ASSETS
Current assets
Cash and cash equivalents 2,200,941 3,997,807
Accounts receivable 1,348,195
1,131,026
Restricted cash (note 7(a)) -
2,698,719
Trade receivable from a related 1,771,107
party (note 11) 3,490,725
Inventory (note 5) 3,634,055
3,719,919
Prepayments 31,254
61,775
8,985,552
15,099,971
Property, plant and equipment (note 61,976,380
6) 59,569,186
Mineral property interests (note 7) 34,218,565
28,894,477
Other assets and deposits 161,999
139,140
Reclamation deposits (note 9) 2,962,663
2,659,642
108,305,159
106,362,416
LIABILITIES AND SHAREHOLDERS` EQUITY
Current liabilities
Bank indebtedness (note 12) 3,727,911
3,540,880
Accounts payable and accrued 5,153,147 4,832,038
liabilities
Due to related parties (note 11) 380,910
193,655
Income taxes 798,392
456,046
Current portion of capital lease 5,562,429
obligations (note 8) 5,440,181
15,622,789
14,462,800
Long-term liabilities
Capital lease obligations (note 8) 1,987,130
3,284,596
Due to related parties (note 11) 413,960 383,330
Future income taxes 12,491,000
12,126,000
Reclamation obligation (note 9) 4,091,889
3,802,655
18,983,979
19,596,581
Non-controlling interest 1,789,340
1,882,009
Shareholders` equity
Share capital (note 10) 119,954,269
119,952,532
Warrants (note 10(c)) -
1,693,197
Contributed surplus 5,975,803
4,167,304
Accumulated other comprehensive (7,934,466) (13,409,383)
loss
Deficit (46,086,555)
(41,982,624)
71,909,051
70,421,026
Continuance of operations and going concern (note
1)
Contingencies (note 13)
Subsequent events (note 8)
108,305,159
106,362,416
The accompanying notes are an integral part of these consolidated
financial statements.
Approved by the Board of Directors
/s/ Dr. John Bristow /s/ Dr. Mark Bristow
Dr. John Bristow Dr. Mark Bristow
Director, Chief Executive Officer Director
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited - Expressed in Canadian Dollars)
Three months ended May
31
$ $
2009 2008
Revenue
Rough diamonds sales
3,872,799 7,094,921
Contract diamond sales - 156,220
Other sales 56,374
79,791
3,929,173 7,330,932
Cost of sales
Cost of rough diamonds sales (4,850,581)
(4,608,568)
Amortization and depletion (1,819,080)
(2,574,231)
Operating profit (loss) (2,740,488) 148,133
Expenses
Accretion of reclamation obligation (14,288)
(note 9) 68,623
Exploration 57,611
304,158
Foreign exchange loss (gain) 546,059
(206,122)
Interest on capital leases 342,721
462,817
Interest expense 407,302
86,041
Legal, accounting and audit 333,700
137,327
Office and administration 656,469
972,055
Shareholder communications 119,366
79,645
Stock-based compensation - 29,833
exploration (note 10(b)) 202,624
Stock-based compensation - 86,276
administration (note 10(b)) 482,975
Travel and conferences 35,619
211,904
Transfer agent 22,173
10,051
2,622,841 2,812,098
Other items
Loss on disposal of equipment 25,781
20,968
Interest income (142,789)
(1,381,283)
Write-down of assets 657,634 -
540,626
(1,360,315)
Loss before income taxes 5,903,955
1,303,650
Current income tax expense - 267,996
Future income tax recovery (1,346,407)
(682,008)
Loss before non-controlling interest 4,557,548
889,638
Non-controlling interest (453,617)
(88,285)
Loss for the period 4,103,931
801,353
Other comprehensive income (5,474,917) -
Total comprehensive income (loss)
1,370,986 (801,353)
Basic and diluted loss per common share
0.02 0.00
Weighted average number of
common shares outstanding
238,041,651 237,731,010
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY & CONSOLIDATED
STATEMENTS OF ACCUMULATED COMPREHENSIVE LOSS AND DEFECIT
(Expressed in Canadian Dollars)
Three months ended May Year ended February 28
31
2009 2009
(unaudited)
Share capital Number of $ Number of $
shares shares
Balance at beginning of 238,041,569 223,755,854 112,095,390
the period 119,952,532
Share purchase options 1,500 930 - -
exercised at $0.62 per
