| Tue 2 Aug 2011, 14:30 | | RDI - Rockwell Diamonds Incorporated - Rockwell updates prefeasibility study for |
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RDI
RDI
RDI - Rockwell Diamonds Incorporated - Rockwell updates prefeasibility study for
Saxendrift and preliminary assessments for Wouterspan, Niewejaarskraal and
Tirisano Projects
ROCKWELL DIAMONDS INCORPORATED
(A company incorporated in accordance with the laws of British Columbia, Canada)
(Incorporation number BCO354545)
(Formerly Rockwell Ventures Inc.)
(South African registration number: 2007/031582/10)
Share code on the JSE Limited: RDI ISIN: CA77434W2022
Share code on the TSX: RDI CUSIP Number: 77434W103
Share code on the OTCBB: RDIAF
ROCKWELL UPDATES PREFEASIBILITY STUDY FOR SAXENDRIFT AND PRELIMINARY ASSESSMENTS
FOR WOUTERSPAN, NIEWEJAARSKRAAL AND TIRISANO PROJECTS
August 2, 2011, Vancouver, BC - Rockwell Diamonds Inc. ("Rockwell" or the
"Company") (TSX: RDI; JSE: RDI; OTCBB: RDIAF) updates the results of preliminary
assessments of its alluvial diamond deposits on its properties in South Africa.
Rockwell is focused on increasing production to 10,000 carats per month within
five years. The Company has the capacity to deliver this growth, organically,
through the development of its significant resource base, and is advancing plans
to access the capital necessary to meet its production goals.
Current production of some 2,500 carats of large gem quality diamonds per month
is derived from two operations, the Holpan/Klipdam mine located in the Northern
Cape, and the Saxendrift mine in the Middle Orange River are of the Northern
Cape Province. The Company is in the final stages of acquiring and redeveloping
the Tirisano mine, located in Ventersdorp in the North West Province, which is
slated to come on stream in the second half of fiscal 2012. It also plans to
re-commission the Wouterspan and Niewejaarskraal projects within the next two
years.
A Prefeasibility Study for Saxendrift and Preliminary assessments for Tirisano,
Wouterspan and Niewejaarskraal were completed and announced at the Company`s
recent year end. Results of the Wouterspan study presented in Rockwell`s May
31, 2011 news release were based on forecasted 10% annual increases in diamond
prices as advised by the South African Diamond Council. Base case results were
reported from the Tirisano and Niewejaarskraal studies, using the average
diamond price received during the last year of mining at these past producers.
The following provides the results of the base case and forecast increasing
price as presented in the preliminary assessments.
The studies were done in South African Rand (ZAR) and US dollars (USD), and used
a conversion rate of 6.8 ZAR:1 USD. Royalties applied in each case vary
according to the profitability of the mining company, subject to a minimum rate
of 0.5% and maximum rate 7.0% for diamonds. The results presented are for 100%
of the projects. Rockwell holds a 74% interest in the Wouterspan and
Niewejaarskraal projects and will also hold a 74% interest in Tirisano once the
project acquisition is completed. The remaining 26% interests are held by Black
Economic Empowerment partners.
The assessments are preliminary in nature, and include inferred mineral
resources that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
mineral reserves, so there is no certainty that the preliminary assessment will
be realized.
Wouterspan Preliminary Assessment
Rockwell conducted bulk sampling and trial mining activities at Wouterspan until
November 2008 and has retained the property on care and maintenance since that
time. The preliminary assessment of the project was done based on the indicated
and inferred mineral resources at 30 November 2010. The diamond value used for
the resource estimate and the base case for the preliminary assessment is the
average received for +5,500 carats of diamonds sold from the adjacent Saxendrift
mine (USD2,029 per carat) during fiscal 2010.
Planned excavation of the diamondiferous gravels is by hydraulic excavator
followed by transport of gravel to the plant site in mine haul trucks.
