---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 20-F

[   ]  REGISTRATION STATEMENT PURSUANT TO SECTION
12(b) or 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 28, 2010

OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________to
_______________

OR

[   ]  SHELL COMPANY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report
_______________

Commission file number 000-30588

ROCKWELL DIAMONDS INC.(Exact name of Registrant specified in its charter)

NOT APPLICABLE(Translation of
Registrant's name into English)

BRITISH COLUMBIA, CANADA(Jurisdiction of
incorporation or organization)

Level 1, Wilds View, Isle of Houghton,Cnr. Carse
OGowrie & Boundary Rd, Houghton Estate, Johannesburg 2198P O
Box 3011 Houghton, South Africa, 2041(Address of principal
executive offices)

Gerhard Jacobs, +27 (0)11 481 7200,GerhardJ@Rockwelldiamonds.com, Level 1, Wilds
  View,
  Isle of Houghton, Cnr Boundary & Carse OGowrie Road, Houghton Estate,
  Johannesburg,South Africa, 2041(Name, Telephone, E-mail and/or Fascimili number and Address of the Company
  Contact Person)

---

- ii -

Securities registered or to be registered pursuant to Section
12(b) of the Act.

|Title of Each Class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | Not applicable                           

Securities registered or to be registered pursuant to Section
12(g) of the Act Common Shares without Par Value(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.None

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report.

370,843,069 Common Shares without Par Value

Indicate by check mark if the Registrant is a well known
seasoned issuer as defined in Rule 405 of the Securities Act. Yes
[  
]               
No [X]

If this report is an annual or transition report, indicate by
check mark if the Registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 Yes [  
]               
No [X]

Indicate by check mark whether Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934during the preceding 12 months (or for such shorter
period that Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
[X]               
No [   ]

Indicate by check mark whether the registrant (1) has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405of this chapter) during the preceding 12 months (or for such period
that the registrant was required to submit and post such files). Yes
[  
]               
No [   ]

Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer or non-accelerated filer. See definition
of "accelerated filer" and "large accelerated filer" in Rule 12b 2 of the
Exchange Act.

[   ]  Large Accelerated
Filer           
[   ]  Accelerated
Filer           [X]  Non
Accelerated Filer

---

- ii -

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|                | International Financial
      Reporting Standards as issued |          
|--------------- | ----------------------------------------------------------- | ---------
|U.S. GAAP [   ] | by the International Accounting
      Standards Board [   ] | Other [X]

If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item Registrant has
elected to follow: Item
17[X]          
   Item 18 [   ]

If this is an annual report, indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act):
Yes [  
]               
No [X]

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)

Indicate by check mark whether Registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934subsequent to the distribution of
securities under a plan confirmed by a court.

NOTE REGARDING FORWARD LOOKING STATEMENTS

Except for statements of historical fact, certain information
contained herein constitutes "forward-looking statements" including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, as well as all projections of
future results. Such forward-looking statements involved known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of Rockwell to be materially different from any
future results, performance or achievements of Rockwell expressed or implied by
such forward-looking statements. Such risks are discussed in Item 3D "Risk
Factors." The statements contained in Item 4B "Business Overview", Item 5
"Operating and Financial Review and Prospects" and Item 11 "Quantitative and
Qualitative Disclosures About Market Risk" are inherently subject to a variety
of risks and uncertainties that could cause actual results, performance or
achievements to differ significantly.

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

|          |                                                                                    | PAGE
|--------- | ---------------------------------------------------------------------------------- | ----
|          |                                                                                    |     
|PART 1    |                                                                                    | 2   
|          |                                                                                    |     
|ITEM 1.   | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                              | 2   
|          |                                                                                    |     
|ITEM 2.   | OFFER STATISTICS AND EXPECTED TIMETABLE                                            | 2   
|          |                                                                                    |     
|ITEM 3.   | KEY INFORMATION                                                                    | 2   
|          |                                                                                    |     
|ITEM 4.   | INFORMATION ON THE COMPANY                                                         | 12  
|          |                                                                                    |     
|ITEM 5.   | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                       | 55  
|          |                                                                                    |     
|ITEM 6.   | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                         | 70  
|          |                                                                                    |     
|ITEM 7.   | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                  | 95  
|          |                                                                                    |     
|ITEM 8.   | FINANCIAL INFORMATION                                                              | 99  
|          |                                                                                    |     
|ITEM 9.   | THE OFFER AND LISTING                                                              | 101 
|          |                                                                                    |     
|ITEM 10.  | ADDITIONAL INFORMATION                                                             | 103 
|          |                                                                                    |     
|ITEM 11.  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK                   | 116 
|          |                                                                                    |     
|ITEM 12.  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                             | 117 
|          |                                                                                    |     
|ITEM 13.  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                    | 118 
|          |                                                                                    |     
|ITEM 14.  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
      AND USE OF PROCEEDS | 118 
|          |                                                                                    |     
|ITEM 15.  | CONTROLS AND PROCEDURES                                                            | 118 
|          |                                                                                    |     
|ITEM 16   |                                                                                    | 120 
|          |                                                                                    |     
|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT                                                   | 120 
|          |                                                                                    |     
|ITEM 16B. | CODE OF ETHICS                                                                     | 120 
|          |                                                                                    |     
|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                             | 120 
|          |                                                                                    |     
|ITEM 16D. | EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES                             | 120 
|          |                                                                                    |     
|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
      AFFILIATED PURCHASERS .     | 120 
|          |                                                                                    |     
|ITEM 16F. | CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT                                       | 121 
|          |                                                                                    |     
|ITEM 16G. | CORPORATE GOVERNANCE                                                               | 121 

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 Page 2 

|ITEM 17. | FINANCIAL STATEMENTS | 122
|-------- | -------------------- | ---
|         |                      |    
|ITEM 18. | FINANCIAL STATEMENTS | 122
|         |                      |    
|ITEM 19. | EXHIBITS             | 123

---

CAUTIONARY NOTE TO INVESTORS CONCERNING ESTIMATES OF
INDICATED RESOURCES

This Annual Report on Form 20-F includes references to
"indicated resources". Rockwell advises investors that while this term is
recognized and required by Canadian securities regulations (under National
Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S.
Securities and Exchange Commission does not recognize it. Readers cannot assume
that all or any part of mineral deposits in this category will ever be converted
into reserves.

