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2016
Tania R Marshall,
Pr.Sci.Nat.
Explorations Unlimited
Glenn A Norton,
Pr.Sci.Nat.
Rockwell Diamonds Inc.
TECHNICAL REPORT
ON THE REMHOOGTE/HOLSLOOT ALLUVIAL DIAMOND PROJECT,
HAY DISTRICT, REPUBLIC OF SOUTH AFRICA
FOR
ROCKWELL DIAMONDS INC.
Effective Date: 29 February, 2016
Signature Date: 24 May, 2016
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
Explorations Unlimited Page 2
Table of Contents Page
Summary ……………………………………………………………………………………………………………………………………………7
Figures..............................................................................................................................................4
Tables...............................................................................................................................................6
Plates ...............................................................................................................................................6
1 Introduction ............................................................................................................................ 13
1.1 TERMS OF REFERENCE AND SCOPE OF WORK.......................................................................................................13
1.2 SOURCES OF INFORMATION..............................................................................................................................15
1.3 UNITS AND CURRENCY ....................................................................................................................................15
1.4 FIELD INVOLVEMENT OF QUALIFIED PERSONS ......................................................................................................16
1.5 USE OF DATA ................................................................................................................................................16
2 Reliance On Other Experts ....................................................................................................... 17
2.1 LEGAL OPINION .............................................................................................................................................17
2.2 DIAMOND VALUATION ....................................................................................................................................17
2.3 SURVEY........................................................................................................................................................18
2.4 METALLURGY ................................................................................................................................................18
3 Property Description And Location........................................................................................... 19
3.1 PROPERTY DESCRIPTION AND LOCATION..............................................................................................................19
3.2 PERMITS CONTRACTS AND AGREEMENTS.............................................................................................................21
3.2.1 Agreements...........................................................................................................................................21
3.2.2 Mineral rights (Mining/Prospecting Rights, permits, etc.)....................................................................21
3.2.2.1 Royalty Payments..........................................................................................................................................22
3.2.3 Surface ownership / land use rights......................................................................................................22
3.3 BEE COMPLIANCE..........................................................................................................................................23
3.4 ENVIRONMENTAL...........................................................................................................................................23
3.4.1 Rehabilitation Guarantees....................................................................................................................23
3.5 SOCIAL RESPONSIBILITY ...................................................................................................................................23
3.5.1 Social and Labour Plans ........................................................................................................................23
3.6 ASSOCIATED RISKS..........................................................................................................................................23
4 Accessibility, Climate, Local Resources, Infrastructure And Physiography.................................. 25
4.1 TOPOGRAPHY, ELEVATION AND VEGETATION........................................................................................................25
4.2 ACCESS ........................................................................................................................................................27
4.3 PROXIMITY TO POPULATION CENTRES AND NATURE OF TRANSPORT ..........................................................................27
4.4 CLIMATE AND LENGTH OF OPERATING SEASON ....................................................................................................27
4.5 INFRASTRUCTURE ...........................................................................................................................................28
4.5.1 Power....................................................................................................................................................28
4.5.2 Water....................................................................................................................................................28
4.5.3 Bulk-Sampling infrastructure................................................................................................................28
4.5.4 Access and Communication ..................................................................................................................29
4.5.5 Staff and Labour ...................................................................................................................................29
4.5.6 Essential Services ..................................................................................................................................29
5 History .................................................................................................................................... 30
5.1 BACKGROUND ...............................................................................................................................................30
5.2 PREVIOUS EXPLORATION/DEVELOPMENT............................................................................................................31
5.2.1 Historical...............................................................................................................................................31
5.2.2 Pioneer Mining......................................................................................................................................31
5.2.3 TransHex ...............................................................................................................................................32
5.2.4 Steyn Diamante.....................................................................................................................................33
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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6 Geological Setting And Mineralisation...................................................................................... 35
6.1 GEOLOGY .....................................................................................................................................................35
6.1.1 Regional Geology..................................................................................................................................35
6.1.2 Local Geology........................................................................................................................................36
6.1.3 Property Geology ..................................................................................................................................37
6.2 MINERALISATION ...........................................................................................................................................38
6.2.1 Nature of Mineralisation.......................................................................................................................38
6.2.1.1 Alluvial Fill.....................................................................................................................................................39
6.2.2 Fluvial Model.........................................................................................................................................40
6.2.2.1 Source of the diamonds................................................................................................................................46
6.2.3 Geological Controls...............................................................................................................................48
6.2.4 Geological Model..................................................................................................................................51
6.2.4.1 Rooikoppie Gravels .......................................................................................................................................51
6.2.4.2 Fluvial Alluvial Gravels ..................................................................................................................................53
7 Deposit Types.......................................................................................................................... 56
7.1 PRIMARY FLUVIAL-ALLUVIAL GRAVEL DEPOSITS....................................................................................................56
7.2 DEFLATION OR ‘ROOIKOPPIE’ DEPOSITS..............................................................................................................57
7.2.1 Eluvial Rooikoppie Gravel .....................................................................................................................57
7.2.2 Colluvial Rooikoppie Gravel ..................................................................................................................59
8 Exploration.............................................................................................................................. 61
8.1 SATELLITE IMAGERY ........................................................................................................................................61
8.2 GEOPHYSICS..................................................................................................................................................61
8.3 BULK-SAMPLING............................................................................................................................................61
8.3.1 Remhoogte/Holsloot (“RHC”) ...............................................................................................................61
8.3.1.1 Location ........................................................................................................................................................61
8.3.1.2 Mining/Excavation Methodology..................................................................................................................62
8.3.1.3 Sample processing ........................................................................................................................................64
8.3.1.4 QA/QC...........................................................................................................................................................69
8.3.1.5 Results...........................................................................................................................................................71
9 Drilling .................................................................................................................................... 76
10 Sample Preparation, Analysis And Security............................................................................... 77
10.1 GENERAL SAMPLING ISSUES RELATING TO ALLUVIAL DIAMOND DEPOSITS....................................................................77
10.2 SAMPLE SECURITY ..........................................................................................................................................78
10.3 SAMPLE REPRESENTATIVENESS..........................................................................................................................79
11 Data Verification ..................................................................................................................... 80
11.1 VERIFICATION OF HISTORICAL DATA....................................................................................................................80
11.2 VERIFICATION OF ROCKWELL DATA ....................................................................................................................81
12 Mineral Processing And Metallurgical Testing........................................................................... 84
13 Mineral Resource Estimates..................................................................................................... 85
13.1 PREVIOUS MINERAL RESOURCE ESTIMATES.........................................................................................................86
13.1.1 Explorations Unlimited (6 February, 2015).......................................................................................86
13.2 CURRENT MINERAL RESOURCE ESTIMATES..........................................................................................................87
13.2.1 Inferred Mineral Resource................................................................................................................87
13.2.2 Indicated Mineral Resource..............................................................................................................87
13.2.3 Measured Mineral Resource.............................................................................................................87
13.3 REASONABLE PROSPECTS FOR ECONOMIC EXTRACTION..........................................................................................88
13.3.1 Resource Parameters........................................................................................................................89
13.3.1.1 Volume..........................................................................................................................................................89
13.3.1.2 Diamond Grade.............................................................................................................................................89
13.3.1.3 Diamond Value..............................................................................................................................................90
13.3.1.4 Occurrence of Large Stones ..........................................................................................................................91
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13.3.2 Engineering Parameters...................................................................................................................91
13.3.2.1 Excavating .....................................................................................................................................................92
13.3.2.2 Processing .....................................................................................................................................................92
13.3.3 Infrastructural Parameters...............................................................................................................92
13.3.4 Statutory Parameters .......................................................................................................................92
13.3.5 Environmental/Social Parameters....................................................................................................92
13.3.6 Marketing Parameters .....................................................................................................................92
13.3.6.1 Market Studies..............................................................................................................................................92
13.3.6.2 Rockwell Sales and Contracts........................................................................................................................95
13.3.7 Economic Assumptions and Parameters ..........................................................................................96
13.3.7.1 Diamond Price...............................................................................................................................................96
13.3.7.2 Mining Costs .................................................................................................................................................97
13.3.7.3 Financial Assumptions...................................................................................................................................97
13.3.8 Material Risks...................................................................................................................................98
13.3.8.1 In South Africa...............................................................................................................................................99
13.3.8.2 Specific Risks ...............................................................................................................................................101
13.4 MINERAL RESOURCE STATEMENT....................................................................................................................101
14 Adjacent Properties............................................................................................................... 103
14.1 SILVERSTREAMS ...........................................................................................................................................104
14.2 SANDDRIFT PROSPECT...................................................................................................................................105
15 Other Relevant Data and Information .................................................................................... 107
15.1 EXPLORATION TARGETS.................................................................................................................................107
15.2 COUNTRY PROFILE........................................................................................................................................108
15.2.1 South African Economy...................................................................................................................108
15.2.2 The Mining Industry........................................................................................................................109
15.2.3 South Africa’s Mineral Legislative Environment.............................................................................109
15.2.3.1 Mineral Policy .............................................................................................................................................109
15.2.3.2 Mineral and Petroleum Resource Development Act 28 of 2002 (“MPRDA”)..............................................110
15.2.3.3 Broad Based Black Economic Empowerment (BBBEE) and the Mining Charter..........................................111
15.2.3.4 The Minerals and Petroleum Resources Royalty Bill...................................................................................112
15.2.3.5 The Diamond Amendment Bill....................................................................................................................113
15.2.3.6 Diamond Export Levy Bill 2007 ...................................................................................................................113
15.2.3.7 Precious Metals Bill and the Beneficiation Strategy ...................................................................................114
15.2.3.8 Kimberley Process.......................................................................................................................................114
16 Interpretation And Conclusions.............................................................................................. 116
17 Recommendations................................................................................................................. 118
18 References ............................................................................................................................ 120
19 Date And Signature Page ....................................................................................................... 124
20 Certificate Of Authors............................................................................................................ 125
20.1 TANIA RUTH MARSHALL................................................................................................................................125
20.2 GLENN ALAN NORTON..................................................................................................................................127
Figures
FIGURE 1.1 LOCATION OF ROCKWELL OWNED OPERATIONS IN SOUTH AFRICA (AND THE LOCATION OF THE REMHOOGTE/HOLSLOOT
PROJECT).................................................................................................................................................14
FIGURE 1.2 CORPORATE SHAREHOLDINGS OF ROCKWELL (2015)........................................................................................15
FIGURE 3.1 LOCATION OF THE REMHOOGTE/HOLSLOOT PROJECT IN THE NORTHERN CAPE PROVINCE ........................................19
FIGURE 3.2 LOCATION OF THE REMHOOGTE/HOLSLOOT PROJECT PROPERTIES.......................................................................20
FIGURE 4.1 AVERAGE CLIMATIC CONDITIONS AT KIMBERLEY, (WWW.KIMBERLEY.CLIMATEMPS.COM) .........................................27
FIGURE 5.1 HISTORICAL DIAMOND PRODUCTION FROM THE MOR (REDRAWN FROM TELFER ET AL, 2006)..................................30
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FIGURE 5.2 LOCATION OF TRANSHEX DRILLING ON REMHOOGTE-HOLSLOOT.........................................................................32
FIGURE 5.3 AREAS PREVIOUSLY SAMPLED (MINED OUT) BY STEYN UP UNTIL 31 MAY, 2015.....................................................34
FIGURE 6.1 THE GENERAL GEOLOGY OF SOUTH AFRICA (COUNCIL FOR GEOSCIENCES) ............................................................35
FIGURE 6.2 SCHEMATIC VIEW OF COARSER GRAVEL CHANNEL BARS IN A BRAIDED RIVER SYSTEM ................................................40
FIGURE 6.3 LOCATION OF THE KAROO AND KALAHARI RIVERS ON THE EARLY CRETACEOUS GONDWANA LANDSURFACE AND (DE WIT,
2009) ....................................................................................................................................................41
FIGURE 6.4 AN EXAMPLE OF HOW THE PROPOSED MOR MEANDER PLAIN MAY HAVE LOOKED DURING THE AFRICAN LANDSCAPE CYCLE
DURING THE LATE CRETACEOUS....................................................................................................................42
FIGURE 6.5 LOCATION OF THE KAROO AND KALAHARI RIVERS BY THE END OF THE CRETACEOUS (DE WIT, 2009)..........................42
FIGURE 6.6 AN ARTIST’S IMPRESSION OF THE TYPE OF COMPLEX BRAIDPLAIN THAT MAY HAVE EXISTED ALONG THE MOR DURING THE
POST AFRICAN I LANDSCAPE CYCLE ...............................................................................................................43
FIGURE 6.7 SCHEMATIC DIAGRAM ILLUSTRATING HOW A BRAIDED RIVER CHANNEL MAY BECOME MEANDERING THROUGH, INTER ALIA,
THE FLATTENING OF THE LANDSURFACE AND THE STABILISING OF THE BANKS. ........................................................44
FIGURE 6.8 SCHEMATIC REPRESENTATION OF THE RIETPUTS FORMATION GRAVELS AS DEVELOPED ALONG THE LOWER VAAL RIVER
(MARSHALL, 2004)...................................................................................................................................45
FIGURE 6.9 SFD OF THE ORANGE AND VAAL RIVER ALLUVIAL DIAMOND POPULATIONS, IN COMPARISON WITH BHC.....................47
FIGURE 6.10 COMPARISON OF AVERAGE DIAMOND SIZES FROM THE ORANGE AND VAAL RIVERS AND BHC...................................48
FIGURE 6.11 FIXED AND MOBILE TRAPSITES AND THEIR DEPOSITIONAL ENVIRONMENTS (REDRAWN AFTER JACOB, 2005) .................49
FIGURE 6.12 GEOLOGICAL MAPPING OF THE ROOIKOPPIE GRAVEL UNITS ON REMHOOGTE .........................................................52
FIGURE 6.13 PROPOSED GEOLOGICAL MODEL FOR THE RHC PROJECT ....................................................................................53
FIGURE 6.14 SCHEMATIC SECTION THROUGH FIGURE 16.3..................................................................................................54
FIGURE 7.1 FORMATION OF ELUVIAL GRAVELS (MARSHALL, 2004)......................................................................................57
FIGURE 7.2 FORMATION OF ELUVIAL GRAVELS (MARSHALL, 2004).....................................................................................58
FIGURE 7.3 FORMATION OF COLLUVIAL GRAVELS (MARSHALL, 2004) ..................................................................................59
FIGURE 8.1 LOCATION OF 2015 BULK-SAMPLING ON RHC ................................................................................................62
FIGURE 8.2 SCHEMATIC FLOW SHEET FOR THE REMHOOGTE 1 PLANT ...................................................................................65
FIGURE 8.3 SCHEMATIC FLOWSHEET OF THE H1 PROCESSING PLANT. ...................................................................................67
FIGURE 8.4 SCHEMATIC FLOWSHEET FOR THE IMS PROCESSING PLANT.................................................................................68
FIGURE 8.5 GENERAL PRINCIPLES OF THE STEINERT X-RAY TRANSMISSION SORTING SYSTEM (L VON KETELHODT (IMS), PERS. COMM.
2015) ....................................................................................................................................................69
FIGURE 8.6 TYPICAL DIAMOND CONCENTRATE SHOWING EJECTED TRACERS, BOART DIAMOND (TESTERS) AND OTHER CARBON MATTER
SUCH AS PIECES OF WOOD (L VON KETELHODT (IMS), PERS. COMM. 2015)..........................................................69
FIGURE 8.7 LARGE STONE PLOT.....................................................................................................................................72
FIGURE 8.8 SFD OF RHC STONES (RDI= ROCKWELL, CS= SCHALK STEYN) IN COMPARISON WITH STONES FROM SAXENDRIFT MINE
(BHC) ....................................................................................................................................................73
FIGURE 8.9 GRADE SIZE PLOT FOR SRC COMPARED WITH BHC DATA SHOWING DISTRIBUTION OF CARATS. THE Y-AXIS IS A MEASURE
OF THE AVERAGE STONE DENSITY PER SIZE INTERVAL AND THE X-AXIS IS A MEASURE OF AVERAGE STONE SIZE. BOTH AXES
ARE CALCULATED ON A LOG-LOG SCALE. THE LEGEND IS THE SAME AS FOR FIG. 8.9 ABOVE. ......................................74
FIGURE 9.1 LOCATION OF THE QA/QC DRILLING/PITTING PROGRAMME ON REMHOOGTE........................................................76
FIGURE 10.1 SCHEMATIC DISTRIBUTION OF ALLUVIAL DIAMONDS WITHIN AN ALLUVIAL DEPOSIT – RANDOM DISTRIBUTION OF CLUSTERS
OF POINTS (ROMBOUTS, 1987)...................................................................................................................78
FIGURE 13.1 THE EXTREMELY LOW CONCENTRATIONS OF DIAMONDS, COMBINED WITH LOW HOMOGENEITY RESULTS INSIGNIFICANT
DIFFICULTIES IN THE EVALUATION OF ALLUVIAL DIAMOND DEPOSITS (AFTER LOCK, 2003) ........................................88
FIGURE 13.2 NUMBER OF LARGE DIAMONDS CALCULATED TO OCCUR IN MOR DEPOSITS ...........................................................91
FIGURE 13.3 THE DIAMOND PIPELINE..............................................................................................................................93
FIGURE 13.4 REVENUES ACROSS THE DIAMOND VALUE CHAIN POSTED CONTINUED GROWTH IN 2014 BUT SLOWED DOWN IN 2015
(BAIN & COMPANY, 2015).........................................................................................................................93
FIGURE 13.4 LOCATION OF ESTIMATED INFERRED MINERAL RESOURCES ON THE REMHOOGTE/HOLSLOOT PROJECT AS AT 29 FEBRUARY
2016 ...................................................................................................................................................102
FIGURE 14.1 NUMEROUS PROPERTIES ALONG THE MOR HAVE BEEN PROSPECTED FOR DIAMONDS ............................................103
FIGURE 15.1 FLUVIAL-ALLUVIAL GRAVEL EXPLORATION TARGETS CURRENTLY IDENTIFIED ON THE REMHOOGTE/HOLSLOOT PROJECT 108
FIGURE 17.1 LOCATION OF PROPOSED DRILLING/PITTING ON REMHOOGTE/HOLSLOOT DURING 2016 .......................................118
FIGURE 17.2 LOCATION OF PROPOSED ROOIKOPPIE SAMPLING ON REMHOOGTE/HOLSLOOT DURING 2016................................119
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Tables
TABLE 3.1 UTM CO-ORDINATES OF THE REMHOOGTE/HOLSLOOT PROJECT.........................................................................20
TABLE 3.2 SUMMARY OF THE PROJECT LANDHOLDINGS DESCRIBED IN THIS REPORT................................................................21
TABLE 5.1 VENMYN’S MINERAL RESOURCE STATEMENT FOR REMHOOGTE-HOLSLOOT (AS AT FEB 2006) .................................33
TABLE 8.1 TRACER TEST AND RECOVERY FROM 1 JUNE TO 8 AUGUST, 2015........................................................................70
TABLE 8.2 EXAMPLE OF TRACER RECOVERY THROUGH THE R1 PLANT ..................................................................................70
TABLE 8.3 PRODUCTION STATISTICS FOR THE MAY 2015 – FEBRUARY 2016 BULK-SAMPLING PROGRAMME ON RHC .................71
TABLE 8.4 SALES VALUES FOR DIAMONDS FROM RHC (FY2016).......................................................................................74
TABLE 13.1 ESTIMATED INFERRED MINERAL RESOURCE ON REMHOOGTE/HOLSLOOT (AS AT 6 FEBRUARY, 2015)........................86
TABLE 13.2 ESTIMATED INFERRED MINERAL RESOURCE ON REMHOOGTE/HOLSLOOT (AS AT 31 JULY, 2015) ...........................102
TABLE 15.1 ECONOMIC INDICATORS FOR SOUTH AFRICA (MARCH, 2016) WWW.TRADINGECONOMICS.COM.............................109
Plates
PLATE 4.1 LANDSCAPE TYPICAL OF THE MOR PROPERTIES................................................................................................25
PLATE 4.2 GRASSES, TREES AND SHRUBS COMMON TO THE NAMA-KAROO BIOME …………………………………………….………………26
PLATE 6.1 ROOIKOPPIE GRAVELS AS MINED ON REMHOOGTE-HOLSLOOT BY STEYN DIAMANTE IN 2014. THE HUMMOCKY FOOTWALL
IS COMPRISED OF CALCRETE MAKONDOS OVERLYING SUSPECTED FLUVIAL-ALLUVIAL DEPOSITS WHICH, ELSEWHERE ON THE
PROPERTY, ARE SEEN TO CONTAIN GRAVEL UNITS .............................................................................................37
PLATE 6.2 FLUVIAL-ALLUVIAL GRAVEL UNIT ON REMHOOGTE, UNDERLYING THE UBIQUITOUS ROOIKOPPIE GRAVEL......................37
PLATE 6.7 RIVERTON FORMATIONS SANDS AND SILTS ALONG THE MOR AT THE BRIDGE BETWEEN SAXENDRIFT AND WOUTERSPAN
(PHOTO COURTESY OF R HORN, ROCKWELL 2016). .........................................................................................46
PLATE 6.4 LOCAL STRUCTURES AND REGIONAL BEDROCK FABRIC CONTRIBUTES TO DIAMOND CONCENTRATION WITHIN THE MOR
GRAVELS..................................................................................................................................................50
PLATE 6.3 COBBLE-PEBBLE (CP) VARIETY OF ROOIKOPPIE GRAVEL ON RHC .........................................................................51
PLATE 7.1 TYPICAL STRATIGRAPHY OF THE MOR ALLUVIAL DIAMOND DEPOSITS WITH A LOWER FLUVIAL-ALLUVIAL UNIT AND AN
OVERLYING DEFLATION OR ROOIKOPPIE GRAVEL (SAXENDRIFT MINE) ..................................................................56
PLATE 7.2 CALCRETE MAKONDOS INFILLED WITH GRAVEL CONCENTRATE (SEEN IN PROFILE (ABOVE) AND AT THE SURFACE (RIGHT)).
