---

|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

T A B L E   O F   C O N T E N T S

|1.1    | DATE                                                                        | 2 
|------ | --------------------------------------------------------------------------- | --
|       |                                                                             |   
|1.2    | OVERVIEW                                                                    | 2 
|       |                                                                             |   
|1.3    | SELECTED
      ANNUAL INFORMATION                                           | 22
|       |                                                                             |   
|1.4    | SUMMARY
      OF QUARTERLY RESULTS                                          | 23
|       |                                                                             |   
|1.5    | RESULTS
      OF OPERATIONS                                                 | 23
|       |                                                                             |   
|1.6    | LIQUIDITY                                                                   | 25
|       |                                                                             |   
|1.7    | CAPITAL
      RESOURCES                                                     | 27
|       |                                                                             |   
|1.8    | OFF-BALANCE SHEET ARRANGEMENTS                                              | 28
|       |                                                                             |   
|1.9    | TRANSACTIONS WITH RELATED PARTIES                                           | 29
|       |                                                                             |   
|1.10   | FOURTH
      QUARTER                                                        | 31
|       |                                                                             |   
|1.11   | PROPOSED
      TRANSACTIONS                                                 | 31
|       |                                                                             |   
|1.12   | CRITICAL
      ACCOUNTING ESTIMATES                                         | 32
|       |                                                                             |   
|1.13   | CHANGES
      IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION             | 33
|       |                                                                             |   
|1.14   | FINANCIAL
      INSTRUMENTS AND OTHER INSTRUMENTS                           | 35
|       |                                                                             |   
|1.15   | OTHER
      MD&A REQUIREMENTS                                               | 37
|       |                                                                             |   
|1.15.1 | ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT
      SIGNIFICANT REVENUE | 37
|       |                                                                             |   
|1.15.2 | DISCLOSURE OF OUTSTANDING SHARE DATA                                        | 38
|       |                                                                             |   
|1.15.3 | INTERNAL
      CONTROLS OVER FINANCIAL REPORTING PROCEDURES                 | 39
|       |                                                                             |   
|1.15.4 | DISCLOSURE CONTROLS AND PROCEDURES                                          | 40

1

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.1       
Date

This Management Discussion and Analysis ("MD&A") should be
read in conjunction with the audited consolidated financial statements of
Rockwell Diamonds Inc. ("Rockwell", or the "Company") for the year ended
February 28, 2009, the nine months ended February 29, 2008, and the year ended
May 31, 2007, prepared in accordance with Canadian generally accepted accounting
principles, and publicly available on SEDAR at www.sedar.com.

This MD&A is prepared as of June 22, 2009. All dollar
figures stated herein are expressed in Canadian dollars, unless otherwise
specified.

This discussion includes certain statements that may be
      deemed "forward-looking statements". All statements in this discussion,
      other than statements of historical facts, that address future production,
      reserve potential, exploration drilling, exploitation activities and
      events or developments that the Company expects are forward-looking
      statements. 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 market prices,
      exploitation and exploration successes, continued availability of capital
      and financing and general economic, market or business conditions.
      Investors are cautioned that any such statements are not guarantees of
      future performance and that actual results or developments may differ
      materially from those projected in the forward-looking statements.


Information Concerning Estimates of
      Indicated and Inferred ResourcesThis management discussion also uses the terms indicated
      resources and inferred resources. Rockwell Diamonds Inc advises
      investors that although these terms are recognized and required by
      Canadian regulations (under National Instrument 43-101 Standards of
      Disclosure for Mineral Projects), the U.S. Securities and Exchange
      Commission does not recognize them. Investors are cautioned not to assume
      that any part or all of the mineral deposits in these categories will ever
      be converted into reserves. In addition, inferred resources have a great
      amount of uncertainty as to their existence, and economic and legal
      feasibility. It cannot be assumed that all or any part of an Inferred
      Mineral Resource will ever be upgraded to a higher category. Under
      Canadian rules, estimates of Inferred Mineral Resources may not form the
      basis of feasibility or pre-feasibility studies, or economic studies
      except for Preliminary Assessment as defined under 43-101. Investors are
      cautioned not to assume that part or all of an inferred resource exists,
      or is economically or legally mineable.


1.2       
Overview

Rockwell Diamonds Inc. ("Rockwell" or the "Company") is engaged
in the business of alluvial diamond production. The Company has also
investigated other potential diamond acquisitions which would provide accretive
value to Rockwell. In the light of current financial and diamond market
conditions the Company is unlikely to progress acquisition opportunities until
such time as these conditions improve.

In December 2007, the Companys Board of Directors approved a
resolution to change the Companys year end from May to February, resulting in a
nine month period for fiscal 2008. The information presented below is a
comparison of the twelve months fiscal year ended February 28, 2009 (fiscal
2009) and the nine months fiscal period ended February 29, 2008 (fiscal
2008).

2

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.2.1    Summary

Operations

During fiscal 2009, Rockwell operated three alluvial diamond
mines and successfully commissioned its fourth operation at Saxendrift. The
Company also acquired some 12,254 hectares in additional prospecting permits in
the North Cape Province, a number of which are adjacent to the Wouterspan and
Saxendrift properties.

In the latter part of the fiscal year, the diamond market was
significantly impacted by the world financial crisis. Market demand decreased as
retailers resisted committing their limited capital towards polished diamond
inventory. This situation was caused by the economic crisis and banks were not
lending money to retailers to purchase new stock until their debt had been
reduced. This had an immediate effect on their ability to purchase rough
diamonds.

Rough diamond prices declined by 30-50% during the third
quarter. In response, the Company reviewed all of its operations and took
measures to streamline operations and reduce costs, and also deferred some
diamond tenders.

At the end of November 2008, the Company ceased operations for
its normal yearend holiday and the shutdown period was extended from one to two
months during the fourth quarter. As a consequence of adverse financial and
diamond market conditions the Company restructured its Middle Orange River
operations to reduce costs and placed its Wouterspan operation on care and
maintenance. Consequently the Company only achieved approximately one month of
production at its operating mines during the fourth quarter of fiscal 2009.

Operations at the Holpan/Kilpdam and Saxendrift mines resumed
in early February 2009, but the Wouterspan operation continues to be held on
care and maintenance. Future plans for Wouterspan when funds are available
include the construction of a new high throughput low cost processing facility
that would enable the operation to be more profitable.

According to some market experts, prices for rough diamonds
bottomed out in April and increased by 15% to 20% in May. Rockwell began to
receive higher prices in March. The Company sold parcels of diamonds in
February, March and May 2009. The average price per carat received increased
from US$318.32 in February (US$0.97 Million), to US$531.43 in March (US$1.5
Million) and to US$584.69 in May (US$1.3 Million).

In the three month period ended February 28, 2009:

- 948.71 carats were produced at the Holpan/Klipdam and Saxendrift operations
- 3,043.26 carats were sold at an average price of US$318.32 per carat
- Revenues from sales were $1.0 million.

3

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

- Cost of sales and amortization totalled $11.8 million, resulting in an
  operating loss of $10.8 million for the period.
- Net general and administrative expenses amounted to $2.9 million and
  impairments of $2.9 million, less a future tax expense of $1.7 million,
  interest expense of 2.3 million and a reversal of non-controlling interest of
  $2.0 million, resulting in a net loss of $20.5 million or $0.09 per share.

In the twelve months ending February 28, 2009:

- 17,503.0 carats were produced from operations at Holpan/Klipdam, Wouterspan
  and Saxendrift.
- 15,320.4 carats were sold at an average price of US$2,159.30 per carat.
- Revenues from sales of $34.6 million.
- Cost of sales and amortization totalled $36.4 million, resulting in an
  operating loss of $1.8 million for the period.
- Net general and administrative expenses amounted to $9.7 million,
  impairments of $2.6 million, a future tax recovery of $3.3 million, resulted
  in a net loss of $13.0 million or $0.05 per share.

Diamonds in inventory at February 28, 2009 totalled 3,526.19
carats. Inventory in the financial statements has been valued at average prices
achieved per mine of said inventory in the current period.

Diamond stock at 28/02/09Carats
      
      
      Average
      
      
      US$on
      
      
      pricehand
      
      
      achievedKlipdam
      
      572.20
      
      
      X $314.68
      
      
      180,000.00987.42
      
      
      X $406.21
      
      
      401,095.00182.69
      
      
      X $438.92
      
      
      80,274.081742.31
      
      
      
      
      
      661,369.08Holpan & Wouterspan
      
      463.97
      
      
      X $367.48
      
      
      170,499.70240.75
      
      
      X $216.03
      
      
      52,009.22711.95
      
      
      X $407.56
      
      
      290,162.341416.67
      
      
      
      
      
      512,671.26Saxendrift
      
      157.53
      
      
      X$1312.77
      
      
      206,800.66209.68
      
      
      X $407.56
      
      
      85,457.18367.21
      
      
      
      
      
      292,257.84Total US$
      
      3526.19
      
      
      
      
      
      1,466,298.18Total Canadian $
      
      
      
      
      
      
      
      CA$1,845,986


4

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Mineral Resources

Mineral resources were reviewed at year end for the
Holpan/Klipdam and Saxendrift operations, and Wouterspan property (currently on
care and maintenance awaiting improved market conditions), and the recently
acquired Niewejaarskraal property. The information emerging from this review is
presented on page 13 and 14.

Corporate

On September 9, 2008, Pala Investments Holdings Limited
(Pala) made an unsolicited offer to acquire all of the outstanding shares of
Rockwell for $0.36 per share (the Offer). After careful consideration,
including consultation with its independent financial and legal advisors and
recommendation from a special committee, Rockwells Board concluded that the
Offer significantly undervalued Rockwell and was not in the best interests of
its shareholders. Management accordingly recommended to shareholders to reject
the Offer. A Directors circular was mailed to shareholders on September 22,
2008. The Offer was subsequently withdrawn by Pala.

1.2.2Financing

In fiscal 2009, the Company did not complete any debt
financings. Due to the current recession, the Company will be raising funds in
the current financial year. Please see section 1.7 and the Going Concern note in
the Annual Financial Statements for further information of financing
requirements.

1.2.3    Agreements

Durnpike Agreement

On June 30, 2006, the Company entered into an
Agreement-in-Principle to acquire interests and/or rights in four alluvial
diamond properties in South Africa and the Democratic Republic of Congo (DRC).
These four properties include the Holpan/Klipdam Property in South Africa,
Wouterspan Property in South Africa, Kwango River Project in the DRC and Galputs
Minerale Project in South Africa.

Subsequently and pursuant to the terms of a further
comprehensive agreement, which superseded the abovementioned
Agreement-in-Principle (the Definitive Agreement), the Company acquired all of
the shares in and claims on shareholders loan account in Durnpike Investment
(Pty) Ltd. (Durnpike), a private South African company, from eight vendors
(the Vendors), payable in common shares of the Company (Common Shares). Some
of the underlying rights were held by the H Van Wyk Diamonds (HVWD) and Van
Wyk Trust, collectively the Van Wyk Diamond Group (VWDG). For further details
on these acquisitions, see the Notes to the Annual Financial Statements.

Pursuant to the Definitive Agreement:

- The Company acquired from the Vendors all of their shares in and claims on
  loan account against Durnpike for consideration of ZAR 39.8 million ($6.1
  million), payable in common shares of the Company on the earlier of (i) the
  date of the JSE listing; and (ii) within approximately 12 months

5

---

- On November 30, 2007, the Company began trading on the JSE and hence completed
    its JSE listing condition. Consequently, the Company issued 7,848,663 Common
    Shares as settlement of its commitment and also 1,676,529 Common Shares as
    finder fees relating to the Durnpike acquisition.
- Durnpikes interest in the Kwango River Project was constituted by
    an agreement concluded in 2006 (Midamines Agreement) with Midamines
    SPRL (Midamines), the holder of the exploration permit on the
    Kwango River Project, to act as contractor on behalf of Midamines to manage
    and carry out exploration and mining. Durnpike was entitled to an 80% share
    of the net revenue from the sale of any diamonds produced from the contract
    area.
- Under the Midamines Agreement, Durnpike agreed to certain minimum royalty
    payments being made to Midamines, and Midamines undertook several obligations
    in favour of Durnpike including that of procuring and facilitating Durnpikes
    access to the Kwango River Project site. The royalties took the form of a
    series of recurring annual minimum royalty payments of US$1,200,000 per annum
    (commencing on December 31, 2007). During 2008, pursuant to an amending agreement
    to the Midamines Agreement, the Company paid consideration of $600,000 to
    Midamines in order to increase the size of the concession (Permit 331). As
    part of such amending agreement Midamines waived its right to payment of the
    abovementioned US$1,200,000 royalty payment on 31 December 2007. Subsequently,
    and pursuant to Midamines persistent breach of material provisions of
    the Midamines Agreement (coupled with its failure to remedy such instances
    of breach notwithstanding notice to do so), Durnpike cancelled the Midamines
    Agreement and claimed damages.
- Midamines has subsequently disputed Durnpikes entitlement to cancel
    the Midamines Agreement and has demanded payment of US$1.2 million as well
    as other amounts which have not yet been determined. Midamines has threatened
    to refer the dispute to arbitration and to joint Rockwell as party thereto,
    but no formal referral to arbitration has as yet been forthcoming.