CAUTIONARY NOTE TO INVESTORS CONCERNING ESTIMATES OF INFERRED
RESOURCES

This Annual Report on Form 20-F includes references to "inferred
  resources". Rockwell advises investors that while this term is recognized and
  required by Canadian securities regulations (under National Instrument 43-101
  Standards of Disclosure for Mineral Projects), the U.S. Securities and
  Exchange Commission does not recognize it. Readers cannot assume that all or
  any part of mineral deposits in this category will ever be converted into reserves.
  In addition, "inferred resources" have a great amount of uncertainty as to their
  existence, and great uncertainty as to their economic and legal feasibility.
  Under Canadian rules, estimates of Inferred Mineral Resources may not form the
  basis of feasibility or preliminary feasibility studies, except in rare cases.
  Investors are cautioned not to assume that part or all of an inferred resource
  exists, or is economically or legally mineable.

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 Page 2 

PART 1

ITEM
1.           IDENTITY OF
DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM
2.           OFFER STATISTICS
AND EXPECTED TIMETABLE

Not applicable.

ITEM
3.           KEY
INFORMATION

A.          
Selected Financial Data

The following table summarizes selected consolidated financial
data for Rockwell Diamonds Inc. (the "Company" or "Rockwell" or the
"Registrant") for the years ended February 28, 2010, 2009, the nine months ended
February 29, 2008 and the years ended May 31, 2007 and 2006. The financial
statements have been prepared in accordance with Canadian generally accepted
accounting principles ("Cdn GAAP"). Note 17 to the financial statements included
herein provides descriptions of the material measurement differences between Cdn
GAAP and United States generally accepted accounting principles ("US GAAP") as
they relate to the Company and a reconciliation to US GAAP of the Company's
financial statements.

The information in the table was extracted from the detailed
consolidated financial statements and related notes included in this annual
report, and should be read in conjunction with such financial statements
included elsewhere in the document and with the information appearing under the
heading, "Item 5. Operating and Financial Review and Prospects."

The selected financial data is presented in Canadian Dollars
and in accordance with Canadian GAAP and United States GAAP.

---

 Page 3 

|(In Canadian Dollars)           |   | As at       |   |   | As at       |   |   | As at       |   |   |                    |   |   |             |  
|------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | - | - | ------------------ | - | - | ----------- | -
|                                |   | February 28 |   |   | February 28 |   |   | February 29 |   |   | As
      at May 31 |  
|Balance Sheet Data              |   | 2010        |   |   | 2009        |   |   | 2008        |   |   | 2007               |   |   | 2006        |  
|                                |   |             |   |   |             |   |   |             |   |   |                    |   |   |             |  
|Total assets (Cdn GAAP)         | $ | 105,243,386 |   | $ | 106,362,416 |   | $ | 133,693,124 |   | $ | 129,606,383        |   | $ | 288,647     |  
|Total assets (US GAAP)          |   | 105,243,386 |   |   | 106,362,416 |   |   | 133,693,123 |   |   | 130,135,690        |   |   | 288,646     |  
|Total liabilities (Cdn GAAP)    |   | 27,400,354  |   |   | 34,059,381  |   |   | 34,643,769  |   |   | 52,564,080         |   |   | 1,146,070   |  
|Total liabilities (US GAAP)     |   | 27,400,354  |   |   | 34,059,381  |   |   | 34,643,769  |   |   | 52,034,772         |   |   | 1,146,070   |  
|Share capital (Cdn GAAP)        |   | 127,999,040 |   |   | 119,952,532 |   |   | 112,095,390 |   |   | 88,903,530         |   |   | 11,857,649  |  
|Share capital (US GAAP)         |   | 127,999,040 |   |   | 119,952,532 |   |   | 112,095,390 |   |   | 88,903,530         |   |   | 11,857,649  |  
|(Deficit) (Cdn GAAP)            |   | (49,020,317 | ) |   | (41,982,624 | ) |   | (29,006,662 | ) |   | (19,603,634        | ) |   | (13,238,492 | )
|(Deficit) (US GAAP)             |   | (49,020,317 | ) |   | (41,982,624 | ) |   | (29,006,662 | ) |   | (19,603,634        | ) |   | (13,696,885 | )
|Shareholders equity (Cdn GAAP) |   | 77,194,091  |   |   | 70,421,026  |   |   | 87,114,807  |   |   | 71,592,842         |   |   | (857,423    | )
|Shareholders equity (US GAAP)  |   | 77,843,032  |   |   | 72,303,035  |   |   | 99,049,355  |   |   | 77,571,611         |   |   | (857,424    | )
|Weighted Average No. Shares     |   | 267,164,309 |   |   | 237,924,152 |   |   | 196,428,551 |   |   | 55,418,242         |   |   | 23,640,123  |  