PHOTOS FROM SAXENDRIFT MINE .................................................................................................................58
PLATE 7.3 SIGNIFICANT THICKNESSES OF COLLUVIAL GRAVELS CAN ACCUMULATE DOWNSLOPE FROM THE ORIGINAL FLUVIAL DEPOSIT
………………………………………………………………………………………………………………………………………………………..60
PLATE 8.1 FIRST PHASE EXCAVATION OF THE GRAVELS......................................................................................................63
PLATE 8.2 SECOND PHASE EXCAVATION OF MAKONDOS...................................................................................................64
PLATE 8.3 COARSE AND FINE STREAMS OF THE BV AT THE R1 PROCESSING PLANT.................................................................64
PLATE 8.4 THE FOUR ROTARY PAN PLANTS AT THE R2 PROCESSING PLAN.............................................................................66
PLATE 8.6 STEINERT X-RAY SORTING SYSTEM OF THE IMS PLANT ON REMHOOGTE ..............................................................68
PLATE 14.1 THE “BASAL” GRAVEL UNIT OVERLAIN BY THE “MIDDLINGS” UNIT, SEPARATED BY A FINE-GRAINED LAYER (UPPER TERRACE
GRAVEL PROFILE).....................................................................................................................................104
PLATE 14.2: SANDDRIFT KIMBERLITE DYKE/STRINGERS (VIEW TO THE NORTH-EAST) ...............................................................105
PLATE 14.3: LOWER TERRACES DEVELOPED ON SANDDRIFT, AS YET UNPROSPECTED. ..............................................................106
Units and Abbreviations
ABBREVIATION DESCRIPTION
amsl Above mean sea level
BBBEE
Broad Based Black Economic Empowerment (the more correct term of the usually
shortened BEE (Black Economic Empowerment)) and used in this report
Bottom cut-off
(“bcos”)
Bottom cut-off refers to the smallest size diamond (in mm) that is recovered in the
sampling and mining process
Cdn$ Canadian Dollar
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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CIM Canadian Institute of Mining Metallurgy and Petroleum
CP Competent Person, as defined by SAMREC
cpht Carats per 100 Tonnes
ct Carat(s)
ct/100m3
Carats per 100 cubic metres
ct/st Carats per Stone
DMR
Department of Mineral Resources (Previously known as Department of Minerals and
Energy or “DME”)
DMS Dense Media Separation plant
DTM Digital Terrain Model
DWS
Department of Water and Sanitation (previously known as Department of Water and
Forestry or “DWAF”)
EMPlan Environmental Management Plan (as required for a prospecting right)
EMPR Environment Management Programme (as required for a mining right)
ESKOM Electricity Supply Commission
GSSA Geological Society of South Africa
IMSSA Institute of Mine Surveyors of South Africa
JSE Johannesburg Stock Exchange
m Metres
M Million
Ma Millions of Years before Present
MPRDA Mineral and Petroleum Resource Development Act (act 28 of 2002)
NAPEGG
The Association of Professional Engineers, Geologists and Geophysicists of the
Northwest Territories
NI 43-101 National Instrument 43-101
Pr. Sci. Nat. Professional Natural Scientist
QP Qualified Person, as defined by National Instrument 43-101
SACNASP South African Council for Natural Scientific Professions
SAIMM South African Institute for Mining and Metallurgy
SAMREC South African Code for Reporting of Mineral Resources and Mineral Reserves
SARS South African Revenue Service
SG Specific Gravity
SLP Social & Labour Plan (as required for a mining right)
tph Tonnes (metric) per hour
TSX Toronto Stock Exchange
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USD United States Dollar
ZAR South African Rand
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Summary
Background
Explorations Unlimited (“EU”) was retained by Rockwell Diamonds Inc. (“Rockwell” or “the Company”) to
prepare a Technical Report for the Remhoogte/Holsloot Alluvial Diamond Project (“Remhoogte/Holsloot”
or “the Property”) in the Hay District of the Northern Province, South Africa. The Remhoogte/Holsloot
Project comprises portions of the contiguous farms Remhoogte 152 and Holsloot 47. This Technical
Report, comprising background information, drill and sample data derived from the property up to 29
February 2016, is prepared to document the results of exploration work and the resource estimate on the
Wouterspan property as summarized in the Company’s Annual Information Form for the 2016 fiscal year.
The conclusions expressed in this independent technical report are appropriate as at 29 February, 2016.
The assessment is, therefore, only valid as of this date and will change with time in response to ongoing
exploration and production results as well as with variations in economic, market, legal or political factors.
Rockwell is a company involved in the exploration and mining of alluvial diamond deposits. In South
Africa, Rockwell and its wholly-owned subsidiary, Rockwell Resources RSA (Pty) Ltd (“Rockwell RSA”),
own, and Rockwell RSA operates the Wouterspan project through a 70% shareholding in HC Van Wyk
Diamonds Limited. Rockwell and Rockwell RSA also own the Saxendrift Mine (currently being operated
by contract operators) and hold the Niewejaarskraal project (currently inactive) through a 70%
shareholding in Saxendrift Mine (Pty) Ltd. Rockwell's 30% BEE partner of choice in these projects is
Siyancuma Capital (Pty) Ltd (“Siyancuma”).
Under the terms of a Sale Agreement signed on 5 January, 2015, Rockwell RSA entered into a transaction
with the vendors Steyn Diamante CC, Bondeo 140 CC (“Bondeo”) and Schalk and Celeste Steyn (together
the vendors are collectively referred to as “Steyn Diamonds”) to acquire, inter alia, all of the assets and
certain liabilities comprising the business carried on by Steyn Diamonds in respect of the Property. The
assets to be transferred to Rockwell RSA include the Mining Right in respect of diamonds over a portion
of the remainder of the farm Remhoogte 152, measuring 1,585.36 hectares, in the Magisterial /
Administrative district of Prieska and various items of earth-moving plant and equipment, processing
plants and rehabilitation guarantees. The total purchase price is in the amount of ZAR284,180,000
(USD24.7M or Cdn$28.5M). On 27 May 2015, Rockwell announced1
that that all conditions precedent,
including evidence of sufficient financing to complete the acquisition of the Remhoogte/Holsloot project,
and its associated plant and equipment in MOR were met and the transaction was completed by end May
2015.
The Remhoogte/Holsloot project is located on the south bank of the Orange River in the Herbert district
of the Northern Cape Province, some 85km southwest of Douglas and some 200km from Kimberley. The
following permits are valid for the project.
1
News Release of 27 May, 2015
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Property Name Area (ha) Mineral Right
Holder
Permit Type and
Number
Renewal Date
Certain Portion of the
Remainder of the farm
Remhoogte 152
1,585.36
Pioneer
Minerals (Pty)
Ltd2
New Order
Mining Right
NC 0291MR
14 August 2020
Portion of Portion 3 of
Holsloot 47
1,049.59
Saxendrift Mine
(Pty) Ltd
New Order
Prospecting Right
735/2006PR
A Mining Right has
been granted (17 June
2015). A date for the
notarial execution is
still awaited.Rooisloot Portion of
Holsloot 47
Geology
The present Orange River between Douglas and Prieska, generally referred to as the Middle Orange River
(“MOR”), displays a meandering channel morphology, best developed in areas underlain by the Dwyka
Group. Palaeochannel depositional packages of the Orange River are preserved at different elevations
above the present Orange River bed. The ages of the terraces young with decreasing elevation and,
conversely, the probability of preservation decreases with increasing age and elevation. The Remhoogte
deposit (“RHC”) comprises an extensive flat lying alluvial sequence located on terraces developed on the
left bank of the present Orange River, approximately 20-70m above the Orange River. The bedrock is well
exposed in the workings and shale and tillite of the Karoo age Dwyka Group are common. The fluvial-
alluvial gravels comprise a sequence of (basal) gravels 2-4m thick overlain by generally less than 5m of
variably calcreted sands and silts and covered by a thin layer of soil and scree. The cobble-sized clasts
within the gravels consist mostly of lava and quartzite with significant, if variable, amounts of Banded Iron
Formation (BIF), and minor amounts of limestone, tillite, and agate. The matrix is sandy to gritty. As is
usual with these types of deposits the degree of calcretisation decreases downward, and are
characterised by hardpan or laminar calcrete at the surface to loosely cemented gravels at depth. The
gravels, which are generally known to be diamondiferous, are, typically, not well sorted and are typical of
braid bars that migrate through sections of river channels in response to variable water speed.
The bedrock on both Remhoogte and Holsloot is Dwyka shales. Both colluvial and fluvial-alluvial gravel
units are known to exist on RHC.
The Rooikoppie gravel thickness varies and ranges from 0.4m to +1.0m. The thin Rooikoppie gravel is
generally pebble to cobble sized in a sandy matrix. The thicker Rooikoppie ranges from cobble to pebble
sized and pebble to boulder sized. The gravel sampled from the edge of the terrace has a sand- to pebble-
matrix. A high percentage of pebble clasts with an abundance of Banded Iron Formation (“BIF”) and chert
(both black and blue varieties) are observed within the matrix. Other minerals observed include jasper,
quartzite, Ventersdorp lava, quartz, agate and a variety of fibrous crocidolite locally known as “Tiger’s
Eye” due to its golden-brown to red-brown colours.
The nature of makondo3
development varies throughout the property. Both deeper, well-developed
makondos and shallow makondos are observed. The gravel fill of the shallow makondos is generally finer,
compared with the fill of the deeper makondos which is coarser. The shapes of clasts infilling the
2
The relationship between Pioneer Minerals and TransHex is detailed in Section 3.3.2
3
Makondos are solution cavities or potholes in the calcrete, typically filled with a deflated gravel concentrate
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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makondos typically range from rounded to sub-angular with pebble sized clasts dominantly rounded. The
makondo observed can be connected or disconnected and also form channel type features. The depth of
makondos generally vary from 0.2 to +1.2m.
The fluvial-alluvial gravels have not yet been characterised.
Previous Exploration and Development
Historically, diamonds have been recovered from the Rooikoppie gravels of the RHC project since 1926.
In 1983, prospecting indicated the presence of fluvial-alluvial deposits beneath the calcrete. Semi-
systematic prospecting was initiated by Pioneer Minerals (“Pioneer”) in 1999, with drilling (over three
small areas) and very limited sampling. Trans Hex acquired Pioneer and completed an extensive drilling
programme – with a grid of 200m x 100m (and up to 50m x 50m in places). No bulk-sampling was,
however completed during this time.
Since March 2014, Steyn has sampled mainly colluvial Rooikoppie gravels from the properties, with one
small, non-representative sample of fluvial-alluvial gravels. During January 2015, Rockwell appointed RBG
Surveys (Pty) Ltd to survey the areas sampled by Steyn. The surveyed sample volumes as at end May,
2015 total 1,123,877m3
. The diamond register indicates that some 10,551ct were sold (on open tender)
during the period March 2014 to May 2015 for some USD3,150/ct. The largest stone recovered during
this period was 178ct. The calculated sample grade for the Rooikoppie gravel on Remhoogte/Holsloot
was approximately 0.9ct/100m3
.
Bulk Sampling
There are four sample processing plants on Remhoogte/Holsloot – Remhoogte 1 (“R1”), Remhoogte 2
(“R2”), Holsloot 1 (“H1”) and the Steinert/IMS4
sensor-based diamond sorting plant. Gravels derived from
Phase 1 excavation are processed through R1, R2 and H1. The makondo gravels are processed through
the R1 plant and the IMS plant is used to retreat recovery tailings.
During the period up to end February 2016, 8,043.99ct were recovered from 906,144m3
for an average
sample grade of some 0.9ct/100m3
. This represented 2,128 stones at an average size of 3.8ct/st. During
FY2016, 7,465ct of diamonds were sold for an average of USD1,511/ct.
Diamond size frequency distribution patterns for the Remhoogte diamonds are broadly similar to those
for the other MOR terraces, as would be expected, given similar sources and general depositional
environments. There are, however, some significant differences –the diamonds recovered from
Remhoogte have a finer size distribution than those from the BHC terrace on the nearby Saxendrift mine,
but the grade is higher.
Mineral Resource and Mineral Reserve Estimates
The Inferred Mineral Resource has been estimated by Rockwell’s Group Technical Manager, G. Norton,
(Pr. Sci. Nat.), a Qualified Person who is not independent of the Company and reviewed by T.R. Marshall,
PhD, (Pr. Sci. Nat.), a Qualified Person who is independent of the Company and who is responsible for the
estimates.
4
This is a joint venture between IMS Engineering (Pty) Ltd of South Africa and Steinert Elektromagnetbau of Germany
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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The volumes estimated here have been modelled from the existing TransHex database, as modified by
the Rockwell QA/QC data and the diamond grade and values are based on bulk-sampling by Rockwell
during the period to February 2016. It is apparent that there is a significant decrease in the gravel volume
compared to the previous year. This is as a result of a 60% variance between the original TransHex
estimates of volume and the re-estimated volumes based on Rockwell’s QA/QC drilling and pitting data.
Terrace
Complex
Bottom
Cut-off
Volume
(m³)
Grade
(ct/100m³)
Value
(USD/ct)
Rooikoppie 5mm 1,300,000 0.9 1,500
Exploration Targets
Re-evaluation of the TransHex database by Rockwell indicates that Exploration Targets of some 9-10Mm3
of fluvial-alluvial (“GMX”) gravel might be expected to exist on Remhoogte and Holsloot, with target
grades of some 0.4-0.6ct/100m3
and average expected diamond values within the range USD1,300-
1,600/ct. The target grades and values are based on the variations seen in the results from similar GMX
deposits on the nearby Saxendrift property. These results from the on-going Remhoogte/Holsloot
sampling programme cannot be extrapolated to these deposits, since the Remhoogte/Holsloot data
refers to Rooikoppie gravels only. It is important to note that these potential volumes, grades and values
are conceptual in nature, that there has been insufficient exploration in these areas to define a Mineral
Resource and that it is uncertain if further exploration will result in the targets being delineated as a
Mineral Resource.
Recommendations
Rockwell should continue to drill and excavate bulk-sample pits in order to improve confidence in the
gravel volume model of both the Rooikoppie and fluvial-alluvial gravel units. In addition, sampling of the
Rooikoppie gravel units should be continued in order to upgrade both grade and value with further
confidence. It has also been proposed that the sampling programme proceed to the fluvial-alluvial
deposits on Remhoogte once the gravels have been verified by drilling (re-drilling). The prospecting
programme should be planned to upgrade the Mineral Resources that may exist on the Remhoogte /
Holsloot project and initiate technical and economic studies which may culminate in the completion of a
Preliminary Economic Assessment. Advance to any subsequent exploration phase is contingent on
positive results in the initial drilling and sampling programme.
Rockwell has proposed a budget of ZAR5M for the exploration drilling programme on
Remhoogte/Holsloot, as well as a budget of ZAR25M/month for the Rooikoppie sampling exercise. It is
planned that cash flow from operations on the Project will be used to fund this work programme.
The independent QP believes that, notwithstanding the problems inherent in resource estimations in
alluvial diamond deposits, the results to date are sufficiently encouraging that the Property warrants
further sampling followed by preliminary technical and economic evaluation. Further, in the opinion of
the independent QP, both the proposed exploration/sampling programme and the budget costs seem
reasonable.
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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1 INTRODUCTION
1.1 Terms of Reference and Scope of Work
Explorations Unlimited (“EU”) was retained by Rockwell Diamonds Inc. (“Rockwell” or the “Company”) to
prepare a Technical Report for the Remhoogte/Holsloot Alluvial Diamond Project (“Remhoogte/Holsloot”
or “the Property”) in the Hay District of the Northern Province, South Africa (Fig. 1.1). The
Remhoogte/Holsloot Project comprises portions of the farms Remhoogte 152 and Holsloot 47. This
Technical Report comprises background information and drill and sample data that includes bulk-
sampling information from the Property up to 29 February, 2016. It has been prepared to document the
results of exploration and the Mineral Resource estimate for the project as summarised in the Company’s
Annual Information Form for the 2016 fiscal year.
EU is a South African based consultancy owned by Dr Tania R Marshall that has been operating since 1996.
EU provides a variety of exploration and prospecting consulting services to the international minerals
community, in particular with respect to geological evaluation and financial valuation of alluvial diamond
mineral properties. This Technical Report was prepared, primarily, and supervised by Dr T.R. Marshall
(Pr. Sci. Nat.). Dr Marshall has over 20 years’ experience in the alluvial diamond industry, including a
background in international mineral exploration and evaluation studies and has had direct experience
with alluvial-eluvial diamond mining operations as a consulting geologist and, also, as an operator. Dr
Marshall’s experience includes operational and financial aspects of alluvial diamond mining, including
mine-planning and costing. Rockwell has accepted that the qualifications, expertise, experience,
competence, and professional reputation of Dr Marshall are appropriate and relevant for the preparation
of this Report.
Rockwell, listed on the TSX (RDI) and the JSE (RDI), is a company involved in the exploration and mining
of alluvial diamond deposits in South Africa (Fig. 1.1 and 1.2). Rockwell's BEE partner in the MOR
operations is Siyancuma.
• Rockwell and its wholly-owned subsidiary Rockwell Resources RSA (Pty) Ltd (“Rockwell RSA”) owns
70% of Saxendrift Mine (Pty) Ltd, the vehicle which holds the Saxendrift, Niewejaarskraal, Holsloot
and Zwemkuil projects;
o Rockwell RSA owns Saxendrift Mine (including the Brakfontein Hill Complex and the
Saxendrift Hill Complex). This property is currently being operated by a number of contract
operators.
o Rockwell RSA owns the Niewejaarskraal Project (currently on Care & Maintenance).
o Rockwell RSA operates the Holsloot Project.
