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Rockwell Diamonds:
High value diamond minerJames Allan
Corporate Advisor1st BAC Indaba Natural Resources Day
March/April 2008
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March/April 2008
TSX:RDI JSE:RDI OCTBB:RDIAF
Disclaimer…
This presentation includes certain statements and other information that may be deemed"forward-looking". Other than statements of historical fact all statements in this presentationthat address future production, resource potential, exploration drilling, exploitation activitiesthat address future production, resource potential, exploration drilling, exploitation activitiesand events or developments that the Company expects are forward-looking statements.Although the Company believes the expectations expressed in such forward-lookingstatements are based on reasonable assumptions, such statements are not guarantees offuture performance and actual results or developments may differ materially from those in theforward-looking statements. Factors that could cause actual results to differ materially fromthose in forward-looking statements include market prices, exploitation and explorationsuccesses, availability of capital and financing, and general economic, market or businessconditions. Investors are cautioned that any such statements are not guarantees of futureperformance and that actual results or developments may differ materially from those
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performance and that actual results or developments may differ materially from thoseprojected in the forward-looking statements. For more information on Rockwell, Investorsshould review Rockwell’s annual Form 20-F filing with the United States Securities andExchange Commission www.sec.com and the Company's home jurisdiction filings that areavailable at www.sedar.com.
High value producer…Selected examples May 2006 - Jan 2007
156 caratsFlawless D US$5.7M
(US$37,000/carat)
39 caratsFlawless D
US$858,000 (US$22,000/carat)
152 caratsFlawless DUS$4.3M
(US$28,000/carat)
132 caratsIntense Yellow
US$1.6M (US$12,200/carat)
3
51 caratsSpotless DUS$1.3M
(US$25,750/carat)
49 caratsD
US$1.0M (US$21,200/carat)
34 caratsVivid Yellow US$720,000
(US$21,100/carat)
54 caratsFancy YellowUS$432,000
(US$8,000/carat)
High value producer…Selected examples Jan 2007 -> present
58 caratsD colour
US$1.55M(US$26,676/carat)
110 caratsI/J colour stoneUS$ 555,555
(US$5,000/carat)
212 caratsYellow
US$2.44M (US$11,500/carat)
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96.33 caratsFancy YellowUS$950,000
(US$9,800/carat)
72.58 caratsFancy YellowUS$919,880
(US$12,674/carat)
“Rarity, Quality and Value”
7.28 caratFlawless Intense PinkRecovered at Holpan
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Exceptional, record price achievedUS $1.054 million (US$145,000/carat)
Corporate Structure
Shares on issue: 237mFully diluted: 407mMarket Capitalization: ~C$130m
Warrants ~42 m: (2yr structure – 80c strike in 2008; 100c in 2009; can generate C$25m in 2008)
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2008; 100c in 2009; can generate C$25m in 2008)
Warrants ~115m: (2 yr period @ 70c)
Cash on hand ~C$20m
Share Analysis TSX:RDI JSE:RDI OTCBB:RDIAF
TSX: RDI
$0.80
ShareholdersMajor Institutional Holders
Price and Volume
$0.40
$0.50
$0.60
$0.70
$0.80
M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08
(C$/
shar
e)
Major Institutional Holders
Pala Investments 17.3%
BlackRock Financial 7.6%
Peregrine Capital 4.9%
QVT Financial 4.3%
BAC Fund 3.2%
Front Street Capital 2.4%
Craton Capital 2.4%
Cadiz African Harvest 2.2%Volume (000s)
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Cadiz African Harvest 2.2%
Oryx Investment Mgt 2.1%
US Global Investors 1.6%