As provided for in the Definitive Agreement, the Company
executed an agreement in relation to the acquisition of control of the mineral
rights relating to the Galputs Minerale Project. For the Galputs deal to be
fulfilled the condition precedent was that the South African Department of
Minerals and Energy had to give its written approval to transfer the shares from
the vendor to the purchaser by no later than May 31, 2008. No written approval
was obtained, so this acquisition was not completed.

6

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Makoenskloof property acquisition

In conjunction with the acquisition of Durnpike, HCVW had an
option agreement to acquire the Makoenskloof alluvial diamond project in South
Africa. As a result of the acquisition of HCVW by Durnpike, and concurrent
acquisition of Durnpike by Rockwell, the Company assumed the option to purchase
the Makoenskloof property. In November 2006, HCVW exercised its option to
purchase the property and the company that held the mineral rights of the
Makoenskloof property. The Company paid a total consideration of ZAR 19 million
($2.7 million) for the property and associated equipment.

A bulk sampling program was carried out during fiscal 2008. The
property has been on care and maintenance since that time.

Middle Orange River Operations (MORO)
Agreement

In March 2007, Rockwell and Trans Hex, through its wholly owned
subsidiary Trans Hex Operations (Pty) Ltd (THO), announced that the companies
had entered into an agreement whereby Rockwells wholly owned South African
subsidiary, Rockwell Resources RSA (Pty) Ltd (Rockwell RSA), would acquire two
open pit alluvial diamond mines (Saxendrift and Niewejaarskraal) then on care
and maintenance, and three alluvial diamond exploration projects (Kwartelspan,
Zwemkuil-Mooidraai, and Remhooget-Holsloot) referred to collectively as the
Middle Orange River Operations from Trans Hex (the Transaction). Pursuant to
the terms of the Transaction, Trans Hex was to transfer all its relevant mineral
rights and associated assets into a new special purpose vehicle (Saxendrift
Mine Pty (Ltd)) which Rockwell acquired via Rockwell RSA.

The MORO include:

- the rights to prospect and explore for and/or mine precious stones and/or
  other minerals and/or metals held directly or indirectly by THO in the
  Saxendrift area (described above);
- substantial indicated and inferred mineral resources;
- the material plant, machinery, equipment and other movable assets owned
  and/or used by THO - These operating assets were independently valued by
  Manhattan Mining Equipment (Pty) Limited in April 2005 at ZAR 53.3 million
  ($8.0 million);
- the employees of THO in terms of Section 197 of South Africas Labour
  Relations Act of 1995; and
- a rehabilitation liability which will be taken over by Rockwell on the
  basis that the tailings and other heaps of unprocessed diamond bearing
  middlings gravel and Rooikoppie gravels will be reprocessed by Rockwell to
  recover contained diamonds. The plan is to process the material and
  simultaneously rehabilitate these areas.

The Transaction was substantially completed in April 2008 when
the Ministerial consent to transfer the Saxendrift mining right, as well as
prospecting rights in respect of the Kwartelspan, Zwemkuil-Mooidraai and part of
the Remhoogte-Holsloot projects, was obtained. Cession of the Niewejaarskraal
mining right occurred on March 4, 2009, and a payment of ZAR18,901,294 ($2.4
million) plus interest of ZAR2,381,294 ($0.3 million). Rockwell has chosen not
to exercise the option on the Remhoogte prospecting right due to current harsh
financial constraints and depressed diamond prices. All the above

7

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

rights have been ceded to Saxendrift Mine (Pty) Ltd and
Rockwell Resources RSA has taken ownership of the company.

Farhom Property

On July 30, 2007, H.C. Van Wyk Diamonds acquired 100% of the
shares and shareholder loans of Farhom Mining & Construction (Pty) Ltd for
ZAR10 million ($1.5 million). This company holds the mineral rights over the
Farhom farm which is part of the Wouterspan property. This transaction was
concluded in terms of an option granted to HCVW on February 24, 2005 and later
amended on July 10, 2007.

Black Economic Empowerment Holdings (BEE) in Rockwell
Properties

During the year ended May 31, 2007, African Vanguard Resources
(Proprietary) Limited (AVR), the holding company of Richtrau No 136
(Proprietary) Limited (Richtrau) purchased through Richtrau a 15% interest in
the VWDG from the Van Wyk Trust for an amount of ZAR22.5 million ($3.4 million).
During November 30, 2008 AVR indicated its commitment to increase its
shareholding in the VWDG to 26% by subscribing for an additional 11% shares in
each of the entities comprising the VWDG. The additional 11% stake was acquired
by another subsidiary of AVR at a subscription price of ZAR 17.5 million.

The AVR group was also contractually committed to inject ZAR
10.5 million in working capital into the VWDG. Given the credit crunch,
depressed economic conditions and fall in diamond prices the AVR group indicated
to the Board of Directors of Rockwell RSA (the holding company of the entities
in VWDG) during the fourth quarter that it was unable to make these payments and
that it would pursue funding mechanisms to complete its obligations. Rockwell
RSA has endeavoured to identify alternate sources of funding with a view to
assist AVR to complete its investment but these attempts were, unsuccessful.
Rockwell RSA has entered into discussions with AVR and the Department of
Minerals and Energy with the assistance of its legal counsel to address
completion of the BEE participation in the share capital of the entities
comprising the VWDG.

Effective July 1, 2008, AVR, via Liberty Lane Investments (Pty)
Limited acquired a shareholding of an effective 26% in the Saxendrift project by
subscribing for shares in Saxendrift Mines (Pty) Limited. This transaction was
concluded in respect of the requirements of the Minerals and Petroleum Resources
Development Act and has been structured via a loan structure under written by
Rockwell Resources RSA (Pty) Limited. AVR has paid an initial deposit of R3
million in respect of this transaction which is structured over a two year
period.

8

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.2.4    Production Properties

Production and Sales  Quarter Comparison

The following is a comparison of the current quarter (ended
February 28, 2009) with the quarter ended February 29, 2008.

PRODUCTIONOperation
      3
        months ending February 28, 2009
      3
        months ending February 29, 2008Volume (cubic meters)
      Carats
      Average grade (carats per 100
        cubic meters)
      Volume (cubic meters)
      Carats
      Average grade (carats per 100
        cubic meters)Holpan
      49,073
      259.77
      0.53
      167,338
      1,266.46
      0.76Klipdam
      43,250
      523.18
      1.21
      182,583
      1,234.80
      0.68Wouterspan
      -
      -
      -
      194,468
      1,786.87
      0.92Makoenskloof
      -
      -
      -
      18,029
      73.12
      0.41Saxendrift
      21,171
      165.76
      0.78
      -
      -
      -Total
      113,494
      948.71
      0.84
      562,418
      4,361.25
      0.78


SALES,
        REVENUE AND INVENTORYOperation
      3
        months ending February 28, 2009
      3
        months ending February 29, 2008Sales (carats)
      Value of Sales (US$)
      Average value (US$
        per carat)
      Inventory (carats)
      Sales (carats)
      Value of Sales (US$)
      Average value (US$
        per carat)
      Inventory (carats)Holpan
      704.73
      134,633
      191.04
      839.82
      1,272.18
      1,645,214
      1,293.22
      366.28Klipdam
      832.12
      111,576
      134.09
      1,742.31
      1,257.73
      946,534
      752.57
      360.01Wouterspan
      957.04
      340,738
      356.03
      576.85
      1,973.48
      6,222,776
      3,153.20
      309.92Makoenskloof
      -
      -
      -
      -
      155.39
      705,254
      4,538.60
      0.38Saxendrift
      549.37
      381,784
      694.95
      367.21
      -
      -
      -
      -Total
      3,043.26
      968,731
      318.32
      3,526.19
      4,658.78
      9,519,778
      2,043.41
      1,036.59


The rapid increase in commodity prices in 2008 resulted in
higher than average valuations, which subsequently resulted in a crash in
commodity pricing in October 2008. This crash had a direct impact on diamond
pricing and sales. It is estimated that high average prices achieved in October
2008 will only be realised again in 2010 or later.

9

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Production and Sales  Twelve Month Comparison

The following is a comparison of fiscal 2009 with the fiscal
nine months ending February 29, 2008.

PRODUCTIONOperation
      12 months ending
        February 28, 2009
      9
        months ending February 29, 2008Volume (cubic meters)
      Carats
      Average grade (carats per 100
        cubic meters)
      Volume (cubic meters)
      Carats
      Average grade (carats per 100
        cubic meters)Holpan
      561,583
      4,127.40
      0.73
      676,026
      5,385.82
      0.80Klipdam
      711,924
      7,041.81
      0.99
      584,643
      5,018.88
      0.86Wouterspan
      552,293
      3,897.06
      0.71
      890,059
      6,398.00
      0.72Makoenskloof
      -
      -
      -
      217,382
      943.70
      0.43Saxendrift
      194,287
      2,436.73
      1.18
      -
      -
      -Total
      2,020,087
      17,503.00
      0.87
      2,368,110
      17,746.40
      0.75


SALES,
        REVENUE AND INVENTORYOperation
      12 months ending
        February 28, 2009
      9
        months ending February 29, 2008Sales (carats)
      Value of Sales
        (US$)
      Average value (US$
        per carat)
      Inventory (carats)
      Sales (carats)
      Value of Sales
        (US$)
      Average value (US$
        per carat)
      Inventory (carats)Holpan
      3,741.08
      4,272,511
      1,142.05
      839.82
      5,425.29
      7,218,906
      1,330.60
      366.28Klipdam
      5,656.97
      18,954,292
      3,350.61
      1,742.31
      5,061.47
      7,264,657
      1,435.29
      360.01Wouterspan
      3,640.81
      4,698,121
      1,290.41
      576.85
      6,237.59
      16,067,663
      2,575.94
      309.92Makoenskloof
      212.00
      1,500,119
      7,076.03
      -
      943.32
      4,513,376
      4,784.57
      0.38Saxendrift
      2,069.54
      3,656,268
      1,766.71
      367.21
      -
      -
      -
      -Total
      15,320.40
      33,081,311
      2,159.30
      3,526.19
      17,667.67
      35,064,602
      1,984.68
      1,036.59


Holpan/Klipdam

The Holpan/Klipdam Property is located 45 km from Kimberley,
South Africa. It consists of the contiguous Holpan 161 farm and Klipdam 157
farm, covering an area of 3,836 hectares. The production from Holpan and Klipdam
is accounted for separately because they are separate operating entities.

Three months ended February 28, 2009 compared to three
months ended February 29, 2008

Production at Holpan in the quarter was 259.77 carats from
49,073 cubic meters (90,785.05 tonnes) of gravel processed, compared with
1,266.46 carats from 167,338 cubic meters (309,575 tonnes) of gravel processed
in the quarter ending February 29, 2008.

Sales from Holpan were 704.73 carats at an average value of
US$191.04 per carat, compared to 1,272.18 carats at an average value of
US$1,293.22 per carat in the three months ending February 29, 2008.

10

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Production at Klipdam was 523.18 carats from 43,250 cubic
meters (80,013 tonnes) of gravels, compared to 1,234.80 carats from 182,583
cubic meters (337,779 tonnes) of gravel produced in the quarter ended February
29, 2008.

Sales from Klipdam were 832.12 carats at an average value of
US$134.09 per carat compared to 1,257.73 carats at an average value of 752.57
per carat in the three months ending February 29, 2008.

Twelve months ending February 28, 2009 compared to the nine
months ending February 29, 2008

Production at Holpan over the twelve months was 4,127.40 carats
from 561,583 cubic meters (1,038,929 tonnes) of gravel processed, compared with
5,385.82 carats from 676,026 cubic meters (1,065,648 tonnes) of gravel processed
in the nine months ended February, 2008.