• Through a Transaction and Shareholders agreement5
with Gump Mining cc, Rockwell RSA
incorporated a new company Gumrock Mining (Pty) Ltd (“Gumrock”) to carry out the prospecting and
mining activities on the Kwartelspan Complex project. Both Gump Mining cc and Rockwell RSA own
50% of the issued shares, with shareholding to be diluted according to funding requirements and
abilities.
• Rockwell and Rockwell RSA also owns (and Rockwell RSA operates) the Wouterspan Project (MOR)
through a 74% shareholding in HC Van Wyk Diamonds Limited (“HCVWD”);
• Through an acquisition of Bondeo6
144 cc, Rockwell RSA owns and operates the Remhoogte and
Reads Drift projects
5
Signed 23rd April, 2014
6
As announced by Rockwell on 5 January 2015
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
Explorations Unlimited Page 14
Figure 1.1 Location of Rockwell owned operations in South Africa (and the location of the
Remhoogte/Holsloot project)
In addition to these mineral holdings, Rockwell owns a 20% stake in Flawless Diamond Trading House
(Proprietary) Limited ("FDTH"), which offers a unique marketing and sales arm for Rockwell at a fee which
is well below the market norm. This acquisition provides Rockwell with access to additional revenue, and
allows the Company to gain insight into diamond sales trends which will assist with its short and long term
production and growth plans.
The Technical Report was compiled, primarily, by Dr Marshall. Where the document refers to “the
author”, the senior (independent) QP, Dr Marshall, is referenced, unless otherwise indicated. The
document was co-authored by Mr Glenn Norton who is the Group Technical Manager for Rockwell
Diamonds Inc. Mr Norton has over ten years’ experience in the exploration and exploitation of alluvial
diamonds throughout Africa and is Rockwell’s in-house Qualified Person. This Technical Report has been
prepared in accordance with Canadian Securities Administrators’ National Instrument 43-101 - Standards
Of Disclosure For Mineral Projects (“NI 43-101”), the NAPEGG guidelines for the Reporting of Diamond
Exploration Results, Identified Mineral Resources and Ore Reserves and the Best Practice Guidelines
prepared by CIM to assist the QP in the planning, supervision, preparation and reporting of Mineral
Resource and Mineral Reserve (“MRMR”) estimates. The Mineral Resource estimate has, further, been
prepared with specific reference to the 2016 South African Code for the Reporting of Exploration Results,
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Mineral Resources and Mineral Reserves (“SAMREC”7
) code. In particular, the SAMREC Code provides
guidelines for the diamond industry. The SAMREC Code has also been incorporated into the JSE Listings
Rules. Since Rockwell is dual listed in both Canada and South Africa, reference will continually be made
to both CIM and SAMREC Mineral Resource estimation codes (with CIM taking preference as the
company’s primary listing is the TSX).
Figure 1.2 Corporate shareholdings of Rockwell (2015)
The conclusions expressed in this Technical Report are appropriate as at 29 February, 2016. The appraisal
is, therefore, only valid for this date and will change with time in response to ongoing exploration and
production results as well as with variations in diverse external factors.
1.2 Sources of Information
The comments and recommendations in this report, specific to the Remhoogte/Holsloot project, are
based, primarily, on information and technical documents and production data supplied by Rockwell.
Other technical/scientific papers and miscellaneous documents referred to are identified within the text
or have been referenced in Section 18.
1.3 Units and Currency
All values are metric, unless otherwise stated. Historical grade and tonnage figures are reported in units
as originally published. All budget costs are presented in South African Rands (ZAR). Diamond values are
expressed in United States Dollars, for which a nominal exchange rate of USD1 = ZAR15.6 has been used
(26 April, 2016).
7
Including the SAMREC Guideline Document for the Reporting of Diamond Exploration Results, Diamond Resources
and Diamond Reserves (and other Gemstones, where Relevant) (“SAMREC Diamond Guidelines”)
RockwellDiamondsInc
(RDI-TSX/JSE)
Rockwell Resources
RSA (Pty) Ltd
Saxendrift Mine (Pty) Ltd
("SAX")
Zwemkuil Project
Holsloot Project
H C Van Wyk Diamonds Ltd
("HCVWD")
Wouterspan Project
Bondeo 144 cc
("Bondeo")
Remhoogte Project
Reads Drift Project
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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1.4 Field involvement of Qualified Persons
Dr Marshall visits the Remhoogte/Holsloot project site for two days each month. The latest visit was
undertaken by Dr Marshall of on during 19-20 April 2016. EU’s extensive experience in this area (including
previous visits to the Property) as well as that gained from prior investigations of other, nearby deposits
was also drawn upon as required. Mr Norton is Rockwell’s Group Technical Manager and is on site 3-5
days each week.
1.5 Use of Data
Neither EU nor family members of the principal of EU have a business relationship with Rockwell or any
associated company, or with any other company mentioned in the Technical Report which is likely to
materially influence the impartiality of the Report, or create the perception that the credibility of the
Report could be compromised or biased in any way. The views expressed herein are genuine and deemed
independent of Rockwell. Moreover, neither the Independent QP, nor family members have any financial
interest in the outcome of any transaction involving the properties considered in this Report, other than
the payment of normal professional fees for the work undertaken in its preparation (which is based upon
hourly charge-out rates and reimbursement of expenses). The payment of such fees is not dependent
upon the content, or conclusions, of this Report or any consequences of any proposed transaction.
Rockwell has warranted that a full disclosure of all material information in its possession or control has
been made to EU, and that it is complete, accurate, true and not misleading. Draft copies of the Report
have been reviewed for factual errors by Rockwell. Any changes made as a result of these reviews did
not involve any alteration to the conclusions made. Hence, the statements and opinions expressed in this
document are given in good faith and in the belief that such statements and opinions are not false and
misleading at the date of this Report.
Written consent is provided for the filing of the Technical Report with any stock exchange and other
regulatory authority and also for any publication by them of the Technical Report for regulatory purposes,
including electronic publication in the public company files on their websites accessible by the public. EU
reserves the right, but will not be obligated, to revise this Technical Report and conclusions if additional
information becomes known to EU subsequent to the date of this Technical Report.
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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2 RELIANCE ON OTHER EXPERTS
2.1 Legal Opinion
An opinion regarding the underlying legal contracts, permissions and agreements was provided by
Director in Mining and Resources, Chris Stevens of Werksmans Attorneys on 18 March, 2016 – “Rockwell
Diamonds Inc. – Title Opinion: Remhoogte, Rietsdrift (Bo-Karoo), Wouterspan and Zwemkuil”.
Chris Stevens is a director with Werksmans Attorneys where he is head of the firm's Mining and Resources
practice area. He advises on all aspects of mining law in South Africa, including in relation to commercial
arrangements, conveyancing, litigation, opinion work, black economic empowerment laws and due
diligence aspects. He advises many of the South African major mining houses on these aspects, as well
as medium size mining companies and junior exploration companies. He further advises numerous
American, UK, Canadian and Australian mining companies with interests in South Africa and acts for
numerous black empowerment companies in relation to mining transactions. He has also been involved
in numerous transactions for South African mining entities in sub-Saharan Africa. He has also been
integrally involved in advising numerous mining companies on various aspects of the Mineral and
Petroleum Resources Development Act, 28 of 2002, as well as the amendments to that legislation. Chris
Stevens co-lectured the LLB course at the University of the Witwatersrand on prospecting and mining law
in 1998 to 2007. He lectures at the University of the Witwatersrand to mining and engineering students
on compliance aspects and annually lectures at the University of Pretoria for MSc geology students in a
compliance course. He sat on the mining law committee of the International Bar Association in 2002 to
2006. Chris Stevens received B.Com and LLB degrees from the University of Witwatersrand and has been
practicing mining law since 1987. He was admitted as a notary public in 1990. Chris Stevens speaks at
numerous conferences, both in South Africa and internationally in relation to the South African mining
industry and, as such, is well qualified to produce reliable legal opinions on the Remhoogte project.
The Independent QP has not independently verified the status of these contracts, permissions and
agreements but has accepted that the legal opinions contained within the due diligence report are
materially accurate. The Independent QP has relied on such opinions for the compilation of Section 3.2.
2.2 Diamond Valuation
Valuation of the recovered diamonds has been through the industry standard practice of putting
representative diamond parcels up for sale, either through Flawless Diamonds Tender House (“FDTH”) or
Diacore8
.
• FDTH is a marketing and tender sale company (held 20% by Rockwell) that operates a professional
run, fully transparent “sealed-bid tender system”. Details of this process are described in a later
section.
• Diacore provides rough and polished diamonds to customers internationally and has
manufacturing facilities/offices in Botswana, South Africa, Namibia, India, Dubai, Belgium, Israel
and New York. The group is well-known for its investment in rare and exceptional diamonds as
well as for the creation of unique high-end jewellery.
Values obtained for diamonds through both these means represent actual sales completed in competitive
market by registered, practicing, international diamond buyers whose qualifications (and individual
identities) are unknown. Since the values thus obtained are actual, realised sales figures, and not simply
a valuation with no obligation to purchase, there are no risks associated with the diamond values used in
8
Diacore was previously known as the Steinmetz Diamond Group
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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this technical report. These sales values have been relied upon by the Independent QP in all sections
relating to Mineral Resource and Mineral Reserve estimates. The Independent QP has checked each
brokers note and Kimberley Process Certificate to verify the information provided.
2.3 Survey
The surveying on Remhoogte was completed by an independent survey services company, RBW Survey
(Pty) Ltd (contracted by Rockwell). The overseeing of the fieldwork and calculations is done by a
competent person under the auspices of Roland Harms (registered with The Institute of Mine Surveyors
of South Africa (IMSSA)), supported by qualified and trained surveyors in the field. The legal appointment
and signing off of month-end calculations and all prescribed statutory plans are the responsibility of
Werner Harms, appointed in terms of the Mines and Works Act of 1956. Weekly pre and post-profiling
of all applicable surfaces is undertaken using a sub -1cm accuracy Real Time Global Positioning System
(“GPS”) instrument. A profile grid of ± 5m on even surfaces and 1m on uneven surfaces is set up. Volumes
are calculated using the “Model Maker Systems” software package, a standard package, developed
specifically for the technical and land surveying, engineering, mining, town-planning, landscaping,
quantity surveying, irrigation design and construction industries.
The standard checks implemented in the calculations include but are not limited to:
• Start-up checks to a maximum tolerance of 0.5cm.
• All profiling to be within 1cm of accuracy.
• Volume calculations - manual editing of all DTM’s where necessary and comparing total volume
of excavations with grid volumes.
• Careful record keeping of stockpiles at the plant and in the pit.
• Communication between survey and mining.
• All volumes are reported at the middle and end of each month for a multiple of surfaces.
• Accuracy to comply with SAMREC – margin of error in the reporting volumes not to exceed 5% of
accuracy.
• Elimination of grey areas, such as lack of profiling, stockpiles and excavations not surveyed.
Once the area has been excavated and surveyed the surveyor also supplies the RAW data, volumes and
plan of the pit in DXF format to Rockwell’s Geology department. This allows for independent calculation
and comparisons of the resulting volume estimations, by both in-house and independent QP.
2.4 Metallurgy
Since June 2011, Dr. Kurt Petersen of Metal Dog Minerals has been contracted by Rockwell to assist and
to advise on processing and metallurgical issues on all of their diamond projects. Dr Petersen holds an
MSc in Engineering Science from the University of Queensland (Australia) and a PhD in Metallurgy from
Stellenbosch University (South Africa). With over 15 years’ experience in process modelling and
simulation (10 years specifically in the Diamond industry), Dr Petersen is highly experienced in the design
of diamond plants and optimisation of recovery performance. In this capacity, Dr Petersen, in association
with Mr Norton, is involved in on-going due diligence on the processing capacity on Remhoogte/Holsloot.
A number of documents dealing with processing/metallurgical issues were prepared by Dr Petersen for,
and on behalf of, Rockwell RSA. The Independent QP has relied on this information in section 8.3.1.
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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3 PROPERTY DESCRIPTION AND LOCATION
3.1 Property description and location
The Remhoogte/Holsloot project is located along the south bank of the MOR between Douglas and
Prieska in the Northern Cape Province of South Africa (Fig. 3.1), which area has been the site of intense
alluvial diamond activity since the 19th
century. The MOR and, particularly, the stretch between Douglas
and Prieska, are historically important diamond mining centres, with alluvial deposits having been mined
here for over 100 years ((De Wit, Ward, Jacob, Spaggiari, & van der Westhuisen, 1997); (Marshall, 1987)).
Figure 3.1 Location of the Remhoogte/Holsloot project in the Northern Cape Province
The Remhoogte/Holsloot project is situated approximately 85km southwest of Douglas which, in turn,
lies 110km southwest of Kimberley, the administrative capital of the Northern Cape Province and the
historic centre of the South African diamond mining industry. The Mining Right on Remhoogte identified
in and constitutes 1,585.36ha and the Prospecting Right on Holsloot comprise 1.049.59ha (Fig. 3.2 and
Table 3.1). The area held by these permits includes sufficient space for (current and future) mine offices
and out-buildings, processing and final recovery facilities, as well as for the necessary fines disposal
(tailings) ponds, transitory coarse dumps and more permanent water supply dams.
Remhoogte/Holsloot Project
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Figure 3.2 Location of the Remhoogte/Holsloot Project Properties
Table 3.1 UTM Co-ordinates of the Remhoogte/Holsloot project
POINT UTM Y UTM X
A 6729991 693145.6
B 6729808 695146.3
C 6729037 695712.1
D 6729987 697975.7
E 6728596 699223.5
F 6726174 694227.9
G 6727866 692022.1
H 6728498 699053.6
I 6726714 699858
J 6724326 695149.8
K 6726244 694385.7
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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3.2 Permits contracts and agreements
3.2.1 Agreements
Under the terms of a Sale Agreement signed on 5 January, 2015, Rockwell assumed control9
of the
Remhoogte/Holsloot project on 28 May 2015. Financing has been secured through the granting of a
bridging loan by key shareholders, being Diacore and Rockwell’s chairperson Mark Bristow. The total loan
amounts to USD16million plus ZAR16million , of which USD15 million and ZAR16 million has been
committed by Diacore and the remaining USD1 million by Mark Bristow; together with a further USD0.5
million as a working capital reserve for transaction costs associated with the acquisition. Agreements
have been signed to meet the new purchase consideration – which has been restructured and reduced
from ZAR284 million to ZAR214.95 million through exclusion of certain earthmoving equipment from the
assets being acquired.
3.2.2 Mineral rights (Mining/Prospecting Rights, permits, etc.)
Table 3.2 Summary of the project landholdings, described in this report
Property Name Area (ha) Mineral Right
Holder
Permit Type and
Number
Renewal Date
Certain Portion of the
Remainder of the farm
Remhoogte 152
1,585.36
Pioneer
Minerals (Pty)
Ltd
New Order
Mining Right
NC 0291MR
14 August 2020
Portion of Portion 3 of
Holsloot 47
1,049.59
Saxendrift Mine
(Pty) Ltd
New Order
Prospecting Right
735/2006PR
A Mining Right has
been granted (17
June 2015). A date
for the notarial
execution is still
awaited.
Rooisloot Portion of
Holsloot 47
Holsloot
• In respect of the Remainder of Portion 3 of Holsloot 47, Trans Hex had acquired a prospecting right
in terms of Section 17 of MPRDA (Prospecting Right 735/2006 PR on 14 December 2006).
• An application in terms of Section 11 of the MPRDA was lodged for Ministerial consent to cede the
prospecting right from Mvelaphanda to Saxendrift. The right was then ceded to Saxendrift by way of
a notarial deed of cession of prospecting right which was executed on 4 March 2008 and registered
at the Mining Titles Registration office on 11 April 2008 under number 11/2008.
• Bondeo acquired the Holsloot property from Rockwell in 2012, but the transfer was never finalised.
Consequently the Holsloot permits remain in the name of Rockwell (Saxendrift Mine (Pty) Ltd).
• The Mining Right has been granted on 17 June, 2015. Saxendrift, as the grantee, is awaiting a date
for notarial execution of the Right.
9
News Release of June 25, 2015
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Remhoogte
• The Mining Right for Remhoogte is held by Pioneer, a wholly owned subsidiary of Trans Hex (Pty) Ltd
(“TransHex”).
• The shares of Pioneer were purchased by Bondeo from TransHex and a Section 11 cession transferred
the Mining Right from Pioneer to Bondeo. On 14 January 2015, an application was lodged for a
Section 11 to cede the shares from Bondeo 140 CC to Saxendrift Mine (Pty) Ltd. On 15 May 2015 the
Section 11 from Bondeo 140 CC to Saxendrift Mine Pty Ltd was approved and Saxendrift took over
the operation from 1 June 2015 with all the employees of Bondeo 140 CC.
• The Mining Right has been properly and notarially executed and registered in the Mineral and
Petroleum Titles Registration Office. It has been granted on standard terms and conditions applicable
to mining rights and has been granted for diamonds.
3.2.2.1 Royalty Payments
As with all mining properties in South Africa, the Remhoogte/Holsloot project is subject to a State royalty.
The minimum and maximum rates for diamonds (unrefined minerals) are 0.5% and 9.0%, respectively. In
terms of the Mining and Petroleum Royalties Act, Rockwell has registered as a royalty payer with SARS.
During FY2016, Rockwell paid 798.906.82 to SARS on behalf of Pioneer.
3.2.3 Surface ownership / land use rights
In respect of the Remaining Extent of Portion 3 of the farm Holsloot 47, a land use agreement has been
concluded between the surface owner, Mrs C M Muller and Saxendrift, dated June 2015. In terms of the
agreement, whilst mining operations are carried out, Saxendrift would pay ZAR75,000 per month to the
owner and if the mine is placed under care and maintenance, ZAR25,000 per month. The monthly
payments escalate annually at 10%. Otherwise the agreement is on standard terms and conditions for
surface use agreements of this kind.
A joint land use agreement has been entered into between Saxendrift and Jouren Trading and
Investments (Pty) Ltd (“Jouren”) relating to Holsloot. Jouren has applied for a section 53 approval in terms
of the MPRDA for its project being the development, construction and operation of a 75MW Prieska solar
photovoltaic energy facility on a portion of the property. Saxendrift has agreed to withdraw its objection
to the project and has agreed to consent to the section 53 approval. Saxendrift has also undertaken not
to conduct any mining operations on the project area of Jouren and has agreed in respect of certain initial
mining blocks to complete mining operations by no later than 31 December 2015.
In August 2013, Bondeo concluded an agreement with Mrs A J de Villiers, the surface rights owner of
Remhoogte, to acquire access for the purposes of mining operations. The agreement included the
payment of ZAR1M on signature and the payment of ZAR10M on an unspecified date when Bondeo10
established its equipment on Remhoogte in order to commence with mining operations.
To the extent relevant to this Project, the extent of the surface rights is considered sufficient for (current
and future) mine offices and out-buildings, processing and final recovery facilities, as well as for the
necessary, fines disposal (tailings) ponds, transitory coarse dumps and more permanent water supply
dams.
10
The management of Bondeo have verbally confirmed that this payment was made in 2015, but have yet to supply
the requested documentation detailing proof of payment.
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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3.3 BEE Compliance
In October 2014, Rockwell RSA and others concluded a consolidated sale of shares agreement with
Siyancuma Capital (Pty) Ltd (“Siyancuma”) in terms of which Rockwell RSA agreed to sell 30% of the shares
in Saxendrift, HC van Wyk and Jasper to Siyancuma (“Sale Agreement”).
Mr Richard Mhlonto (currently Group HR/Industrial Relations Manager for Rockwell RSA) and Mr Oupa
Sekhukhune are currently the ultimate shareholders in Siyancuma. In due course, a trust established for
the benefit of Rockwell RSA employees will acquire 30% of the shares in Siyancuma.