Processing will be by a high-volume, low-cost plant, comprised of 8 (or 12)
18-foot rotary pan plants. Trial-mining is also planned to investigate the
efficiency of sending selected size fractions to selected pans, namely
+2-6mm, -6-12mm and +12-32mm, which is expected to greatly improve the recovery
efficiencies of the pans. The mine plan has been developed in two phases -
phase 1, comprising plant throughput of 180,000 cubic metres per month, for a
period of some 24 months, followed by phase 2, to achieve at throughput at some
340,000 cubic metres per month. The key parameters and result of the base case
and the case based on forecast increases in gem-quality alluvial diamonds are
tabulated below:
Wouterspan Preliminary Assessment Key Parameters
Indicated resources 5,025,500 m3
Inferred resources 37,774,000 m3
Average Grade 0.7 ct/100m3
Average sales value USD 2,029/ct
Proposed monthly throughput 340,000 m3
Proposed mine life 11 years
Operating Costs ZAR 45/m3
Mining Royalties Variable *
Capital required to bring mine into ZAR 122,000,000
production
Earthmoving fleet budget N/A
Tax 28%
Key Results
Base Case 10% Price
Escalation
Internal Rate of Return (IRR) 101% 135%
Net Present Value (NPV) at discount
values of:
15% ZAR ZAR
482,000,000 1,199,000,000
20% ZAR ZAR 885,000,000
363,000,000
25% ZAR ZAR 667,000,000
279,000,000
The NPV at the 20% discount rate in US dollars is 53 million for the base case
and US 130 million using the escalated diamond prices.
Niewejaarskraal Preliminary Assessment
No processing has taken place on Niewejaarskraal since Rockwell acquired the
project in 2006. The mineral resources were re-estimated in 2008, and remain
unchanged as at November 30, 2010. During FY2010, Rockwell sold +5,500 carats
of diamonds from the adjacent Saxendrift mine on the open market for USD2,029
per carat, and this value was applied to estimate resources and the base case.
Niewejaarskraal is located in the same area as Saxendrift and Wouterspan, so the
geology is similar and similar mining methods are expected to be employed. There
is an existing processing plant on Niewejaarskraal, but it will need to be
completely re-furbished and upgraded prior to re-commissioning. A processing
plant like at Wouterspan above is planned. The mine plan has been developed to
run at some 340,000 cubic metres per month. The key parameters and result of
the base case and the case based on forecast increases in gem-quality alluvial
diamonds are tabulated below:
Niewejaarskraal Preliminary Assessment Key Parameters
Inferred Resources 20,630,000 m3
Average Grade 0.84 ct/100 m3
Average sales value USD 2,029/ct
Proposed monthly throughput 340,000 m3
Proposed mine life (inferred 6 years
resources)
Operating Costs ZAR 45/m3
Mining Royalties 0.5-7%
Capital required to bring mine ZAR 130,000,000
into production
Earthmoving fleet budget N/A
Tax 28%
Key Results
Base Case 10% Price
Escalation
IRR 123% 183%
NPV at discount values of:
15% ZAR 450,000,000 ZAR
1,067,000,000
20% ZAR 369,000,000 ZAR869,000,000
25% ZAR 304,000,000 ZAR715,000,000
The NPV at the 20% discount rate in US dollars is 54 million for the base case
and US 128 million using the escalated diamond prices. Tirisano Preliminary
Assessment
The Tirisano Project, a past producer that has been on care and maintenance
since 2008, is currently being acquired by Rockwell. The acquisition will be
complete once the mining rights have been ceded to Rockwell.
Tirisano occurs in a karst environment. Gravel deposition is related to periodic
subsidence which has taken place since, at least, the Mesozoic period, resulting
in a build-up of a very thick sequence. The diamondiferous deposits range from
thin tabular horizons to thick (+60 metres) units, infilling palaeokarst hollows
and sinkholes. The preferred extraction method is open cast mining.