Directors/Mgmt 6.9%
Other 45.7%
0
1,000
2,000
3,000
4,000
M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08
Ownership split:
17.91% 12.9% 3.2% 29.2%
Company overview
Established alluvial miner: 3 mines in South Afric a
Life of Mine: ~14 years at 7 m tonnes per annumLife of Mine: ~14 years at 7 m tonnes per annum(@ current mining rate)
Production: US$1,760 per carat (2007 average sales price)
Positive cash-flow: FY2008 6-month turnover ~ C$26m
THG MORO acquisition being finalized – doubles LOM
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THG MORO acquisition being finalized – doubles LOM
Pipe-line of new projects (7)
Mine and Project localities
LimpopoZimbabwe
NHolpan -Klipdam
Southern Africa
Lower Orange
Wouterspan
Bloemhof
JohannesburgVentersdorp
Pretoria
Botswana
Namibia
Swaziland
RSA
N
Vaal River
Holpan -Klipdam
Makoenskloof
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Springbok
KoaValley
Lower Orange
Prieska
Douglas
Middle Orange
KimberleyBloemfontein
Vaal River
Lesotho
RSA
0 300
Kilometres
Riet
River
OrangeRiverGalputs
Saxendrift Niewejaarskraal
Experienced management
Dr John Bristow (CEO) – ex-DeBeers
Dominique de la Roche (CFO) – corporate & mining experienceexperienceJeffrey Brenner (Diamond Marketing & Sales) – rough diamond expertHennie van Wyk (Operations Director) – experienced alluvial miner
Bruce Cubitt (Mining & Earth Moving Manager
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Bruce Cubitt (Mining & Earth Moving ManagerDeon Vermuelen (Manager Metallurgy) – ex-DeBeersGlenn Norton (Mineral Resource Manager) – diamond & coal mining experience
Board of Directors
David Copeland- Chairperson(mining engineer/ geologist)
John Bristow- President & CEOMark Bristow- CEO Randgold ResourcesScott Cousens- Director of CompaniesDominique de la Roche- CFO
Patrick Bartlett- Independent (diamond geologist)Rene Carrier- Independent
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Rene Carrier- Independent
Doug Silver- Independent
Diamond market dynamics
Demand outstripping supply
Shortage of high value (+2 carat) diamonds (7% by volume)
Strong year on year price increases
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Strong year on year price increases
Demand scenarios and mine supplyDemand Scenarios and Supply
$m
14000
16000
18000
20000
22000
24000
HIgh
Medium
Low
13
10000
12000
14000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Supply
Rockwell tender prices
2400
2500
1800
1900
2000
2100
2200
2300
14
1500
1600
1700
1800
1 2 3 4 5 6 7 8
Average price per tender 3 month rolling average
To
Warrenton
R370R371
Mines & Projects
N
Vaal River: Holpan & Klipdam mines
BARKLY WEST
Delportshoop
R370
R31
R31
N12
R370
R374
KLIPDAM
HOLPAN
Khosopkraal
Harrisdale
ProjectsROCKWELL MINES
New prospecting rights
Barkly West office
Pretoria
Johannesburg
RichardsFigure 1
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KIMBERLEYR64
R357
R31
BloemfonteinKimberley
Cape Town Port ElizabethEast London
Durban
RichardsBay
Figure 2
40 km
Mines and ProjectsDouglas rights
R313
R385N
Middle Orange River: Wouterspan
Projects
ROCKWELL MINES
New prospecting rights
Bulk Sampling
Acquired mines/rights
Douglas rights
DOUGLAS
MAKOENSKLOOF
Reads Drift
Diamond ValleyWOUTERSPAN
Lanyon Vale
R357
N
Pretoria
JohannesburgFigure 1
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PRIESKA
R313
R357
R369R369
R347
Bloemfontein
Kimberley
Cape TownPort Elizabeth
East London
Durban
RichardsBay
Figure 1
Figure 2
40 km
Resources
Tonnes Grade AverageValue
RevenuePer
In- situValueValue
Per caratPer
TonneValue
(74%)#Wouterspan 77m 0.3 cpht $2 500 $7.50 $427m
Holpan &Klipdam
20m 0.45 cpht $1 240 $5.50 $81m
Acquisition 86m 0.43 cpht $2 000 $10.80 $547m
TOTAL 183m 0.38cpht $2 050* $7.80* $1056m*