All suspensive conditions have now been fulfilled, including approval from the Company’s shareholders
due to Siyancuma being a related party to the Company. This transaction, concluded on 23 April 2015,
satisfies the equity ownership requirements of the Broad-Based Socio-Economic Empowerment Charter
for the South African Mining Industry (as evidenced in the Rockwell Scorecard for the broad-based socio-
economic empowerment charter and verified by the DMR.
3.4 Environmental
Pioneer has an approved (2008) standard Environmental Management Programme (“EMP”) on
Remhoogte. This will remain valid until an update is submitted by Rockwell. The Environmental
Management Plan (EMPlan) for Holsloot has not yet been approved by DMR – this will take place on the
date of notarial execution of the mining right.
3.4.1 Rehabilitation Guarantees
In regard to provision for rehabilitation, the DMR's estimate for rehabilitation (February, 2016) is an
amount of ZAR4,864,923. Already guarantees of an amount of R1 294 047 have been submitted under
the prospecting right held by Saxendrift and this will have to be topped-up to fulfil the requirements for
the mining right.
Pioneer has rehabilitation guarantees totalling ZAR5,724,067 and ZAR770,000 on Remhoogte. Since the
rehabilitation liabilities have increased (ZAR11,095,704 as at February 2016) due to the increased
sampling done by Rockwell, the guarantees quantum has increased and will be replaced by Rockwell after
the quarterly Financial Quantum and Performance Assessment has been completed.
3.5 Social Responsibility
3.5.1 Social and Labour Plans
In accordance with the MRPDA a Social and Labour Plan (“SLP”) is required to be submitted to the DMR
along with the other requirements for a mining right. Pioneer has a SLP dated 15 August 2012, which
appears to comply with all DMR regulations and is committed to the expenditure of ZAR1,395,000 over
the first five years (until 2017). As soon as operations proceed on the Remhoogte/Holsloot property,
Rockwell’s global SLP will be updated to include this operation.
3.6 Associated Risks
To the extent known, no specific risks exist that may affect access, title or right, or the ability of Rockwell
to perform work on the properties comprising the Remhoogte/Holsloot project. However, generalised
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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risks associated with prospecting and mining are always present. These issues are discussed more fully
in Section 13.3.8 and will not be repeated here.
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4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
4.1 Topography, elevation and vegetation
The project area is situated in a region of gently undulating hills on the edge of the Karoo, an area of
sparse, arid semi desert that occupies much of central South Africa. The area comprises elevated palaeo-
river terraces up to some 90m above the present Orange River. The terraces are cut by a number of small
ephemeral streams that flow towards the Orange River. The surrounding terrain (Plate 4.1) is a flat semi-
desert environment with sparse grass and occasional shrubs, thorn bushes and succulents in a sandy soil.
Bigger trees line the banks of the Orange River. Since no exploration or mining activities will be
undertaken in the present river channel, bank-full discharge conditions will have no effect on operations.
Even during floods, the effect on the mining pits will be insignificant, since the narrow, modern-day
floodplains are not exploration targets.
Plate 4.1 Landscape typical of the MOR properties
There are an estimated 5,400 plant species in the Northern Cape Province. The largest part of the
province falls within the Nama-Karoo biome, the third largest biome in South Africa, covering about 20.5%
of the country or more than 260,000 km2
. It stretches across the vast central plateau of the western half
of the country.
The dominant vegetation is a grassy, dwarf shrubland. Grasses tend to be more common in depressions
and on sandy soils, and less abundant on clayey soils. Grazing rapidly increases the relative abundance
of shrubs. Most of the grasses are of the C4 type and, like the shrubs, are deciduous in response to rainfall
events. Sweet Thorn Acacia karroo occurs in many places along the banks of the Orange River (Plate 4.2).
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Plate 4.2
Grasses, trees
and shrubs
common to the
Nama-Karoo
biome
The amount and nature of the fuel load is insufficient to carry fires and fires are rare within the biome.
The large historical herds of Springbok and other game no longer exist. Like the many bird species in the
area - mainly larks - the game was probably nomadic between patches of rainfall events within the biome.
The Brown Locust and Karoo Caterpillar exhibit eruptions under similarly favourable, local rainfall events,
and attract large numbers of bird and mammal predators. Common animals include the Bat-Eared Fox,
Ostrich, Spring Hare, and tortoises. The Riverine Rabbit is a threatened species found in the Nama Karoo.
Less than 1% of the biome is conserved in formal areas. The Prickly Pear Opuntia aurantiaca and Mesquite
Prosopis glandulosa are the major alien invader species. Urbanization and agriculture are minimal, and
irrigation is confined to the Orange River valley and some pans. Most of the land is used for grazing, by
sheep (for mutton, wool and pelts) and goats, which can be commensurate with conservation. However,
under conditions of overgrazing, many indigenous species may proliferate, including Threethorn
Rhigozum trichotomum, Bitterbos Chrysocoma ciliata and Sweet Thorn Acacia karroo, and many grasses
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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and other palatable species may be lost. There are very few rare or Red Data Book plant species in the
Nama Karoo Biome, however, the Shepherd’s Bush (Boscia albutrunca) is a protected species that occurs
widely.
4.2 Access
The property is easily accessed via a network of regional tarred and gravel roads, as well as farm tracks
within the Project property.
4.3 Proximity to population centres and nature of transport
The project is situated some 200km from Kimberley and Barkly West via route R357 from Douglas to
Prieska, south along the Orange River. Douglas and Prieska are some 80km and 50km distant from the
Remhoogte/Holsloot operation, respectively. For reference, Kimberley is some 570km from
Johannesburg and can be accessed by national road as well as by regular commercial rail and air services.
4.4 Climate and Length of Operating Season
The Northern Cape climate (Fig. 4.1) is mainly semi desert – this is a large dry region of fluctuating
temperatures and varying topographies. The annual rainfall is sparse, only 50 to 400mm per annum. The
average is 256mm, mostly in the form of spectacular summer thunderstorms. The average annual
evaporation rate is measured at 2,524mm. The low rainfall and high evaporation rates result in extremely
dry conditions. Daytime temperatures can be extreme and vary from lows of around in winter to highs
of around 42°C in summer. Average temperatures, however, are in the range between a winter minimum
of 3°C to a summer maximum of 33°C.
Figure 4.1 Average climatic conditions at Kimberley, (www.kimberley.climatemps.com)
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In summer (December to February), temperatures in the Northern Cape usually reach between 33°C and
42°C (in 1948 a recorded high of 52°C was measured along the Orange River). During winter (June to
August), daytime temperatures are cold to mild (-5°C to 22°C), and often drop below 0°C at night.
The operation has a year-round operating season and prevailing climatic conditions do not impact on the
mining operation to any significant degree. Disruptions, however, do occur due to poor road conditions
following heavy rains and three-to-four hour down-time may occur when soaked gravel stockpiles are too
wet to process efficiently. During years of exceptional rainfall flooding may occur, resulting in significant
disruptions to production, as well as damage to infrastructure (municipal as well as on-mine).
Frosts occur in winter and hail can occur in summer. The prevailing winds are from the east (June to
October) and the southwest (October to January). The average monthly wind speeds are generally below
6.3 m/s. Strong winds may be experienced on occasions. The strongest winds are from the northwest
which, although resulting in unpleasant working conditions, do not disrupt operations.
4.5 Infrastructure
This section describes the infrastructure as currently known, identifying any issues that could, potentially,
be problematic for future operation. As bulk-sampling operations progress, technical studies will be
initiated to determine the detailed infrastructural requirements. However, to the extent relevant, there
is a sufficiency of surface rights for mining operations and any related infrastructures to be erected.
4.5.1 Power
Remhoogte is connected to the national Electricity Supply Commission (ESKOM) electricity grid, with the
necessary transformers and supply lines in place. Steyn Diamonds has an account with ESKOM
(#743946437) in the amount of ZAR480,710.85, which will need to be replaced by Rockwell.
Holsloot does not have a separate power supply, and obtains electricity from a 750kVA line from the
Niewejaarskraal project, via a sub-station on Rockwell’s Mooidraai property
4.5.2 Water
Water for the Remhoogte/Holsloot project will be pumped from the Orange River. No process water will
be withdrawn from groundwater sources. Treated water will be used for drinking and domestic purposes.
No water permit has been obtained for Holsloot yet. The original application by Pioneer Minerals (for
some 600,000m3
per annum) is still to be finalised and is expected to be submitted to DWS as soon as the
relevant documentation has been obtained from Pioneer. In the interim, any initial sampling prospecting
operations will use recycled water from Remhoogte. The water licence has been approved in principle
and Rockwell is awaiting final authorisation.
4.5.3 Bulk-Sampling infrastructure
The final location of all the necessary bulk-sampling infrastructure (coarse and fine tailings dumps,
sampling plant sites, maintenance sheds, fuel storage bunkers, administration buildings, etc.) will all be
determined once the property has been drilled to establish the presence/absence of gravels.
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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4.5.4 Access and Communication
The Project area is accessed via tarred route R357 from Douglas to Prieska. This is a national road that is
suitable for the transport of heavy earth-moving machinery by low-bed transporter trucks. A well-
maintained network of high-speed gravel roads and farm tracks provides access to all areas of the
prospecting areas.
An unpaved airstrip is situated on the farm Saxendrift 20, some 40km to the east. A helipad is located on
both Saxendrift and the adjacent Wouterspan. Kimberley Airport (IATA: KIM) services the region with
regular, scheduled daily flights to/from Johannesburg (1hr,15min) and Cape Town (2hr,40min).
Communication is available through three cellular telephone networks.
4.5.5 Staff and Labour
In the initial stage of the project, all administrative issues, including staff and labour accommodation as
well as security will be managed from the nearby Saxendrift Mine, where Rockwell has well-established
facilities.
4.5.6 Essential Services
All services and facilities are available in Kimberley (~200km distant), including the regional office of the
Department of Mineral Resources (DMR). However, most essential services can be obtained at Douglas,
some 95km distant from the property.
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5 HISTORY
5.1 Background
The first alluvial diamond discovery in South Africa was on the farm De Kalk on the banks of the Upper
Orange River, some 55km upstream from Saxendrift in 1866. (De Wit, 1996). Recoveries of several large
(+100ct) diamonds led to initial enthusiastic mining of shallow “Rooikoppie” gravels by artisanal diggers
who flocked to the area.
Since the late 1800’s, numerous properties along the MOR have been prospected/mined for alluvial
diamonds (Fig. 5.1), the majority of which have been derived from high level terraces. The MOR has not
seen the intense prospecting and mining activities more typical of the Vaal and Lower Orange Rivers,
because large areas are covered by a very hard layer of calcrete, 0.5m – 3m thick, which limited historic
access to the underlying gravel horizons. In addition, the gravels in many areas contain a high percentage
of banded ironstone clasts, which make the treatment and concentration of the gravels technically
difficult, from a metallurgical perspective, unless magnetic separators are used.
Figure 5.1 Historical diamond production from the MOR (redrawn from Telfer et al, 2006)
Through the application of modern treatment methods and equipment, recoveries have improved to the
extent that these deposits can now be mined efficiently. The mining problems have been solved by the
use of blasting and heavy earthmoving equipment to rip and remove the hard calcrete-silcrete layer. This
new technology resulted in the area being effectively explored for the first time by companies such as
Remhoogte/Holsloot Project
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Northern Cape Diamond Mining, Moonstone Diamonds (Moonstone Diamonds announcement to the
ASX, 20 Oct 1997), Pioneer Minerals and the Gem Diamond Mining Corporation (Gem Circular to
Shareholders, 1998, Gem Diamond Mining Corporation Annual Report, 1999).
5.2 Previous Exploration/Development
5.2.1 Historical
During the years 1926-1937, the farm Remhoogte was a proclaimed diggings11
, from which some 6,087ct
were recovered. In this time a number of large stones were reported, viz. 133ct, 74ct, 62ct, 45ct, 38ct,
31ct, 30ct, and 18ct (R. Cooke, Pers. Com. 2000).
In 1983, a Mr. Edwards of Cape Town investigated the Remhoogte deposit in conjunction with an
Australian junior company. Only one trench and several small pits were dug. Although details are
unknown, it is apparent that diamond recoveries were negligible or absent. It is suspected that the low
diamond recoveries were due to the abundance of banded iron formation causing the diamonds to be
lost with the heavy concentrate. Also, a cursory examination of the trench, by the Independent QP some
years later, indicates that the gravels in this location are not concentrated into channel bars but represent
finer inter-channel sedimentation associated with slower flowing tributaries of a braided river system.
5.2.2 Pioneer Mining
From August-December 1999, Pioneer12
processed an unknown amount of Rooikoppie gravel
(estimated13
around 28,000T) and recovered 158.83cts with an average size of 1.91ct/st and USD647/ct
(the work was actually done by a Mr. Jimmy Carr, a well-known, local contract miner). In addition some
2,950 tonnes of calcreted, fluvial-alluvial gravels were processed to recover 10.57cts (15 stones) for a
sample grade of 0.36cpht. Total diamond recoveries for the 1999 sampling programme14
are 169.4ct at
1.81ct/st and USD 522/ct (it is uncertain how accurately these results reflect the deposit types: on a visit
to the site by the Independent QP in 2000, inefficient excavation of the Rooikoppie gravels was noted,
and it was unclear whether the washed primary gravel represents channel bars with efficient diamond
concentration mechanisms or less inefficient inter-channel material).
Three small areas were selected and drilled by Pioneer on a 100m x 100m grid to indicate the presence
and thickness of Rooikoppie gravels and the underlying fluvial-alluvial gravels. The gravels lie on a plateau
some 65-80m above the present Orange River. The sequence consists of a variably calcreted braided
alluvial deposit (“Fluvial-alluvial Gravel”) which is overlain by an extensive Rooikoppie gravel – the
Rooikoppie gravel in this instance is predominantly an eluvial deposit, with minor colluvial occurrences.
The bedrock to the Remhoogte deposit is soft Dwyka shale and minor Dwyka tillite. A number of linear
features have been identified in the geological mapping.
11
A proclaimed digging is an area within a farming or residential property that was identified by the State for the
exclusive use of artisanal miners, without the need for many of the normal regulatory requirements. Most such areas
have been deproclaimed since the 1940’s.
12 The Independent QP visited this prospect with R Cooke in 2000 and much of the information in this section is drawn
from personal notes taken during that field-trip.
13
According to Telfer, et al, 2006
14
Venmyn (Telfer, et al, 2006) also present a table indicating that the Pioneer programme processed some 38,000m3
to recover 242.81ct at a sample grade of 0.9ct/100m3
. In another section, they note that the total diamond recovery
by Pioneer in 1999 was only 184ct. The Independent QP has been unable to reconcile these differences.
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Reconnaissance work (aerial photographic interpretation and very limited drilling) completed by Pioneer
(and presented in Telfer, et al., 2006) suggested that some 13MT of Rooikoppie gravel and 30-40MT of
fluvial-alluvial gravel was expected to exist on Remhoogte and Holsloot. Average grades (for the
Rooikoppie gravel) were estimated at some 0.9ct/100m3
(0.43cpht) – based on average recoveries from
surrounding properties.
These figures represent the results of reconnaissance sampling data and the QP’s do not consider them to
be Mineral Resources, but they are presented here for historical completeness and Rockwell is not treating
these estimates as current Mineral Resources.
5.2.3 TransHex
During TransHex’s tenure15
, only the high terrace was drilled and no bulk-sampling was completed,
although six such samples were planned (Telfer, Stacey, Ecklund, & Bloomer, 2006). RC drilling on the
Remhoogte-Holsloot properties included 1,606 boreholes for a total of 13,021m. Drilling was undertaken
in 2002 on a 200X100m grid and, in 2003, infilled on the north-eastern area of the terrace to achieve a
50X50m grid spacing (Fig. 5.2).
Figure 5.2 Location of TransHex drilling on Remhoogte-Holsloot.
15
TransHex has held the rights to Remhoogte (directly or indirectly) from 1999 and Holsloot from Dec 2006 to March
2008).
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Venmyn estimated gravel volumes of some 11.5Mm3
(7.7Mm3
of Rooikoppie and 3.8Mm3
of fluvial-
alluvial) gravels to be present on the Remhoogte-Holsloot project. This was estimated from the extent of
the drillholes as opposed to the interpreted size of the terrace according to Pioneer.
Despite Venmyn’s note that no grade or value estimations were made by TransHex due to the lack of
bulk-sampling, both TransHex and Venmyn issued an Inferred Mineral Resource statement for the project
(Table 5.1), using historical results from Pioneer Minerals for the grade of the Rooikoppie Gravels16
and
the results from the adjacent Zwemkuil-Mooidraai for the grade of the fluvial-alluvial gravels17
.
Table 5.1 Venmyn’s Mineral Resource statement for Remhoogte-Holsloot (as at Feb 2006)
Gravel Classification Volume (m3
) Grade (ct/100m3
) Value (USC/ct)
Rooikoppie
Inferred
Resource
7,715,748 0.90 1,431
Basal 3,786,923 1.64 827
TOTAL/AVE 11,502,671 1.15 1,146
The authors of this Technical Report do not consider that the Venmyn estimates are compliant with CIM
(or SAMREC) requirements for Inferred Mineral Resources. This information is reported for historical
context only and Rockwell is not treating these estimates as current Mineral Resources.
TransHex’s Annual Report for 2014 reports total Inferred Mineral Resources of 7,501,000m3
at a grade of
1.19ct/100m3
(bottom cut-off of 2mm) for the Remhoogte property. There is, however, no information
in the Report detailing how these resources were estimated or what the value of the diamonds are. As a
result, the authors of this Technical Report do not consider this estimate as either CIM or SAMREC
compliant. This information is reported purely for completeness and Rockwell is not treating these
estimates as current Mineral Resources.
5.2.4 Steyn Diamante
Steyn operated on Remhoogte-Holsloot from March 2014 to end May 2015, during which time some
123,877m3
of gravel was processed (Fig 5.3). Mainly colluvial Rooikoppie gravels were sampled from the
properties, with one small, non-representative sample18
of fluvial-alluvial gravels. The calculated sample
grade19
for the Rooikoppie gravel on Remhoogte/Holsloot was approximately 0.9ct/100m3
.
The diamond register indicates that some 10,551ct were sold (on open tender) during the period March
2014 to 24 April, 2015 for some USD3,150/ct. The largest stone sold during this period was 178ct. Of the
total carats sold, approximately 30% are stones above 10ct (based on the individual recorded diamonds).
These stone constituted 75% of the total revenue from Remhoogte/Holsloot with 13% of the total
revenue from the 178ct stone valued at USD24,223/ct.
16 The Pioneer grade for the Rooikoppie gravels on Remhoogte appears to have been based on less than 200ct.
17 A review of the Zwemkuil-Mooidraai data in a Technical Report by Marshall and Norton (30 June, 2011) indicates
that the sampling on these properties was inadequate and that the Mineral Resource estimated by Venmyn was,
itself, inferred from adjacent properties, for the most part. As a result, Rockwell downgraded the Inferred Resources
estimated by Venmyn on the Zwemkuil and Mooidraai properties to Exploration Target. Consequently, any grade
estimate based on the Zwemkuil-Mooidraai data can only be an Exploration Target.
18
Sampling of the fluvial-alluvial gravels recovered 446ct with the largest diamond recovered a 27ct stone.
19
The sample grade was estimated in February 2015
Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016
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Figure 5.3 Areas previously sampled (mined out) by Steyn up until 31 May, 2015
The gravels on Remhoogte/Holsloot were mined and processed by Steyn as an owner-operator. A
hydraulic excavator was used to remove the Rooikoppie gravel off of the calcreted sequence. No in-pit
screening was employed and all of the gravel was loaded onto Articulated Dump Trucks (“ADT’s”) and
transported to one of the plant sites. The gravels were, subsequently, screened and processed through
one of two sampling plants, located on Holsloot and Remhoogte (Petersen, 7 Sept, 2014).
