Rockwell stokes diamond fever

JOHANNESBURG  - 

Global diamond demand and prices are soaring, so a newly inspired Rockwell Diamonds ( JSE:RDI ) invites shareholders to invest a furtherR140m to jack up production - and hopefully profits.

This is the third time since its listing in 2007 that Rockwell has raised capital. The new capital will double the present market cap of the company of R130.2m. The share price track record has been unfortunate, to put it mildly, and Rockwell has yet to make a profit.

But new CEO James Campbell, for 20 years a De Beers man and former personal assistant to Nicky Oppenheimer, says prospects are brilliant.

The company has a promising 60-page "qualified person's report" on its prospects. Rockwell traditionally produces three of the top 100 diamonds by value in the world. One stone measuring 189 carats fetched $10.3m in September 2008.  It has a new management team, which is heavy on technical expertise. Included in the team Michael Hunt who joined as new COO on July 11 2011 from Pangea Diamond Fields plc where he was Operations Manager.

Rockwell has also entered a partnership with Steinmetz, one of the world's leading cutting and polishing outfits. Steinmetz is to invest $5m in the current capital raising which will increase its equity stake from the current level of 10.5%. 

To illustrate the value add in cutting and polishing, Campbell showed a slide where 212ct rough stone worth $2.44m increased in value to $10m at trade price after cutting and polishing. Under the agreement the profit on beneficiation is shared between Steinmetz and Rockwell. The initial agreement for the sale of stones exceeding 10 carats has recently been increased to include products measuring more than 2.8 carats.

Rockwell already has 20% of Flawless Diamond Trading House, an internationally recognised sales office In Johannesburg.

These factors combined to lift the share price 31% to R5.25 in the past week.

Campbell gave a presentation in Johannesburg on Wednesday, reporting that diamond prices rose 50% in 2010 thanks to growth of 30% in India and 20% in China. Prices this year overtook the record levels of 2008. Rockwell's average price received rose 35% to $1 365 per carat in the 2011 fiscal year and in the first quarter the tender average rose to $1 631 per carat.

Diamond stockpiles globally are low, so higher demand is expected to translate into higher prices.

Rockwell is mining three of its seven ore bodies and plans to double caratage production in three to six years. It is changing its approach and its technology. It wants to process fewer cubic metres of rock and extract an increased caratage. The plan is to grow production from the present  1 200ct a month to 2 500 ct-4000ct a month in one to two years and thereafter to between 9 000 and 10 000 carats per month within five to six years.

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