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TOTAL 183m 0.38cpht $2 050* $7.80* $1056m*
Market Cap % of In-Situ Value : 11%
* Rounded # Black Economic Empowerment Partner 26%
Mines - Wouterspan
Resource ~ 77m tonnes Introduced larger earth Introduced larger earth moving equipment
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Ave 2007 sales price: US$ 2,146 per carat3 month average:US$3,200 per carat
Mines - Holpan
Upgrading screening capacity (2008)capacity (2008)
Installed additional trommel screen
Average 2007 Sales price:
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Sales price: US$1,142 per carat
Mines - Klipdam
New Scrubber commissioned in October commissioned in October 2007Upgraded & modernized processing plant
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Average 2007 sales price:
US$1,291 per carat
New projects & acquisitions
Primary focus - high-value alluvial diamond production eg. Middle Orange area; other producing entities
Concluding Trans Hex Middle Orange acquisition (includes Saxendrift and Niewejaarskraal mines)
Awarded 6 new prospecting permits in RSA; 4 in Middle Orange
Assessing Kwango River alluvial project in Democratic Republic of Congo (DRC)
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Pursuing other acquisition targets (must be value accretive)
Mines and Projects
R313
R385N
Acquisition – THG Middle Orange
Projects
ROCKWELL MINES
New prospecting rights
Bulk Sampling
Trans Hex MORO
DOUGLAS
Makoenskloof
WOUTERSPAN
R357
N
Pretoria
JohannesburgFigure 1
Saxendrift
Niewejaarskraal
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PRIESKA
R313
R357
R369R369
R347
Bloemfontein
Kimberley
Cape TownPort Elizabeth
East London
Durban
RichardsBay
Figure 1
Figure 2
40 km
Beneficiation
Agreement with Steinmetz Diamond Agreement with Steinmetz Diamond Group for selected special stonesCut selected goods in the 2 - 5 carat stone size in SACutting can add significant value
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$4.3m $7m
Financial highlights – FY2008
Revenue FY 2008QTR 1
FY 2008QTR 2
Carats Sold 5231.39 7777.50Carats Sold 5231.39 7777.50
Average Selling Price $2532.20 $1581.40
Revenue - Diamond Sales C$14.0 million C$12.1 million
GP% 45.27% 34.0%
Profit/(Loss) C$0.4 million C$(1.1) million
Cash end of Period C$36.6 million C$12.8 million
Restricted Cash C$15.5 million C$15.5 million
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Weighted Shares in Issue 187,131,953 187,816,993
EPS (C$ Cents) 0.23 (0.01)
Year-end : 29 Feb 08
Pro-forma production projection (carats)
70000
80000
30000
40000
50000
60000
Saxendrift/MORO
Makoenskloof
Wouterspan
Holpan Klipdam
25
0
10000
20000
2008 2009 2010 2011 2012 2013 2014 2015 2016
Forecasts*
FY Feb 2008 2009 2010 2011 2012
Carats 23 000 44 500 68 000 74 000 64 000
Revenue ($m)
41 82 133 148 142
EBITDA ($m) 7 35 65 75 76
EPS (USc) (0.3) 6.5 9.5 11 12.5
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PE 8 5 5 4
*Allan Hochreiter Forecasts
NO ADDITIONAL REVENUE/PROFIT TAKEN INTO ACCOUNT FOR CUTTING AND POLISHING
Investment case
Fully funded and established producer (not an explorer with cash burn)
Shortage of large diamonds – prices very strong
Average price achieved: US$1,760 per carat in FY 2008; trending to $2,200/ct
Growing production profile with a pipeline of projects
Value add in large selected diamonds
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Value add in large selected diamonds
Strong earnings growth and low PE multiple
Questions?
Allan Hochreiter (Pty) LtdAllan Hochreiter (Pty) LtdCorporate finance and advisory
www.allanhochreiter.co.za
Contact [email protected]
+27 11 325 5457 (office)
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+27 11 325 5457 (office)+27 82 565 4507 (mobile)