• The processing plant on Holsloot comprised a fines Dense Media Separation (“DMS”) stream, a
mid-fraction Bourevestnik bulk X-Ray (“BV”) stream and a coarse BV stream.
• There were two plants on Remhoogte – the first consists of a fines pan stream and a coarse BV
stream and the second one comprising two double20
pan plants. The concentrate from the pan
plant was transported to Holsloot where it was processed through the BV plant.
The final hand-sort of the diamonds was done by the project manager, in the presence of Steyn or his
wife. The diamonds would then be removed from site and stored in a secure location. As appropriate,
the diamonds would then be transported to Kimberly, to one of the Tender Houses for cleaning and sale.
20
For a total of four rotary pan plants – this plant was only operational from November, 2014.
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Remhoogte NI43101

  • 1. 2016 Tania R Marshall, Pr.Sci.Nat. Explorations Unlimited Glenn A Norton, Pr.Sci.Nat. Rockwell Diamonds Inc. TECHNICAL REPORT ON THE REMHOOGTE/HOLSLOOT ALLUVIAL DIAMOND PROJECT, HAY DISTRICT, REPUBLIC OF SOUTH AFRICA FOR ROCKWELL DIAMONDS INC. Effective Date: 29 February, 2016 Signature Date: 24 May, 2016
  • 2. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 2 Table of Contents Page Summary ……………………………………………………………………………………………………………………………………………7 Figures..............................................................................................................................................4 Tables...............................................................................................................................................6 Plates ...............................................................................................................................................6 1 Introduction ............................................................................................................................ 13 1.1 TERMS OF REFERENCE AND SCOPE OF WORK.......................................................................................................13 1.2 SOURCES OF INFORMATION..............................................................................................................................15 1.3 UNITS AND CURRENCY ....................................................................................................................................15 1.4 FIELD INVOLVEMENT OF QUALIFIED PERSONS ......................................................................................................16 1.5 USE OF DATA ................................................................................................................................................16 2 Reliance On Other Experts ....................................................................................................... 17 2.1 LEGAL OPINION .............................................................................................................................................17 2.2 DIAMOND VALUATION ....................................................................................................................................17 2.3 SURVEY........................................................................................................................................................18 2.4 METALLURGY ................................................................................................................................................18 3 Property Description And Location........................................................................................... 19 3.1 PROPERTY DESCRIPTION AND LOCATION..............................................................................................................19 3.2 PERMITS CONTRACTS AND AGREEMENTS.............................................................................................................21 3.2.1 Agreements...........................................................................................................................................21 3.2.2 Mineral rights (Mining/Prospecting Rights, permits, etc.)....................................................................21 3.2.2.1 Royalty Payments..........................................................................................................................................22 3.2.3 Surface ownership / land use rights......................................................................................................22 3.3 BEE COMPLIANCE..........................................................................................................................................23 3.4 ENVIRONMENTAL...........................................................................................................................................23 3.4.1 Rehabilitation Guarantees....................................................................................................................23 3.5 SOCIAL RESPONSIBILITY ...................................................................................................................................23 3.5.1 Social and Labour Plans ........................................................................................................................23 3.6 ASSOCIATED RISKS..........................................................................................................................................23 4 Accessibility, Climate, Local Resources, Infrastructure And Physiography.................................. 25 4.1 TOPOGRAPHY, ELEVATION AND VEGETATION........................................................................................................25 4.2 ACCESS ........................................................................................................................................................27 4.3 PROXIMITY TO POPULATION CENTRES AND NATURE OF TRANSPORT ..........................................................................27 4.4 CLIMATE AND LENGTH OF OPERATING SEASON ....................................................................................................27 4.5 INFRASTRUCTURE ...........................................................................................................................................28 4.5.1 Power....................................................................................................................................................28 4.5.2 Water....................................................................................................................................................28 4.5.3 Bulk-Sampling infrastructure................................................................................................................28 4.5.4 Access and Communication ..................................................................................................................29 4.5.5 Staff and Labour ...................................................................................................................................29 4.5.6 Essential Services ..................................................................................................................................29 5 History .................................................................................................................................... 30 5.1 BACKGROUND ...............................................................................................................................................30 5.2 PREVIOUS EXPLORATION/DEVELOPMENT............................................................................................................31 5.2.1 Historical...............................................................................................................................................31 5.2.2 Pioneer Mining......................................................................................................................................31 5.2.3 TransHex ...............................................................................................................................................32 5.2.4 Steyn Diamante.....................................................................................................................................33
  • 3. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 3 6 Geological Setting And Mineralisation...................................................................................... 35 6.1 GEOLOGY .....................................................................................................................................................35 6.1.1 Regional Geology..................................................................................................................................35 6.1.2 Local Geology........................................................................................................................................36 6.1.3 Property Geology ..................................................................................................................................37 6.2 MINERALISATION ...........................................................................................................................................38 6.2.1 Nature of Mineralisation.......................................................................................................................38 6.2.1.1 Alluvial Fill.....................................................................................................................................................39 6.2.2 Fluvial Model.........................................................................................................................................40 6.2.2.1 Source of the diamonds................................................................................................................................46 6.2.3 Geological Controls...............................................................................................................................48 6.2.4 Geological Model..................................................................................................................................51 6.2.4.1 Rooikoppie Gravels .......................................................................................................................................51 6.2.4.2 Fluvial Alluvial Gravels ..................................................................................................................................53 7 Deposit Types.......................................................................................................................... 56 7.1 PRIMARY FLUVIAL-ALLUVIAL GRAVEL DEPOSITS....................................................................................................56 7.2 DEFLATION OR ‘ROOIKOPPIE’ DEPOSITS..............................................................................................................57 7.2.1 Eluvial Rooikoppie Gravel .....................................................................................................................57 7.2.2 Colluvial Rooikoppie Gravel ..................................................................................................................59 8 Exploration.............................................................................................................................. 61 8.1 SATELLITE IMAGERY ........................................................................................................................................61 8.2 GEOPHYSICS..................................................................................................................................................61 8.3 BULK-SAMPLING............................................................................................................................................61 8.3.1 Remhoogte/Holsloot (“RHC”) ...............................................................................................................61 8.3.1.1 Location ........................................................................................................................................................61 8.3.1.2 Mining/Excavation Methodology..................................................................................................................62 8.3.1.3 Sample processing ........................................................................................................................................64 8.3.1.4 QA/QC...........................................................................................................................................................69 8.3.1.5 Results...........................................................................................................................................................71 9 Drilling .................................................................................................................................... 76 10 Sample Preparation, Analysis And Security............................................................................... 77 10.1 GENERAL SAMPLING ISSUES RELATING TO ALLUVIAL DIAMOND DEPOSITS....................................................................77 10.2 SAMPLE SECURITY ..........................................................................................................................................78 10.3 SAMPLE REPRESENTATIVENESS..........................................................................................................................79 11 Data Verification ..................................................................................................................... 80 11.1 VERIFICATION OF HISTORICAL DATA....................................................................................................................80 11.2 VERIFICATION OF ROCKWELL DATA ....................................................................................................................81 12 Mineral Processing And Metallurgical Testing........................................................................... 84 13 Mineral Resource Estimates..................................................................................................... 85 13.1 PREVIOUS MINERAL RESOURCE ESTIMATES.........................................................................................................86 13.1.1 Explorations Unlimited (6 February, 2015).......................................................................................86 13.2 CURRENT MINERAL RESOURCE ESTIMATES..........................................................................................................87 13.2.1 Inferred Mineral Resource................................................................................................................87 13.2.2 Indicated Mineral Resource..............................................................................................................87 13.2.3 Measured Mineral Resource.............................................................................................................87 13.3 REASONABLE PROSPECTS FOR ECONOMIC EXTRACTION..........................................................................................88 13.3.1 Resource Parameters........................................................................................................................89 13.3.1.1 Volume..........................................................................................................................................................89 13.3.1.2 Diamond Grade.............................................................................................................................................89 13.3.1.3 Diamond Value..............................................................................................................................................90 13.3.1.4 Occurrence of Large Stones ..........................................................................................................................91
  • 4. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 4 13.3.2 Engineering Parameters...................................................................................................................91 13.3.2.1 Excavating .....................................................................................................................................................92 13.3.2.2 Processing .....................................................................................................................................................92 13.3.3 Infrastructural Parameters...............................................................................................................92 13.3.4 Statutory Parameters .......................................................................................................................92 13.3.5 Environmental/Social Parameters....................................................................................................92 13.3.6 Marketing Parameters .....................................................................................................................92 13.3.6.1 Market Studies..............................................................................................................................................92 13.3.6.2 Rockwell Sales and Contracts........................................................................................................................95 13.3.7 Economic Assumptions and Parameters ..........................................................................................96 13.3.7.1 Diamond Price...............................................................................................................................................96 13.3.7.2 Mining Costs .................................................................................................................................................97 13.3.7.3 Financial Assumptions...................................................................................................................................97 13.3.8 Material Risks...................................................................................................................................98 13.3.8.1 In South Africa...............................................................................................................................................99 13.3.8.2 Specific Risks ...............................................................................................................................................101 13.4 MINERAL RESOURCE STATEMENT....................................................................................................................101 14 Adjacent Properties............................................................................................................... 103 14.1 SILVERSTREAMS ...........................................................................................................................................104 14.2 SANDDRIFT PROSPECT...................................................................................................................................105 15 Other Relevant Data and Information .................................................................................... 107 15.1 EXPLORATION TARGETS.................................................................................................................................107 15.2 COUNTRY PROFILE........................................................................................................................................108 15.2.1 South African Economy...................................................................................................................108 15.2.2 The Mining Industry........................................................................................................................109 15.2.3 South Africa’s Mineral Legislative Environment.............................................................................109 15.2.3.1 Mineral Policy .............................................................................................................................................109 15.2.3.2 Mineral and Petroleum Resource Development Act 28 of 2002 (“MPRDA”)..............................................110 15.2.3.3 Broad Based Black Economic Empowerment (BBBEE) and the Mining Charter..........................................111 15.2.3.4 The Minerals and Petroleum Resources Royalty Bill...................................................................................112 15.2.3.5 The Diamond Amendment Bill....................................................................................................................113 15.2.3.6 Diamond Export Levy Bill 2007 ...................................................................................................................113 15.2.3.7 Precious Metals Bill and the Beneficiation Strategy ...................................................................................114 15.2.3.8 Kimberley Process.......................................................................................................................................114 16 Interpretation And Conclusions.............................................................................................. 116 17 Recommendations................................................................................................................. 118 18 References ............................................................................................................................ 120 19 Date And Signature Page ....................................................................................................... 124 20 Certificate Of Authors............................................................................................................ 125 20.1 TANIA RUTH MARSHALL................................................................................................................................125 20.2 GLENN ALAN NORTON..................................................................................................................................127 Figures FIGURE 1.1 LOCATION OF ROCKWELL OWNED OPERATIONS IN SOUTH AFRICA (AND THE LOCATION OF THE REMHOOGTE/HOLSLOOT PROJECT).................................................................................................................................................14 FIGURE 1.2 CORPORATE SHAREHOLDINGS OF ROCKWELL (2015)........................................................................................15 FIGURE 3.1 LOCATION OF THE REMHOOGTE/HOLSLOOT PROJECT IN THE NORTHERN CAPE PROVINCE ........................................19 FIGURE 3.2 LOCATION OF THE REMHOOGTE/HOLSLOOT PROJECT PROPERTIES.......................................................................20 FIGURE 4.1 AVERAGE CLIMATIC CONDITIONS AT KIMBERLEY, (WWW.KIMBERLEY.CLIMATEMPS.COM) .........................................27 FIGURE 5.1 HISTORICAL DIAMOND PRODUCTION FROM THE MOR (REDRAWN FROM TELFER ET AL, 2006)..................................30