|                                   |   |             |  |   |             |  |   | Nine months |  |   |                         |  |   |           | 
|---------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | ----------------------- |  | - | --------- | 
|                                   |   | Year ended  |  |   | Year ended  |  |   | ended       |  |   |                         |  |   |           | 
|                                   |   | February 28 |  |   | February 28 |  |   | February 29 |  |   | Year
      ended May 31 | 
|                                   |   |             |  |   |             |  |   |             |  |   |                         |  |   |           | 
|Statement of Operations
      Data |   | 2010        |  |   | 2009        |  |   | 2008        |  |   | 2007                    |  |   | 2006      | 
|Revenues (US and Cdn GAAP)         | $ | 29,776,933  |  | $ | 34,330,078  |  | $ | 36,038,106  |  | $ | 10,103,328              |  | $ | Nil       | 
|Loss for the period(1)(Cdn GAAP)   |   | 7,037,693   |  |   | 12,975,962  |  |   | 9,403,028   |  |   | 6,365,142               |  |   | 1,600,673 | 
|Loss for the period(1)(US GAAP)    |   | 7,037,693   |  |   | 12,975,962  |  |   | 9,403.028   |  |   | 6,365,142               |  |   | 1,553,817 | 
|Loss per share (Cdn GAAP)          | $ | 0.03        |  | $ | 0.05        |  | $ | 0.05        |  | $ | 0.11                    |  | $ | 0.07      | 
|Loss per share (US GAAP)           | $ | 0.03        |  | $ | 0.05        |  | $ | 0.05        |  | $ | 0.11                    |  | $ | 0.07      | 

Note:

(1)Loss from continuing operations and loss for the
period are the same for all periods presented.

No cash or other dividends have been declared.

Currency and Exchange Rates

All monetary amounts contained in this Annual Report are,
unless otherwise indicated, expressed in Canadian Dollars, Rockwell's reporting
currency. On August 25, 2010 the Bank of Canada noon rate for Canadian Dollars
was US$0.9397: Cdn$1.00 The following table sets out the exchange rates, based
on the noon rates as reported by the Bank of Canada, for the conversion of
United States Dollars into one Canadian Dollar in effect at the end of the
specified periods, the average exchange rates during such periods (based on
daily noon rates as reported by the Bank of Canada) and the range of high and
low exchange rates for such periods:

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 Page 4 

Exchange Rates

Years Ended February 28
      Nine Months
      Years Ended May 31EndedFebruary 292010
      2009
      2008
      2007
      2006End of Period
      0.9596
      0.7870
      1.0206
      0.9347
      0.9079Average for Period
      0.8996
      0.9056
      0.9831
      0.8800
      0.8521High for Period
      0.9755
      1.0161
      1.0905
      0.9347
      0.9099Low for Period
      0.7692
      0.7711
      0.9298
      0.8437
      0.7951


The following table sets out the high and low exchange rates,
based on the noon rate as reported by the Bank of Canada, for the conversion of
United States Dollars into one Canadian Dollar, for the following periods:

Exchange Rates

High
    LowFebruary 2010
    0.9597
    0.9316March 2010
    0.9888
    0.9596April 2010
    1.0039
    0.9803May 2010
    0.9885
    0.9278June 2010
    0.9805
    0.9429July 2010
    0.9724
    0.9381


B.          
Capitalization and Indebtedness

Not applicable

C.          
Reasons for the Offer and Use of Proceeds

Not applicable

D.Risk Factors

This annual report contains forward-looking statements which
relate to future events or Rockwell's future performance, including its future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may", "should", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", or "potential" or the
negative of these terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in enumerated in this section entitled "Risk
Factors", that may cause Rockwell's or the mining industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect Rockwell's current
judgment regarding the direction of its business, actual results will almost
always vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested in this annual report. Except
as required by applicable law, including the securities laws of the United
States, Rockwell does not intend to update any of the forward-looking statements
to conform these statements to actual results.

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 Page 5 

An investment in Rockwell's common stock involves a number of
significant risks. The investor should carefully consider the following risks
and uncertainties in addition to other information in this annual report in
evaluating Rockwell and its business before purchasing shares of Rockwell's
common stock. Rockwell's business, operating results and financial condition
could be seriously harmed due to any of the following risks. The risks described
below are not the only ones facing Rockwell. Additional risks not presently
known to Rockwell may also impair its business operations. The investor could
lose all or part of your investment due to any of these risks.

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 Page 6 

Risks Associated With Mining

There is no assurance that Rockwell can formally
establish the existence of any mineral reserve on any of its properties. Until
Rockwell is able to establish a mineral reserve, there can be no assurance that
production from these properties will continue for any period of time and if
production fails, Rockwell's business may ultimately fail.

Although Rockwell now owns and operates properties with a
history of sporadic to regular diamond production, which have been subject to
examination, testing and quantification through scientific exploration
techniques, a reliable determination of grade is difficult in alluvial deposits.
Accordingly, there is no assurance that Rockwell can formally establish the
existence of any mineral reserve on any of its properties. A mineral reserve is
defined by the Securities and Exchange Commission in its Industry Guide 7 (which
can be viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7)
as that part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination. The probability
of an individual prospect ever having a "reserve" that meets the requirements of
the Securities and Exchange Commission's Industry Guide 7 is remote. If none of
our current or future mineral resource properties contains any "reserve," any
funds that Rockwell spends on exploration will be lost.

Even if Rockwell establishes a mineral reserve, there can
be no assurance that the related property will be mined.

Even if Rockwell eventually establishes a mineral reserve on
one or more of its properties, there can be no assurance that it will be able to
turn the property into a producing mine. Both mineral exploration and mine
development involve a high degree of risk and few properties which are explored
are ultimately developed into producing mines.

The commercial viability of an established mineral deposit will
depend on a number of factors including, by way of example, the size, grade and
other attributes of the mineral deposit, the proximity of the resource to
infrastructure such as electrical power, roads, a point for shipping, government
regulation and market prices. Most of these factors will be beyond Rockwell's
control, and any of them could increase costs and make extraction of any
identified mineral resource unprofitable.