Sales from Holpan were 3,741.08 carats at an average value of
US$1,142.05 per carat, compared to 5,425.29 carats at an average value of
US$1,330.60 per carat in the nine months of fiscal 2008.

At February 28, 2009, the inventory at Holpan is 839.82 carats.

In the twelve months of the 2009 fiscal year, production at
Klipdam was 7,041.81 carats from 711,924 cubic meters (1,317,059 tonnes) of
gravels, compared to 5,018.88 carats from 584,643 cubic meters (1,081,589
tonnes) of gravels produced in the nine months ending February 29, 2008.

In the twelve months of the 2009 fiscal year, sales from
Klipdam were 5,656.97 carats at an average value of US$3,350.61 per carat,an increase in carats sold and value per carat sold from 5,061.47 carats at
an average value of US$1,435.29 per carat in the nine months in fiscal 2008.

At February 28, 2009, the inventory at Klipdam is 1,742.31
carats.

Wouterspan

The Wouterspan Property is located near Douglas, South Africa.
It comprises portions, totalling 969.4 hectares, of the Lanyon Vale 376 farm.
Operations are taking place on three portions of the property called the Farhom,
Okapi, and Stofdraai farms, exploiting the Rooikoppie and Primary gravel
units.

Three months ending February 28, 2009 compared to three
months ending February 29, 2008

During the quarter, the property produced zero carats as the
property was placed on care and maintenance, a decrease from 1,786.87 carats
produced and 194,468 cubic meters (408,383 tonnes) of gravels processed in the
quarter ended February 29, 2008.

Sales from Wouterspan were 957.04 carats at an average price of
US$356.03 per carat, compared to 1,973.48 carats at an average price of
US$3,153.20 per carat, in the three months ending February 29, 2008.

11

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Twelve months ending February 28, 2009 compared to twelve
months ending February 29, 2008

During the twelve months of the fiscal 2009 year, the property
produced 3,897.06 carats from 552,293 cubic meters (1,159,815 tonnes) of gravel,
a decrease from 6,398.0 carats produced and 890,059 cubic meters (1,869,124
tonnes) of gravel processed in the nine months ended February 29, 2008.

Sales from Wouterspan were 3,640.81 carats at an average price
of US$1,290.41 per carat, compared to 6,237.59 carats at an average value of
US$2,575.94 per carat in the nine months in fiscal 2008.

The inventory at Wouterspan is 576.85 carats.

Saxendrift Property

The Saxendrift property is located on the south bank of the
Middle Orange River and adjacent to the Wouterspan diamond operation. The
Company acquired and re-commissioned an existing small pan plant on the property
in the first quarter of fiscal 2009. Full commissioning of the new high-volume
wet rotary pan plant took place in the third quarter of fiscal 2009, so
production increased in the last six months of the year.

Three months ending February 28, 2009 compared to three
months ending February 29, 2008

During the quarter ending February 28, 2009, the property
produced 165.76 carats from 21,171 cubic meters (44,459 tonnes) of gravel.
Saxendrift was not in production in fiscal 2008.

In the fourth quarter of fiscal 2009, 549.37 carats were sold
at an average price of US$694.95 per carat.

Twelve months ending February 28, 2009 compared to nine
months ended February 29, 2008.

In fiscal 2009, 2,436.73 carats were produced from 194,287
cubic meters (408,003 tonnes) of gravel.

In fiscal 2009, 2,069.54 carats were sold at an average value
of $1,766.71 per carat.

The inventory at Saxendrift is 367.21 carats.

Production Costs

Production was stopped over January and February due to the
credit crunch which has lead to the economic recession. Operations at Holpan an
Klipdam commenced in the second week of February, and Saxendrift the third week
of February, achieving a cost per ton of US$5.23 per ton, which included a full
month of fixed costs and retrenchment costs for closing the marginal production
at Wouterspan, and commencing full scale mining operations at Saxendrift. A wide
ranging cost cutting and efficiency improvements across the Company have
succeeded in limiting expenses. In the corresponding period in the prior year
US$4.66 per tonne was achieved.

Average mining costs for the first two months (March and April)
of fiscal 2010, excluding depreciation, rehabilitation and royalties for the
current period were, Klipdam $2.93 / metric ton, Holpan $2.55 / metric ton and
Saxendrift $2.65 metric / ton. The average cost for all operations including
rehabilitation, hire purchase

12

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

payments and royalties was $4.16 / metric ton. This is
anticipated to decrease as settling in problems are resolved and engineering
improvements are implemented on the new Saxendrift plant.

Mineral Resource Estimates

Holpan/Klipdam

The mineral resources at February 28, 2009 were estimated by
Rockwells Manager, Resources, G. Norton, Pr.Sci.Nat. a qualified person who is
not independent of the Company, and reviewed by T. Marshall, PhD, Pr.Sci.Nat., a
qualified person who is independent of the Company. A technical report by
Marshall and Norton has been filed on www.sedar.com with Rockwells year end materials.

Holpan and Klipdam Mineral Resources

INFERRED RESOURCES
    INDICATED RESOURCESDescription of Gravel
      Resource
    Volume (cubic
      meters)
    Volume (cubic
      meters)
    Grade
      (carats/100 cubic meters)
    Value
      (US$/carat)Holpan Fluvial- alluvial Gravel
    294,000
      
    0.74
    2008 -1,157
      2009#- 671Holpan Rooikoppie gravel
    5,643,000
    1,137,273Klipdam Fluvial- alluvial Gravel
    1,504,163
      
    0.91
    2008 - 3,892
      2009#- 915Klipdam Rooikoppie gravel
    1,312,000
    1,135,229TOTAL
    8,753,163
    2,272,502
    0.84


* Volumes fully diluted of sampling and mining for the period
2008-Feb2009 
  # Modelled values for 2009 (by Rockwell, 2009)

Wouterspan

Mineral resources at February 28, 2009 were estimated by
Rockwells Manager, Resources, G. Norton, Pr.Sci.Nat. a qualified person who is
not independent of the Company reviewed by T. Marshall, PhD, Pr.Sci.Nat., a
qualified person who is independent of the Company. A technical report by
Marshall and Norton has been filed on www.sedar.com with Rockwells year end materials.

13

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Wouterspan Mineral Resources

INFERRED RESOURCES
    INDICATED RESOURCESDescription of Gravel
      Resource
    Volume (cubic
      meters)
    Volume (cubic
      meters)
    Grade1
      (carats/100 cubic meters)
    Value2
      (US$/carat)Rooikoppie
    5,911,000
    716,769
    0.70
    1,511Fluvial-alluvial
    31,863,000
    4,311,167TOTAL
    37,774,000
    5,027,9361
    0.70
    1,511


Notes to table: Total figure rounded off.

|1 | Although the volumes of Rooikoppie and Fluvial-Alluvial
      gravels are estimated separately, the processing combines them, so
      separate grade determinations are not possible.                                       
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | The average diamond value given are to October 2008, as
      this is the figure that prices will have to achieve before the new process
      plant will be constructed and the mine is put back into full
      production.

The Wouterspan operation was placed on care and maintenance on
November 30, 2008.

Saxendrift/Kwartelspan

Mineral resources at February 28, 2009 were estimated by
Rockwells Manager, Resources, G. Norton, Pr.Sci.Nat., a qualified person who is
not independent of the Company and reviewed by T. Marshall, PhD, Pr.Sci.Nat., a
qualified person who is independent of the Company. A technical report by
Marshall and Norton has been filed on www.sedar.com with Rockwells year end materials.

Saxendrift Mineral Resources

MINING AREA
      RESOURCE CLASSIFiCATION
      Volume (cubic
        meters)
      Grade (carats/100
        cubic meters)
      Value (US$/carat)Saxendrift Terrace A
      INDICATED 1
      804,945
      1.32
      2,154INDICATED 2
      2,483,494
      0.8Saxendrift Terrace B
      INDICATED
      1,774,660
      1.15
      1,075TOTAL
        INDICATED
      5,063,099
      1.01Saxendrift Terrace A
      INFERRED
      3,629,127
      0.8
      1,075Saxendrift Terrace B
      INFERRED
      86,476
      0.68
      1,075Stockpiles
      INFERRED
      642,540
      0.29
      2,154TOTAL INFERRED
      4,358,143
      0.72


During 2008 Rockwell re-modelled the resources according to the
Companys standards, and identified differences in volumes based on an
incomplete dataset supplied to Rockwell by TransHex, and different to that
supplied to Venmyn in 2006/7. Overall, the indicated resources have increased
and the inferred resources have decreased from the previous estimate.

During May through to October 2008, some 1,520.17 carats of
diamonds were sold from Saxendrift Terrace A for an average value of
US$2,154.02/carat. These diamonds were recovered from (primarily)

14

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

in-situ gravels and (minor) bantams. Although no
diamonds were recovered from Terrace B gravels, the model value for these stones
was some US$1,540/carat. The sale of some 500 carats at end February 2009 for
only R695/carat is indicative of the weakness of the present diamond market. In
order to account for the current depressed market, Rockwell has proposed a
modelled value of US$1,075/carat for the short term (2009) for Terrace A stones
and US$1,075/carat for Terrace B stones were used in the 2009 estimates.

At the expected mining and processing rates of 1,199,000 cubic
meters per annum, the currently defined indicated gravel resource is expected to
be sufficient for 48 months. During this time, an exploration program will be
undertaken with the objective of upgrading the inferred resources to an
indicated category. In addition, an attenuated prospecting program will define
further exploration potential on both Saxendrift and the nearby Kwartelspan
prospect.

Kwartelspan

A single terrace was identified by TransHex to exist on the
Kwartelspan prospect area. Based on drilling and bulk-sampling of Rooikoppie
gravels an inferred resource was estimated.

Kwartelspan Mineral Resources

RESOURCE CLASSIFICATION
    Volume (cubic
      meters)
    Grade (carats/100
      cubic meters)
    Value
      (US$/carat)INFERRED
    1,384,577
    1.50
    793


The Mineral Resources as of March 2007 at Kwartelspan were
estimated by the South African consulting company Venmyn. C.A. Telfer,
Pr.Sci.Nat., of Venmyn is an independent qualified person as defined by National
Instrument 43-101.

1.2.5    Exploration and Development
Properties

Middle Orange River Properties

In addition to the Saxendrift mine and adjacent Kwartelspan
prospect (see above), the MORO properties include the past producing
Niewejaarskraal mine and Vieglandsput, Zwemkuil-Mooidraai Holsloot prospecting
projects, totalling approximately 12,155.3550 hectares.

The Niewejaarskraal Mine was operated from 2002-2006 by Trans
Hex. It has been on care and maintenance since late 2006.

Trans Hex also conducted exploration and evaluation work on
several large alluvial gravel terraces on the Kwartelspan property, located to
the north-east of Saxendrift, and on the Vieglandsput, Zwemkuil-Mooidraai and
Holsloot properties, located to the south-west of Niewejaarskraal. The
exploration work included reverse circulation drilling, trenching and bulk
sampling. Rockwell has also remodelled the gravel at Niewejaarskraal and
commissioned a re-estimate of the mineral resources.

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Niewejaarskraal

Rockwell and its consultant re-processed the Trans Hex drilling
data according to Companys operating procedures. The estimated resources have
increased, overall, but have re-classified as Inferred due to the lack of
confidence in the original data  due primarily to the length of time lapsed
since the last diamond valuation (and the uncertainties surrounding current and
short-term diamond prices) and the improvements made in diamond
processing/recovery procedures which will change the available diamond grade
values. The current estimates also represent volumes available in the ground,
fully depleted of material removed by the THO bulk-sampling program.

Mineral resources at February 28, 2009 were estimated by
Rockwells Manager, Resources, G. Norton, Pr.Sci.Nat., a qualified person who is
not independent of the Company and reviewed T. Marshall, PhD, Pr.Sci.Nat., a
qualified person who is independent of the Company. A technical report by
Marshall and Norton has been filed on www.sedar.com with Rockwells year end materials.

Niewejaarskraal Mineral Resources

AREA
    **GRAVEL** **TYPE**
    RESOURCE
      CLASSIFICATION
    Volume (cubic
      meters)
    Grade
      (carats/100 cubic meters)
    Value
      (US$/Carat)Terrace A
    Fluvial-alluvial
      Rooikoppie
    INFERRED
    11,831,500 1,840,000
    0.84
    1,075Terrace B
    Fluvial-alluvial
      Rooikoppie
    INFERRED
    5,990,000 969,000
    0.84
    1,075Total
    
    INFERRED
    20,630,500
    0.84
    1,075


Niewejaarskraal Disclosure

In terms of the Sale of Shares and Claims Agreement entered
into between, amongst others, Rockwell Resources RSA (Proprietary) Limited
(Rockwell) and Trans Hex Operations (Proprietary) Limited (Trans Hex) on 3
March 2007, Rockwell indirectly acquired the mining and prospecting rights to,
amongst other areas, Portion 6 of the Farm Niewejaarskraal 40 in the magisterial
district of Prieska (Niewejaarskraal). In terms of the same agreement,
Rockwell also indirectly acquired, amongst other things, certain mining
equipment situated on Niewejaarskraal, including a dense media separation plant
previously erected and operated by Trans Hex.