share
Consideration for - - 14,285,715 7,857,142
additional interest of
operating mines net of
issue cost at $0.55 per
share
Fair value of stock - 807 - -
options allocated to
shares issued on
exercise
Balance at end of the 238,043,069 119,952,532
period 119,954,269 238,041,569
$ $
Warrants
Balance at beginning of 1,693,197
the period 1,693,197
Expired broker warrants -
(1,693,197)
Balance at end of the - 1,693,197
period
$ $
Contibuted surplus
Balance at beginning of 2,332,882
the period 4,167,304
Stock-based 1,834,422
compensation (note 116,109
10(b))
Expired broker warrants -
1,693,197
Fair value of stock -
options allocated to (807)
shares issued on
exercise
Balance at end of the 4,167,304
period 5,975,803
Accumulated other
comprehensive loss
Balance at beginning of -
the period (13,409,383)
Comprehensive income 5,474,917
(loss) on currency (13,409,383)
translation of
previously integrated
operations
Balance at end of the
period (7,934,466) (13,409,383)
$ $
Deficit
Balance at beginning of
the period (41,982,624) (29,006,662)
Loss for the period
(4,103,931) (12,975,962)
Balance at end of the
period (46,086,555) (41,982,624)
TOTAL SHAREHOLDERS` 70,421,026
EQUITY 71,909,051
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - Expressed in Canadian
Dollars)
Three months ended May 31
$ $
Cash provided by (used in): 2009 2008
Operating activities
Loss for the period
(4,103,931) (801,353)
Items not affecting cash
Accretion of reclamation (14,288) 68,623
obligation
Amortization and depletion 692,920 1,831,387
Amortization of capital lease 1,126,160 742,844
equipment
Write-down of mineral property 657,634 424,975
interests
Stock-based compensation (note 116,109 685,598
10)
Loss on disposal of equipment 25,781 20,968
Future income tax recovery (1,346,407) (682,008)
Unrealized foreign exchange (316,719) 414,951
gain
Non-controlling interest (453,617) (88,285)
Changes in non-cash working capital
items
Accounts receivable (217,169) (528,395)
Amounts due to and from related 1,937,503 (473,724)
parties
Inventory 85,864 (2,460,035)
Prepayments 30,521
(2,296,336)
Accounts payable and accrued 321,109 (707,239)
liabilities
Income taxes 342,346 317,064
Cash provided used in operating
activities (1,116,184) (3,530,965)
Investing activities
Acquisition of Saxendrift Mines - (12,205,245)
(Pty) Limited
Restricted cash 2,698,719 10,560,902
Purchase of equipment and mineral (2,399,726) (1,745,978)
properties
Proceeds received on disposal of 333,462 139,428
equipment
Other assets and deposits (22,859) 664,526
Reclamation deposits
(303,021) (42,603)
Cash used in investing activities 306,575 (2,628,970)
Financing activities
Principal repayments under capital (1,175,218) (2,393,086)
lease obligations
Common shares issued for cash, net 930 -
of issue costs
Addition of capital lease - 1,019,434
obligations
Amounts received to related parties - 32,624
Amounts paid pursuant to property - 459,075
acquisition
Drawdown of credit facility 187,031 -
Cash provided by (used in) financing
activities (987,257) (881,953)
Decrease in cash and cash equivalents (1,796,866) (7,041,888)
during the period
Cash and cash equivalents, beginning 19,623,848
of period 3,997,807
Cash and cash equivalents, end of 12,581,960
period 2,200,941
$ $
Interest paid on facilities during the 86,041
period 407,302
Interest paid on capital leases 462,817
342,721
Interest received 1,381,283
142,789
Income taxes paid during the period 317,064
-
Supplemental disclosure of non-cash
investing and financing activities:
Issuance of commons shares as 7,857,143
consideration for acquisition of -
property
Issuance of common shares as 482,975
consideration for property finders 86,276
fees
Equipment acquired under capital 1,381,283
lease 1,346,407
The accompanying notes are an integral part of these consolidated
financial statements.