Mineral operations are subject to applicable law and
government regulation. Even if Rockwell establishes a mineral resource in a
commercially exploitable quantity, these laws and regulations could restrict or
prohibit the exploitation of that mineral resource. If Rockwell cannot exploit
any mineral resource that it might discover on our properties, its business may
fail.

Both mineral exploration and extraction require permits from
various foreign, federal, state, provincial and local governmental authorities
and are governed by laws and regulations, including those with respect to
prospecting, mine development, mineral production, transport, export, taxation,
labor standards, occupational health, waste disposal, toxic substances, land
use, environmental protection, mine safety and other matters. There can be no
assurance that Rockwell will be able to obtain or maintain any of the permits
required for the continued exploration of its mineral properties or for the
construction and operation of a mine on its properties at economically viable
costs. If Rockwell cannot accomplish these objectives, our business could fail.

Rockwell believes that it is in compliance with all material
  laws and regulations that currently apply to its activities but there can be
  no assurance that it can continue to do so. Current laws and regulations could
  be amended and the Company might not be able to comply with them, as amended.
  Further, there can be no assurance that Rockwell will be able to obtain or maintain
  all permits necessary for our future operations, or that it will be able to
  obtain them on reasonable terms. To the extent such approvals are required and
  are not obtained, Rockwell may be delayed or prohibited from proceeding with
  planned exploration or development of its mineral properties.

---

 Page 7 

In addition, environmental hazards unknown to Rockwell which
  have been caused by previous or existing owners or operators of the properties
  may exist on the properties in which Rockwell holds an interest. Even if Rockwell
  relinquishes its licenses, it will still remain responsible for any required
  reclamation and rehabilitation of the properties.

Mineral exploration and development are subject to
particular operating risks. Rockwell does not currently insure against these
risks. In the event of a highwall collapse or similar occurrence, Rockwell's
liability may exceed its resources, which would have an adverse impact on
Rockwell.

All Rockwells current operations are shallow opencast which
has an inherently lower risk than other deeper operations which are susceptible
to cave-ins.

Nonetheless, mineral exploration, development and production
involve many risks which even a combination of experience, knowledge and careful
evaluation may not be able to overcome. Hazards such as unusual or unexpected
formations and other conditions are involved.

Rockwell's operations will be subject to all the hazards and
risks inherent in the exploration, development and production of resources,
including liability for pollution, cave-ins or similar hazards against which it
cannot insure against or which it may elect not to insure. Any such event could
result in work stoppages and damage to property, including damage to the
environment. Rockwell applies international best practices principles in all
areas of the operations and complies with all health, safety and mining
legislation of the South African Republic. Rockwell does not currently maintain
any insurance coverage against these operating hazards. The payment of any
liabilities that arise from any such occurrence may have a material, adverse
impact on Rockwell.

The prediction of grade can be more challenging for the
type of deposit which the Company is exploiting.

In the case of alluvial diamond deposits, the prediction of
grade can be challenging due to the inherent geological nature of such deposits.
The alluvial diamonds are laid down by rivers flowing over uneven terrain and
the diamonds vary in terms of size and quality. Individual diamonds are not
evenly or uniformly distributed through out an alluvial deposit; neither are
they randomly distributed. Rather, their distribution has been described as a
random distribution of clusters of points. The clusters are both randomly
distributed in space, and the point density of the cluster is also random. In
order to determine grade under such circumstances it is necessary to process
large volumes of material (bulk sampling) in order to be sure that grade
calculations are representative and accurate. Moreover, in the case of such
deposits, drilling is only of use in the determination of gravel distribution
and not diamond content, since the volume of material recovered is
insufficiently representative of grade.

Mineral prices are subject to dramatic and unpredictable
fluctuations.

Rockwell expects to derive revenues from the extraction and
sale of diamonds. The prices of diamonds have fluctuated widely in recent years,
and are affected by numerous factors beyond Rockwell's control including
international, economic and political trends, expectations of inflation,
currency exchange fluctuations, interest rates, global or regional consumptive
patterns, speculative activities and increased production due to new extraction
developments and improved extraction and production methods. The effect of these
factors on the price of diamonds and base metals, and, therefore, the economic
viability of any of Rockwell's projects, cannot accurately be predicted.

---

 Page 8 

The mining industry is highly competitive and there is no
assurance that Rockwell will continue to be able to acquire mineral claims. If
Rockwell cannot continue to acquire properties to explore for mineral resources,
it may be required to reduce or cease operations.

The mineral exploration, development, and production industry
is largely unintegrated. Rockwell competes with other exploration companies
looking for mineral resource properties and the resources that can be produced
from them. However, the mining business operates in a worldwide market, and
prices for minerals are derived from relatively pure market forces. Accordingly,
competition to sell any minerals or concentrates produced should not be an issue
if mineral prices warrant production

Rockwell competes with many companies possessing greater
financial resources and technical facilities. This competition could adversely
affect Rockwell's ability to acquire suitable prospects for exploration in the
future. Accordingly, there can be no assurance that Rockwell will acquire any
interest in additional mineral resource properties that might yield reserves or
result in commercial mining operations.

Risks Related to Rockwell

The recoverability of the amounts shown for the Companys
mineral property interests, property, plant and equipment and inventory is
dependent upon the existence of economically recoverable mineral resources and
future profitable production or proceeds from the disposition of the mine. The
Companys continuing operations are also dependent upon the discovery and
existence of economically recoverable mineral reserves, the ability of the
Company to obtain the necessary financing to complete the exploration and
development of its mineral property interests, and upon future profitable
production or proceeds from the disposition of its mineral property interests.

Rockwell requires additional financing in order to
continue in business as a going concern, the availability of which is
uncertain.