During the course of 2008, prior to the prospecting and mining
rights having been transferred from Trans Hex to Rockwell, a representative of
the land owner of Niewejaarskraal asserted a claim of ownership over the
equipment located on Niewejaarskraal. This claim was ostensibly based on a
surface rights agreement entered into between Trans Hex and the owner of
Niewejaarskraal and an allegation that Trans Hex had abandoned the mining
equipment concerned. This Contract expired prior to Rockwell receiving the
Niewejaarskraal mining rights. Since the transfer of the prospecting and mining
rights associated with and the mining equipment located on Niewejaarskraal to
Rockwell, it has not received any formal approach from the land owner of
Niewejaarskraal progressing this claim. Discussions with the landowner have
indicated that he would be happy to enter into amenable and workable landowner
agreements with Rockwell subject to appropriate land use agreements been entered
into between the Parties . In addition, Rockwell has had sight of the legal
advice provided by external legal counsel to Trans Hex to the effect that the
merits of this claim are limited. In the event that a claim were to made by the
owner of Niewejaarskraal against Rockwell in respect of this mining equipment,
Rockwell will vigorously defend

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

its ownership of that equipment and will also seek to rely on
  certain protective warranties and indemnities that were given to it by Trans
  Hex in the Sale of Shares and Claims Agreement.

Other MORO Exploration Prospects

The Mineral Resources as of March 2007 were estimated by the
South African consulting company Venmyn. C.A. Telfer, Pr.Sci.Nat., of Venmyn is
an independent qualified person as defined by National Instrument 43-101.

Other MORO Prospects Mineral Resources

PROJECT
    RESOURCE
      CLASSIFICATION
    Volume (cubic
      meters)
    Grade (carats/100
      cubic meters)Zwemkuil-Mooidraai
    INFERRED
    1,640,000
    0.95


Additional Alluvial Diamond Prospects in MORO Area

In August 2008, the Company acquired eight new prospecting
permits from the Department of Mineral and Energy (DME). These new prospecting
permits are located in the Middle Orange River area in the Northern Cape
Province of South Africa, and include a number of permits which are adjacent to
the Companys Wouterspan and Saxendrift properties.

Project
      Areas
    Farm Name
    Portion
    Size (Ha)
    Type of RightLanyonvale
    Lanyonvale 376
    Ptn 16 (Ptn of Ptn 9)
    240.4480
    Prospecting PermitLanyonvale 376
    Rem of Ptn 18 (Ptn of Ptn 10)
    271.5347
    Prospecting PermitLanyonvale 376
    Ptn 7 & 11
    2917.4437
    Prospecting PermitDouglas
    Zweet Fontein 76
    Rem of Ptn 1; Ptn 2 (Ptn of Ptn 1)
    2045.1312
    Prospecting PermitBlaaubosch Drift 78
    Rem of Ptn 1 & Ptn 3Makoenskloof
    Reads Drift 74
    Ptn 20 & 38 (Ptn of Ptn 18)
    2226.9832
    Prospecting PermitDiamond Valley
    Diamond Valley 29
    R/E; Ptn 1 & 2
    2679.9832
    Prospecting PermitSaxendrift
    Saxendrift 20
    Ptn 12,13,16,24 &25
    1873.6890
    Prospecting Permit


Ptn = Portion; R/E = Remaining Extent

Lanyonvale Project: The Lanyonvale properties are
situated adjacent to and downstream of Rockwells Wouterspan Mine on the Middle
Orange River.

Douglas Project Area:These properties are located
upstream of the confluence of the Vaal and Orange Rivers, outside of the town of
Douglas. There have been alluvial operations around the town of Douglas for the
last 100 years.

Makoenskloof Area:This property is situated on the
north bank of the Middle Orange River, downstream of Makoenskloof where Rockwell
performed bulk sampling in 2007, producing some diamonds. The

17

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

new property is located adjacent to a private operation owned
  by another party that is known for the recovery of large diamonds.

Diamond Valley:This property is located some 10 kilometers
  south of the modern day Orange River and at the same general elevation as the
  Companys Saxendrift project located about 15 kilometers to the west.

Saxendrift: These properties are adjacent to the lower
(Terrace C) of the three terraces that are located on the contiguous mineral
right portions that collectively comprise the Saxendrift property package. The
Company already holds rights to the property that hosts the upper terraces A and
B which have a history of historical diamond production. With the granting of
this new right, Rockwell now has access to the three main terraces contained
within the Saxendrift project area, with the potential to add further gravel
resources at Saxendrift. Terrace C is located approximately 20 to 40 meters
above the current river, whereas Terrace A is some 120 meters above the present
day river, and Terrace B is situated between A and C. Rockwell is currently
constructing a new processing plant on Terrace A.

Mineral Rights Conversions

In respect of the requirements of the Minerals and Petroleum
Resources Development Act, old order mineral rights shall be converted to new
order rights provided that all the relevant documentation has been lodged before
the requisite date of 1 May 2009. Provided that these conditions are met then
the conversion of mineral Rights shall be granted by the Department of Minerals
and Energy. Rockwell has lodged its documentation for the conversion of its
mineral rights in a timely manner and is confident that those rights (namely
Holpan and Rietputs) not yet converted shall be converted in due course,
allowing for backlogs given the large number of rights that were submitted to
the Department of Minerals and Energy by the due date and which are being
processed by the Department.

Kwango River Project, DRC

Durnpikes interest in the Kwango River Project was constituted
by an agreement (Midamines Agreement) concluded during 2006 with Midamines
SPRL (Midamines), the holder of the exploration permit on the Kwango River
Project, to act as contractor on behalf of Midamines to manage and carry out
exploration and mining. Durnpike was entitled to an 80% share of the net revenue
from the sale of any diamonds produced from the contract area.

Under the Midamines Agreement, Durnpike agreed to certain
minimum royalty payments being made to Midamines, and Midamines undertook
several obligations in favour of Durnpike including that of procuring and
facilitating Durnpikes access to the Kwango River Project site. The royalties
took the form of a series of recurring annual minimum royalty payments of
US$1,200,000 per annum (commencing on December 31, 2007). During the first
quarter of 2008, pursuant to an amending agreement to the Midamines Agreement,
the Company paid consideration of $600,000 to Midamines in order to increase the
size of the concession (Permit 331). As part of such amending agreement
Midamines waived its right to payment of the abovementioned US$1,200,000 royalty
payment on 31 December 2007. Subsequently, and pursuant to Midamines persistent
breach of material provisions of the Midamines Agreement (coupled with its
failure to remedy such instances of breach notwithstanding notice to do so),
Durnpike cancelled the Midamines Agreement and claimed damages.

18

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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Midamines has subsequently disputed Durnpikes entitlement to
cancel the Midamines Agreement and has demanded payment of US$1.2 million as
well as other amounts which have not yet been determined. Midamines has
threatened to refer the dispute to arbitration and to joint Rockwell as party
thereto, but no formal referral to arbitration has as yet been forthcoming.

Ricardo Property, Chile

The Company held a 100% interest in the Ricardo Property, a
copper prospect located within the Calama Mining District, Chile that it
acquired in 1998. Exploration was carried out by two companies who optioned the
property in 2000 and 2004. Since that time, Rockwell has sought partners to
continue exploration or to divest of the property. In July 2008, the Ricardo
property was acquired by Hunter Dickinson Acquisitions Inc., a company with
certain directors and officers in common.

Other

Rockwell has adopted a policy that includes insurance cover for
all equipment that is purchased on Hire Purchase or leases but does not carry
full cover for other equipment that is paid off or which has been acquired in
respect of its acquisitions of Trans Hex mineral rights and equipment. The
Company also has cover on small vehicles, busses, horse and trailer road trucks,
Flow-sort X-ray equipment and some of its fixed properties and assets.

1.2.6    Diamond Market Trends

The months from November 2008 to February 2009 were the most
testing times for prices and the overall diamond industry since the Great
Depression. In response, Rockwell cancelled all sales for November and December
2008, embarked on a cost cutting program and also suspended all operations for
the months December 2008 and January 2009. The immediate decisions which
Rockwell management took during this period assisted the Company to address the
challenges of the credit crunch and related depressed diamond prices.

The diamond industrys financial stability was severely tested
during this period and resulted in a few operations being liquidated as the
industry and banks worked together to avoid liquidations as this would have had
a detrimental ripple effect on the industry overall. However, there was a large
amount of stressed sales of inventory, which created opportunities for companies
with a positive cash balance.

Retailers continued their resistance to purchasing additional
inventory and also reduced in-store inventory to acceptable levels while
improving their levels of debt. The result of these latter actions was a
worldwide cessation of trade in polished diamonds and, subsequently, rough
diamonds for the months November to January. Trade resumed in February albeit
very cautiously. A lower level of stressed sales continued through February and
ultimately placed pressure on the values offered for rough diamonds, creating
further opportunities for cash strong traders, and enabling them to purchase
rough diamonds at prices that reduced the average values of their inventories.
The pressure placed on rough diamond values and the high amount of opportunistic
buying resulted in producers receiving around 50% below the high prices received
in 2008.

19

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|ROCKWELL DIAMONDS INC.                         
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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Certain producers were forced to sell at these prices while
Rockwell managed its operations and cash flow, and deferred selling until the
latter part of February. Therefore, Rockwell diamonds were not sold at massive
discounts. Rockwell also moved away from selling its entire inventory on tenders
as we realized that traders were not prepared to offer good value but were
attempting to purchase at prices equivalent to those last seen in the year 2000.
Furthermore, the Company sold both directly to the industry and in part via
tender. The combination of the postponement of diamond sales as well as using
direct sales earned Rockwell better prices.

The largest producers, De Beers and Alrosa, also resisted
selling at the discounted prices and introduced a slow down and cessation at the
operational level. Most producers world-wide adopted a similar approach of
cessation and reduction in production. Rough diamond inventory immediately
reduced and, remarkably, shortages became evident in late February resulting in
the increase in rough diamond prices.

The polished market was equally stressed but the diamond
engagement sector of the retail industry maintained itself and saw relatively
high volumes of polished 0.75 carat-2 carat stones sold, resulting in a price
and demand increase for rough diamonds up to 5 carats in size. There was little
demand for larger, over 5 carat rough diamonds because traders were unwilling to
invest in a product that was difficult to sell unless such diamonds were highly
discounted.

By the end of February 2009, rough diamond prices were 40%
below the highs of 2008 (84% below the averages achieved by Rockwell in 2008 due
to both price and mix). However based on the Companys own results and market
research, and information gleaned from www. Polished Prices, the BMO Rough
Diamond Index, and Royal Bank Canada Diamond Research publications indications
are that rough diamond prices have begun to increase since that time as shown in
tender prices in March and May. (The average price per carat received increased
from US$318.32 in February, to US$531.43 in March and to US$584.69 in May).

Rockwell is relatively confident that rough diamond prices will
continue to increase during 2009 as is supported by market experts. However the
occurrence of possible further corrections in rough diamond prices through 2009
cannot be totally discounted.

The graph below provides a summary of Rockwells diamond
production and prices since start-up in 2006 is indicated below. This graph is
typical of alluvial diamond producers in that it shows strong fluctuations
consistent with the highly varied nature of alluvial diamond mine production as
compared to a primary kimberlite production prices. Because of this predicting
average prices is challenging. In respect of 2009 sales, data suggest that the
overall market prices appear to be trending upwards in line with the views of
market observers and experts.

