Rockwell’s fourth quarter performance shows positive progress on the back of recent strategic and operational review and subsequent restructuring

May 30, 2016, Vancouver, BC - Rockwell Diamonds Inc. ('Rockwell' or the 'Company') (TSX:RDI; JSE:RDI) announces results for the three and twelve months ended February 29, 2016.

Currency values are presented in Canadian dollars, unless otherwise indicated.

Salientfeatures

• During the quarter, Rockwell continued to implement key decisions flowing from the recent strategic and operational review. The new, de-layered reporting structure has already reduced ongoing overhead costs. The deferred closure of Saxendrift is delivering substantial savings on the initially estimated closure costs.
• Rockwell's financial results reflect a reduction in operational losses in the quarter trending to cash breakeven following the annual Christmas operations shutdown.
• The Group has repaid $6.1 million of long-term debt (relating to the Bondeo acquisition) over fiscal 2016.
• Consolidated average cash operating costs for the Middle Orange River ('MOR') operations stood at US$9.1 per m, down 18% year-on-year and 12% on the previous quarter of fiscal 2016.
• Construction work on the WPC processing plant is in progress to deliver a plant and in-field screening capable of processing 200,000m per month during the third quarter of fiscal 2017; ramp-up will commence towards the end of June.

FINANCIALHIGHLIGHTS

* Net of debt repayments

• Average MOR grades were up 76% on Q4 F2015, and 25% on Q3 F2016 to 0.60 carats per 100m of gravel processed, reflecting the expected results of the Remhoogte - Holsloot ('RHC') acquisition. MOR revenues were up 40% quarter-on-quarter.
• Exploration work continued on properties adjacent to Wouterspan. Detailed reverse circulation drilling and bulk sampling also commenced at RHC to define the economic potential of Palaeo gravels on the property.
• A continued focus on safety has led to Saxendrift and RHC achieving over 600,000 lost time injury free hours to date.

Commenting on the fourth quarter financial performance, James Campbell, CEO and Presidentsaid:

'This quarter concluded a year that saw Rockwell repositioning itself fundamentally by reducing overhead cost, selling the non-core Tirisano asset outright, completing the closure of NJK, bringing Saxendrift closer to closure and acquiring two new mines with a third in construction.

The results of the NJK closure, the reducing economics of Saxendrift and the underperformance of RHC impacted our working capital negatively during the year. A more favourable debt repayment mechanism negotiated for the RHC acquisition will improve our liquidity and allow us to invest in exploration and development projects in the months ahead.

Looking at the year and the quarter, we recorded a significant improvement at a trading level. Our average cash operating cost continued to trend down by 18% to US$9.1 per m3 and improved carat recoveries over Q3 with better prices, coupled with the benefit of a weaker Rand, resulted in a reduction in operating losses in the quarter.

In the months ahead, as construction progresses at Wouterspan and the additional in-field screening capacity at RHC stabilises, we will continue to scrutinise our mining efficiencies and address any residual process deficiencies and bottlenecks. Although we have not yet been able to achieve our strategic goal to process 500,000m of gravels per month from our MOR operations, we expect to be back at 350,000 mper month before the end of fiscal 2017.

The diamond market is beginning to show signs of recovery thanks to a combination of midstream restructuring and supply constraints and it is our objective to be able to capitalise on these improvements as we deliver on our revised strategic objectives.'