The Company and its subsidiaries incurred losses of $7 million
during the year ended February 28, 2010 and continue to incur losses subsequent
to year end. The Companys sales are irregular.

Based on the Companys cash resources and forecasts, the
Company has sufficient working capital and reserves to maintain operations
through breakeven point and sufficient cash and working capital to fund
continuing losses. Future events beyond the Companys control may change the
Companys ability to continue as a going concern.

Some of Rockwell's directors and officers serve on the
boards of other exploration companies, which could potentially give rise to
conflicts of interest.

Some of Rockwell's directors and officers are engaged, and will
continue to be engaged, in the search for additional business opportunities on
their own behalf and on behalf of other companies. Situations may arise where
these directors and officers will be in direct competition with Rockwell.
Conflicts, if any, will be dealt with in accordance with the relevant provisions
of the Business Corporations Act (British Columbia) and applicable
law.

The loss of any of Rockwell's key management employees
could have a material adverse effect on Rockwell's business.

The nature of Rockwell's business and Rockwell's ability to continue
  its exploration activities and to exploit any mineral reserves that it may find
  in the future depends, in large part, on Rockwell's ability to attract and maintain
  qualified key management personnel. Competition for such personnel is intense,
  and there can be no assurance that Rockwell will be able to attract and retain
  such personnel. Rockwell's development now and in the future will depend on
  the efforts of key management figures, such as John W. Bristow, Rockwell's Chief
  Executive Officer, and Gerhard Jacobs, Chief Financial Officer, Graham Chamberlain
  Chief Operating Officer and Glenn Norton Mineral Reource Manager. The loss of
  any of these key people could have a material adverse effect on Rockwell's business.

---

 Page 9 

Rockwell's properties are located in the Republic of South
  Africa

All mineral properties are located in the Republic of South
Africa. Operations may be affected in varying degrees by government regulations
with respect to restrictions on production, repatriation of profits, price
controls, export controls, income taxes, expropriations or property,
environmental legislation and mine safety.

South Africa has undergone major constitutional changes to
effect majority rule, and also to effect mineral title. Accordingly, many laws
may be considered relatively new, resulting in risks such as possible
misinterpretation of new laws, modification of mining or exploration rights,
operating restrictions, increased taxes, environmental regulation, mine safety
and other risks arising out of a new sovereignty over mining, Rockwell's
operations may also be affected in varying degrees by political and economic
instability, terrorism, crime, extreme fluctuations in currency exchange rates
and inflation.

South African government empowerment initiatives may
adversely affect Rockwell's ability to obtain or maintain permits and licenses
for mining rights in South Africa.

In order to address inequalities to Historically Disadvantaged
Persons ("HDP") engendered by South Africa's former apartheid system, the South
African Government has initiated certain government empowerment initiatives.

In October 2002, the South African government enacted the
Mineral Development Act that deals with the state's policy towards the future of
ownership of minerals rights and the procedures for conducting mining
transactions in South Africa. The Mineral Development Act is a statute with
wide-ranging objectives, including sustainable development and the promotion of
equitable access to South Africa's mineral wealth by the inclusion of HDP into
the industry. The Mineral Development Act came into effect in May 2004. The
South African government has stated that, under the Mineral Development Act, it
will be issuing permits and licenses for prospecting and mining rights to
applicants using a "scorecard" approach. Applicants will need to demonstrate
their eligibility for consideration based upon the number of credits accumulated
in terms of quantifiable ownership transformation criteria, such as employment
equity and human resource development.

Future amendments to, and interpretations of, the economic
empowerment initiatives by the South African government and the South African
courts could adversely affect the business of Rockwell and its results of
operations and its financial condition.

Absence of dividends

Rockwell has paid no dividends on its shares since
incorporation, and does not anticipate doing so in the foreseeable future.

Rockwell is subject to potentially volatile exchange rate
fluctuations

Rockwell conducts operations in currencies other than Canadian
Dollars. Of particular significance is the fact that Rockwells operations in
South Africa are almost entirely paid for in South African Rand, which has
historically devalued against the United States Dollar, but which recently has
shown unexpected and substantial strength against most major world currencies,
including the United States Dollar. The strength in the South African Rand, if
it continues, will negatively impact the potential profitability of Rockwells
mining operations.

---

 Page 10 

Rockwell expects to be a passive foreign investment
company, which could have consequences for U.S. investors.

Potential investors who are U.S. taxpayers should be aware that
Rockwell expects to be a passive foreign investment company ("PFIC") for the
current fiscal year, that it may also have been a PFIC in prior years, and that
it may also be a PFIC in subsequent years. If Rockwell is a PFIC for any year
during a U.S. taxpayer's holding period, then such U.S. taxpayer generally will
be required to treat any so-called "excess distribution" received on its common
shares, or any gain realized upon a disposition of common shares, as ordinary
income and to pay an interest charge on a portion of such distribution or gain,
unless the taxpayer makes a qualified electing fund ("QEF") election or a
mark-to-market election with respect to the shares of Rockwell. In certain
circumstances, the sum of the tax and the interest charge may exceed the amount
of the excess distribution received, or the amount of proceeds of disposition
realized, by the taxpayer. A U.S. taxpayer who makes a QEF election generally
must report on a current basis its share of Rockwell's net capital gain and
ordinary earnings for any year in which Rockwell is a PFIC, whether or not
Rockwell distributes any amounts to its shareholders.

Rockwell's stock is a penny stock. Trading of Rockwell's
stock may be restricted by the SEC's penny stock regulations which may limit a
stockholder's ability to buy and sell Rockwell's stock.

