Mr. James Campbell reports

ROCKWELL PROVIDES FEEDBACK FROM SECOND QUARTER DIAMOND SALES

Rockwell Diamonds Inc.'s second-quarter fiscal 2013 revenues from diamond sales before beneficiation were down 3 per cent compared with the same period last year, but increased by 16 per cent from the previous quarter.

Total proceeds of $6.8-million (U.S.) were generated from the sale of 5,147 carats at an average price per carat for the quarter of $1,322 (U.S.) compared with $7.0-million (U.S.) for the same period last year and $5.9-million (U.S.) for the previous quarter. The quarterly increase is underpinned by the jump in carats that was led by the company's diamond value management, reflecting a quarter-on-quarter increase of 30 per cent.

         DIAMOND SALES AND REVENUE FOR THE COMPANY'S OPERATIONAL MINES FOR THE
                             QUARTER ENDED AUG. 31, 2012

                           Carats            Revenue (U.S.$)     Price per carat (U.S.$)
                      Q2 2013   Q2 2012    Q2 2013    Q2 2012     Q2 2013       Q2 2012  

Holpan                      -        27 $        - $    4,755      $    -        $  176    
Klipdam                 2,502     1,456  2,174,387  1,500,506         869         1,031   
Saxendrift plus Jasper  1,699     1,740  4,257,158  5,542,268       2,506         3,186   
Tirisano                  776         -    282,808          -         364             -     
                        -----     ----- ---------- ----------      ------        ------
Total                   4,977     3,223  6,714,353  7,047,529       1,349         2,186   
Saxendrift bulk X-ray     170         -     90,207          -         529             -
                        -----     ----- ---------- ----------      ------        ------     
Total sales             5,147     3,223 $6,804,560 $7,047,529       1,322         2,186
                        -----     ----- ---------- ----------      ------        ------   

Comprising 839 carats from Saxendrift and 860 carats from Jasper

The salient features of the second-quarter diamond sales are as follows:

• The Klipdam mine achieved a 72-per-cent increase in carats sold, averaging revenue per carat of $869 (U.S.). This compares favourably with the average carat value of $550 (U.S.) in the previous three months and is the result of recent mining in the paleaochannel unit that yields larger, higher-quality diamonds.
• Carats sold from the Saxendrift complex, comprising Saxendrift, the bulk X-ray plant and the newly acquired Jasper project, increased by 7 per cent to 1,869 carats at an average price of $2,326 (U.S.) per carat. The average carat value for Saxendrift, while down on the same period last year, increased 40 per cent from the previous quarter to $2,419 (U.S.), largely due to the sale of several high-quality diamonds.
• A total of 27 stones exceeding 9.80 carats in size, recovered from Saxendrift and Jasper, were sold into the beneficiation joint venture with Steinmetz Diamond Group during the quarter. This includes:
  • A clean 70.55-carat white, makable rough diamond recovered in August, 2012, from the Jasper project that fetched a price of $18,000 per carat. This diamond was sold into the Steinmetz beneficiation joint venture, under the terms of which Rockwell participates equally in the profits from the sale of the polished diamonds.
• Diamond sales from Tirisano totalled 776 carats as the mine was put on hold from July, 2012, in order to right size the operation.

"Our second-quarter diamond sales improved, reflecting further delivery on our strategic objectives which include optimizing our productive mines and leveraging our production profile by developing new assets," said James Campbell, chief executive officer, Rockwell. "Klipdam showed a 72-per-cent year-on-year increase in carats sold during the second quarter, translating into a 45-per-cent increase in revenue from diamond sales. The quality and average diamond value of the stones that we recovered in August from the newly acquired Jasper project matched Saxendrift's typical production profile. This encouraging result expands our options for the Saxendrift complex, indicating potential to increase its economic life. We are also in the final stages of right sizing Tirisano. The rationalized processing plant at Tirisano has now been integrated into the new wet front end, in order that the mine can recover higher-quality stones and make a positive contribution to our bottom line."

Regarding the diamond market, Mr. Campbell commented: "Rough and polished diamond prices corrected to more realistic levels during the quarter under review, and market activity was much healthier, compared to the same period in 2011 where trading was muted. We believe that the overall market fundamentals are more positive than they have been since 2008, which will be beneficial for diamond prices."

Notable stones

The company continued to produce large stones at all its operations during the second quarter with the recovery of 50 stones exceeding 10 carats:

• Klipdam produced 20 stones exceeding 10 carats, including three stones exceeding 20 carats.
• Saxendrift produced 11 stones that were larger than 10 carats, including two from the bulk X-ray plant, with four stones exceeding 20 carats, including a 96.56-carat fancy yellow clean sawable rough diamond.
• The Jasper project produced 18 stones exceeding 10 carats during preliminary bulk sampling in August, 2012, with seven stones exceeding 20 carats, including the 70-carat rough diamond referred to above as well as a 60.15-carat mackle.
• Tirisano produced one plus-10-carat stone.

These stones were channelled into the company's beneficiation joint venture with Steinmetz Diamond Group, which delivers value-added revenues for Rockwell's stones that are larger than 2.8 carats.

We seek Safe Harbor.