Rockwell Diamonds Inc. entered into a purchase and sale agreement with Nelesco 318 Proprietary Limited. The agreement pertains to certain assets and the assumption of certain liabilities for cash consideration of CAD $4.3M, and the assumption of CAD $6.7M in rehabilitation liabilities, and the transfer of almost 100 employees.

‘This transaction represents a significant milestone in our repositioning plans for the “new Rockwell” explains the CEO Tjaart Willemse. It not only brings in cash in addition to the recently announced funding by two of the key shareholders and a third party, but also disposes of non-core assets and associated liabilities, leaving the new Rockwell to focus on completing the next phase and ramp up of the Wouterspan mine and processing plant and advance its portfolio of development and exploration properties. The transfer of 98 employees also assists with our employee right sizing initiative and reduces the number of retrenchees.

I am very appreciative of the support we are getting from our investors and commercial suppliers and particularly our employees during this challenging time, and with this transaction now well advanced to completion stage, and our plant expansion and commissioning in progress, we are excited by what the new Rockwell will deliver.”

Deferred taxes worth CAD $2.8M from a 2015 purchase of Pioneer Minerals, will be reversed, under International Financial Reporting Standards. This will reduce the company’s consolidated liabilities by a total of CAD $9.5M. An impairment of CAD $1.25M book value is expected to be recorded on the transaction.

Payment will be in three tranches based on certain criteria.

During the period up to completion of all conditions, Nelesco will operate on a contract mining basis with a royalty payable to the company of 2.5 percent of revenue from diamonds recovered from properties covered by the transaction and be responsible for any related rehabilitation liabilities. In addition, the transaction provides for the lease of the Saxendrift office and accommodation complex back to the company for a period of twenty years as well as access to water. The company will provide electricity to Nelesco at cost.