Because the market price for Rockwell's shares is less than
US$5.00, its securities are classified as "penny stock". For transactions
involving a penny stock, brokers or dealers are required to approve a previous
account for penny stock transactions, which involves obtaining financial
information concerning the investor and satisfying themselves that the investor
has sufficient knowledge and experience to evaluate the risks associated with
penny stock. The broker or dealer must also deliver certain information to
investors on penny stock, including disclosure concerning the risks associated
with penny stock, and must receive a written agreement from investors prior to
the transactions. As a result of the penny stock restrictions, brokers or
potential investors may be reluctant to trade in Rockwell's securities, which
may result in less liquidity for Rockwell's stock.

FINRA sales practice requirements may limit a
stockholder's ability to buy and sell Rockwell's stock.

In addition to the "penny stock" rules promulgated by the
Securities and Exchange Commission (see above for discussions of penny stock
rules), the Financial Indiustry Regulatory Authority (FINRA) has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer's financial status, tax status, investment
objectives and other information. Under interpretations of these rules, the
FINRA believes that there is a high probability that speculative low priced
securities will not be suitable for at least some customers. The FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy Rockwell common stock, which may limit the ability to buy and sell
Rockwell stock and have an adverse effect on the market for Rockwell shares.

Rockwell has a number of outstanding share purchase
options, the exercise of which could result in equity dilution.

At February 28, 2010, Rockwell had 22,818,890 share purchase
options outstanding. If exercised could likely act as an upside damper on the
trading price range of Rockwell's shares. The underlying shares issuable upon
exercise of these securities represent approximately 6% of Rockwell's issued
shares at February 28, 2010.

---

 Page 11 

Significant rainfall

Due to the exposure to the natural elements of nature, the
potential impact is difficult to quantify for this risk. Business models are
prepared to make provision for this and the impact is discounted based on
historical experience. Where practical stockpiles are created to minimize the
impact on plant throughput.

Diesel price

Diesel consumption is a material component of overall costs at
Rockwell. Being linked to the price of crude oil and the resultant exposure to
the fluctuating Rand Dollar exchange rate, the purchase price can be
volatile.

---

 Page 12 

ITEM
4.           INFORMATION ON
THE COMPANY

SUMMARY

A.          
History and Development of Rockwell

|1. | The legal name of the Registrant is "Rockwell Diamonds
      Inc."                                                                                                                                                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|2. | Rockwell was incorporated under the Company Act(British Columbia) (the predecessor legislation to the Business
      Corporations Act(British Columbia)) on November 10, 1988 under the
      name "Annabel Gold Mines Inc."                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|3. | The Company changed its name to "Carissa Mining
      Corporation" on January 24, 1994. On October 26, 1995, the Company changed
      its name to "Rockwell Ventures Inc.", consolidated its share capital on
      the basis of five shares to one and subsequently increased its authorized
      share capital to 200,000,000 Common Shares without par value.                  
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|4. | On December 29, 2004, Rockwell increased its authorized
      share capital to consist of an unlimited number of Common Shares without
      par value.                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|5. | At the Company's Annual and Extraordinary General Meeting
      held on November 28, 2005, the Company's shareholders approved the
      creation of a class of preferred shares and the consolidation of the
      Company's Common Shares on a four old shares for one new basis. Regulatory
      approval of this capital reorganization was received on January 27,
      2006.
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|6. | The Company changed its name from "Rockwell Ventures
      Inc." on May 14, 2007 to "Rockwell Diamonds Inc."                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|7. | The principal events in the development of Rockwell's
      business are:                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                

---

 Page 13 

| | (iii) | On March 6, 2007, the Company and Trans Hex Group Limited
      (Trans Hex) entered into a conditional agreement whereby the Companys
      wholly owned South African subsidiary, Rockwell Resources RSA (Pty) Ltd.
      (Rockwell RSA), would acquire through Trans Hexs wholly-owned
      subsidiary, Trans Hex Operations (Pty) Ltd. (THO), two open pit alluvial
      diamond mines, namely Saxendrift and Niewejaarskraal, and three alluvial
      diamond exploration projects, namely Kwartelspan, Zwemkuil-Mooidraai and
      Remhoogte-Holsloot, which are located along the southern bank of the
      Middle Orange River in the Northern Cape Province of South Africa
      (Northern Cape) and which are collectively referred to as the Middle
      Orange River Operations and Projects (or MORO). The agreement
      included:
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | the rights to prospect, explore and/or mine precious
      stones and/or other minerals and/or metals held directly or indirectly by
      THO in the Saxendrift area of the Northern Cape;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | a series of large remnant alluvial diamond terraces;                                                                                                                                       
| | • | the plant, machinery, equipment and other movable assets
      owned and/or used by THO;                                                                                                   
| | • | certain employees of THO; and                                                                                                                                                              
| | • | a rehabilitation liability which will be taken over by
      the Company.                                                                                                                  

In April 2008 the Company completed the
MORO acquisition, including registration and transfer of Saxendrift Mine Pty
(Ltd) and the Saxendrift mining right, as well as prospecting rights in respect
of the Kwartelspan, Zwemkuil-Mooidraai and part of the Remhoogte-Holsloot
projects.