20

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21

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.3      Selected Annual
Information

The consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles, and are
expressed in Canadian dollars except common shares outstanding.

|                                                          | As at             |   | As at             |   | As at        |  
|--------------------------------------------------------- | ----------------- | - | ----------------- | - | ------------ | -
|Balance
      Sheet                                       | February 28, 2009 |   | February 29, 2008 |   | May 31, 2007 |  
|Current assets                                            | 15,099,971        |   | 38,596,562        |   | 56,142,572   |  
|Mineral properties                                        | 28,894,477        |   | 25,247,937        |   | 24,121,855   |  
|Other assets                                              | 62,367,968        |   | 69,848,625        |   | 49,341,956   |  
|Total assets                                              | 106,362,416       |   | 133,693,124       |   | 129,606,383  |  
|                                                          |                   |   |                   |   |              |  
|                                                          |                   |   |                   |   |              |  
|Current liabilities                                       | 14,462,800        |   | 12,502,301        |   | 29,399,774   |  
|Other liabilities                                         | 21,478,590        |   | 34,076,016        |   | 28,613,767   |  
|Shareholders equity (deficiency)                         | 70,421,026        |   | 87,114,807        |   | 71,592,842   |  
|Total liabilities
      and shareholders equity          | 106,362,416       |   | 133,693,124       |   | 129,606,383  |  
|                                                          |                   |   |                   |   |              |  
|                                                          | Year ended        |   | Nine months ended |   | Year ended   |  
|Statement of
      Operations                             | February 28, 2009 |   | February 29, 2008 |   | May 31, 2007 |  
|Revenue                                                   | 34,633,477        |   | 36,149,308        |   | 10,103,328   |  
|Mine site operating costs                                 | (25,113,363       | ) | (22,730,271       | ) | (8,974,742   | )
|Amortization and depletion                                | (11,287,197       | ) | (6,533,941        | ) | (2,074,415   | )
|Operating profit
      (loss)                             | (1,767,083        | ) | 6,885,096         |   | (945,829     | )
|                                                          |                   |   |                   |   |              |  
|                                                          |                   |   |                   |   |              |  
|Expenses                                                  |                   |   |                   |   |              |  
|Accretion of reclamation obligation                       | 1,072,389         |   | 464,316           |   | 55,471       |  
|Exploration                                               | 498,739           |   | 604,169           |   | 1,371,351    |  
|Foreign exchange loss (gain)                              | (350,485          | ) | (751,318          | ) | (3,580,364   | )
|Legal, accounting and audit                               | 1,863,261         |   | 790,725           |   | 691,759      |  
|Office and administration                                 | 3,489,460         |   | 2,697,077         |   | 2,993,453    |  
|Shareholder communications                                | 453,489           |   | 198,985           |   | 200,574      |  
|Stock-based compensation                                  | 1,834,422         |   | 1,826,317         |   | 79,623       |  
|Travel and conference                                     | 605,812           |   | 654,705           |   | 666,194      |  
|Transfer agent
      filings                              | 250,878           |   | 544,232           |   | 176,530      |  
|Subtotal                                                  | 9,717,965         |   | 7,029,208         |   | 2,654,591    |  
|                                                          |                   |   |                   |   |              |  
|Loss on disposal of equipment                             | 364,918           |   | 402,411           |   | 94,621       |  
|Loss on disposal of mineral properties                    | 203,339           |   | -                 |   | -            |  
|Interest (income)                                         | (2,672,021        | ) | (1,118,396        | ) | (372,149     | )
|Interest on capital leases                                | 1,592,001         |   | 1,289,385         |   | 433,125      |  
|Convertible note accretion and interest
      expense     | 3,009,680         |   | 270,976           |   | 2,466,839    |  
|Loss on early extinguishment convertible promissory notes |                  |   |                  |   | 137,957      |  
|Write down of assets                                      | 2,590,958         |   |                  |   |             |  
|Write-off of amounts receivable                           | 291,063           |   | 18,360            |   | 224,942      |  
|Write-down of marketable securities                       |                  |   |                  |   | 1            |  
|Subtotal                                                  | 5,379,938         |   | 862,736           |   | 2,985,336    |  
|                                                          |                   |   |                   |   |              |  
|Loss before income taxes                                  | 16,864,986        |   | 1,006,848         |   | 6,585,756    |  
|Income tax expense                                        | 7,000             |   | 179,290           |   |             |  
|Future income tax
      (recovery) expense                | (3,347,000        | ) | 2,261,110         |   | (635,773     | )
|Loss before non-controlling interest                      | 13,524,986        |   | 3,447,248         |   | 5,949,983    |  
|Non-controlling
      interest                            | (549,024          | ) | 5,955,779         |   | 415,159      |  
|Loss for the period                                       | 12,975,962        |   | 9,403,027         |   | 6,365,142    |  
|Other
      comprehensive loss                            | 13,409,383        |   |                  |   |             |  
|Total comprehensive loss                                  | 26,385,345        |   | 9,403,027         |   | 6,365,142    |  
|                                                          |                   |   |                   |   |              |  
|Basic and diluted loss per common share                   | 0.05              |   | 0.05              |   | 0.11         |  
|Weighted average number of common shares outstanding      | 237,924,152       |   | 196,428,551       |   | 55,418,242   |  

22

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.4      Summary of Quarterly
Results

Expressed in thousands of Canadian dollars (000), except
per-share amounts. Minor differences are due to rounding.

|Balance Sheet                                | Feb 28  |   | Nov 30  |   | Aug 31  |   | May 31  |   | Feb 29  |   | Nov 30  |   | Aug 31  |   | May 31  |  
|-------------------------------------------- | ------- | - | ------- | - | ------- | - | ------- | - | ------- | - | ------- | - | ------- | - | ------- | -
|                                             | 2009    |   | 2008    |   | 2008    |   | 2008    |   | 2008    |   | 2007    |   | 2007    |   | 2007    |  
|Current assets                               | 15,100  |   | 22,830  |   | 21,757  |   | 27,190  |   | 38,597  |   | 36,823  |   | 46,861  |   | 56,143  |  
|Mineral properties                           | 28,894  |   | 36,831  |   | 37,386  |   | 36,592  |   | 25,248  |   | 24,928  |   | 25,589  |   | 24,122  |  
|Other assets                                 | 62,368  |   | 85,330  |   | 80,146  |   | 74,621  |   | 69,848  |   | 66,544  |   | 55,997  |   | 49,341  |  
|Total assets                                 | 106,362 |   | 144,991 |   | 139,289 |   | 138,403 |   | 133,693 |   | 128,295 |   | 128,447 |   | 129,606 |  
|                                             |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Current liabilities                          | 14,463  |   | 14,814  |   | 17,369  |   | 15,353  |   | 12,502  |   | 17,173  |   | 23,899  |   | 29,400  |  
|Other liabilities                            | 21,478  |   | 32,171  |   | 28,941  |   | 28,194  |   | 34,076  |   | 30,395  |   | 32,297  |   | 28,613  |  
|Shareholders equity (deficiency)            | 70,421  |   | 98,006  |   | 92,979  |   | 94,856  |   | 87,115  |   | 80,727  |   | 72,251  |   | 71,593  |  
|Total liabilities and
      shareholders'    | 106,362 |   | 144,991 |   | 139,289 |   | 138,403 |   | 133,693 |   | 128,295 |   | 128,447 |   | 129,606 |  
|equity                                       |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|                                             |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Working capital                              | 637     |   | 8,016   |   | 4,388   |   | 11,837  |   | 26,095  |   | 19,650  |   | 22,962  |   | 26,743  |  
|                                             |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Statement of Operations                      | Feb 28  |   | Nov 30  |   | Aug 31  |   | May 31  |   | Feb 29  |   | Nov 30  |   | Aug 31  |   | May 31  |  
|                                             | 2009    |   | 2008    |   | 2008    |   | 2008    |   | 2008    |   | 2007    |   | 2007    |   | 2007    |  
|Revenue                                      | 1,008   |   | 16,126  |   | 10,168  |   | 7,331   |   | 9,802   |   | 12,125  |   | 14,222  |   | 7,684   |  
|Mine site operating costs                    | (9,143  | ) | (3,710  | ) | (7,651  | ) | (4,609  | ) | (7,350  | ) | (9,571  | ) | (5,809  | ) | (7,100  | )
|Amortization                                 | (3,177  | ) | (2,864  | ) | (2,673  | ) | (2,574  | ) | (2,418  | ) | (2,141  | ) | (1,975  | ) | (1,680  | )
|Operating profit (loss)                      | (11,312 | ) | 9,552   |   | (156    | ) | 148     |   | 34      |   | 413     |   | 6,438   |   | (1,096  | )
|                                             |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Expenses                                     |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Accretion of reclamation obligation          | 809     |   | 95      |   | 99      |   | 69      |   | 378     |   | 28      |   | 59      |   | 55      |  
|Exploration                                  | 132     |   | 96      |   | -33     |   | 304     |   | 174     |   | 127     |   | 304     |   | 162     |  
|Foreign exchange                             | (72     | ) | (903    | ) | 831     |   | (206    | ) | 16      |   | (126    | ) | (641    | ) | (2,856  | )
|Legal, accounting and audit                  | 408     |   | 678     |   | 640     |   | 137     |   | 472     |   | 253     |   | 66      |   | 403     |  
|Office and administration                    | 960     |   | 689     |   | 868     |   | 972     |   | 1,147   |   | 850     |   | 700     |   | 1,651   |  
|Shareholder communications                   | 81      |   | 173     |   | 119     |   | 80      |   | 65      |   | 64      |   | 69      |   | 57      |  
|Stock-based compensation                     | 276     |   | 499     |   | 373     |   | 686     |   | 1,177   |   | 617     |   | 32      |   | 8       |  
|Travel and conference                        | 147     |   | 139     |   | 108     |   | 212     |   | 382     |   | 147     |   | 126     |   | 285     |  
|Transfer agent filings                       | 178     |   | 28      |   | 35      |   | 10      |   | 439     |   | 98      |   | 7       |   | 56      |  
|Subtotal                                     | 2,919   |   | 1,494   |   | 3,040   |   | 2,264   |   | 4,250   |   | 2,058   |   | 722     |   | (179    | )
|Gain on investments                          |        |   |        |   |        |   |        |   |        |   |        |   |        |   | 16      |  
|Write-off of amounts
      receivable        | 291     |   |        |   |        |   |        |   | 18      |   |        |   |        |   | 225     |  
|Loss (gain) on disposal of equipment         | 66      |   | (6      | ) | 284     |   | 21      |   | 424     |   | 3       |   | -25     |   | 82      |  
|Loss on disposal of mineral
      properties | 203     |   |        |   |        |   |        |   |        |   |        |   |        |   |        |  
|Interest income                              | (191    | ) | (357    | ) | (743    | ) | (1,381  | ) | (447    | ) | (186    | ) | (487    | ) | (222    | )
|Interest on capital leases                   | 354     |   | 335     |   | 440     |   | 463     |   | 391     |   | 427     |   | 471     |   | 433     |  
|Accretion and interest expense               | 2,309   |   | 452     |   | 163     |   | 86      |   | 84      |   | 102     |   | 86      |   | 610     |  
|Write down of assets                         | 2,591   |   |        |   |        |   |        |   |        |   |        |   |        |   |        |  
|Profit (loss) before income taxes            | (19,854 | ) | 7,634   |   | (3,340  | ) | (1,305  | ) | (4,686  | ) | (1,991  | ) | 5,671   |   | (2,061  | )
|Future income tax recovery (expense)         | 2,089   |   | 134     |   | 703     |   | 414     |   | (698    | ) | 25      |   | (1,768  | ) | 646     |  
|Profit (loss) before non-controlling         | (17,765 | ) | 7,768   |   | (2,637  | ) | (891    | ) | (5,384  | ) | (1,966  | ) | 3,903   |   | (1,415  | )
|interest                                     |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Non-controlling interest                     | 2,015   |   | (3,241  | ) | 589     |   | 88      |   | 3,322   |   | (837    | ) | 3,472   |   | 506     |  
|Profit (loss) for the
      period           | (19,780 | ) | 11,009  |   | (3,226  | ) | (979    | ) | (8,706  | ) | (1,129  | ) | 431     |   | (1,921  | )
|                                             |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Basic and diluted profit (loss) per share    | (0.08   | ) | 0.05    |   | (0.01   | ) | (0.003  | ) | (0.04   | ) | (0.00   | ) | 0.00    |   | (0.02   | )
|Weighted average number of common            | 237,924 |   | 238,537 |   | 238,537 |   | 237,731 |   | 223,891 |   | 187,817 |   | 187,132 |   | 99,614  |  
|shares outstanding (thousands)               |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  

23

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.5     
Results of Operations

In December 2007, the Companys Board of Directors approved a
resolution to change the Companys year end from May to February, resulting in a
nine month period for the fiscal period ended February 29, 2008. The information
presented below is a comparison of the twelve months year ended February 28,
2009 (fiscal 2009) and the nine months fiscal period ended February 29, 2008
(fiscal 2008).