Financialreview

• Revenue:The Group reported a 35% drop in rough diamond revenues at $10.2 million (Q4 F2015: $15.6 million) and beneficiation revenue of $0.2 million (Q4 F2015: $1.5 million). Total revenues decreased 39% to $10.4 (Q4 F2015: $17.1 million), due to the exclusion of goods sourced from Tirisano contract miners, and a decline in the per carat value of goods from Saxendrift as this operation comes to the end of its economic life.
• Production Costs: The Group's consolidated average cash operating costs for the fourth quarter at its MOR operations was US$9.13 (Q4 F2015: US$11.2) per cubic metre processed. The average total cash cost (including royalty payments) for all the operations for Q4 F2016, amounted to US$12.83 per cubic metre processed (Q4 F2015: US$13.21).
• Cost of sales before amortization and depreciationdecreased to $10.7 million (Q4 F2015: $20.2 million), mainly due to the impact of no further goods being sourced from Tirisano contract mining, and operational efficiencies resulting from the closure of NJK and Saxendrift Hill Complex at the end of the last financial year.
• Gross (loss) profit before amortization and depreciation: A loss of $236,000 was reported by the Group for Q4 F2016, which compares to a loss of $5.1 million for Q4 F2015. Whilst MOR carats sold were up 10% on the previous year, revenue per carat decreased to US$1,468 (Q4 F2015: US$2,461) mainly due to lower value diamond recoveries at Saxendrift.
• Loss attributable to owners of the parent of $17.4 million (2015: $8.2 million) was driven mainly by the impact of non-cash charges such as impairments and accelerated depreciation relating to certain unusable plant and equipment at NJK.
• Net cash position: At February 29, 2016 the Group had net cash and cash equivalents of ($1.3) million overdraft (Q4 F2015: $0.6 million in cash), having recorded a net reduction of $1.9 million associated with the servicing and repayment of long-term debt. The Group has repaid $6.1 million of long-term debt over fiscal 2016. It has also reduced its overdraft limit by $1.0 million over the same period.
• Middle Orange River ('MOR') operating performance: Volumes mined from Rockwell's MOR operations during the quarter totalled 0.8 million m(Q4 F2015: 1.2 million m); this is down 32% year-on-year, due to the reduction of operations at Saxendrift and the shutdown of NJK. Gravel processed was 40% down year-on-year at 0.8 million m(Q4 F2015: 1.3 million m), owing to the diminished operational profile following the sale of Tirisano, the suspension of activities at Niewejaarskraal and the winding down of Saxendrift operations. The effect of the closure of NJK was largely offset by new volumes processed at Remhoogte - Holsloot Complex.
• Current uncertainties: The auditor's unqualified opinion includes a reference to Note 1.2 in the audited financial statements which outlines the company's basis of presentation as a going concern. The Note discloses two uncertainties, namely the completion of the new mining strategy and the timely ramp-up of Wouterspan, either of which may have a material impact. The mining strategy is expected to be put into effect with an executed contract in the next four weeks, while the Wouterspan plant ramp-up is expected to commence shortly thereafter. At present, the Company expects these uncertainties to clear as they are both under the control of management, and will provide further disclosure on these developments as events warrant.

Market update

The diamond market stabilised during the fourth quarter of fiscal 2016, after a challenging year that saw De Beers' sales 45% down and prices for De Beers' and Alrosa's goods reduced by 15%, whilst in the open market up to 30% reductions were seen in rough diamond prices.

US festive season sales were up in low percentage terms, which assisted greatly with reducing inventories of polished diamonds in the pipeline. Retailers restocked in limited quantities and preferred to take goods on memo from industry rather than stress their cash flows by purchasing polished. Chinese New Year sales were disappointing and overall stock levels of Chinese retailers remain high. Polished prices stabilised during the quarter with some increases being seen in the prices of goods in short supply.

The rough diamond market has started 2016 on a more optimistic note, helped by smaller supply and price reductions by De Beers and Alrosa, which returned Sightholders to profitability for the first time after a long period. Factories that had reduced production by up to 50% during 2015 have recommenced manufacturing and this has created healthy demand for rough. Prices of diamonds under 10cts increased a few percent points during January and February 2016 due to pipeline restocking.

There is concern that this restocking might compound the existing oversupply of polished, which may place pressure on rough prices during the second half of 2016.

Outlook and priorities

The re-commissioning of Wouterspan and increase of throughput at RHC remain key priorities for the Company in the short term, as it continues to pursue its strategic processing target of 500,000m of gravel per month.

A decision has been taken to outsource mining on a fixed pay-per-volume delivered basis. The new arrangement, which represents a fundamental change in Rockwell's business and operations model, will transfer the volume risks related to EMV availability to the mining service provider.

With screening constraints addressed, and a new mining arrangement soon to be implemented, RHC will be on track to deliver increased processing capacity of up to 180,000m of gravel per month shortly.

Rockwell remains focused on rebuilding its MOR production profile and delivering new growth opportunities. The Company continues to evaluate new projects and value accretive consolidation opportunities.

Exploration efforts to identify new value opportunities with potential to add to the Company's resources will continue on the properties surrounding Wouterspan.

Rockwell's focus will remain firmly on safety, and particularly on avoiding the risk of complacency as significant safety milestones are achieved.