1. CONTINUANCE OF OPERATIONS AND GOING CONCERN
Rockwell Diamonds Inc. ("Rockwell" or the "Company") is engaged in the
business of diamond production and the acquisition and exploration of
natural resource properties. The Company`s principal mineral property
interests are located in South Africa.
The accompanying interim consolidated financial statements have been
prepared on a going concern basis in accordance with Canadian generally
accepted accounting principles (``GAAP``). The going concern basis of
presentation assumes that Rockwell will continue in operation for the
foreseeable future and will be able to realise its assets and discharge
its liabilities and commitments in the normal course of business.
The Company incurred losses of $4,103,931 during the three months ended
May 31, 2009 and continues to incur losses subsequent to the quarter end.
Although the Company has reduced costs substantially, sales of diamonds
have also decreased. The risk that cash and working capital will not be
sufficient to fund the continuing losses indicates that a material
uncertainty exists which may cast substantial doubt on the ability of the
Company to continue as a going concern. The directors believe that the
Company will continue as a going concern for the next quarter as well as
the fiscal year ending on February 28, 2010.
.
The cash flow forecasts for the 2010 fiscal year indicate that additional
funds of approximately $4 million will be required to enable the Company
to continue as a going concern. The additional funding was calculated on
the assumption that volumes remain constant with current production, with
the new plant still operating at below 50% capacity, prices remaining at
current depressed levels (which are 50% below pre-September 2008 levels)
and the South African Rand remains at current levels relative to the
United States and Canadian dollar.
The directors have started the process to raise financing by either a
rights offering or a private placement, and have identified and
communicated with current investors and potential new investors to ensure
that the desired investment is raised.
Accordingly, the interim financial statements have been prepared on the
basis of accounting policies applicable to a going concern. Should the
Company and its subsidiaries be unsuccessful in raising the additional
funds of $4 million, they may be unable to realise their assets and
discharge their liabilities in the normal course of business. If the
going concern basis is not appropriate for these consolidated financial
statements, then significant adjustments would be necessary in the
carrying value of assets and liabilities, the reported revenues and
expenses, and the balance sheet classifications used.
2. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
These consolidated financial statements have been prepared in accordance
with Canadian GAAP. These consolidated financial statements include the
accounts of the Company, its subsidiaries and its variable interest
entities where the Company has been determined to be the primary
beneficiary. All significant intercompany balances and transactions have
been eliminated upon consolidation.
These interim financial statements do not include all the disclosures
required for annual financial statements under generally accepted
accounting principles. However, these interim financial statements
follow the same accounting policies and methods of application as the
Company`s most recent audited annual financial statements except for the
changes described in note 3 below. These interim consolidated financial
statements should be read in conjunction with the Company`s audited
annual consolidated financial statements for the year ended February 28,
2009, which are filed on www.sedar.com.
3. CHANGES IN ACCOUNTING POLICIES
Effective March 1, 2009, the Company adopted the following accounting
standards issued by the Canadian Institute of Chartered Accountants
("CICA"). These new standards have been adopted on a prospective basis
with no restatement to prior period financial statements.
(a) Section 3064 - Goodwill and Intangibles
The Canadian Accounting Standards Board ("AcSB") issued CICA Handbook
Section 3064 which replaces Section 3062, "Goodwill and Other Intangible
Assets", and Section 3450, "Research and Development Costs". This new
section establishes standards for the recognition, measurement,
presentation and disclosure of goodwill subsequent to its initial
recognition and of intangible assets. Standards concerning goodwill
remain unchanged from the standards included in the previous Section
3062. The Company evaluated the impact of this new standard and
concluded that this standard did not have a significant impact on the
financial statements.