The Company had a loss of $13 million for fiscal 2009 compared
to a net loss of $9.4 million for the nine months ending February 29, 2008. The
loss was due to collapse in the diamond market in the fourth quarter of fiscal
2009, along with a global credit crunch which caused a total collapse in the
demand and prices of commodities, with the diamond market being badly hit.
Consequently, the Company decided to shut down operations in December and
January, and the Wouterspan Mine was put into care and maintenance in order to
preserve its cash balances.

During fiscal 2009, the Company realized diamond sales of $34.6
million compared to $36.1 million for fiscal 2008. This decrease was a result of
the economic crisis which has caused diamond prices to collapse, resulting in no
sales between November 2008 and February 2009. Since February 2009, prices
remain approximately 55% below those achieved prior to November 2008.

Mining costs were $25.1 million in fiscal 2009 compared with
$22.7 million in fiscal 2008. In fiscal 2009, the Saxendrift mine was
commissioned in February. Amortisation and depletion for the year was $11.3
million compared to $6.5 million in the prior fiscal period. All commissioning
and retention costs were expensed and not capitalised. Due to the economic
crisis, the Company decided to restructure the Middle Orange River operations
and place the Wouterspan mine on care and maintenance to conserve cash and
minimize costs. As part of this restructuring drive some 143 employees were
retrenched, and short term contracts for some 40 employees were not renewed. All
operations were shut down over December 2008 and January 2009, with all staff
paid in full during the shutdown period.

Administrative costs for fiscal 2009 increased to $9.7 million
in comparison to $7 million incurred for fiscal 2008 ($9.3 million annualised).
Management have been successful in containing costs, even though the Company
experienced significant legal costs due to the unsolicited bid by Pala and also
had to make restructuring and retrenchment payments during the last quarter of
fiscal 2009.

Significant impairments were made as a result of the economic
downturn. Impairments totalling $2.6 million were incurred for mineral rights,
property plant and equipment and receivables. As the diamond market is
recovering with prices anticipated to be back to 50% of pre crash prices and the
appetite for larger stones returning, these investments are anticipated to
regain their market value in the next eighteen months.

Impairments:Loan by DME for reclamation
    $0.5 MillionProcessing Plant
    $1.6 MillionMineral Rights
    $0.3 MillionMine buildings
    $0.2 Million


24

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.6 Liquidity

Liquidity Risk

At February 28, 2009, the Company had cash of $4.0 million,
restricted cash of $2.7 million and operations had an overdraft balance of $3.5
million, a net balance of $3.1million, with available cash of $0.4 million and a
working capital of $0.6 million, as compared to cash and cash equivalents of
$19.6 million and working capital of $26.1 million at February 29, 2008.

The Company had no long-term debt at February 28, 2009, other
than asset retirement obligations relating to its Klipdam, Holpan, Wouterspan
mines and Saxendrift operations, and capital lease obligations relating to
mining equipment with three to four year lease agreements. The Companys capital
lease obligations are denominated in South African Rand (ZAR). Capital lease
obligations have been presented at an exchange rate of 1 Canadian dollar = ZAR
7.8, the closing rate in effect on February 28, 2009. Since then, the South
African Rand has further strengthened to 1 Canadian dollar = ZAR 7.3 by mid May
2009.

The significant decline in the prices of diamonds in recent
months has had a negative impact on the Companys profitability. With the
current global financial crisis and economic downturn, the Company anticipates
diamond prices will remain depressed in the near term.

In light of the current economic environment, the Companys
near-term goal has been to preserve its cash balance to the greatest extent
possible, by minimizing operating costs and curtailing capital expenditures. In
this regard, the Company is reviewing its operations with a view to optimize
efficiencies, putting marginal operations on care-and-maintenance, and reducing
costs wherever possible without compromising safety, health or environmental
standards. Specific initiatives taken include:

- Restructuring and retrenchments were undertaken to reduce costs;
- The high cost, low grade Wouterspan operation was placed on care and
  maintenance in January 2009;
- Introduction of a smart mining program to modernize earth moving
  procedures, and the initiation of a comprehensive review of processing and
  recovery plant to ensure optimization and lowering of operating costs;
- The operations team and mine managers, assisted by a professional engineer,
  have implemented significant technical and operational improvements at the
  Holpan DMS to reduce costs, and improve throughput;
- The progressive implementation of wide ranging optimization and
  de-bottlenecking of the new high volume Saxendrift processing and final
  recovery plant by a dedicated engineering task force to ensure improved
  throughput and lowering of costs; and
- Improving utilization of the earth moving fleet which, in addition to
  reducing costs, has given the Company the ability to develop new operations
  without outlays of large amounts of capital on new earth moving equipment.
- The Company also continues to review its capital expenditure program for
  2009, non-core activities and all service provider contracts. Management
  continues to focus on improved

25

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

operational practices and efficiencies
at each mining operation, and is actively identifying additional cost cutting
opportunities.

The Company anticipates the cost reduction and operational
efficiency measures taken by the Company along with existing cash flow from
operations and the Companys holdings of cash and equivalents will be sufficient
to fund current operations and satisfy obligations as they come due.

Although the Company has implemented the necessary plans to
ensure sufficient financial liquidity in the near term, the Companys ability to
repay or refinance its financial liabilities to their contractual maturities
depends on a number of factors such as an improvement in diamond demand and
prices and unfreezing of credit and capital markets, some of which are beyond
the Companys control. There is no assurance that our expected cash flows from
operations in combination with other steps being taken will allow the Company to
meet these obligations as they become due.

The Company has an overdraft facility in the amount of ZAR28
million ($3.5million) available for its operations. Current operating income is
being used to service this facility. This facility has an interest cost based on
prime and reviewed periodically.

As of the end of June 10, 2009, the Company has unrestricted
cash of $1.4 million and has utilized $2.8 million of the $3.5 million overdraft
facility to maintain its operational requirements. The cash available of $2.1
million is available to finance the shortfall in operations until the
anticipated breakeven point in the market prices anticipated in September 2009.

The average cash burn in the first few months of current 2010
fiscal year is ZAR5 million per month, decreasing as sales have been increasing.
This recovery has been slowed by the strengthening of the ZAR in relation to
sales achieved in US$.

To ensure the continuation of operations, and develop existing
and new opportunities, the Board of Directors of Rockwell have proposed a
financing to strengthen the Companys balance sheet through a rights offering.

26

---

|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Contractual Obligations and Commitments

The Company has the following payment commitments: (a) minimum
lease payments of $8.7 million, with $5.4 million payable in the next 12 months,
with instalments up to the year 2012 to various financial institutions for plant
and equipment.

The following are the contractual maturities of contractual obligations:

Payments due by periodTotal
      Less than one
      1 to 3 years
      3-5 years
      More than 5Contractual obligation
      Nil
      Nil
      Nil
      Nil
      NilLong term debt obligations
      8.7m
      5.4m
      3.3m
      Nil
      NilOperating lease obligations
      Nil
      Nil
      Nil
      Nil
      NilPurchase obligations
      Nil
      Nil
      Nil
      Nil
      NilOther
      Nil
      Nil
      Nil
      Nil
      NilTotal
      8.7m
      5.4m
      3.3m
      Nil
      Nil


Other than described above and in the notes of the audited
financial statements for the year ended February 28, 2009, the Company has no
"Purchase Obligations" defined as any agreement to purchase goods or services
that is enforceable and legally binding on the Company that specifies all
significant terms, including: fixed or minimum quantities to be purchased;
fixed, minimum or variable price provisions; and the approximate timing of the
transaction.

1.7      Capital Resources

The Company's sources of capital are primarily equity
investment and debt.

Historically, the Companys sources of funding have been cash
flow from operations and the issuance of equity securities for cash, primarily
through private placements to sophisticated investors and institutions. The
Company has issued common share capital in each of the past few years, pursuant
to private placement financings and the exercise of warrants and options. The
Companys access to financing, when the financing is not transaction specific,
is always uncertain. There can be no assurance of continued access to
significant equity funding.

The Company's access to capital sources is dependent upon
general financial market conditions, especially those that pertain to venture
capital situations such as mineral exploration and development.

Recent market events and conditions, including disruptions in
the international credit markets and other financial systems and the
deterioration of global economic conditions have had a significant material
adverse impact on a number of financial institutions forcing them into
bankruptcy or requiring government authorities to rescue them. These events and
a general flight from risk have limited access to capital and credit for many
companies. The unprecedented disruptions in the current credit and financial
markets, could, among other things, impede access to capital or increase the
cost of capital, which would have an adverse effect on the Companys ability to
obtain, or increase its cost of obtaining, capital and

27

---

|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

financing, if required, for its operations. The Companys
access to additional capital may not be available on terms acceptable to the
Company or at all.

Furthermore, in recent months, worldwide securities markets
have experienced a high level of price and volume volatility, and the market
price of securities of many companies have experienced unprecedented declines in
price which have not necessarily been related to the operating performance,
underlying asset values or prospects of such companies. In addition,
significantly higher redemptions by holders of mutual and hedge funds has forced
many of such funds (including those holding the Companys securities) to sell
such securities at any price. Therefore, there can be no assurance that
significant fluctuations in the trading price of the Companys common shares
will not occur, or that such fluctuations will not materially adversely affect
the Companys ability to raise equity funding without significant dilution to
its existing shareholders, or at all.

During the year ended February 28, 2009, the Company did not
complete any debt financings. The Company anticipates that it has sufficient
funding facilities and funds available (Ref 1.6 above) to meet its working
capital requirements, provided that the diamond market recovers and sales
achieve over US$917 per carat on the near future and the exchange rate remains
constant. At an exchange rate of ZAR8.8 / US$1 and current volumes and grade
being achieved, breakeven point is anticipated to be reached when the Sales
price per carat recovers to the US$1,000  US$1,100 per carat range.

The Company intends to raise additional funds and are
investigating various available options at this stage to ensure adequate working
capital should the recovery in the markets be delayed beyond our estimations and
to complete capital projects to expand production.

Other than already described above, the Company had no other
lines of credit or other sources of financing which have been arranged but as
yet unused as at February 28, 2009.

1.8      Off-Balance Sheet
Arrangements

None.

28

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.9      Transactions
  with Related Parties

|Balances payable                          |   | As at February 28, 2009 |  |   | As at February 29,2008 | 
|----------------------------------------- | - | ----------------------- |  | - | ---------------------- | 
|Banzi
      Trading (h)                   | $ |                        |  | $ |                       | 
|Jeffrey Brenner (d)                       |   | 7,890                   |  |   |                       | 
|Jakes
      Tyres (i)                     |   | 5,498                   |  |   | 49,604                 | 
|Hunter Dickinson Services Inc. (a)        |   | 180,267                 |  |   |                       | 
|Current balances payable                  | $ | 193,655                 |  | $ | 49,604                 | 
|                                          |   |                         |  |   |                        | 
|Liberty Lane (l)                          |   | 383,330                 |  |   |                       | 
|Long-term balances payable                | $ | 383,330                 |  | $ |                       | 
|                                          |   |                         |  |   |                        | 
|Balances receivable                       |   |                         |  |   |                        | 
|Hunter Dickinson
      Services Inc. (a)  | $ |                        |  | $ | 78,504                 | 
|Flawless Diamonds Trading House
      (g) |   | 3,441,510               |  |   | 477,298                | 
|Banzi Trade 26
      (Pty) Ltd (h)        |   | 19,547                  |  |   | 33,744                 | 
|Diacor CC (k)                             |   | 29,668                  |  |   | 3,888                  | 
|                                          | $ | 3,490,725               |  | $ | 593,434                | 

|Transactions                                |   | Year
      ended  |  |   | Nine
      Months Ended |  |   | Year
      ended | 
|------------------------------------------- | - | ----------------- |  | - | ----------------------- |  | - | ---------------- | 
|                                            |   | February 28, 2009 |  |   | February 29, 2008       |  |   | May 31, 2007     | 
|Services rendered and expenses reimbursed:  |   |                   |  |   |                         |  |   |                  | 
|Hunter Dickinson Services Inc. (a)          | $ | 1,280,316         |  | $ | 863,861                 |  | $ | 1,988,027        | 
|Euro-American Capital
      Corporation (b) |   |                  |  |   | 14,393                  |  |   | 18,765           | 
|CEC Engineering (c)                         |   | 26,904            |  |   | 39,766                  |  |   | 187,225          | 
|John Bristow                                |   |                  |  |   |                        |  |   | 115,320          | 
|Jeffrey B Traders CC (d)                    |   |                  |  |   | 52,740                  |  |   | 141,318          | 
|Seven Bridges Trading
      (e)             |   |                  |  |   | 57,952                  |  |   | 55,534           | 
|Cashmere Trading (f)                        |   | 18,808            |  |   | 353,736                 |  |   | 43,357           | 
|Banzi Trade 26 (Pty)
      Ltd (h)          |   | 29,768            |  |   | 47,575                  |  |   | 251,942          | 
|Jakes Tyres (i)                             |   | 440,283           |  |   | 1,141,454               |  |   | 267,361          | 
|AA Van Wyk (j)                              |   |                  |  |   | 148,658                 |  |   | 173,977          | 
|Diacor CC (k)                               |   | 39,510            |  |   | 3,888                   |  |   |                 | 
|                                            |   |                   |  |   |                         |  |   |                  | 
|Sales rendered to:                          |   |                   |  |   |                         |  |   |                  | 
|Flawless Diamonds
      Trading House (g)   | $ | 34,330,078        |  | $ | 36,038,106              |  | $ | 10,085,536       | 
|Banzi Trade 26 (Pty) Ltd (h)                |   | 884               |  |   |                        |  |   |                 | 
|                                            |   |                   |  |   |                         |  |   |                  | 