  • 5. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 5 FIGURE 5.2 LOCATION OF TRANSHEX DRILLING ON REMHOOGTE-HOLSLOOT.........................................................................32 FIGURE 5.3 AREAS PREVIOUSLY SAMPLED (MINED OUT) BY STEYN UP UNTIL 31 MAY, 2015.....................................................34 FIGURE 6.1 THE GENERAL GEOLOGY OF SOUTH AFRICA (COUNCIL FOR GEOSCIENCES) ............................................................35 FIGURE 6.2 SCHEMATIC VIEW OF COARSER GRAVEL CHANNEL BARS IN A BRAIDED RIVER SYSTEM ................................................40 FIGURE 6.3 LOCATION OF THE KAROO AND KALAHARI RIVERS ON THE EARLY CRETACEOUS GONDWANA LANDSURFACE AND (DE WIT, 2009) ....................................................................................................................................................41 FIGURE 6.4 AN EXAMPLE OF HOW THE PROPOSED MOR MEANDER PLAIN MAY HAVE LOOKED DURING THE AFRICAN LANDSCAPE CYCLE DURING THE LATE CRETACEOUS....................................................................................................................42 FIGURE 6.5 LOCATION OF THE KAROO AND KALAHARI RIVERS BY THE END OF THE CRETACEOUS (DE WIT, 2009)..........................42 FIGURE 6.6 AN ARTIST’S IMPRESSION OF THE TYPE OF COMPLEX BRAIDPLAIN THAT MAY HAVE EXISTED ALONG THE MOR DURING THE POST AFRICAN I LANDSCAPE CYCLE ...............................................................................................................43 FIGURE 6.7 SCHEMATIC DIAGRAM ILLUSTRATING HOW A BRAIDED RIVER CHANNEL MAY BECOME MEANDERING THROUGH, INTER ALIA, THE FLATTENING OF THE LANDSURFACE AND THE STABILISING OF THE BANKS. ........................................................44 FIGURE 6.8 SCHEMATIC REPRESENTATION OF THE RIETPUTS FORMATION GRAVELS AS DEVELOPED ALONG THE LOWER VAAL RIVER (MARSHALL, 2004)...................................................................................................................................45 FIGURE 6.9 SFD OF THE ORANGE AND VAAL RIVER ALLUVIAL DIAMOND POPULATIONS, IN COMPARISON WITH BHC.....................47 FIGURE 6.10 COMPARISON OF AVERAGE DIAMOND SIZES FROM THE ORANGE AND VAAL RIVERS AND BHC...................................48 FIGURE 6.11 FIXED AND MOBILE TRAPSITES AND THEIR DEPOSITIONAL ENVIRONMENTS (REDRAWN AFTER JACOB, 2005) .................49 FIGURE 6.12 GEOLOGICAL MAPPING OF THE ROOIKOPPIE GRAVEL UNITS ON REMHOOGTE .........................................................52 FIGURE 6.13 PROPOSED GEOLOGICAL MODEL FOR THE RHC PROJECT ....................................................................................53 FIGURE 6.14 SCHEMATIC SECTION THROUGH FIGURE 16.3..................................................................................................54 FIGURE 7.1 FORMATION OF ELUVIAL GRAVELS (MARSHALL, 2004)......................................................................................57 FIGURE 7.2 FORMATION OF ELUVIAL GRAVELS (MARSHALL, 2004).....................................................................................58 FIGURE 7.3 FORMATION OF COLLUVIAL GRAVELS (MARSHALL, 2004) ..................................................................................59 FIGURE 8.1 LOCATION OF 2015 BULK-SAMPLING ON RHC ................................................................................................62 FIGURE 8.2 SCHEMATIC FLOW SHEET FOR THE REMHOOGTE 1 PLANT ...................................................................................65 FIGURE 8.3 SCHEMATIC FLOWSHEET OF THE H1 PROCESSING PLANT. ...................................................................................67 FIGURE 8.4 SCHEMATIC FLOWSHEET FOR THE IMS PROCESSING PLANT.................................................................................68 FIGURE 8.5 GENERAL PRINCIPLES OF THE STEINERT X-RAY TRANSMISSION SORTING SYSTEM (L VON KETELHODT (IMS), PERS. COMM. 2015) ....................................................................................................................................................69 FIGURE 8.6 TYPICAL DIAMOND CONCENTRATE SHOWING EJECTED TRACERS, BOART DIAMOND (TESTERS) AND OTHER CARBON MATTER SUCH AS PIECES OF WOOD (L VON KETELHODT (IMS), PERS. COMM. 2015)..........................................................69 FIGURE 8.7 LARGE STONE PLOT.....................................................................................................................................72 FIGURE 8.8 SFD OF RHC STONES (RDI= ROCKWELL, CS= SCHALK STEYN) IN COMPARISON WITH STONES FROM SAXENDRIFT MINE (BHC) ....................................................................................................................................................73 FIGURE 8.9 GRADE SIZE PLOT FOR SRC COMPARED WITH BHC DATA SHOWING DISTRIBUTION OF CARATS. THE Y-AXIS IS A MEASURE OF THE AVERAGE STONE DENSITY PER SIZE INTERVAL AND THE X-AXIS IS A MEASURE OF AVERAGE STONE SIZE. BOTH AXES ARE CALCULATED ON A LOG-LOG SCALE. THE LEGEND IS THE SAME AS FOR FIG. 8.9 ABOVE. ......................................74 FIGURE 9.1 LOCATION OF THE QA/QC DRILLING/PITTING PROGRAMME ON REMHOOGTE........................................................76 FIGURE 10.1 SCHEMATIC DISTRIBUTION OF ALLUVIAL DIAMONDS WITHIN AN ALLUVIAL DEPOSIT – RANDOM DISTRIBUTION OF CLUSTERS OF POINTS (ROMBOUTS, 1987)...................................................................................................................78 FIGURE 13.1 THE EXTREMELY LOW CONCENTRATIONS OF DIAMONDS, COMBINED WITH LOW HOMOGENEITY RESULTS INSIGNIFICANT DIFFICULTIES IN THE EVALUATION OF ALLUVIAL DIAMOND DEPOSITS (AFTER LOCK, 2003) ........................................88 FIGURE 13.2 NUMBER OF LARGE DIAMONDS CALCULATED TO OCCUR IN MOR DEPOSITS ...........................................................91 FIGURE 13.3 THE DIAMOND PIPELINE..............................................................................................................................93 FIGURE 13.4 REVENUES ACROSS THE DIAMOND VALUE CHAIN POSTED CONTINUED GROWTH IN 2014 BUT SLOWED DOWN IN 2015 (BAIN & COMPANY, 2015).........................................................................................................................93 FIGURE 13.4 LOCATION OF ESTIMATED INFERRED MINERAL RESOURCES ON THE REMHOOGTE/HOLSLOOT PROJECT AS AT 29 FEBRUARY 2016 ...................................................................................................................................................102 FIGURE 14.1 NUMEROUS PROPERTIES ALONG THE MOR HAVE BEEN PROSPECTED FOR DIAMONDS ............................................103 FIGURE 15.1 FLUVIAL-ALLUVIAL GRAVEL EXPLORATION TARGETS CURRENTLY IDENTIFIED ON THE REMHOOGTE/HOLSLOOT PROJECT 108 FIGURE 17.1 LOCATION OF PROPOSED DRILLING/PITTING ON REMHOOGTE/HOLSLOOT DURING 2016 .......................................118 FIGURE 17.2 LOCATION OF PROPOSED ROOIKOPPIE SAMPLING ON REMHOOGTE/HOLSLOOT DURING 2016................................119
  • 6. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 6 Tables TABLE 3.1 UTM CO-ORDINATES OF THE REMHOOGTE/HOLSLOOT PROJECT.........................................................................20 TABLE 3.2 SUMMARY OF THE PROJECT LANDHOLDINGS DESCRIBED IN THIS REPORT................................................................21 TABLE 5.1 VENMYN’S MINERAL RESOURCE STATEMENT FOR REMHOOGTE-HOLSLOOT (AS AT FEB 2006) .................................33 TABLE 8.1 TRACER TEST AND RECOVERY FROM 1 JUNE TO 8 AUGUST, 2015........................................................................70 TABLE 8.2 EXAMPLE OF TRACER RECOVERY THROUGH THE R1 PLANT ..................................................................................70 TABLE 8.3 PRODUCTION STATISTICS FOR THE MAY 2015 – FEBRUARY 2016 BULK-SAMPLING PROGRAMME ON RHC .................71 TABLE 8.4 SALES VALUES FOR DIAMONDS FROM RHC (FY2016).......................................................................................74 TABLE 13.1 ESTIMATED INFERRED MINERAL RESOURCE ON REMHOOGTE/HOLSLOOT (AS AT 6 FEBRUARY, 2015)........................86 TABLE 13.2 ESTIMATED INFERRED MINERAL RESOURCE ON REMHOOGTE/HOLSLOOT (AS AT 31 JULY, 2015) ...........................102 TABLE 15.1 ECONOMIC INDICATORS FOR SOUTH AFRICA (MARCH, 2016) WWW.TRADINGECONOMICS.COM.............................109 Plates PLATE 4.1 LANDSCAPE TYPICAL OF THE MOR PROPERTIES................................................................................................25 PLATE 4.2 GRASSES, TREES AND SHRUBS COMMON TO THE NAMA-KAROO BIOME …………………………………………….………………26 PLATE 6.1 ROOIKOPPIE GRAVELS AS MINED ON REMHOOGTE-HOLSLOOT BY STEYN DIAMANTE IN 2014. THE HUMMOCKY FOOTWALL IS COMPRISED OF CALCRETE MAKONDOS OVERLYING SUSPECTED FLUVIAL-ALLUVIAL DEPOSITS WHICH, ELSEWHERE ON THE PROPERTY, ARE SEEN TO CONTAIN GRAVEL UNITS .............................................................................................37 PLATE 6.2 FLUVIAL-ALLUVIAL GRAVEL UNIT ON REMHOOGTE, UNDERLYING THE UBIQUITOUS ROOIKOPPIE GRAVEL......................37 PLATE 6.7 RIVERTON FORMATIONS SANDS AND SILTS ALONG THE MOR AT THE BRIDGE BETWEEN SAXENDRIFT AND WOUTERSPAN (PHOTO COURTESY OF R HORN, ROCKWELL 2016). .........................................................................................46 PLATE 6.4 LOCAL STRUCTURES AND REGIONAL BEDROCK FABRIC CONTRIBUTES TO DIAMOND CONCENTRATION WITHIN THE MOR GRAVELS..................................................................................................................................................50 PLATE 6.3 COBBLE-PEBBLE (CP) VARIETY OF ROOIKOPPIE GRAVEL ON RHC .........................................................................51 PLATE 7.1 TYPICAL STRATIGRAPHY OF THE MOR ALLUVIAL DIAMOND DEPOSITS WITH A LOWER FLUVIAL-ALLUVIAL UNIT AND AN OVERLYING DEFLATION OR ROOIKOPPIE GRAVEL (SAXENDRIFT MINE) ..................................................................56 PLATE 7.2 CALCRETE MAKONDOS INFILLED WITH GRAVEL CONCENTRATE (SEEN IN PROFILE (ABOVE) AND AT THE SURFACE (RIGHT)). PHOTOS FROM SAXENDRIFT MINE .................................................................................................................58 PLATE 7.3 SIGNIFICANT THICKNESSES OF COLLUVIAL GRAVELS CAN ACCUMULATE DOWNSLOPE FROM THE ORIGINAL FLUVIAL DEPOSIT ………………………………………………………………………………………………………………………………………………………..60 PLATE 8.1 FIRST PHASE EXCAVATION OF THE GRAVELS......................................................................................................63 PLATE 8.2 SECOND PHASE EXCAVATION OF MAKONDOS...................................................................................................64 PLATE 8.3 COARSE AND FINE STREAMS OF THE BV AT THE R1 PROCESSING PLANT.................................................................64 PLATE 8.4 THE FOUR ROTARY PAN PLANTS AT THE R2 PROCESSING PLAN.............................................................................66 PLATE 8.6 STEINERT X-RAY SORTING SYSTEM OF THE IMS PLANT ON REMHOOGTE ..............................................................68 PLATE 14.1 THE “BASAL” GRAVEL UNIT OVERLAIN BY THE “MIDDLINGS” UNIT, SEPARATED BY A FINE-GRAINED LAYER (UPPER TERRACE GRAVEL PROFILE).....................................................................................................................................104 PLATE 14.2: SANDDRIFT KIMBERLITE DYKE/STRINGERS (VIEW TO THE NORTH-EAST) ...............................................................105 PLATE 14.3: LOWER TERRACES DEVELOPED ON SANDDRIFT, AS YET UNPROSPECTED. ..............................................................106 Units and Abbreviations ABBREVIATION DESCRIPTION amsl Above mean sea level BBBEE Broad Based Black Economic Empowerment (the more correct term of the usually shortened BEE (Black Economic Empowerment)) and used in this report Bottom cut-off (“bcos”) Bottom cut-off refers to the smallest size diamond (in mm) that is recovered in the sampling and mining process Cdn$ Canadian Dollar
  • 7. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 7 CIM Canadian Institute of Mining Metallurgy and Petroleum CP Competent Person, as defined by SAMREC cpht Carats per 100 Tonnes ct Carat(s) ct/100m3 Carats per 100 cubic metres ct/st Carats per Stone DMR Department of Mineral Resources (Previously known as Department of Minerals and Energy or “DME”) DMS Dense Media Separation plant DTM Digital Terrain Model DWS Department of Water and Sanitation (previously known as Department of Water and Forestry or “DWAF”) EMPlan Environmental Management Plan (as required for a prospecting right) EMPR Environment Management Programme (as required for a mining right) ESKOM Electricity Supply Commission GSSA Geological Society of South Africa IMSSA Institute of Mine Surveyors of South Africa JSE Johannesburg Stock Exchange m Metres M Million Ma Millions of Years before Present MPRDA Mineral and Petroleum Resource Development Act (act 28 of 2002) NAPEGG The Association of Professional Engineers, Geologists and Geophysicists of the Northwest Territories NI 43-101 National Instrument 43-101 Pr. Sci. Nat. Professional Natural Scientist QP Qualified Person, as defined by National Instrument 43-101 SACNASP South African Council for Natural Scientific Professions SAIMM South African Institute for Mining and Metallurgy SAMREC South African Code for Reporting of Mineral Resources and Mineral Reserves SARS South African Revenue Service SG Specific Gravity SLP Social & Labour Plan (as required for a mining right) tph Tonnes (metric) per hour TSX Toronto Stock Exchange
  • 8. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 8 USD United States Dollar ZAR South African Rand
  • 9. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 9 Summary Background Explorations Unlimited (“EU”) was retained by Rockwell Diamonds Inc. (“Rockwell” or “the Company”) to prepare a Technical Report for the Remhoogte/Holsloot Alluvial Diamond Project (“Remhoogte/Holsloot” or “the Property”) in the Hay District of the Northern Province, South Africa. The Remhoogte/Holsloot Project comprises portions of the contiguous farms Remhoogte 152 and Holsloot 47. This Technical Report, comprising background information, drill and sample data derived from the property up to 29 February 2016, is prepared to document the results of exploration work and the resource estimate on the Wouterspan property as summarized in the Company’s Annual Information Form for the 2016 fiscal year. The conclusions expressed in this independent technical report are appropriate as at 29 February, 2016. The assessment is, therefore, only valid as of this date and will change with time in response to ongoing exploration and production results as well as with variations in economic, market, legal or political factors. Rockwell is a company involved in the exploration and mining of alluvial diamond deposits. In South Africa, Rockwell and its wholly-owned subsidiary, Rockwell Resources RSA (Pty) Ltd (“Rockwell RSA”), own, and Rockwell RSA operates the Wouterspan project through a 70% shareholding in HC Van Wyk Diamonds Limited. Rockwell and Rockwell RSA also own the Saxendrift Mine (currently being operated by contract operators) and hold the Niewejaarskraal project (currently inactive) through a 70% shareholding in Saxendrift Mine (Pty) Ltd. Rockwell's 30% BEE partner of choice in these projects is Siyancuma Capital (Pty) Ltd (“Siyancuma”). Under the terms of a Sale Agreement signed on 5 January, 2015, Rockwell RSA entered into a transaction with the vendors Steyn Diamante CC, Bondeo 140 CC (“Bondeo”) and Schalk and Celeste Steyn (together the vendors are collectively referred to as “Steyn Diamonds”) to acquire, inter alia, all of the assets and certain liabilities comprising the business carried on by Steyn Diamonds in respect of the Property. The assets to be transferred to Rockwell RSA include the Mining Right in respect of diamonds over a portion of the remainder of the farm Remhoogte 152, measuring 1,585.36 hectares, in the Magisterial / Administrative district of Prieska and various items of earth-moving plant and equipment, processing plants and rehabilitation guarantees. The total purchase price is in the amount of ZAR284,180,000 (USD24.7M or Cdn$28.5M). On 27 May 2015, Rockwell announced1 that that all conditions precedent, including evidence of sufficient financing to complete the acquisition of the Remhoogte/Holsloot project, and its associated plant and equipment in MOR were met and the transaction was completed by end May 2015. The Remhoogte/Holsloot project is located on the south bank of the Orange River in the Herbert district of the Northern Cape Province, some 85km southwest of Douglas and some 200km from Kimberley. The following permits are valid for the project. 1 News Release of 27 May, 2015
  • 10. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 10 Property Name Area (ha) Mineral Right Holder Permit Type and Number Renewal Date Certain Portion of the Remainder of the farm Remhoogte 152 1,585.36 Pioneer Minerals (Pty) Ltd2 New Order Mining Right NC 0291MR 14 August 2020 Portion of Portion 3 of Holsloot 47 1,049.59 Saxendrift Mine (Pty) Ltd New Order Prospecting Right 735/2006PR A Mining Right has been granted (17 June 2015). A date for the notarial execution is still awaited.Rooisloot Portion of Holsloot 47 Geology The present Orange River between Douglas and Prieska, generally referred to as the Middle Orange River (“MOR”), displays a meandering channel morphology, best developed in areas underlain by the Dwyka Group. Palaeochannel depositional packages of the Orange River are preserved at different elevations above the present Orange River bed. The ages of the terraces young with decreasing elevation and, conversely, the probability of preservation decreases with increasing age and elevation. The Remhoogte deposit (“RHC”) comprises an extensive flat lying alluvial sequence located on terraces developed on the left bank of the present Orange River, approximately 20-70m above the Orange River. The bedrock is well exposed in the workings and shale and tillite of the Karoo age Dwyka Group are common. The fluvial- alluvial gravels comprise a sequence of (basal) gravels 2-4m thick overlain by generally less than 5m of variably calcreted sands and silts and covered by a thin layer of soil and scree. The cobble-sized clasts within the gravels consist mostly of lava and quartzite with significant, if variable, amounts of Banded Iron Formation (BIF), and minor amounts of limestone, tillite, and agate. The matrix is sandy to gritty. As is usual with these types of deposits the degree of calcretisation decreases downward, and are characterised by hardpan or laminar calcrete at the surface to loosely cemented gravels at depth. The gravels, which are generally known to be diamondiferous, are, typically, not well sorted and are typical of braid bars that migrate through sections of river channels in response to variable water speed. The bedrock on both Remhoogte and Holsloot is Dwyka shales. Both colluvial and fluvial-alluvial gravel units are known to exist on RHC. The Rooikoppie gravel thickness varies and ranges from 0.4m to +1.0m. The thin Rooikoppie gravel is generally pebble to cobble sized in a sandy matrix. The thicker Rooikoppie ranges from cobble to pebble sized and pebble to boulder sized. The gravel sampled from the edge of the terrace has a sand- to pebble- matrix. A high percentage of pebble clasts with an abundance of Banded Iron Formation (“BIF”) and chert (both black and blue varieties) are observed within the matrix. Other minerals observed include jasper, quartzite, Ventersdorp lava, quartz, agate and a variety of fibrous crocidolite locally known as “Tiger’s Eye” due to its golden-brown to red-brown colours. The nature of makondo3 development varies throughout the property. Both deeper, well-developed makondos and shallow makondos are observed. The gravel fill of the shallow makondos is generally finer, compared with the fill of the deeper makondos which is coarser. The shapes of clasts infilling the 2 The relationship between Pioneer Minerals and TransHex is detailed in Section 3.3.2 3 Makondos are solution cavities or potholes in the calcrete, typically filled with a deflated gravel concentrate
  • 11. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 11 makondos typically range from rounded to sub-angular with pebble sized clasts dominantly rounded. The makondo observed can be connected or disconnected and also form channel type features. The depth of makondos generally vary from 0.2 to +1.2m. The fluvial-alluvial gravels have not yet been characterised. Previous Exploration and Development Historically, diamonds have been recovered from the Rooikoppie gravels of the RHC project since 1926. In 1983, prospecting indicated the presence of fluvial-alluvial deposits beneath the calcrete. Semi- systematic prospecting was initiated by Pioneer Minerals (“Pioneer”) in 1999, with drilling (over three small areas) and very limited sampling. Trans Hex acquired Pioneer and completed an extensive drilling programme – with a grid of 200m x 100m (and up to 50m x 50m in places). No bulk-sampling was, however completed during this time. Since March 2014, Steyn has sampled mainly colluvial Rooikoppie gravels from the properties, with one small, non-representative sample of fluvial-alluvial gravels. During January 2015, Rockwell appointed RBG Surveys (Pty) Ltd to survey the areas sampled by Steyn. The surveyed sample volumes as at end May, 2015 total 1,123,877m3 . The diamond register indicates that some 10,551ct were sold (on open tender) during the period March 2014 to May 2015 for some USD3,150/ct. The largest stone recovered during this period was 178ct. The calculated sample grade for the Rooikoppie gravel on Remhoogte/Holsloot was approximately 0.9ct/100m3 . Bulk Sampling There are four sample processing plants on Remhoogte/Holsloot – Remhoogte 1 (“R1”), Remhoogte 2 (“R2”), Holsloot 1 (“H1”) and the Steinert/IMS4 sensor-based diamond sorting plant. Gravels derived from Phase 1 excavation are processed through R1, R2 and H1. The makondo gravels are processed through the R1 plant and the IMS plant is used to retreat recovery tailings. During the period up to end February 2016, 8,043.99ct were recovered from 906,144m3 for an average sample grade of some 0.9ct/100m3 . This represented 2,128 stones at an average size of 3.8ct/st. During FY2016, 7,465ct of diamonds were sold for an average of USD1,511/ct. Diamond size frequency distribution patterns for the Remhoogte diamonds are broadly similar to those for the other MOR terraces, as would be expected, given similar sources and general depositional environments. There are, however, some significant differences –the diamonds recovered from Remhoogte have a finer size distribution than those from the BHC terrace on the nearby Saxendrift mine, but the grade is higher. Mineral Resource and Mineral Reserve Estimates The Inferred Mineral Resource has been estimated by Rockwell’s Group Technical Manager, G. Norton, (Pr. Sci. Nat.), a Qualified Person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a Qualified Person who is independent of the Company and who is responsible for the estimates. 4 This is a joint venture between IMS Engineering (Pty) Ltd of South Africa and Steinert Elektromagnetbau of Germany
  • 12. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 12 The volumes estimated here have been modelled from the existing TransHex database, as modified by the Rockwell QA/QC data and the diamond grade and values are based on bulk-sampling by Rockwell during the period to February 2016. It is apparent that there is a significant decrease in the gravel volume compared to the previous year. This is as a result of a 60% variance between the original TransHex estimates of volume and the re-estimated volumes based on Rockwell’s QA/QC drilling and pitting data. Terrace Complex Bottom Cut-off Volume (m³) Grade (ct/100m³) Value (USD/ct) Rooikoppie 5mm 1,300,000 0.9 1,500 Exploration Targets Re-evaluation of the TransHex database by Rockwell indicates that Exploration Targets of some 9-10Mm3 of fluvial-alluvial (“GMX”) gravel might be expected to exist on Remhoogte and Holsloot, with target grades of some 0.4-0.6ct/100m3 and average expected diamond values within the range USD1,300- 1,600/ct. The target grades and values are based on the variations seen in the results from similar GMX deposits on the nearby Saxendrift property. These results from the on-going Remhoogte/Holsloot sampling programme cannot be extrapolated to these deposits, since the Remhoogte/Holsloot data refers to Rooikoppie gravels only. It is important to note that these potential volumes, grades and values are conceptual in nature, that there has been insufficient exploration in these areas to define a Mineral Resource and that it is uncertain if further exploration will result in the targets being delineated as a Mineral Resource. Recommendations Rockwell should continue to drill and excavate bulk-sample pits in order to improve confidence in the gravel volume model of both the Rooikoppie and fluvial-alluvial gravel units. In addition, sampling of the Rooikoppie gravel units should be continued in order to upgrade both grade and value with further confidence. It has also been proposed that the sampling programme proceed to the fluvial-alluvial deposits on Remhoogte once the gravels have been verified by drilling (re-drilling). The prospecting programme should be planned to upgrade the Mineral Resources that may exist on the Remhoogte / Holsloot project and initiate technical and economic studies which may culminate in the completion of a Preliminary Economic Assessment. Advance to any subsequent exploration phase is contingent on positive results in the initial drilling and sampling programme. Rockwell has proposed a budget of ZAR5M for the exploration drilling programme on Remhoogte/Holsloot, as well as a budget of ZAR25M/month for the Rooikoppie sampling exercise. It is planned that cash flow from operations on the Project will be used to fund this work programme. The independent QP believes that, notwithstanding the problems inherent in resource estimations in alluvial diamond deposits, the results to date are sufficiently encouraging that the Property warrants further sampling followed by preliminary technical and economic evaluation. Further, in the opinion of the independent QP, both the proposed exploration/sampling programme and the budget costs seem reasonable.