(b) EIC 173 - Credit Risk and the Fair value of Financial Assets and
Financial Liabilities
The AcSB issued EIC-173 which requires the Corporation to consider its
own credit risk as well as the credit risk of its counterparty when
determining the fair value of financial assets and liabilities, including
derivative instruments. The standard is effective for the first quarter
of 2009 and is required to be applied retrospectively without restatement
of prior periods. The adoption of this standard did not have an impact on
the valuation of financial assets or liabilities of the Company.
(c) EIC 174 - Mining Exploration Costs
The AcSB issued EIC-174, "Mining Exploration Costs" which provides
guidance to mining enterprises related to the measurement of exploration
costs and the conditions that a mining enterprise should consider when
determining the need to perform an impairment review of such costs. The
accounting treatments provided in EIC-174 have been applied in the
preparation of these financial statements and did not have an impact on
the valuation of the Company`s mineral properties.
(d) New Accounting Standards Not Yet Adopted:
i) International Financial Reporting Standards ("IFRS")
In 2006, the Canadian Accounting Standards Board ("AcSB") published a new
strategic plan that will significantly affect financial reporting
requirements for Canadian companies. The AcSB strategic plan outlines
the convergence of Canadian GAAP with International Financial Reporting
Standards ("IFRS") over an expected five year transitional period. In
February 2008, the AcSB announced that 2011 is the changeover date for
publicly-listed companies to use IFRS, replacing Canadian GAAP. The date
is for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2011. The transition date of March 1,
2011 will require the restatement for comparative purposes of amounts
reported by the Company for the year ended February 28, 2011. The
Company is currently in the process of developing an IFRS conversion plan
and evaluating the impact of the transition to IFRS.
ii) Business Combinations/Consolidated Financial Statements/Non-
Controlling Interests
The AcSB adopted CICA sections 1582, "Business Combinations", 1601,
"Consolidated Financial Statements", and 1602, "Non-Controlling
Interests" which superseded current sections 1581, "Business
Combinations" and 1600 "Consolidated Financial Statements". These new
sections replace existing guidance on business combinations and
consolidated financial statements to harmonize Canadian accounting for
business combinations with IFRS. These Sections will be applied
prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning
on or after January 1, 2011. Earlier adoption is permitted. If an entity
applies these Sections before January 1, 2011, it is required to disclose
that fact and apply each of the new sections concurrently. The
Corporation is currently evaluating the impact of the adoption of these
changes on its consolidated financial statements.
4. CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENTS
(a) Capital Management Objectives
The Company`s primary objectives when managing capital are to
safeguard the Company`s ability to continue as a going concern, so
that it can continue to provide returns for shareholders, and to
have sufficient funds on hand for business opportunities as they
arise.
The Company considers the components of shareholders` equity, as
well as its cash and cash equivalents, and bank indebtedness as
capital. The Company`s investment policy is to invest its cash in
highly liquid short-term interest-bearing investments, having
maturity dates of three months or less from the date of acquisition,
that are readily convertible to known amounts of cash.
The Company manages the capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. The Company may issue new
shares through private placements, issue debt, or return capital to
shareholders, in order to maintain or adjust the capital structure.
As at May 31, 2009, the Company is not subject to externally imposed
capital requirements other than the overdraft facility (note 12).
In order to facilitate the management of its capital requirements,
the Company prepares annual expenditure budgets that are updated as
necessary depending on various factors, including successful capital
deployment and general industry conditions.
There were no changes to the Company`s approach to capital
management during the three months ended May 31, 2009 and the
Company expects it will be able to raise sufficient capital
resources to carry out its plans of operations for fiscal 2010 as
disclosed in note 1.
(b) Carrying Amounts and Fair Values of Financial Instrument
The carrying value of the Company`s cash and cash equivalents,
accounts receivable, restricted cash, trade receivable from a
related party, reclamation deposits, bank indebtedness, accounts
payable and accrued liabilities and due to/from related parties
approximate their fair values.
