Image: White Diamonds

http://www-diamond.us/white-diamonds/

The alluvial diamond miner reported a net profit of Can$2.0 million for the three months to end August after posting a net loss of Can$1.2 million in the three months to end May, its first quarter.

The second quarter profit reflects an improvement of Can$9.1 million from the comparable quarter last year.

Rockwell Diamonds president and CEO James Campbell said profit improvement was underpinned by strong cash flows from operations.

But production issues continue to plague the company. After a 40% fall in production to 4,428 carats during the first quarter production decreased a significant 47% to 3,611 carats in the second quarter chiefly due to the closure of the Holpan operation outside Kimberley in May and production issues at Klipdam.

Although there were ongoing production challenges at Saxendrift in the Northern Cape, it recovered a number of notable stones during the quarter.

Rockwell said tangible progress was being made to resolve production issues at both Klipdam and Saxendrift. It said mining at Tirisano would also make a meaningful contribution to the production profile.

The company completed its acquisition of Tirisano in early September and it has started ramping-up to commercial production, which is seen as starting this month.

"We are on track with the implementation of proven technologies to improve production at Saxendrift and at Tirisano, where we are ready to start production in the next few weeks. We have also successfully recapitalized the company and raised sufficient capital for our immediate investment requirements, supplemented by the Can$6.5 million proceeds from the sale of non-productive assets in July 2011. As a result, we were able to minimise the dilution of existing Rockwell investors," said Campbell.

At end August 2011, the company had net cash holdings of Can$14.4 million and working capital of Can$13.7 million.

With current assets amounting to Can$22.4 million and current liabilities of $8.7 million, the company's current ratio improved to 2.58 from 1.58 at end August 2010.

The company reported revenue of Can$9.2 million for the quarter while it continued to benefit from the improving diamond market, the lower inventories available for sale during the quarter impacted diamond sales.

Carats sold in the second quarter amounted to 3,223, which were sold at a significantly higher average price of US$2,186 per carat. The average selling price in the second quarter of last year was US$1,048 per carat.

But the company said diamond prices have softened slightly since the end of the second quarter as a reflection of the turmoil in global financial markets.

It said given the outlook, a quick recovery in diamond prices was unlikely.

"However, the long term supply and demand fundamentals, driven by substantial uptake of diamonds from China and India and a gradual reduction in supply, should continue to support prices," it said.