On April 11, 2009 the remaining mineral
right in terms of the Niewejaarskraal acquisition, was registered and
transferred. This action completed the Saxendrift/Remhoogte-Holsloot transaction
negotiated during April 2008.

|8. | During the year ended May 31, 2007, Africa Vanguard
      Resources (Pty) Limited (AVR), the holding Company of Richtrau No 136
      (Pty) Limited (Richtrau), purchased through Richtrau a 15% interest in
      Van Wyk Diamond Group (VWDG) from the Van Wyk Trust for an amount of
      ZAR22.5 million ($3.4 million). The holdings of the VWDG comprised the
      mining projects known as Holpan, Klipdam, and Wouterspan purchased by
      Rockwell through its wholly owned South African subsidiary Rockwell
      Resources RSA (Pty) Limited (Rockwell RSA) from H C Van Wyk Diamonds
      Limited. Subsequently on November 30, 2008, AVR indicated its commitment
      to increase its shareholding in the VWDG to 26% by subscribing for an
      additional 11% of the shares in each of the entities comprising VWDG. The
      additional 11% stake was acquired by another subsidiary of AVR, Georgia
      Avenue Investments (Pty) Limited (Georgia), at a subscription price of
      ZAR17.5 million. The AVR group was also contractually committed to inject
      ZAR10.5 million in working capital into the VWDG.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | As a result of the world wide credit contraction and
      economic recession, depressed market conditions and decline 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 of
      fiscal 2009 that it was unable to make outstanding payments to complete
      its financial obligations, and that it was pursuing other funding
      mechanisms to meet its obligations. As at February 28, 2009, AVR owed
      Rockwell approximately ZAR19 million to conclude the Georgia transactions;
      this amount is still outstanding at February 28, 2010. The contractually
      committed ZAR10.5 million due to VWDG has also not been received from AVR
      at this point in time.                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Rockwell RSA has, in conjunction with AVR, endeavoured
        to identify alternate sources of funding to assist AVR to complete its
        investment in the VWDG projects, and currently negotiations are being
        progressed with the Industrial Development Corporation (IDC)
        of South Africa. Rockwell RSA is in on-going discussions with AVR, and
        has also engaged with the Department of Mineral Resources with the assistance
        of its legal counsel to address the completion of the BEE participation
        in the share capital of the entities comprising VWDG. The shares for the
        outstanding equity purchases are held in trust by legal firm Tabacks pending
        conclusion of the transaction.                                                                                                                                                                                                                                                                                                                                                                                                 

---

 Page 14 

Effective October 2, 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 for an amount of approximately ZAR26 million. This transaction was also
  conducted in respect of the Minerals and Petroleum Resources Development Act
  and has been structured via a loan structure underwritten by Rockwell Resources
  RSA (Pty) Limited. As of February 28, 2010, AVR has only paid an initial deposit
  of ZAR3 million in respect of this transaction which is structured over a two
  year period. Rockwell is also in discussion with AVR regarding the funding for
  the outstanding amount of this transaction.

|9. | Rockwell's principal capital expenditures and exploration
      expenditures in the fiscal years ended February 28, 2010, February 28,
      2009 and nine months ended February 29, 2008 are as
  follows:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year
    
    Exploration Expenditures Deferred (capitalized
      or invested)
    
    
    Mineral Property Acquisition Cost
      Capitalized
    
    
    Property, Plant and Equipment Acquired
    
    
    Exploration Expenditures Expensed (excluding
      related stock-based compensation)
    
    
    Mineral Property Acquisitions Expensed2010
    
    nil
    
    $
    1,703,195
    
    $
    981,561
    
    $
    97,805
    
    $
    657,6342009
    
    nil
    
    $
    5,351,500
    
    $
    18,937,995
    
    $
    498,739
    
    
    nil2008
    
    nil
    
    $
    1,822,138
    
    $
    26,751,592
    
    $
    604,169
    
    
    nil2007
    
    nil
    
    $
    18,696,487
    
    $
    46,340,914
    
    $
    1,371,351
    
    
    nil


|    | 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
      with Rockwell. No significant divestitures have occurred in the years
      presented.                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10. | Etruscan Diamonds Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company has signed a term sheet on March 10, 2010
      with Etruscan Diamonds Limited whereby the Company proposes to purchase
      Etruscans Blue Gum diamond operation in the Ventersdorp region, South
      Africa. The acquisition is for 74% of the operation with the balance owned
      pursuant to South Africas Black Economic Empowerment regime. The price to
      be paid to Etruscan is an amount not exceeding ZAR33.5 million
      (approximately $4.7 million) payable in Rockwell shares valued at $0.068
      each. The Company will also assume certain non-material property
      maintenance obligations effective on signature of the term sheet and other
      financial obligations upon completion of the
acquisition.

---

 Page 15 

|11. | Flawless Diamonds Trading House (Pty)
    Limited                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                        
|    | On April 21, 2010 the Company acquired a 20% shareholding
      in Flawless Diamonds Trading House (Pty) Limited (Flawless) from Hennie
      van Wyk for the amount of $95,686. Flawless is a registered diamond broker
      which provides specialist diamond valuation, marketing and tender sales
      services to the Company.
|    |                                                                                                                                                                                                                                                                                                                                        
|    | Through its shareholding, Rockwell will have the ability
      to exercise significant influence over the operations of Flawless and as a
      result will equity account the results of Flawless in fiscal 2011 from the
      effective date of acquiring its shareholding.                                                       

Summarised financial information of
FlawlessFinancial Position as at February 28,
      2010Total Assets
    
    5,159,027Total Liabilities
    
    4,672,164Net Assets
    
    486,863Financial Performance for the year ended February
      28, 2010Total Revenue
    
    36,813.912Total profit for the period
    
    168,712Capital commitments and contingent
      liabilities of associate
    
    Nil


|12. | (i) PALA TAKE-OVER BID - September 9,
  2008                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | On September 9, 2008, Pala Investments Holding Limited
      (Pala), a Swiss based investment fund with an approximately 17%
      shareholding in Rockwell through its indirect wholly-owned subsidiary
      0833824 B.C. Ltd., made an unsolicited offer to purchase all of the
      outstanding common shares of Rockwell for $0.36 per share.                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | In response to the offer, the Board of Directors
      established a Special Committee of its independent directors. The Special
      Committee, assisted by its independent financial and legal advisors,
      carefully reviewed and considered all aspects of Palas offer and, based
      on that review, unanimously recommended that Rockwell shareholders should
      reject the offer as it fell significantly short of providing fair
      value.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Board of Directors rejected the bid for the
      following key reasons:                                                                                                                                                                                                                                                                                                                                                                                  
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Pala withdrew its bid on November 3, 2009 after further
      discussions with the Company. The Company subsequently appointed a Pala
      nominee and two new independent directors to the
Board.                                                                                                                                                                                                                                                            