  • 13. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 13 1 INTRODUCTION 1.1 Terms of Reference and Scope of Work Explorations Unlimited (“EU”) was retained by Rockwell Diamonds Inc. (“Rockwell” or the “Company”) to prepare a Technical Report for the Remhoogte/Holsloot Alluvial Diamond Project (“Remhoogte/Holsloot” or “the Property”) in the Hay District of the Northern Province, South Africa (Fig. 1.1). The Remhoogte/Holsloot Project comprises portions of the farms Remhoogte 152 and Holsloot 47. This Technical Report comprises background information and drill and sample data that includes bulk- sampling information from the Property up to 29 February, 2016. It has been prepared to document the results of exploration and the Mineral Resource estimate for the project as summarised in the Company’s Annual Information Form for the 2016 fiscal year. EU is a South African based consultancy owned by Dr Tania R Marshall that has been operating since 1996. EU provides a variety of exploration and prospecting consulting services to the international minerals community, in particular with respect to geological evaluation and financial valuation of alluvial diamond mineral properties. This Technical Report was prepared, primarily, and supervised by Dr T.R. Marshall (Pr. Sci. Nat.). Dr Marshall has over 20 years’ experience in the alluvial diamond industry, including a background in international mineral exploration and evaluation studies and has had direct experience with alluvial-eluvial diamond mining operations as a consulting geologist and, also, as an operator. Dr Marshall’s experience includes operational and financial aspects of alluvial diamond mining, including mine-planning and costing. Rockwell has accepted that the qualifications, expertise, experience, competence, and professional reputation of Dr Marshall are appropriate and relevant for the preparation of this Report. Rockwell, listed on the TSX (RDI) and the JSE (RDI), is a company involved in the exploration and mining of alluvial diamond deposits in South Africa (Fig. 1.1 and 1.2). Rockwell's BEE partner in the MOR operations is Siyancuma. • Rockwell and its wholly-owned subsidiary Rockwell Resources RSA (Pty) Ltd (“Rockwell RSA”) owns 70% of Saxendrift Mine (Pty) Ltd, the vehicle which holds the Saxendrift, Niewejaarskraal, Holsloot and Zwemkuil projects; o Rockwell RSA owns Saxendrift Mine (including the Brakfontein Hill Complex and the Saxendrift Hill Complex). This property is currently being operated by a number of contract operators. o Rockwell RSA owns the Niewejaarskraal Project (currently on Care & Maintenance). o Rockwell RSA operates the Holsloot Project. • Through a Transaction and Shareholders agreement5 with Gump Mining cc, Rockwell RSA incorporated a new company Gumrock Mining (Pty) Ltd (“Gumrock”) to carry out the prospecting and mining activities on the Kwartelspan Complex project. Both Gump Mining cc and Rockwell RSA own 50% of the issued shares, with shareholding to be diluted according to funding requirements and abilities. • Rockwell and Rockwell RSA also owns (and Rockwell RSA operates) the Wouterspan Project (MOR) through a 74% shareholding in HC Van Wyk Diamonds Limited (“HCVWD”); • Through an acquisition of Bondeo6 144 cc, Rockwell RSA owns and operates the Remhoogte and Reads Drift projects 5 Signed 23rd April, 2014 6 As announced by Rockwell on 5 January 2015
  • 14. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 14 Figure 1.1 Location of Rockwell owned operations in South Africa (and the location of the Remhoogte/Holsloot project) In addition to these mineral holdings, Rockwell owns a 20% stake in Flawless Diamond Trading House (Proprietary) Limited ("FDTH"), which offers a unique marketing and sales arm for Rockwell at a fee which is well below the market norm. This acquisition provides Rockwell with access to additional revenue, and allows the Company to gain insight into diamond sales trends which will assist with its short and long term production and growth plans. The Technical Report was compiled, primarily, by Dr Marshall. Where the document refers to “the author”, the senior (independent) QP, Dr Marshall, is referenced, unless otherwise indicated. The document was co-authored by Mr Glenn Norton who is the Group Technical Manager for Rockwell Diamonds Inc. Mr Norton has over ten years’ experience in the exploration and exploitation of alluvial diamonds throughout Africa and is Rockwell’s in-house Qualified Person. This Technical Report has been prepared in accordance with Canadian Securities Administrators’ National Instrument 43-101 - Standards Of Disclosure For Mineral Projects (“NI 43-101”), the NAPEGG guidelines for the Reporting of Diamond Exploration Results, Identified Mineral Resources and Ore Reserves and the Best Practice Guidelines prepared by CIM to assist the QP in the planning, supervision, preparation and reporting of Mineral Resource and Mineral Reserve (“MRMR”) estimates. The Mineral Resource estimate has, further, been prepared with specific reference to the 2016 South African Code for the Reporting of Exploration Results,
  • 15. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 15 Mineral Resources and Mineral Reserves (“SAMREC”7 ) code. In particular, the SAMREC Code provides guidelines for the diamond industry. The SAMREC Code has also been incorporated into the JSE Listings Rules. Since Rockwell is dual listed in both Canada and South Africa, reference will continually be made to both CIM and SAMREC Mineral Resource estimation codes (with CIM taking preference as the company’s primary listing is the TSX). Figure 1.2 Corporate shareholdings of Rockwell (2015) The conclusions expressed in this Technical Report are appropriate as at 29 February, 2016. The appraisal is, therefore, only valid for this date and will change with time in response to ongoing exploration and production results as well as with variations in diverse external factors. 1.2 Sources of Information The comments and recommendations in this report, specific to the Remhoogte/Holsloot project, are based, primarily, on information and technical documents and production data supplied by Rockwell. Other technical/scientific papers and miscellaneous documents referred to are identified within the text or have been referenced in Section 18. 1.3 Units and Currency All values are metric, unless otherwise stated. Historical grade and tonnage figures are reported in units as originally published. All budget costs are presented in South African Rands (ZAR). Diamond values are expressed in United States Dollars, for which a nominal exchange rate of USD1 = ZAR15.6 has been used (26 April, 2016). 7 Including the SAMREC Guideline Document for the Reporting of Diamond Exploration Results, Diamond Resources and Diamond Reserves (and other Gemstones, where Relevant) (“SAMREC Diamond Guidelines”) RockwellDiamondsInc (RDI-TSX/JSE) Rockwell Resources RSA (Pty) Ltd Saxendrift Mine (Pty) Ltd ("SAX") Zwemkuil Project Holsloot Project H C Van Wyk Diamonds Ltd ("HCVWD") Wouterspan Project Bondeo 144 cc ("Bondeo") Remhoogte Project Reads Drift Project
  • 16. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 16 1.4 Field involvement of Qualified Persons Dr Marshall visits the Remhoogte/Holsloot project site for two days each month. The latest visit was undertaken by Dr Marshall of on during 19-20 April 2016. EU’s extensive experience in this area (including previous visits to the Property) as well as that gained from prior investigations of other, nearby deposits was also drawn upon as required. Mr Norton is Rockwell’s Group Technical Manager and is on site 3-5 days each week. 1.5 Use of Data Neither EU nor family members of the principal of EU have a business relationship with Rockwell or any associated company, or with any other company mentioned in the Technical Report which is likely to materially influence the impartiality of the Report, or create the perception that the credibility of the Report could be compromised or biased in any way. The views expressed herein are genuine and deemed independent of Rockwell. Moreover, neither the Independent QP, nor family members have any financial interest in the outcome of any transaction involving the properties considered in this Report, other than the payment of normal professional fees for the work undertaken in its preparation (which is based upon hourly charge-out rates and reimbursement of expenses). The payment of such fees is not dependent upon the content, or conclusions, of this Report or any consequences of any proposed transaction. Rockwell has warranted that a full disclosure of all material information in its possession or control has been made to EU, and that it is complete, accurate, true and not misleading. Draft copies of the Report have been reviewed for factual errors by Rockwell. Any changes made as a result of these reviews did not involve any alteration to the conclusions made. Hence, the statements and opinions expressed in this document are given in good faith and in the belief that such statements and opinions are not false and misleading at the date of this Report. Written consent is provided for the filing of the Technical Report with any stock exchange and other regulatory authority and also for any publication by them of the Technical Report for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public. EU reserves the right, but will not be obligated, to revise this Technical Report and conclusions if additional information becomes known to EU subsequent to the date of this Technical Report.
  • 17. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 17 2 RELIANCE ON OTHER EXPERTS 2.1 Legal Opinion An opinion regarding the underlying legal contracts, permissions and agreements was provided by Director in Mining and Resources, Chris Stevens of Werksmans Attorneys on 18 March, 2016 – “Rockwell Diamonds Inc. – Title Opinion: Remhoogte, Rietsdrift (Bo-Karoo), Wouterspan and Zwemkuil”. Chris Stevens is a director with Werksmans Attorneys where he is head of the firm's Mining and Resources practice area. He advises on all aspects of mining law in South Africa, including in relation to commercial arrangements, conveyancing, litigation, opinion work, black economic empowerment laws and due diligence aspects. He advises many of the South African major mining houses on these aspects, as well as medium size mining companies and junior exploration companies. He further advises numerous American, UK, Canadian and Australian mining companies with interests in South Africa and acts for numerous black empowerment companies in relation to mining transactions. He has also been involved in numerous transactions for South African mining entities in sub-Saharan Africa. He has also been integrally involved in advising numerous mining companies on various aspects of the Mineral and Petroleum Resources Development Act, 28 of 2002, as well as the amendments to that legislation. Chris Stevens co-lectured the LLB course at the University of the Witwatersrand on prospecting and mining law in 1998 to 2007. He lectures at the University of the Witwatersrand to mining and engineering students on compliance aspects and annually lectures at the University of Pretoria for MSc geology students in a compliance course. He sat on the mining law committee of the International Bar Association in 2002 to 2006. Chris Stevens received B.Com and LLB degrees from the University of Witwatersrand and has been practicing mining law since 1987. He was admitted as a notary public in 1990. Chris Stevens speaks at numerous conferences, both in South Africa and internationally in relation to the South African mining industry and, as such, is well qualified to produce reliable legal opinions on the Remhoogte project. The Independent QP has not independently verified the status of these contracts, permissions and agreements but has accepted that the legal opinions contained within the due diligence report are materially accurate. The Independent QP has relied on such opinions for the compilation of Section 3.2. 2.2 Diamond Valuation Valuation of the recovered diamonds has been through the industry standard practice of putting representative diamond parcels up for sale, either through Flawless Diamonds Tender House (“FDTH”) or Diacore8 . • FDTH is a marketing and tender sale company (held 20% by Rockwell) that operates a professional run, fully transparent “sealed-bid tender system”. Details of this process are described in a later section. • Diacore provides rough and polished diamonds to customers internationally and has manufacturing facilities/offices in Botswana, South Africa, Namibia, India, Dubai, Belgium, Israel and New York. The group is well-known for its investment in rare and exceptional diamonds as well as for the creation of unique high-end jewellery. Values obtained for diamonds through both these means represent actual sales completed in competitive market by registered, practicing, international diamond buyers whose qualifications (and individual identities) are unknown. Since the values thus obtained are actual, realised sales figures, and not simply a valuation with no obligation to purchase, there are no risks associated with the diamond values used in 8 Diacore was previously known as the Steinmetz Diamond Group
  • 18. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 18 this technical report. These sales values have been relied upon by the Independent QP in all sections relating to Mineral Resource and Mineral Reserve estimates. The Independent QP has checked each brokers note and Kimberley Process Certificate to verify the information provided. 2.3 Survey The surveying on Remhoogte was completed by an independent survey services company, RBW Survey (Pty) Ltd (contracted by Rockwell). The overseeing of the fieldwork and calculations is done by a competent person under the auspices of Roland Harms (registered with The Institute of Mine Surveyors of South Africa (IMSSA)), supported by qualified and trained surveyors in the field. The legal appointment and signing off of month-end calculations and all prescribed statutory plans are the responsibility of Werner Harms, appointed in terms of the Mines and Works Act of 1956. Weekly pre and post-profiling of all applicable surfaces is undertaken using a sub -1cm accuracy Real Time Global Positioning System (“GPS”) instrument. A profile grid of ± 5m on even surfaces and 1m on uneven surfaces is set up. Volumes are calculated using the “Model Maker Systems” software package, a standard package, developed specifically for the technical and land surveying, engineering, mining, town-planning, landscaping, quantity surveying, irrigation design and construction industries. The standard checks implemented in the calculations include but are not limited to: • Start-up checks to a maximum tolerance of 0.5cm. • All profiling to be within 1cm of accuracy. • Volume calculations - manual editing of all DTM’s where necessary and comparing total volume of excavations with grid volumes. • Careful record keeping of stockpiles at the plant and in the pit. • Communication between survey and mining. • All volumes are reported at the middle and end of each month for a multiple of surfaces. • Accuracy to comply with SAMREC – margin of error in the reporting volumes not to exceed 5% of accuracy. • Elimination of grey areas, such as lack of profiling, stockpiles and excavations not surveyed. Once the area has been excavated and surveyed the surveyor also supplies the RAW data, volumes and plan of the pit in DXF format to Rockwell’s Geology department. This allows for independent calculation and comparisons of the resulting volume estimations, by both in-house and independent QP. 2.4 Metallurgy Since June 2011, Dr. Kurt Petersen of Metal Dog Minerals has been contracted by Rockwell to assist and to advise on processing and metallurgical issues on all of their diamond projects. Dr Petersen holds an MSc in Engineering Science from the University of Queensland (Australia) and a PhD in Metallurgy from Stellenbosch University (South Africa). With over 15 years’ experience in process modelling and simulation (10 years specifically in the Diamond industry), Dr Petersen is highly experienced in the design of diamond plants and optimisation of recovery performance. In this capacity, Dr Petersen, in association with Mr Norton, is involved in on-going due diligence on the processing capacity on Remhoogte/Holsloot. A number of documents dealing with processing/metallurgical issues were prepared by Dr Petersen for, and on behalf of, Rockwell RSA. The Independent QP has relied on this information in section 8.3.1.
  • 19. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 19 3 PROPERTY DESCRIPTION AND LOCATION 3.1 Property description and location The Remhoogte/Holsloot project is located along the south bank of the MOR between Douglas and Prieska in the Northern Cape Province of South Africa (Fig. 3.1), which area has been the site of intense alluvial diamond activity since the 19th century. The MOR and, particularly, the stretch between Douglas and Prieska, are historically important diamond mining centres, with alluvial deposits having been mined here for over 100 years ((De Wit, Ward, Jacob, Spaggiari, & van der Westhuisen, 1997); (Marshall, 1987)). Figure 3.1 Location of the Remhoogte/Holsloot project in the Northern Cape Province The Remhoogte/Holsloot project is situated approximately 85km southwest of Douglas which, in turn, lies 110km southwest of Kimberley, the administrative capital of the Northern Cape Province and the historic centre of the South African diamond mining industry. The Mining Right on Remhoogte identified in and constitutes 1,585.36ha and the Prospecting Right on Holsloot comprise 1.049.59ha (Fig. 3.2 and Table 3.1). The area held by these permits includes sufficient space for (current and future) mine offices and out-buildings, processing and final recovery facilities, as well as for the necessary fines disposal (tailings) ponds, transitory coarse dumps and more permanent water supply dams. Remhoogte/Holsloot Project
  • 20. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 20 Figure 3.2 Location of the Remhoogte/Holsloot Project Properties Table 3.1 UTM Co-ordinates of the Remhoogte/Holsloot project POINT UTM Y UTM X A 6729991 693145.6 B 6729808 695146.3 C 6729037 695712.1 D 6729987 697975.7 E 6728596 699223.5 F 6726174 694227.9 G 6727866 692022.1 H 6728498 699053.6 I 6726714 699858 J 6724326 695149.8 K 6726244 694385.7
  • 21. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 21 3.2 Permits contracts and agreements 3.2.1 Agreements Under the terms of a Sale Agreement signed on 5 January, 2015, Rockwell assumed control9 of the Remhoogte/Holsloot project on 28 May 2015. Financing has been secured through the granting of a bridging loan by key shareholders, being Diacore and Rockwell’s chairperson Mark Bristow. The total loan amounts to USD16million plus ZAR16million , of which USD15 million and ZAR16 million has been committed by Diacore and the remaining USD1 million by Mark Bristow; together with a further USD0.5 million as a working capital reserve for transaction costs associated with the acquisition. Agreements have been signed to meet the new purchase consideration – which has been restructured and reduced from ZAR284 million to ZAR214.95 million through exclusion of certain earthmoving equipment from the assets being acquired. 3.2.2 Mineral rights (Mining/Prospecting Rights, permits, etc.) Table 3.2 Summary of the project landholdings, described in this report Property Name Area (ha) Mineral Right Holder Permit Type and Number Renewal Date Certain Portion of the Remainder of the farm Remhoogte 152 1,585.36 Pioneer Minerals (Pty) Ltd New Order Mining Right NC 0291MR 14 August 2020 Portion of Portion 3 of Holsloot 47 1,049.59 Saxendrift Mine (Pty) Ltd New Order Prospecting Right 735/2006PR A Mining Right has been granted (17 June 2015). A date for the notarial execution is still awaited. Rooisloot Portion of Holsloot 47 Holsloot • In respect of the Remainder of Portion 3 of Holsloot 47, Trans Hex had acquired a prospecting right in terms of Section 17 of MPRDA (Prospecting Right 735/2006 PR on 14 December 2006). • An application in terms of Section 11 of the MPRDA was lodged for Ministerial consent to cede the prospecting right from Mvelaphanda to Saxendrift. The right was then ceded to Saxendrift by way of a notarial deed of cession of prospecting right which was executed on 4 March 2008 and registered at the Mining Titles Registration office on 11 April 2008 under number 11/2008. • Bondeo acquired the Holsloot property from Rockwell in 2012, but the transfer was never finalised. Consequently the Holsloot permits remain in the name of Rockwell (Saxendrift Mine (Pty) Ltd). • The Mining Right has been granted on 17 June, 2015. Saxendrift, as the grantee, is awaiting a date for notarial execution of the Right. 9 News Release of June 25, 2015
  • 22. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 22 Remhoogte • The Mining Right for Remhoogte is held by Pioneer, a wholly owned subsidiary of Trans Hex (Pty) Ltd (“TransHex”). • The shares of Pioneer were purchased by Bondeo from TransHex and a Section 11 cession transferred the Mining Right from Pioneer to Bondeo. On 14 January 2015, an application was lodged for a Section 11 to cede the shares from Bondeo 140 CC to Saxendrift Mine (Pty) Ltd. On 15 May 2015 the Section 11 from Bondeo 140 CC to Saxendrift Mine Pty Ltd was approved and Saxendrift took over the operation from 1 June 2015 with all the employees of Bondeo 140 CC. • The Mining Right has been properly and notarially executed and registered in the Mineral and Petroleum Titles Registration Office. It has been granted on standard terms and conditions applicable to mining rights and has been granted for diamonds. 3.2.2.1 Royalty Payments As with all mining properties in South Africa, the Remhoogte/Holsloot project is subject to a State royalty. The minimum and maximum rates for diamonds (unrefined minerals) are 0.5% and 9.0%, respectively. In terms of the Mining and Petroleum Royalties Act, Rockwell has registered as a royalty payer with SARS. During FY2016, Rockwell paid 798.906.82 to SARS on behalf of Pioneer. 3.2.3 Surface ownership / land use rights In respect of the Remaining Extent of Portion 3 of the farm Holsloot 47, a land use agreement has been concluded between the surface owner, Mrs C M Muller and Saxendrift, dated June 2015. In terms of the agreement, whilst mining operations are carried out, Saxendrift would pay ZAR75,000 per month to the owner and if the mine is placed under care and maintenance, ZAR25,000 per month. The monthly payments escalate annually at 10%. Otherwise the agreement is on standard terms and conditions for surface use agreements of this kind. A joint land use agreement has been entered into between Saxendrift and Jouren Trading and Investments (Pty) Ltd (“Jouren”) relating to Holsloot. Jouren has applied for a section 53 approval in terms of the MPRDA for its project being the development, construction and operation of a 75MW Prieska solar photovoltaic energy facility on a portion of the property. Saxendrift has agreed to withdraw its objection to the project and has agreed to consent to the section 53 approval. Saxendrift has also undertaken not to conduct any mining operations on the project area of Jouren and has agreed in respect of certain initial mining blocks to complete mining operations by no later than 31 December 2015. In August 2013, Bondeo concluded an agreement with Mrs A J de Villiers, the surface rights owner of Remhoogte, to acquire access for the purposes of mining operations. The agreement included the payment of ZAR1M on signature and the payment of ZAR10M on an unspecified date when Bondeo10 established its equipment on Remhoogte in order to commence with mining operations. To the extent relevant to this Project, the extent of the surface rights is considered sufficient for (current and future) mine offices and out-buildings, processing and final recovery facilities, as well as for the necessary, fines disposal (tailings) ponds, transitory coarse dumps and more permanent water supply dams. 10 The management of Bondeo have verbally confirmed that this payment was made in 2015, but have yet to supply the requested documentation detailing proof of payment.
