Rockwell on power outages affecting South Africa business

Rockwell Diamonds Inc. reports on the situation regarding power outages in South Africa and the impacts on its mining operations.

Recent media reports have highlighted the power outages that have taken place in South Africa since the start of 2008 as a consequence of load shedding procedures being implemented by ESKOM, the National electricity utility supplier.

In spite of the power outages affecting business and mining ventures in South Africa, the Company’s mining operations at Wouterspan, Holpan and Klipdam continue to operate, although with interruptions, and management has moved rapidly to conduct an operational review of the situation and implement remedial actions to mitigate the consequences of the power outages.

Since the Company resumed operations on January 7, 2008 after the mandated Christmas-New Year shutdown, mining and earth moving operations have continued at all Rockwell mine sites, and the following actions have been taken to mitigate the consequences of load shedding that has occurred since the start of the new year:

- Diesel generator sets belonging to the Company have been installed at the front-end gravel screening plants at the Wouterspan, Holpan and Klipdam operations to ensure that run-of-mine gravel screening to a size range of +2 -30 mm continues with minimal disruption. This has allowed the mining and screening of diamond bearing gravel to proceed, with the creation of large stockpiles of screened gravel at each of the Company’s three operations.

- All scheduled and planned maintenance is being conducted during periods of power outages to reduce overall plant downtime.

- The Company is investigating the most effective options to provide back-up electricity supplies at its mining operations and has identified various local and foreign suppliers with whom it is in discussions in respect of price and delivery times to secure and purchase at least two high-voltage (e.g. 2.8 MVA 11 000 volt) generator sets, which will be installed at its Wouterspan and Holpan operations, respectively. Once installed, generators sets of this capacity will be capable of providing enough electrical power to operate the entire screening, treatment, and final diamond recovery sections of the metallurgical processing plants at the Wouterspan and Holpan sites, as well as maintain essential ancillary services (e.g. maintenance and repair facilities).

- Following the installation of 11 000 volt generators at Wouterspan and Holpan, the Company will have enough spare generator set capacity to also ensure that its Klipdam mine has sufficient back-up capacity to operate at optimal capacity. The Company is also investigating the benefits of placing an order for a third large generator set, which would be utilized as a back-up power source at new projects developed by the Company.

- As part of this operational review, the Makoenskloof bulk sampling operation has been placed on care and maintenance, pending detailed interpretation of the drilling data, 3D modelling, and associated in-depth analysis of grade, diamond size frequency, sales value and cost parameters by the Company’s experts and an outside diamond consultant. The Makoenskloof bulk sampling program has, to date, reached a break-even point financially. The project is, however, sensitive to grade and cost parameters and given the current uncertainty of ESKOM power supply to this locality, management has deemed it prudent to place the project on care and maintenance, curtail unnecessary costs, and focus its efforts on its established mines.

- A back-up generator set has been installed at the Barkly West management and administration office to ensure that there is minimal impact on normal business activities of the Company and that computer functions, back-up servers, and CCTV monitoring systems remain operational.

- The current situation will undoubtedly have an impact on short term costs and production as detailed below, although an aggressive program to reduce operating costs and eliminate unnecessary expenses has been initiated at all of the Company’s mines and operations.

Power outages have impacted most directly on the operations of the Company’s metallurgical treatment plants and final recovery facilities at Wouterspan, Holpan and Klipdam. During the period January 7 to 25, 2008, power outages totalling 69 hours, 39 hours, and 39 hours were experienced at Wouterspan, Holpan and Klipdam, respectively. Following these power outages, lead times are required to bring each plant back to full operational capacity and, consequently, the overall downtime due to the outages is increased by a factor of about 1.5.

The overall impact of power outrages on production and operating costs since start-up of mining operations on January 7, 2008 are being evaluated for January 2008. Current indications are that the carat production target for the period January 7 to 31 will be some 30 - 40% below forecast.

Longer term cost impacts of running generator sets during power outages are being investigated in detail, though the actual consequences and costs of this will also depend on the extent to which load shedding will continue to be applied by ESKOM. Once an analysis of the impact of the power outages on January production and costs is established, and an analysis of the consequences of power generation by generator sets is complete, further information including costs, delivery dates and installation times will be released to shareholders.

President and CEO John Bristow noted that the power outages affecting South Africa are of obvious concern to the Company and the Management and Operations Teams have responded rapidly to mitigate the impacts of the black-outs. The Company has set in-place procedures which will help alleviate the consequences of the current and possible longer term impacts of load shedding on its mining operations. A risk analysis and response plan has been implemented and investors will be updated as data and information became available.

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