Related Party transactions are explained below. These
arrangements and transactions have typically been established to provide
professional and cost effective services and resources to Rockwell. In
particular these services relate to the remote areas in which some of Rockwells
operations are located and have also been established to address security and
social responsibility requirements. In remote areas it is difficult to obtain
key services and make purchases of certain supplies on an as needed basis.
Likewise security consideration is paramount given the high value product
produced by the Company.

|(a) | Hunter Dickinson Services Inc. (HDSI) is a private
      company with a director in common with the Company. HDSI provides
      geological, technical, corporate development, administrative and
      management services to, and incurs third party costs on behalf of, the
      Company on a full cost recovery market related basis pursuant to an
      agreement dated November 21, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

|(b) | Euro-American Capital Corporation is a private company
      controlled by Rene Carrier, a former director of the Company, which
      provided management services to the Company at market rates for those
      services. Rene Carrier resigned as a Director in November 2008.                                                                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(c) | CEC Engineering Ltd. is a private company owned by David
      Copeland, Chairman and a director of the Company, which provides
      engineering and project management services at market rates.                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(d) | Jeffrey B Traders CC is a private company controlled by
      Jeffrey Brenner, a former director and employee of the Company, which
      provided management and specialized diamond marketing services to the
      Company at market rates.                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(e) | Seven Bridges Trading is a wholly owned subsidiary of
      Randgold Resources, a public company where Mark Bristow, a director of the
      Company, serves in an executive capacity. Seven Bridges Trading provides
      office, conferencing, information technology, and other administrative and
      management services at market rates to the Companys South African
      subsidiaries.                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(f) | Cashmere Trading is a private company owned by Hennie Van
      Wyk, an officer of the Company, which provides helicopter services for the
      movement of product on an ad-hoc basis at competitive market rates thereby
      providing benefits to the company and its employees in respect of secure
      transport of high value product and reduced insurance premiums.                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(g) | Flawless Diamonds Trading House (Flawless) is a private
      company where certain directors, former directors and officers of the
      Company, namely, Messr. Brenner, J W and D M Bristow and Van Wyk, are
      shareholders of. Flawless is a registered diamond broker which provides
      specialist diamond valuation, marketing and tender sales services to the
      Company for a fixed fee of 1% of turnover which is below the market rate
      charged by similar tender houses.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(h) | Banzi Trade 26 (Pty) Ltd (Banzi) is 49% owned by HC van
      Wyk Diamonds Ltd and 51% by Bokomoso Trust. Banzi is an empowered private
      company established to provide self sustaining job creation programs to
      local communities as part of the companys Social and Labour Plan which is
      required in terms of the Minerals and Petroleum Resources Development Act
      (MPRDA) Banzi provides the Company with buildings materials at market
      rates.                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(i) | Jakes Tyres is a private company with certain directors
      and officers (H C van Wyk) in common with the Company that provides tyres,
      tyre repair services and consumables at market rates to Rockwells remote
      Middle Orange River operations.                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(j) | AA Van Wyk is a private company owned by a party related
      to the directors and officers of the Company, which provided contract
      mining services at market rates.                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(k) | Diacor CC is a private company of which H C van Wyk is a
      director from which Company has purchased consumable materials at market
      rates.                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(l) | Liberty Lane is the BEE partner of the Saxendrift
      property and has certain directors in common with the
  Company.                                                                                                                                                                                                                                                                                                                                                                             

30

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.10      Fourth Quarter

The Company had a loss of $19.8 million for the quarter ending
February 28, 2009 compared to a net loss of $8.7 million for the quarter ending
February 29, 2008. The loss was due to collapse in the diamond market in the
fourth quarter of fiscal 2009, along with a global credit crunch which caused a
total collapse in the demand and prices of commodities, with the diamond market
being badly hit. Consequently, the Company decided to shut down operations in
December and January, and the Wouterspan Mine was put into care and maintenance
in order to preserve its cash balances.

During the quarter ended February 28, 2009, the Company
realized diamond sales of $1.0 million compared to $9.8 million for the quarter
ended February 28, 2009. This decrease was a result of the economic crisis which
has caused diamond prices to collapse, resulting in no sales between November
2008 and February 2009. Since February 2009, prices remain approximately 55%
below those achieved prior to November 2008.

Mining costs and amortisation was $12.3 million for the quarter
ending February 28, 2009 compared with $9.8 million quarter ending February 29,
2008. The new plant at Saxendrift mine was commissioned in February. All
commissioning and retention costs were expensed and not capitalised. Due to the
economic crisis, the Company decided to put the Wouterspan mine on care and
maintenance to conserve cash and minimize costs. All operations were shut down
over December 2008 and January 2009, with all staff paid in full during the
shutdown period.

Administrative costs for the quarter ended February 28, 2009
decreased to $2.9 million in comparison to $4.3 million incurred in for the same
quarter last fiscal period. Management have been successful in containing costs,
even with retrenchment costs and increased legal and corporate advisory services
in the current period as a result of the hostile takeover bid brought against
Rockwell Diamonds.

The effect of the credit crisis causing the commodities markets
to fall, have resulted in Rockwell having a cash burn of $6.4 million in the
quarter ended February 28, 2009. No sales were made between November to January,
and only a small tender made in late February, there was no cash inflow in the
quarter. Operations were suspended in December and January, however due to
labour legislation we were required to pay full operations salaries of
$1.5million, fixed costs of $0.9 million and lease payments of $0.3 million. In
February operations commenced, causing a cash outflow of $2.9 million and lease
payments of $0.8 million, with no cash inflow.

For the period 1 March to 27 May 2009, cash burn slowed to $0.5
million as sales have recommenced with the diamond price recovering slowly. The
strengthening of the rand against the US Dollar, the currency in which sales are
made, has slowed the recovery. It is anticipated that the average prices will
rise to over US$1,000 per carat by September 2009, which at current exchange
rates, should ensure cash flow break even.

1.11      Proposed
  Transactions

None.

31

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.12      Critical Accounting Estimates

The Company's accounting policies are presented in note 3 of
the consolidated financial statements for the year ended February 28, 2009,
which have been publicly filed on SEDAR at www.sedar.com and as presented in
changes in accounting policies item 1.13. The preparation of consolidated
financial statements in accordance with generally accepted accounting principles
requires management to select accounting policies and make estimates. Such
estimates may have a significant impact on the financial statements. These
estimates include:

- mineral resources and reserves,
- the carrying values of diamond and supplies inventories,
- the carrying values of mineral properties,
- the carrying values of property, plant and equipment,
- rates of amortization of property, plant and equipment
- the carrying values of the reclamation liability,
- the assumptions used in determining the reclamation obligation,
- the valuation allowances for future income taxes,
- the valuation of stock-based compensation expense.

Actual amounts could differ from the estimates used and,
accordingly, affect the results of operation.

Mineral resources and reserves, and the carrying values of
property, plant and equipment

Mineral resources and reserves are estimated by professional
geologists and engineers in accordance with recognized industry, professional
and regulatory standards. These estimates require inputs such as future metal
prices, future operating costs, and various technical geological, engineering,
and construction parameters. Changes in any of these inputs could cause a
significant change in the estimated resources and reserves which, in turn, could
have a material effect on the carrying value of property, plant and equipment.

Due to the recent drop in diamond prices, the Company conducted
a review of the carrying values of its mineral properties, plant, and equipment
under Canadian GAAP as at February 28, 2009. The Company prepared cash flow
forecasts for the mine and development projects using price assumptions
reflecting prevailing diamond prices and analysts' consensus forecasts, current
life-of-mine plans and forecast operating cost profiles. The analysis was based
on the life of mining properties, using long-term price assumptions of US$968,
US$824 and US$604 per carat for the Saxendrift, Klipdam and Holpan mines
respectively as well as a long-term foreign exchange of US$1 to ZAR 8.8. Sales
and production volumes were set at 20% below forecast. Other assumptions used in
determining whether impairment existed include: (a) Inflation rate of 5%, (b)
Prime lending rate of 12%, (c) Finance lease periods of 36 months, (d) No
increases in salaries and wages, (e) Royalty payments of 5%, (f) Fuel and oil
increases of 2.5%, and (g) Electricity increases of 27.5% .

The undiscounted cashflows were greater than the carrying value
of the long lived assets and thus, a comparison to fair value was not required.

32

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

The Company identified a portion of assets at Saxendrift, H.C.
Van Wyk, and Durnpike whose net asset values did not accurately reflect the
expected benefits of their remaining useful lives. These assets were written
down by a total amount of $2,590,958.

The Companys estimates of mineral prices, recoverable
reserves, and operating, capital and reclamation costs used in impairment tests
are subject to certain risks and uncertainties that may affect the
recoverability of mineral property costs. Although the Company has made its best
estimate of these factors, it is possible that changes could occur in the future
that could adversely affect managements estimate of the net cash flow from its
assets.

Site restoration costs

Upon the completion of any mining activities, the Company will
ordinarily be required to undertake environmental reclamation activities in
accordance with local and/or industry standards. The estimated costs of these
reclamation activities are dependent on labour costs, the environmental impacts
of the Company's operations, the effectiveness of the chosen reclamation
techniques, and applicable government environmental standards. Changes in any of
these factors could cause a significant change in the reclamation expense
charged in a period.

Stock-based compensation expense

From time to time, the Company may grant share purchase options
to employees, directors, and service providers. The Company uses the
Black-Scholes option pricing model to estimate a value for these options. This
model, and other models which are used to value options, require inputs such as
expected volatility, expected life to exercise, and interest rates. Changes in
any of these inputs could cause a significant change in the stock-based
compensation expense charged in a period.

1.13      Changes in Accounting Policies
  including Initial Adoption

|(a) | The following accounting policies were adopted during the
      year ended February 28, 2009:                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | This standard requires disclosure of an entitys
      objectives, policies and processes for managing capital, quantitative data
      about what the entity regards as capital and whether the entity has
      complied with any externally imposed capital requirements and, if it has
      not complied, the consequences of such non-compliance.                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | These standards replace CICA 3861, "Financial
      Instruments  Disclosure and Presentation". These new standards
      require entities to disclose quantitative and qualitative information that
      enable users to evaluate the significance of financial instruments on the
      Companys financial performance, and the nature and extent of risks
      arising from financial instruments to which the

33

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Company is exposed during the year and
at the balance sheet date. In addition, disclosure is required of managements
objectives, policies and procedures for managing these risks.

(iii)    Inventories
  (Section 3031)

This standard replaces the existing
Section 3030 with the same title and will harmonize accounting for inventories
under Canadian GAAP with International Financial Reporting Standards ("IFRS").
This standard requires that inventories be measured at the lower of cost and net
realizable value, and includes guidance on the determination of costs, including
the allocation of overheads and other costs. The standard also requires that
similar inventories within a consolidated group be measured using the same
method. It also requires the reversal of previous write-downs to net realizable
value when there is a subsequent increase in the value of inventories. The
Company adopted this standard during the current period and determined that
there was no significant impact on the financial statements.