  • 23. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 23 3.3 BEE Compliance In October 2014, Rockwell RSA and others concluded a consolidated sale of shares agreement with Siyancuma Capital (Pty) Ltd (“Siyancuma”) in terms of which Rockwell RSA agreed to sell 30% of the shares in Saxendrift, HC van Wyk and Jasper to Siyancuma (“Sale Agreement”). Mr Richard Mhlonto (currently Group HR/Industrial Relations Manager for Rockwell RSA) and Mr Oupa Sekhukhune are currently the ultimate shareholders in Siyancuma. In due course, a trust established for the benefit of Rockwell RSA employees will acquire 30% of the shares in Siyancuma. All suspensive conditions have now been fulfilled, including approval from the Company’s shareholders due to Siyancuma being a related party to the Company. This transaction, concluded on 23 April 2015, satisfies the equity ownership requirements of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry (as evidenced in the Rockwell Scorecard for the broad-based socio- economic empowerment charter and verified by the DMR. 3.4 Environmental Pioneer has an approved (2008) standard Environmental Management Programme (“EMP”) on Remhoogte. This will remain valid until an update is submitted by Rockwell. The Environmental Management Plan (EMPlan) for Holsloot has not yet been approved by DMR – this will take place on the date of notarial execution of the mining right. 3.4.1 Rehabilitation Guarantees In regard to provision for rehabilitation, the DMR's estimate for rehabilitation (February, 2016) is an amount of ZAR4,864,923. Already guarantees of an amount of R1 294 047 have been submitted under the prospecting right held by Saxendrift and this will have to be topped-up to fulfil the requirements for the mining right. Pioneer has rehabilitation guarantees totalling ZAR5,724,067 and ZAR770,000 on Remhoogte. Since the rehabilitation liabilities have increased (ZAR11,095,704 as at February 2016) due to the increased sampling done by Rockwell, the guarantees quantum has increased and will be replaced by Rockwell after the quarterly Financial Quantum and Performance Assessment has been completed. 3.5 Social Responsibility 3.5.1 Social and Labour Plans In accordance with the MRPDA a Social and Labour Plan (“SLP”) is required to be submitted to the DMR along with the other requirements for a mining right. Pioneer has a SLP dated 15 August 2012, which appears to comply with all DMR regulations and is committed to the expenditure of ZAR1,395,000 over the first five years (until 2017). As soon as operations proceed on the Remhoogte/Holsloot property, Rockwell’s global SLP will be updated to include this operation. 3.6 Associated Risks To the extent known, no specific risks exist that may affect access, title or right, or the ability of Rockwell to perform work on the properties comprising the Remhoogte/Holsloot project. However, generalised
  • 24. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 24 risks associated with prospecting and mining are always present. These issues are discussed more fully in Section 13.3.8 and will not be repeated here.
  • 25. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 25 4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY 4.1 Topography, elevation and vegetation The project area is situated in a region of gently undulating hills on the edge of the Karoo, an area of sparse, arid semi desert that occupies much of central South Africa. The area comprises elevated palaeo- river terraces up to some 90m above the present Orange River. The terraces are cut by a number of small ephemeral streams that flow towards the Orange River. The surrounding terrain (Plate 4.1) is a flat semi- desert environment with sparse grass and occasional shrubs, thorn bushes and succulents in a sandy soil. Bigger trees line the banks of the Orange River. Since no exploration or mining activities will be undertaken in the present river channel, bank-full discharge conditions will have no effect on operations. Even during floods, the effect on the mining pits will be insignificant, since the narrow, modern-day floodplains are not exploration targets. Plate 4.1 Landscape typical of the MOR properties There are an estimated 5,400 plant species in the Northern Cape Province. The largest part of the province falls within the Nama-Karoo biome, the third largest biome in South Africa, covering about 20.5% of the country or more than 260,000 km2 . It stretches across the vast central plateau of the western half of the country. The dominant vegetation is a grassy, dwarf shrubland. Grasses tend to be more common in depressions and on sandy soils, and less abundant on clayey soils. Grazing rapidly increases the relative abundance of shrubs. Most of the grasses are of the C4 type and, like the shrubs, are deciduous in response to rainfall events. Sweet Thorn Acacia karroo occurs in many places along the banks of the Orange River (Plate 4.2).
  • 26. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 26 Plate 4.2 Grasses, trees and shrubs common to the Nama-Karoo biome The amount and nature of the fuel load is insufficient to carry fires and fires are rare within the biome. The large historical herds of Springbok and other game no longer exist. Like the many bird species in the area - mainly larks - the game was probably nomadic between patches of rainfall events within the biome. The Brown Locust and Karoo Caterpillar exhibit eruptions under similarly favourable, local rainfall events, and attract large numbers of bird and mammal predators. Common animals include the Bat-Eared Fox, Ostrich, Spring Hare, and tortoises. The Riverine Rabbit is a threatened species found in the Nama Karoo. Less than 1% of the biome is conserved in formal areas. The Prickly Pear Opuntia aurantiaca and Mesquite Prosopis glandulosa are the major alien invader species. Urbanization and agriculture are minimal, and irrigation is confined to the Orange River valley and some pans. Most of the land is used for grazing, by sheep (for mutton, wool and pelts) and goats, which can be commensurate with conservation. However, under conditions of overgrazing, many indigenous species may proliferate, including Threethorn Rhigozum trichotomum, Bitterbos Chrysocoma ciliata and Sweet Thorn Acacia karroo, and many grasses
  • 27. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 27 and other palatable species may be lost. There are very few rare or Red Data Book plant species in the Nama Karoo Biome, however, the Shepherd’s Bush (Boscia albutrunca) is a protected species that occurs widely. 4.2 Access The property is easily accessed via a network of regional tarred and gravel roads, as well as farm tracks within the Project property. 4.3 Proximity to population centres and nature of transport The project is situated some 200km from Kimberley and Barkly West via route R357 from Douglas to Prieska, south along the Orange River. Douglas and Prieska are some 80km and 50km distant from the Remhoogte/Holsloot operation, respectively. For reference, Kimberley is some 570km from Johannesburg and can be accessed by national road as well as by regular commercial rail and air services. 4.4 Climate and Length of Operating Season The Northern Cape climate (Fig. 4.1) is mainly semi desert – this is a large dry region of fluctuating temperatures and varying topographies. The annual rainfall is sparse, only 50 to 400mm per annum. The average is 256mm, mostly in the form of spectacular summer thunderstorms. The average annual evaporation rate is measured at 2,524mm. The low rainfall and high evaporation rates result in extremely dry conditions. Daytime temperatures can be extreme and vary from lows of around in winter to highs of around 42°C in summer. Average temperatures, however, are in the range between a winter minimum of 3°C to a summer maximum of 33°C. Figure 4.1 Average climatic conditions at Kimberley, (www.kimberley.climatemps.com)
  • 28. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 28 In summer (December to February), temperatures in the Northern Cape usually reach between 33°C and 42°C (in 1948 a recorded high of 52°C was measured along the Orange River). During winter (June to August), daytime temperatures are cold to mild (-5°C to 22°C), and often drop below 0°C at night. The operation has a year-round operating season and prevailing climatic conditions do not impact on the mining operation to any significant degree. Disruptions, however, do occur due to poor road conditions following heavy rains and three-to-four hour down-time may occur when soaked gravel stockpiles are too wet to process efficiently. During years of exceptional rainfall flooding may occur, resulting in significant disruptions to production, as well as damage to infrastructure (municipal as well as on-mine). Frosts occur in winter and hail can occur in summer. The prevailing winds are from the east (June to October) and the southwest (October to January). The average monthly wind speeds are generally below 6.3 m/s. Strong winds may be experienced on occasions. The strongest winds are from the northwest which, although resulting in unpleasant working conditions, do not disrupt operations. 4.5 Infrastructure This section describes the infrastructure as currently known, identifying any issues that could, potentially, be problematic for future operation. As bulk-sampling operations progress, technical studies will be initiated to determine the detailed infrastructural requirements. However, to the extent relevant, there is a sufficiency of surface rights for mining operations and any related infrastructures to be erected. 4.5.1 Power Remhoogte is connected to the national Electricity Supply Commission (ESKOM) electricity grid, with the necessary transformers and supply lines in place. Steyn Diamonds has an account with ESKOM (#743946437) in the amount of ZAR480,710.85, which will need to be replaced by Rockwell. Holsloot does not have a separate power supply, and obtains electricity from a 750kVA line from the Niewejaarskraal project, via a sub-station on Rockwell’s Mooidraai property 4.5.2 Water Water for the Remhoogte/Holsloot project will be pumped from the Orange River. No process water will be withdrawn from groundwater sources. Treated water will be used for drinking and domestic purposes. No water permit has been obtained for Holsloot yet. The original application by Pioneer Minerals (for some 600,000m3 per annum) is still to be finalised and is expected to be submitted to DWS as soon as the relevant documentation has been obtained from Pioneer. In the interim, any initial sampling prospecting operations will use recycled water from Remhoogte. The water licence has been approved in principle and Rockwell is awaiting final authorisation. 4.5.3 Bulk-Sampling infrastructure The final location of all the necessary bulk-sampling infrastructure (coarse and fine tailings dumps, sampling plant sites, maintenance sheds, fuel storage bunkers, administration buildings, etc.) will all be determined once the property has been drilled to establish the presence/absence of gravels.
  • 29. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 29 4.5.4 Access and Communication The Project area is accessed via tarred route R357 from Douglas to Prieska. This is a national road that is suitable for the transport of heavy earth-moving machinery by low-bed transporter trucks. A well- maintained network of high-speed gravel roads and farm tracks provides access to all areas of the prospecting areas. An unpaved airstrip is situated on the farm Saxendrift 20, some 40km to the east. A helipad is located on both Saxendrift and the adjacent Wouterspan. Kimberley Airport (IATA: KIM) services the region with regular, scheduled daily flights to/from Johannesburg (1hr,15min) and Cape Town (2hr,40min). Communication is available through three cellular telephone networks. 4.5.5 Staff and Labour In the initial stage of the project, all administrative issues, including staff and labour accommodation as well as security will be managed from the nearby Saxendrift Mine, where Rockwell has well-established facilities. 4.5.6 Essential Services All services and facilities are available in Kimberley (~200km distant), including the regional office of the Department of Mineral Resources (DMR). However, most essential services can be obtained at Douglas, some 95km distant from the property.
  • 30. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 30 5 HISTORY 5.1 Background The first alluvial diamond discovery in South Africa was on the farm De Kalk on the banks of the Upper Orange River, some 55km upstream from Saxendrift in 1866. (De Wit, 1996). Recoveries of several large (+100ct) diamonds led to initial enthusiastic mining of shallow “Rooikoppie” gravels by artisanal diggers who flocked to the area. Since the late 1800’s, numerous properties along the MOR have been prospected/mined for alluvial diamonds (Fig. 5.1), the majority of which have been derived from high level terraces. The MOR has not seen the intense prospecting and mining activities more typical of the Vaal and Lower Orange Rivers, because large areas are covered by a very hard layer of calcrete, 0.5m – 3m thick, which limited historic access to the underlying gravel horizons. In addition, the gravels in many areas contain a high percentage of banded ironstone clasts, which make the treatment and concentration of the gravels technically difficult, from a metallurgical perspective, unless magnetic separators are used. Figure 5.1 Historical diamond production from the MOR (redrawn from Telfer et al, 2006) Through the application of modern treatment methods and equipment, recoveries have improved to the extent that these deposits can now be mined efficiently. The mining problems have been solved by the use of blasting and heavy earthmoving equipment to rip and remove the hard calcrete-silcrete layer. This new technology resulted in the area being effectively explored for the first time by companies such as Remhoogte/Holsloot Project
  • 31. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 31 Northern Cape Diamond Mining, Moonstone Diamonds (Moonstone Diamonds announcement to the ASX, 20 Oct 1997), Pioneer Minerals and the Gem Diamond Mining Corporation (Gem Circular to Shareholders, 1998, Gem Diamond Mining Corporation Annual Report, 1999). 5.2 Previous Exploration/Development 5.2.1 Historical During the years 1926-1937, the farm Remhoogte was a proclaimed diggings11 , from which some 6,087ct were recovered. In this time a number of large stones were reported, viz. 133ct, 74ct, 62ct, 45ct, 38ct, 31ct, 30ct, and 18ct (R. Cooke, Pers. Com. 2000). In 1983, a Mr. Edwards of Cape Town investigated the Remhoogte deposit in conjunction with an Australian junior company. Only one trench and several small pits were dug. Although details are unknown, it is apparent that diamond recoveries were negligible or absent. It is suspected that the low diamond recoveries were due to the abundance of banded iron formation causing the diamonds to be lost with the heavy concentrate. Also, a cursory examination of the trench, by the Independent QP some years later, indicates that the gravels in this location are not concentrated into channel bars but represent finer inter-channel sedimentation associated with slower flowing tributaries of a braided river system. 5.2.2 Pioneer Mining From August-December 1999, Pioneer12 processed an unknown amount of Rooikoppie gravel (estimated13 around 28,000T) and recovered 158.83cts with an average size of 1.91ct/st and USD647/ct (the work was actually done by a Mr. Jimmy Carr, a well-known, local contract miner). In addition some 2,950 tonnes of calcreted, fluvial-alluvial gravels were processed to recover 10.57cts (15 stones) for a sample grade of 0.36cpht. Total diamond recoveries for the 1999 sampling programme14 are 169.4ct at 1.81ct/st and USD 522/ct (it is uncertain how accurately these results reflect the deposit types: on a visit to the site by the Independent QP in 2000, inefficient excavation of the Rooikoppie gravels was noted, and it was unclear whether the washed primary gravel represents channel bars with efficient diamond concentration mechanisms or less inefficient inter-channel material). Three small areas were selected and drilled by Pioneer on a 100m x 100m grid to indicate the presence and thickness of Rooikoppie gravels and the underlying fluvial-alluvial gravels. The gravels lie on a plateau some 65-80m above the present Orange River. The sequence consists of a variably calcreted braided alluvial deposit (“Fluvial-alluvial Gravel”) which is overlain by an extensive Rooikoppie gravel – the Rooikoppie gravel in this instance is predominantly an eluvial deposit, with minor colluvial occurrences. The bedrock to the Remhoogte deposit is soft Dwyka shale and minor Dwyka tillite. A number of linear features have been identified in the geological mapping. 11 A proclaimed digging is an area within a farming or residential property that was identified by the State for the exclusive use of artisanal miners, without the need for many of the normal regulatory requirements. Most such areas have been deproclaimed since the 1940’s. 12 The Independent QP visited this prospect with R Cooke in 2000 and much of the information in this section is drawn from personal notes taken during that field-trip. 13 According to Telfer, et al, 2006 14 Venmyn (Telfer, et al, 2006) also present a table indicating that the Pioneer programme processed some 38,000m3 to recover 242.81ct at a sample grade of 0.9ct/100m3 . In another section, they note that the total diamond recovery by Pioneer in 1999 was only 184ct. The Independent QP has been unable to reconcile these differences.
  • 32. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 32 Reconnaissance work (aerial photographic interpretation and very limited drilling) completed by Pioneer (and presented in Telfer, et al., 2006) suggested that some 13MT of Rooikoppie gravel and 30-40MT of fluvial-alluvial gravel was expected to exist on Remhoogte and Holsloot. Average grades (for the Rooikoppie gravel) were estimated at some 0.9ct/100m3 (0.43cpht) – based on average recoveries from surrounding properties. These figures represent the results of reconnaissance sampling data and the QP’s do not consider them to be Mineral Resources, but they are presented here for historical completeness and Rockwell is not treating these estimates as current Mineral Resources. 5.2.3 TransHex During TransHex’s tenure15 , only the high terrace was drilled and no bulk-sampling was completed, although six such samples were planned (Telfer, Stacey, Ecklund, & Bloomer, 2006). RC drilling on the Remhoogte-Holsloot properties included 1,606 boreholes for a total of 13,021m. Drilling was undertaken in 2002 on a 200X100m grid and, in 2003, infilled on the north-eastern area of the terrace to achieve a 50X50m grid spacing (Fig. 5.2). Figure 5.2 Location of TransHex drilling on Remhoogte-Holsloot. 15 TransHex has held the rights to Remhoogte (directly or indirectly) from 1999 and Holsloot from Dec 2006 to March 2008).
  • 33. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 33 Venmyn estimated gravel volumes of some 11.5Mm3 (7.7Mm3 of Rooikoppie and 3.8Mm3 of fluvial- alluvial) gravels to be present on the Remhoogte-Holsloot project. This was estimated from the extent of the drillholes as opposed to the interpreted size of the terrace according to Pioneer. Despite Venmyn’s note that no grade or value estimations were made by TransHex due to the lack of bulk-sampling, both TransHex and Venmyn issued an Inferred Mineral Resource statement for the project (Table 5.1), using historical results from Pioneer Minerals for the grade of the Rooikoppie Gravels16 and the results from the adjacent Zwemkuil-Mooidraai for the grade of the fluvial-alluvial gravels17 . Table 5.1 Venmyn’s Mineral Resource statement for Remhoogte-Holsloot (as at Feb 2006) Gravel Classification Volume (m3 ) Grade (ct/100m3 ) Value (USC/ct) Rooikoppie Inferred Resource 7,715,748 0.90 1,431 Basal 3,786,923 1.64 827 TOTAL/AVE 11,502,671 1.15 1,146 The authors of this Technical Report do not consider that the Venmyn estimates are compliant with CIM (or SAMREC) requirements for Inferred Mineral Resources. This information is reported for historical context only and Rockwell is not treating these estimates as current Mineral Resources. TransHex’s Annual Report for 2014 reports total Inferred Mineral Resources of 7,501,000m3 at a grade of 1.19ct/100m3 (bottom cut-off of 2mm) for the Remhoogte property. There is, however, no information in the Report detailing how these resources were estimated or what the value of the diamonds are. As a result, the authors of this Technical Report do not consider this estimate as either CIM or SAMREC compliant. This information is reported purely for completeness and Rockwell is not treating these estimates as current Mineral Resources. 5.2.4 Steyn Diamante Steyn operated on Remhoogte-Holsloot from March 2014 to end May 2015, during which time some 123,877m3 of gravel was processed (Fig 5.3). Mainly colluvial Rooikoppie gravels were sampled from the properties, with one small, non-representative sample18 of fluvial-alluvial gravels. The calculated sample grade19 for the Rooikoppie gravel on Remhoogte/Holsloot was approximately 0.9ct/100m3 . The diamond register indicates that some 10,551ct were sold (on open tender) during the period March 2014 to 24 April, 2015 for some USD3,150/ct. The largest stone sold during this period was 178ct. Of the total carats sold, approximately 30% are stones above 10ct (based on the individual recorded diamonds). These stone constituted 75% of the total revenue from Remhoogte/Holsloot with 13% of the total revenue from the 178ct stone valued at USD24,223/ct. 16 The Pioneer grade for the Rooikoppie gravels on Remhoogte appears to have been based on less than 200ct. 17 A review of the Zwemkuil-Mooidraai data in a Technical Report by Marshall and Norton (30 June, 2011) indicates that the sampling on these properties was inadequate and that the Mineral Resource estimated by Venmyn was, itself, inferred from adjacent properties, for the most part. As a result, Rockwell downgraded the Inferred Resources estimated by Venmyn on the Zwemkuil and Mooidraai properties to Exploration Target. Consequently, any grade estimate based on the Zwemkuil-Mooidraai data can only be an Exploration Target. 18 Sampling of the fluvial-alluvial gravels recovered 446ct with the largest diamond recovered a 27ct stone. 19 The sample grade was estimated in February 2015
  • 34. Rockwell Diamonds Inc., Remhoogte/Holsloot Project February 29, 2016 Explorations Unlimited Page 34 Figure 5.3 Areas previously sampled (mined out) by Steyn up until 31 May, 2015 The gravels on Remhoogte/Holsloot were mined and processed by Steyn as an owner-operator. A hydraulic excavator was used to remove the Rooikoppie gravel off of the calcreted sequence. No in-pit screening was employed and all of the gravel was loaded onto Articulated Dump Trucks (“ADT’s”) and transported to one of the plant sites. The gravels were, subsequently, screened and processed through one of two sampling plants, located on Holsloot and Remhoogte (Petersen, 7 Sept, 2014). • The processing plant on Holsloot comprised a fines Dense Media Separation (“DMS”) stream, a mid-fraction Bourevestnik bulk X-Ray (“BV”) stream and a coarse BV stream. • There were two plants on Remhoogte – the first consists of a fines pan stream and a coarse BV stream and the second one comprising two double20 pan plants. The concentrate from the pan plant was transported to Holsloot where it was processed through the BV plant. The final hand-sort of the diamonds was done by the project manager, in the presence of Steyn or his wife. The diamonds would then be removed from site and stored in a secure location. As appropriate, the diamonds would then be transported to Kimberly, to one of the Tender Houses for cleaning and sale. 20 For a total of four rotary pan plants – this plant was only operational from November, 2014.