Aside from the financial assets mentioned above, the carrying
amounts of the Company`s other financial assets approximate their
fair values. The following tables show the estimated fair values of
the financial assets:
Estimated fair value as at
May 31, 2009 February 28,
$ 2009
$
Cash and equivalents
2,200,941 3,997,807
Restricted cash - 2,698,719
Held for trading
2,200,941 6,696,526
Accounts receivable
1,348,195 1,131,026
Trade receivable from a 1,771,107 3,490,725
related party
Loans and receivables
3,119,302 4,621,751
Reclamation deposits
2,962,663 2,659,642
Available for sale financial
assets 2,962,663 2,659,642
Total financial assets
8,282,906 13,977,919
The fair value of reclamation deposits represents the market value of quoted
investments.
The fair values of financial liabilities are as follows:
Estimated fair value as at
May 31, February 28,
2009 2009
$ $
Bank Indebtedness
3,727,911 3,540,880
Accounts payable and 4,832,038
accrued liabilities 5,153,147
Amounts due to a related 794,870 576,985
party
Capital lease obligations 7,549,559 8,724,777
Income tax liability 798,392 456,046
18,023,879 18,130,726
5. INVENTORY
As at As at
May 31, February 28,
2009 2009
Rough diamond inventory 1,558,051 1,845,986
Mine supplies 2,076,004 1,873,933
Total inventory 3,634,055 3,719,919
As at May 31, 2009, rough diamond inventory was valued at net realizable
value.
6. PROPERTY, PLANT AND EQUIPMENT
As at May 31, 2009
Cost Accumulated Net book
Amortization value
$ $ $
Land and buildings 6,180,864 - 6,180,864
Processing plant and 55,456,364 17,237,180 38,219,184
equipment
Processing plant and 23,082,962 7,057,893 16,025,069
equipment under capital lease
obligation
Office equipment 929,496 377,890 551,606
Vehicles and light equipment 1,705,811 706,154 999,657
87,355,497 25,379,117 61,976,380
As at February 28, 2009
Cost Accumulated Net book
Amortization value
and
Impairments
Land and buildings 5,822,677 228,591
5,594,086
Processing plant and equipment 52,090,193 15,102,720 36,987,473
Processing plant and equipment 21,374,971 5,931,733 15,443,238
under capital lease obligation
Office equipment 859,678 302,618 557,060
Vehicles and light equipment 1,579,592 592,263 987,329
81,727,111 22,157,925 59,569,186
The Company`s bankers have registered two notarial general covering bonds
of ZAR 10 million ($1.4 million) over all loose assets on the property of
the farm Holpan, Barkley West, Northern Cape.
7. MINERAL PROPERTY INTERESTS
As at
As at
Acquisition Costs May 31, 2009 February 28, 2009
$ $
H.C. Van Wyk Diamonds and Klipdam
Mining
Balance, beginning of period 22,373,984 25,247,936
Acquisition costs - 55,746
Foreign exchange and other 2,192,907 (7,321,972)
adjustments
Future income tax liability - 6,390,327
Change in future income tax - (201,415)
rate
Depletion of mineral properties (585,266) (1,796,639)
during the period
H.C. Van Wyk and Klipdam, end of 23,981,625 22,373,983
period
Saxendrift Mine
Balance, beginning of period 6,520,494 -
Acquisition costs 1,997,268 5,295,754
Foreign exchange and other 1,113,074 (178,144)
adjustments
Future income tax liability 776,715 1,990,181
Depletion of mineral properties (170,611) (587,297)
during the period
Saxendrift Mine (Pty) Ltd, end of 10,236,940 6,520,494
period
Balance, end of period 34,218,565 28,894,477
Acquisition of Niewejaarskraal mining rights relating to Saxendrift Mine
(Pty) Ltd. acquisition
As at February 28, 2009, the Company was committed to pay Trans Hex for
the acquisition of the remaining Niewejaarskraal mining rights. The
Company had placed $2.7 million in trust toward application of the
remaining payment, to be released to Transhex upon the anticipated grant
of Ministerial Consent to the cession of each of the Outstanding Mining
Rights to the Company and registration of cession of such rights in its
name.