Rockwell commissioned mineralogical and metallurgical studies to determine the
most effective methods for processing clay-rich gravels within the sequence that
can cause recovery inefficiencies. The processing facility, currently under
construction, consists of eight 16-foot rotary pans with a front end designed to
break down the clay units. Since no diamonds have recently been sold from the
Tirisano mine, the early 2008 value of USD606 carat has been applied for the
base case; however, diamond sales values rom the district are in the USD700 per
carat range, and can be expected during 2011. A throughput of 180,000 cubic
metres per month is planned. The key parameters and result of the base case and
the case based on forecast increases in gem-quality alluvial diamonds are
tabulated below:
Tirisano Preliminary Assessment Key Parameters
Indicated Resources 25,279,800 m3
Inferred Resources 15,334,000 m3
Average Grade 2.37 ct/100m3
Average sales value USD 606/ct
Proposed monthly throughput 180,000 m3
Proposed mine life 18.8 years
Operating Costs ZAR 49/m3
Mining Royalties 0.5-7%
Capital required to bring mine into ZAR 73,000,000
production
Earthmoving fleet budget N/A
Tax 28%
Key Results
Base Case 10% Price
Escalation
IRR 59% 81%
NPV at discount values of:
15% ZAR ZAR
226,000,000 1,084,000,000
20% ZAR ZAR
153,000,000 645,000,000
25% ZAR ZAR
105,000,000 406,000,000
The NPV at the 20% discount rate in US dollars is 22.5 million for the base case
and US 95 million using the escalated diamond prices.
Saxendrift Prefeasibility Study
The Saxendrift property is located on the south bank of the Orange River in the
Herbert district of the Northern Cape Province, some 50 km southwest of Douglas.
During 2009/2010 trial-mining was initiated on Saxendrift as part of a study to
determine what portion of the gravel resource could be converted to a reserve.
Operational parameters and operating costs were determined both during the
bulk-sampling and trial-mining phases on Saxendrift, and from Rockwell`s
experience on its other operations. It is believed that the detail and
accuracy of this study is at a pre-feasibility level.
The mine plan involves continued mining on the Saxendrift A terrace during
2011/2012 while detailed exploration is undertaken on the C terrace. The
preferred method of mining the alluvial gravels is strip-mining in a shallow,
opencast operation. The processing plant, which was commissioned in late 2008,
is comprised of four scrubbers followed by four 18 ft rotary pan-plants and has
a design plant-throughput of 800 tonnes per hour. With an expected annual
treatment of 1,800,000 cubic metres some 9,000 carats of diamonds are expected
to be recovered through a bank of ten FlowSort machines and an electronic grease
table, as well as final hand-sort in a glove-box under secure conditions.
The life-of-mine, based on these reserves, at the proposed rate of mining of
150,000 cubic metres per month is estimated at 2.7 years. If the indicated
resources are included, with the same parameters as the reserves, then the LoM
could be expected to be extended by an additional 0.98 years.
A discounted cash flow ("DCF") was developed on the basis of the reserves only
as tabulated below. Since all of the capital has already been spent, no
additional Capital expenditures have been budgeted for the outstanding life of
mine. This is a change from the results reported in the Company`s May 31 2011
news release. It also accounts for the lack of IRR value here. Operating costs
have been budgeted at R7.5M/month. The 10% annual escalation in the diamond
price has been used for this study.
Saxendrift Prefeasibility Study Key Parameters
Volume of gravel Cubic Metres
Probable Reserve 4,859,900
Average Grade 0.5ct/100m3
Average sales value (2011) USD2,029/ct
Proposed monthly throughput 150,000m3
Proposed mine life (reserves only) 2.7
Mining Costs (2011) ZAR43/m3
Mining Royalties 0.5-7%
Capex required to bring mine into *No future Capex
production
Earthmoving fleet budget N/A
Tax 28%
Key Results
IRR Cannot be calculated
since no Capex is
budgeted for the proposed
life-of-mine
NPV (reserves only)
10% ZAR85,000,000
16% ZAR72,000,000
19% ZAR 67,000,000
The NPV at 16% in USD is 10.4 million.