(iv)     Going
  Concern  Amendments to Section 1400

CICA Section 1400, "General
Standards of Financial Statement Presentation", was amended to include
requirements to assess and disclose an entity's ability to continue as a going
concern. The Company has assessed its ability to continue as a going concern and
concluded that it will be able to continue as a going concern and disclosed this
in note 1 of the financial statements.

|(b) | Accounting Policies Not Yet Adopted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Canadian Accounting Standards Board ("AcSB") has
      announced its decision to replace Canadian generally accepted accounting
      principles (Canadian GAAP) with International Financial Reporting
      Standards ("IFRS") for all Canadian publicly-listed companies. The AcSB
      announced that the changeover date will commence for interim and annual
      financial statements relating to fiscal years beginning on or after
      January 1, 2011. The transition date for the Company to changeover to IFRS
      will be January 1, 2011. Therefore, the IFRS adoption will require the
      restatement for comparative purposes of amounts reported by the Company
      for the year ended February 28, 2011. The Company is currently in the
      process of developing an IFRS conversion plan and evaluating the impact of
      the transition to IFRS.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The AcSB issued CICA Handbook Section 3064, which
      replaces Section 3062, Goodwill and Other Intangible Assets, and
      Section 3450, Research and Development Costs. This new section
      establishes standards for the recognition, measurement, presentation and
      disclosure of goodwill subsequent to its initial recognition and of
      intangible assets. Standards concerning goodwill remain unchanged from the
      standards included in the previous Section 3062. The section applies to
      interim and annual financial statements relating to fiscal years beginning
      on or after October 1, 2008. The Company is currently evaluating the
      impact of this new standard and anticipates this standard will have no
      significant impact on the financial statements.                                                                  

34

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

(iii)EIC 173  Credit Risk and the Fair value of Financial Assets and
Financial Liabilities

The AcSB issued EIC-173 which requires
the Company to consider its own credit risk as well as the credit risk of its
counterparty when determining the fair value of financial assets and
liabilities, including derivative instruments. The standard is effective for the
first quarter of fiscal 2010 and is required to be applied retrospectively
without restatement of prior periods. The Company is currently evaluating the
impact of this new standard on its consolidated financial statements.

*(iv)******EIC
  174  Mining Exploration Costs*

The AcSB issued EIC-174, Mining
Exploration Costs which provides guidance to mining enterprises related to the
measurement of exploration costs and the conditions that a mining enterprise
should consider when determining the need to perform an impairment review of
such costs. The standard is effective for the first quarter of fiscal 2010 and
is required to be applied retrospectively without restatement of prior periods.
The Company is currently evaluating the impact of this new standard on its
consolidated financial statements.

*(v)******Business
Combinations/Consolidated Financial Statements/Non-Controlling Interests*

The AcSB adopted CICA sections 1582,
Business Combinations, 1601, Consolidated Financial Statements, and 1602,
Non-Controlling Interests which superseded current sections 1581, Business
Combinations and 1600 Consolidated Financial Statements. These new sections
replace existing guidance on business combinations and consolidated financial
statements to harmonize Canadian accounting for business combinations with IFRS.
These Sections will be applied prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after January 1, 2011. Earlier adoption is permitted. If
an entity applies these Sections before January 1, 2011, it is required to
disclose that fact and apply each of the new sections concurrently. The
Corporation is currently evaluating the impact of the adoption of these changes
on its consolidated financial statements.

|1.14 | Financial Instruments and Other
      Instruments                                                                                                                                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                      
|     | The carrying value of the Companys cash and equivalents,
      amounts receivable, restricted cash, trade receivable from a related
      party, reclamation deposits accounts payable and accrued liabilities, due
      to/from related parties and capital lease obligations approximate their
      fair values.

35

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Financial Instrument Risk Exposure
and Risk Management

The Company is exposed in varying
degrees to a variety of financial market and financial instrument related risk,
including credit risk, liquidity risk, foreign exchange risk, interest risk and
commodity price risk. It is also exposed to the diamond market.

Credit Risk

Credit risk is the risk of potential
  loss to the Company if a counterparty to a financial instrument fails to meet
  its contractual obligations. The Companys credit risk is primarily attributable
  to its liquid financial assets including cash and equivalents, accounts receivable
  and trade receivable from a related party. The Company limits exposure to credit
  risk on liquid financial assets through maintaining its cash and equivalents
  with high-credit quality financial institutions. The Company's minimize its
  credit risk by settling the receivables on its diamond sales in the month following
  the sale.The carrying value of the Companys cash and cash equivalents,
  accounts receivable and trade receivable from a related party represent the
  maximum exposure to credit risk. The Company does not have financial assets
  that are invested in asset backed commercial paper.

Liquidity Risk

Liquidity risk is the risk that the
company will not be able to meet its financial obligations as they fall due. The
Company ensures that there is sufficient capital and facilities in place in
order to meet short term business requirements, after taking into account cash
flows from operations and the Companys holdings of cash and cash equivalents.
The Company believes that these sources will be sufficient to cover the likely
requirements for the foreseeable future. The Companys cash and equivalents are
invested in business accounts which are available on demand for the Companys
programs, and which are not invested in any asset backed deposits/investments.

The Company operates in South Africa.
Like other foreign entities operating there, the Company is subject to currency
exchange controls administered by the South African Reserve Bank, that country's
central bank. A significant portion of the Company's funding structure for its
South African operations consists of advancing loans to its South Africa
incorporated subsidiaries and it is possible the Company may not be able to
acceptably repatriate such funds once those subsidiaries are able to repay the
loans or repatriate other funds such as operating profits should any develop.
The repatriation of cash held in South Africa is permitted upon the approval of
the South African Reserve Bank. Cash balances in South Africa are the Rand
balances disclosed below.

Foreign Exchange Risk

In the normal course of business, the
Company enters into transactions for the purchase of supplies and services
denominated in South African Rand (ZAR). In addition, the Company has cash and
certain liabilities denominated in South African Rand. As a result, the Company
is subject to foreign exchange risk from fluctuations in foreign exchange rates.
The Company has not entered into any derivative or other financial instruments
to mitigate this foreign exchange risk.

36

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

Capital Market Risk

The Company is operating in an
uncertain and volatile capital market environment which presents risks in
respect of the Company being able to raise equity or debt to finance existing or
new projects, or pursue growth opportunities through acquisition

Diamond Market Risk

During the latter part (October,
November and December) of 2008 and the early part (January and February) of 2009
the international diamond market softened considerably as a consequence of the
credit crunch and the volatility and uncertainty in the banking and financial
market sector. Diamond demand and prices fluctuate and are affected by numerous
factors beyond the control of the Company, including worldwide economic trends,
worldwide levels of diamond discovery and production and the level of demand
for, and discretionary spending on, luxury goods such as diamonds and jewellery.
Low or negative growth in the worldwide economy, prolonged credit market
disruptions or activities creating disruptions in economic growth could result
in decreased demand for diamonds, thereby negatively affecting the price of
diamonds. Similarly, a substantial increase in the worldwide level of diamond
production could also negatively affect the price of diamonds. In each case,
such developments could materially adversely affect the Companys results of
operations.

1.15      Other MD&A Requirements

Additional information relating to the Company is available on
SEDAR at www.sedar.com.

1.15.1   Additional Disclosure
for Venture Issuers Without Significant Revenue

Not applicable. The Company is not a venture issuer.

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.15.2   Disclosure of Outstanding
  Share Data

The following details the share capital structure as of the date
  of this MD&A. These figures may be subject to minor accounting adjustments
  prior to presentation in future consolidated financial statements.

|                       |                    |  | Exercise |  |            |  |             | 
|---------------------- | ------------------ |  | -------- |  | ---------- |  | ----------- | 
|                       | Expiry
      date  |  | price    |  | Number     |  | Number      | 
|Common shares          |                    |  |          |  |            |  | 238,041,569 | 
|                       |                    |  |          |  |            |  |             | 
|Share purchase options |                    |  |          |  |            |  |             | 
|                       | September 24, 2012 |  | $ 0.62   |  | 5,901,334  |  |             | 
|                       | November 14, 2012  |  | $ 0.63   |  | 1,104,834  |  |             | 
|                       | June 20, 2011      |  | $ 0.45   |  | 950,000    |  | 7,956,168   | 
|                       |                    |  |          |  |            |  |             | 
|                       |                    |  |          |  |            |  |             | 
|Warrants               | November 22, 2009  |  | $ 1.00   |  | 39,600,000 |  | 39,600,000  | 

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|ROCKWELL DIAMONDS INC.                         
|-----------------------------------------------
|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

1.15.3   Internal Controls
over Financial Reporting Procedures

The Company's management is responsible for establishing and
maintaining adequate internal control over financial reporting. The Companys
internal control system was designed to provide reasonable assurance to the
Companys management and the board of directors regarding the preparation and
fair presentation of published financial statements. Internal control over
financial reporting includes those policies and procedures that: (1) pertain to
the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company, (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that
receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company, and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a
material effect on the financial statements. All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those
systems determined effective can provide only reasonable assurance with respect
to financial statement preparation and presentation.

A material weakness in internal control is a significant
deficiency, or combination of significant deficiencies, that results in more
than a remote likelihood that a material misstatement in the Companys annual or
interim financial statements will not be prevented or detected.

During managements evaluation of the effectiveness of internal
controls over financial reporting, management identified significant
deficiencies in the Companys internal controls over financial reporting. The
significant deficiencies identified include insufficient supervision and review
by key accounting personnel over routine, non-routine and complex accounting
transactions, inconsistent application of documented financial reporting
procedures by accounting personnel, and the ineffective review of certain
accounting transactions by accounting personnel.

The identified significant deficiencies resulted from personnel
changes in key accounting and financial reporting positions within Company that
occurred during the fourth quarter. These personnel changes materially affected
the effectiveness of Companys internal control over financial reporting. Due to
the identified significant deficiencies, material audit adjustments were made to
various financial statement accounts and related disclosures in the Companys
annual financial statements. As such, management has concluded that the
combination of these significant deficiencies resulted in a material weakness
and therefore, the Companys internal control over financial reporting was not
effective as at February 28, 2009.

In order to remediate the material weakness, the Companys
management continues to enhance the effectiveness of internal controls related
to its financial reporting process, including improvements to remediate the
internal control deficiencies that existed as at February 28, 2009. Management
has the following remediation plans in progress:

- Enhance controls around the timing and level of review of accounting
  schedules and calculations that support significant financial statement
  accounts;
- Reinforce to accounting personnel the importance of consistent application
  of accounting procedures; and

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|ROCKWELL DIAMONDS INC.                         
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|THREE AND TWELVE MONTHS ENDED FEBRUARY 28, 2009
|MANAGEMENT'S DISCUSSION AND ANALYSIS           
|                                               

- Provide appropriate training to accounting personnel regarding the
  Companys period end financial reporting process and procedures.

These programs, as enhanced, are designed to reduce, although
they may not eliminate, the risk of a material misstatement to a reasonable
level.

1.15.4   Disclosure Controls
  and Procedures

Disclosure controls and procedures are those controls and
procedures that are designed to ensure that the information required to be
disclosed in the filings under applicable securities regulations is recorded,
processed, summarized and reported within the time periods specified. As at
February 28, 2009, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of the design and operation of
the Companys disclosure controls and procedures.

In the third and fourth quarter there were significant changes
in the Directors of the Company, in the Audit Committee, and in key management
positions responsible for the financial management and reporting, including the
Chief Financial Officer and Group Financial Manager positions. The company has
also made a change in audit firm, which has resulted in a break in continuity
with prior periods. This has resulted in weaknesses in the financial reporting
structure, which are currently being addressed.

As noted in the section above, the Chief Executive Officer and
the Chief Financial Officer have noted the need to review the effectiveness of
controls and disclosures operated by the Company.

1.15.5   Addressing Financial
Personnel Shortages and Changes in Management

At year end, the Company was able to fill the vacant Group
Financial Manager position with a qualified Chartered Accountant with eight year
post qualification experience, who has specialised in internal controls and risk
management. The Group Financial Manager has taken on the responsibility of the
year end consolidation while gaining an understanding of the company and with no
continuation support from his predecessor. The benefit of this new placement
will be realized in the coming year.

Rockwell is a young and rapidly growing company under severe
pressure from the resent economic downturn in world and diamond markets. It is
under these circumstances that both CFO and Group Financial Manager positions
were left vacant and put undue pressure on the Financial Statement closing
process. Furthermore, due to the Companys economic circumstances and need to
conserve cash, the Company reduced reliance on external consultants in the
financial statement preparation process.

The CFO, Group Financial Manager and Rockwell staff will be
implementing the appropriate financial reporting processes to ensure sufficient,
appropriate and timely review of the financial statements to mitigate any
potential future delays. Processes will be thoroughly planned, re-engineered to
meet the Companys financially reporting and continuous disclosure obligations.
Management is also currently in the process of adding more staff to its
accounting teams.

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