On April 11th, 2009 all the conditions precedent were met and the Company
paid ZAR18.9 million ($2.6 million) in cash to Trans Hex for the
remaining Niewejaarskraal mining rights of which ZAR 16.5 million ($2.0
million) was capitalized. This action completed the
Saxendrift/Remhoogte-Holsloot transaction negotiated during April 2008.
The Company has no further commitments in relation to more acquisitions.
8. CAPITAL LEASE OBLIGATIONS
Included in property, plant and equipment are mining equipment that the
Company acquired pursuant to three to four year capital lease agreements.
The Company`s capital lease obligations are with the following financial
Institutions:
As at As at
May 31, 2009 February 28, 2009
$ $
Stannic 603,150 883,409
Wesbank 78,633 81,779
Nedbank 97,927 178,092
Komatfin 6,769,849 7,581,497
7,549,559 8,724,777
Capital lease obligations as detailed above are secured over plant and
equipment and are repayable, on average, in 36 monthly installments. Interest
is charged at rates of between 12.00% to 12.75% per annum linked to the
prevailing prime rate of the relative financial institution mentioned above.
Future minimum lease payments are as follows:
As at As at
May 31, 2009 February 28,2009
$ $
2010 6,358,584 6,570,081
2011 1,820,834 2,860,859
2012 - 106,122
Total minimum lease 8,179,418 9,537,062
payments
Less: interest portion (629,859) (812,285)
Present value of capital 7,549,559 8,724,777
lease obligations
Current portion 5,562,429 5,440,181
Non-current portion 1,987,130 3,284,596
Subsequent to May 31, 2009, the Company successfully negotiated a payment
holiday on its Komatsu equipment with one of its lessors. This will enable
the group to defer its cash commitments for four months by ZAR4 million
($546,000) per month.
9. RECLAMATION OBLIGATION
The continuity of the provision for reclamation costs related to the
Holpan, Wouterspan, Klipdam and Saxendrift mines, are as follows:
As at As at
May 31, February 28,
2009 2009 $
$
Holpan, Wouterspan and Klipdam
Balance, beginning of period 1,755,820
2,690,335
Changes during the period:
Reclamation obligation (299,940) (10,274)
recognized (expenditure incurred)
Foreign exchange on reclamation -
211,427
Accretion expense 148,112 944,789
Balance, end of period 2,690,335
2,749,934
Saxendrift
Balance, beginning of period
1,112,320 -
Changes during the period:
Reclamation obligation - 984,720
recognized
Foreign exchange on reclamation 92,095 -
Accretion expense 137,540 127,600
Balance, end of period 1,112,320
1,341,955
Total reclamation obligation, end 3,802,655
of period 4,091,889
The rehabilitation provision is based on an independent professional
surveyor`s measurement of those mined areas which need to be
rehabilitated at year-end.
These measurements determine the volume of material needed to reclaim the
mined areas. The liability is calculated by applying a cost of ZAR4.00
($0.51) for each cubic meter measured, and has been determined with
reference to plant, fuel and labour usage and has been found acceptable
by the Department of Mineral and Energy Affairs.
As required by regulatory authorities, at May 31, 2009, the Company had
cash reclamation deposits totaling $2,962,663 (2008 - $2,659,642). These
investments have been ceded as security in favour of the guarantees the
bank issued on behalf of the group.
10. SHARE CAPITAL
(a) Authorized share capital
The Company`s authorized share capital consists of an unlimited number of
common shares, without par value, and an unlimited number of preferred
shares without par value, of which no preferred shares have been issued.
(b)Share purchase options
The continuity of share purchase options for three months ended May 31,
2009 is as follows:
Expiry date Exerci Feb 28 Grant Exercis Expired/ May 31
se 2009 ed ed cancelle 2009
Price d
$
September 0.62 5,901,3 - 1,500 - 5,899,83
24, 2012 34 4
November 14, 0.63 1,104,8 - - 3,334 1,101,50
2012 34 0
June 20, 0.45 950,000 - - - 950,000
2011
7,956,1 - 1,500 3,334 7,951,33
68 4
Weighted average 0.63
exercise price 0.60 0.00 0.62 0.60
Weighted average fair value of options
granted during the period 0.00
As at May 31, 2009, 7,318,000 of the options outstanding with a weighted
average exercise price of $0.60 per share have vested with grantees.
