Rockwell Diamonds Inc. (TSE:RDI) (OTC:RDIAF) stock price lost nearly 10% of its value after the company reported their production will be adversely affected by heavy flooding.The company reported minor damage to their infrastructure at the Holpan and Klipdam mines, with no effect on the roads. This appears to be just a temporary setback, which should be dealt with quickly and production will resume at normal capacities as soon as the damp gravel dries out.
The event caused a comparatively violent reaction on the usually illiquid stock of RDI. Though the flooding caused some cuts in production and required additional expenditures, from the look of things the effect will be short lived. News driven share price changes should act adequately, since there will be no long-term damage.
The production was stopped for five days at Holpan and Klipdam mines and for three days at the Saxendrift mine. On very rough calculations, the company could have lost up to 10%-15% of monthly production, based on the provided average of 2.5 thousand carats of rough diamonds produced per period.
Short-term price decline actually fitted the previously established channel and barely would have been meaningful, were not the heavy trading volume that came along. Even under such circumstances, the price still failed to close below the important support at 5 cents, meaning more consolidation around the area should come.