Priorities for fiscal 2017 include:

• Ramp-up of production at Remhoogte - Holsloot
• Construction and commissioning of the processing plant at Wouterspan
• Conclusion of a new mining contract
• Closure of Saxendrift and redeployment of staff and equipment to Wouterspan
• Realisation of further cost-savings flowing from recent restructuring

ConferenceCall:

Rockwell will host a telephone conference call on Friday, June 3, 2016 at 09:00 a.m. Eastern Time (15:00 p.m. Johannesburg / 14:00 p.m. London) to discuss these results. The conference call may be accessed as follows:

CountryAccessNumber

Canada and USA (Toll-Free) 1 855 481 5362

South Africa (Toll-Free) 0 800 200 648

South Africa - Johannesburg 011 535 3600

South Africa - Cape Town 021 819 0900

UK (Toll-Free) 0808 162 4061

Other Countries (Intl Toll) +27 11 535 3600

Other countries - Alternate +27 10 201 6800

A transcript of the audio webcast will be available on the Company's website: www.rockwelldiamonds.com. The conference call will be archived for later playback until midnight (ET) June 7, 2016 and can be accessed by dialling the relevant number in the table below and using the pass code 49744#.

CountryAccessNumber

South Africa (Telkom) 011 305 2030

Canada and USA (Toll Free) 1 855 481 5363

Other Countries (Intl Toll) +27 11 305 2030

UK (Toll-Free) 0 808 234 6771

For further details, see Rockwell's complete financial results and Management's Discussion and Analysis posted on the website and on the Company's profile at www.sedar.com. These include additional details on production, sales and revenues for the quarter, as well as comparative results for fiscal 2015.

For further information on Rockwell and its operations in South Africa, please contact

About RockwellDiamonds:

Rockwell is engaged in the business of operating and developing alluvial diamond deposits. The Company also evaluates consolidation opportunities that have the potential to expand its mineral resources and production profile and provide accretive value to the Company.

Rockwell is known for producing large, high quality gemstones comprising a major portion of its diamond recoveries. This is enhanced through a beneficiation joint venture that enables Rockwell to participate in the profits on the sale of the polished and certain re-traded diamonds, which are not beneficiated.

Rockwell has set a strategic goal to become a mid-tier rough diamond production company. In pursuit of this goal the Company has embarked on a strategy to grow its Middle Orange River (MOR) operational base and minimise production and recovery volatility by setting a medium term target to process 500,000m of gravels per month from its MOR operations.

Rockwell's common shares trade on the Toronto Stock Exchange and the JSE Limited under the symbol 'RDI'.

No regulatory authority has approved or disapproved the information contained in this news release.

Forward LookingStatements

Except for statements of historical fact, this news release contains certain 'forward-looking information' within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as 'plan', 'expect', 'project', 'intend', 'believe', 'anticipate', 'estimate' and other similar words, or statements that certain events or conditions 'may' or 'will' occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

Factors that could cause actual results to differ materially from those in forward-looking statements include uncertainties and costs related to the transaction and the ability of each party to satisfy the conditions precedent in a timely manner or at all, exploration and development activities, such as those related to determining whether mineral resources exist on a property; uncertainties related to expected production rates, timing of production and cash and total costs of production and milling; uncertainties related to the ability to obtain necessary licenses, permits, electricity, surface rights and title for development projects; operating and technical difficulties in connection with mining development activities; uncertainties related to the accuracy of our mineral resource estimates and our estimates of future production and future cash and total costs of production and diminishing quantities or grades if mineral resources; uncertainties related to unexpected judicial or regulatory procedures or changes in, and the effects of, the laws, regulations and government policies affecting our mining operations; changes in general economic conditions, the financial markets and the demand and market price for mineral commodities such as diesel fuel, steel, concrete, electricity, and other forms of energy, mining equipment, and fluctuations in exchange rates, particularly with respect to the value of the US dollar, Canadian dollar and South African Rand; changes in accounting policies and methods that we use to report our financial condition, including uncertainties associated with critical accounting assumptions and estimates; environmental issues and liabilities associated with mining and processing; geopolitical uncertainty and political and economic instability in countries in which we operate; and labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in markets in which we operate our mines, or environmental hazards, industrial accidents or other events or occurrences, including third party interference that interrupt operation of our mines or development projects.

For further information on Rockwell, Investors should review Rockwell's home jurisdiction filings that are available at www.sedar.com.

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