Using a Black-Scholes option pricing model with the assumptions noted below,
the fair values of stock options granted have been reflected in the statement
of operations as follows:
Three months ended May 31
2009 2008
$ $
Exploration and 29,833 202,624
engineering
Operations and 86,276 482,975
administration
Total compensation cost 116,109 685,599
expensed to operations,
with the offset credited
to contributed surplus
The weighted-average assumptions used to estimate the fair value of options
granted are as follows:
Three months ended May 31
2009 2008
Risk free interest rate nil 4%
Expected life nil 4.8 years
Expected volatility nil 112%
Expected dividends nil nil
(c) Share purchase warrants
The continuity of share purchase warrants (each warrant exercisable into
one common share) for the period ended May 31, 2009 is as follows:
Expiry date November 22, May 09, May 09, 2009
2009 (i) 2009 (ii) (iii)
Balance, February 28, 39,600,000 116,007,1 5,772,000
2009 54
Issued - - -
Exercised - - -
Expired - 116,007,1 5,772,000
54
Balance, May 31, 2009 39,600,000 - -
(i) The share purchase warrants are exercisable over three years with the
option to exercise at $0.60 expiring on November 22, 2007, the option to
exercise at $0.80 expiring on November 22, 2008 and the option to
exercise at $1.00 expiring on November 22, 2009.
(ii) In May 2007, Rockwell completed a $60 million private placement financing
of 116,007,154 million equity Units at $0.52 each with each Unit
consisting of one common share and one share purchase warrant exercisable
over two years at $0.70. These warrants expired unexercised on May 9,
2009.
(iii) In May 2007, the Company issued 5,772,000 broker warrants
exercisable over two years at $0.70 expiring on May 9, 2009. Using a
Black-Scholes option pricing model, the fair value of the 5,772,000
broker warrants granted in the amount of $1,693,197 (2008 $1,693,197)
have been reflected in the consolidated balance sheet. The weighted-
average assumptions used to estimate the fair value of warrants granted
were an expected volatility of 97%, expected dividends of nil, expected
life of 2 years and risk free rate of 4%. These warrants expired
unexercised on May 9, 2009.
11. RELATED PARTY BALANCES AND TRANSACTIONS
Balances payable As at As at
May 31, 2009 February
$ 28,2009
$
Jeffrey Brenner
- 7,890
Jakes Tyres (g) 3,187 5,498
Hunter Dickinson Services 369,669 180,267
Inc.(a)
Seven Bridges Trading (c) 8,054 -
Current balances payable 380,910
193,655
Liberty Lane (i) 413,960 383,330
Long-term balances payable 413,960
383,330
Balances receivable
Flawless Diamonds Trading 1,718,203 3,441,510
House(e)
Banzi Trade 26 (Pty) Ltd 21,782 19,547
(f)
Diacor CC (h) 31,122 29,668
1,771,107 3,490,725
Three months ended May
31
Transactions 2009 2008
$ $
Services rendered and expenses
reimbursed:
Hunter Dickinson Services 173,616 249,346
Inc. (a)
Seven Bridges Trading (c) 15,739 30,864
Cashmere Trading (d) - 9.812
Banzi Trade 26 (Pty) Ltd 912 7,646
(f)
Jakes Tyres (g) 5,030 199,393
Diacor CC (h) - 3,618
Sales rendered to:
Flawless Diamonds Trading 3,872,799 7,094,921
House (e)
Banzi Trade 26 (Pty) Ltd 577 884
(f)
(a) Hunter Dickinson Services Inc. ("HDSI") is a private company with a
director in common with the Company. HDSI provides geological, technical,
corporate development, administrative and management services to, and
incurs third party costs on behalf of, the Company on a full cost
recovery market related basis pursuant to an agreement dated November 21,
2008.