The opportunity exists, through further planned work to convert the remaining
Indicated Resources to Probable Reserves over the short term and the Inferred
Resources to higher categories over the longer term that has excellent potential
to extend the mine life of the project.
Dr. T.R. Marshall, Pr. Sci. Nat., is the independent qualified person who has
reviewed and approved the contents of this release. Further details of the
studies are provided in revised technical reports which are filed on the
Company`s profile at www.sedar.com.
For further information on Rockwell and its operations in South Africa, please
contact
James Campbell
CEO
+27 (0)83 457 3724
Stephanie Leclercq
Investor Relations
+27 (0)83 307 7587
No regulatory authority has approved or disapproved the information contained
in this news release.
Forward Looking Statements
Except for statements of historical fact, this news release contains certain
"forward-looking information" within the meaning of applicable securities law.
Forward-looking information is frequently characterized by words such as "plan",
"expect", "project", "intend", "believe", "anticipate", "estimate" and other
similar words, or statements that certain events or conditions "may" or "will"
occur. Although the Company believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions, such statements
are not guarantees of future performance and actual results or developments may
differ materially from those in the forward-looking statements.
Factors that could cause actual results to differ materially from those in
forward-looking statements include uncertainties and costs related to
exploration and development activities, such as those related to determining
whether mineral resources exist on a property; uncertainties related to expected
production rates, timing of production and cash and total costs of production
and milling; uncertainties related to the ability to obtain necessary licenses,
permits, electricity, surface rights and title for development projects;
operating and technical difficulties in connection with mining development
activities; uncertainties related to the accuracy of our mineral resource
estimates and our estimates of future production and future cash.
and total costs of production and diminishing quantities or grades if mineral
resources; uncertainties related to unexpected judicial or regulatory procedures
or changes in, and the effects of, the laws, regulations and government policies
affecting our mining operations; changes in general economic conditions, the
financial markets and the demand and market price for mineral commodities such
and diesel fuel, steel, concrete, electricity, and other forms of energy, mining
equipment, and fluctuations in exchange rates, particularly with respect to the
value of the US dollar, Canadian dollar and South African Rand; changes in
accounting policies and methods that we use to report our financial condition,
including uncertainties associated with critical accounting assumptions and
estimates; environmental issues and liabilities associated with mining and
processing; geopolitical uncertainty and political and economic instability in
countries in which we operate; and labour strikes, work stoppages, or other
interruptions to, or difficulties in, the employment of labour in markets in
which we operate our mines, or environmental hazards, industrial accidents or
other events or occurrences, including third party interference that interrupt
operation of our mines or development projects.
For further information on Rockwell, Investors should review Rockwell`s annual
Form 20-F filing with the United States Securities and Exchange Commission
www.sec.com and the Company`s home jurisdiction filings that are available at
www.sedar.com.
Information Concerning Estimates of Indicated and Inferred Resources
This news release also uses the terms `indicated resources` and `inferred
resources`. Rockwell Diamonds Inc advises investors that although these terms
are recognized and required by Canadian regulations (under National Instrument
43-101 Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize them. Investors are cautioned not to
assume that any part or all of the mineral deposits in these categories will
ever be converted into reserves. In addition, `inferred resources` have a great
amount of uncertainty as to their existence, and economic and legal feasibility.
It cannot be assumed that all or any part of an Inferred Mineral Resource will
ever be upgraded to a higher category. Under Canadian rules, estimates of
Inferred Mineral Resources may not form the basis of feasibility or
pre-feasibility studies, or economic studies except for Preliminary
Assessment as defined under 43-101. Investors are cautioned not to assume that
part or all of an inferred resource exists, or is economically or legally
mineable.
Canada
2 August 2011
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 02/08/2011 14:30:01 Produced by the JSE SENS Department.
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