(b) CEC Engineering Ltd. is a private company owned by David Copeland,
Chairman and a director of the Company, which provides engineering and
project management services at market rates.
(c) Seven Bridges Trading is a wholly owned subsidiary of Randgold Resources,
a public company where Mark Bristow, a director of the Company, serves in
an executive capacity. Seven Bridges Trading provides office,
conferencing, information technology, and other administrative and
management services at market rates to the Company`s South African
subsidiaries.
(d) Cashmere Trading is a private company owned by Hennie Van Wyk, a former
officer of the Company, which provides helicopter services for the
movement of product on an ad-hoc basis at competitive market rates
thereby providing benefits to the company and its employees in respect of
secure transport of high value product and reduced insurance premiums.
(e) Flawless Diamonds Trading House ("Flawless") is a private company where
certain directors, former directors and officers of the Company, namely,
Messr. Brenner, J W and D M Bristow and Van Wyk, are shareholders of.
Flawless is a registered diamond broker which provides specialist diamond
valuation, marketing and tender sales services to the Company for a fixed
fee of 1% of turnover which is below the market rate charged by similar
tender houses.
(f) Banzi Trade 26 (Pty) Ltd ("Banzi") is 49% owned by HC van Wyk Diamonds
Ltd and 51% by Bokomoso Trust. Banzi is an empowered private company
established to provide self sustaining job creation programs to local
communities as part of the company`s Social and Labour Plan which is
required in terms of the Minerals and Petroleum Resources Development Act
"MPRDA"). Banzi provides the Company with buildings materials at market
rates.
(g) Jakes Tyres is a private company with former directors and officers (H C
van Wyk) in common with the Company that provides tyres, tyre repair
services and consumables at market rates to Rockwell`s remote Middle
Orange River operations.
(h) Diacor CC is a private company of which H C van Wyk is a director from
which the Company has purchased consumable materials at market rates.
(i) Liberty Lane is the BEE partner of the Saxendrift property and has
certain directors in common with the Company.
12. BANK INDEBTEDNESS
The Company has an overdraft facility in the amount of ZAR28 million
($3.8 million) available for its operations, of which $3.7 million has
been utilized. Current operating income is being used to service this
facility. This facility has an interest cost of Prime (currently 11% per
annum) plus 0.6% and have a notarial bond over assets of ZAR10million
($1.4 million).
HC van Wyk Diamonds Ltd holds guarantees by the bank towards Eskom
(Electricity Provider) of ZAR1,225,300 ($351,738) and the Department of
Minerals and Energy (DME) of ZAR 11,576,104 ($1,580,140) towards
rehabilitation expenses.
13. CONTINGENCIES
In connection with the acquisition of Saxendrift, one of the assets
purchased from Trans Hex, with a carrying value of $6,257 is the subject
of a dispute between Trans Hex and a third party, which claims ownership
in a certain plant. Although the Company is not subject to this dispute
and cannot determine the likelihood of the outcome, the Company has a
warranty claim with Trans Hex should the third party be successful with
its claim against Trans Hex.
During the first quarter of fiscal 2008, pursuant to an amending
agreement to the Midamines Agreement, the Company paid consideration of
$600,000 to Midamines in order to increase the size of the concession
(Permit 331). As part of such amending agreement, Midamines waived its
right to payment of US$1,200,000 in royalty payment on December 31, 2007.
Subsequently, and pursuant to Midamines` persistent breach of material
provisions of the Midamines Agreement (coupled with its failure to remedy
such instances of breach notwithstanding notice to do so), Durnpike
cancelled the Midamines Agreement and claimed damages.
Midamines has subsequently disputed Durnpike`s entitlement to cancel the
Midamines Agreement and has demanded payment of US$1,200,000 as well as
other amounts which have not yet been particularised. Midamines has
threatened to refer the dispute to arbitration and to join Rockwell as
party thereto, but no formal referral to arbitration has as yet been
forthcoming.
16 July 2009
Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)
Date: 16/07/2009 13:49:01 Produced by the JSE SENS Department.
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