---

 Page 16 

(ii) PALA REQUISITIONED SPECIAL
GENERAL SHAREHOLDERS MEETING  April 29, 2009

Pala announced on April 29, 2009 that
it was convening a Special General Meeting (the meeting) of the holders of
common shares to be held on June 17th, 2009, in Vancouver British
Columbia, Canada. Pala was proposing three resolutions for the meeting. The
three Resolutions were as follows:

| | 1. | To consider and, if deemed advisable, to pass a special
      resolution of the shareholders to remove all the directors of the
      Company;                                                                                                                                                                                                                                                                                                                                                                      
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 2. | If Resolution #1 passed, then to elect new directors of
      the Company in place of the removed directors comprising: of Marthinus Von
      Wielligh, Phillip Reynolds, Sandile Zungu, Hennie van Wyk, William Fisher,
      Terrence Janes, and Greg Radke. The effect of these two resolutions would
      be to remove the executive directors from office, namely David Copeland
      (chairman), Mark Bristow, and John Bristow- CEO and replace them with
      Messrs Von Wielligh, Reynolds and van Wyk.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3. | To amend and then terminate the Companys Shareholder
      Rights Plan Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                   

The Executive Directors (Copeland, J
Bristow, and M Bristow issued a competing proxy circular opposing the Pala
initiatives and urged shareholders to support a fair rights offering (one which
did not require that the rights plan be terminated).

At the Special General Meeting held in
Vancouver on June 17th, 2009 Palas resolutions were rejected, the
fair rights offering was withdrawn by the Executive Directors and Pala was
denied its legal and other costs in connection with convening the meeting.
Subsequent to this meeting Greg Radke, Palas representatives on the Rockwell
board, and Terence Janes one of the new independents resigned from the Board of
Rockwell.

The Companys Executive Directors
considered that the outcome of the meeting vote was to affirm their leadership.

B.          
  Business Overview

Durnpike Agreement

On June 30, 2006, the Company entered into an
Agreement-in-Principle to acquire interests and/or rights in 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. Pursuant to the
terms of a comprehensive agreement, (the Definitive Agreement), the Company
acquired all of the shares in and claims on shareholders loan account of
Durnpike, a private South African company, from eight vendors (the Vendors).
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 see the Notes to the 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 from signature of the Definitive
        Agreement. By virtue of such acquisition, the Company acquired Durnpikes
        interests in the four alluvial diamond properties in South Africa. The
        ZAR consideration did not include payment in respect of the Kwango River
        Project, which payment stood to be made by the Company only when (and
        if) the feasibility study referred to below has been completed and approved
        by the board of directors of the Company.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

 Page 17 

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$1.2 million per annum (commencing on December 31, 2007). During
the first quarter of 2008, pursuant to an amendment to the Midamines Agreement,
Durnpike paid consideration of US$600,000 to Midamines as compensation for
access to the entire concession area (Permit 331), as opposed to the limited
contract area. As part of such amendment, Midamines waived its right to payment
of the abovementioned US$1.2 million royalty payment due on December 31,
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 and/or Rockwell cancelled the Midamines Agreement.
Midamines thereafter disputed the entitlement of Durnpike and/or Rockwell to
cancel the Midamines Agreement. It has referred to arbitration a dispute against
Durnpike and Rockwell, in which it claims payment of an estimated and
provisional amount of $41.8 million. Durnpike and/or Rockwell have, in turn,
instituted a counter-claim in the estimated and provisional amounts of
approximately ZAR25.4 million for equipment purchased by Rockwell to undertake
exploration and feasibility work, $1.6 million for start-up and acquisition
costs in the DRC, and US$20 million (while reserving the right to increase the
counter-claim to at least $164.9 million) as an initial estimate of possible
lost earnings.

Comprehensive documentation has been
filed by the parties and arbitration proceedings are pending in Belgium. The
Company remains of the view that the claim against it is without merit and will
vigorously defend against it.

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.

---

 Page 18 

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 and its subsidiary THO
announced that the companies had entered into an agreement whereby Rockwells
wholly owned South African subsidiary, Rockwell RSA, would acquire the MORO 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 ZAR 18,901,294 ($2.4
million) plus interest of ZAR 2,381,294 ($0.3 million). Rockwell chose not to
exercise the option on the Remhoogte prospecting right due to current harsh
financial constraints and depressed diamond prices. All the other 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 Ltd 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 H.C. Van Wyk Diamonds Ltd on February
24, 2005 and later amended on July 10, 2007.

---

 Page 19 

Black Economic Empowerment Holdings (BEE)

During the year ended May 31, 2007, Africa Vanguard Resources
(Pty) Limited (AVR), the holding Company of Richtrau No 136 (Pty) Limited
(Richtrau), purchased through Richtrau a 15% interest in Van Wyk Diamond Group
(VWDG) from the Van Wyk Trust for an amount of ZAR22.5 million ($3.4 million).
The holdings of the VWDG comprised the mining projects known as Holpan, Klipdam,
and Wouterspan purchased by Rockwell through its wholly owned South African
subsidiary Rockwell Resources RSA (Pty) Limited (Rockwell RSA) from H C Van
Wyk Diamonds Limited. Subsequently on November 30, 2008, AVR indicated its
commitment to increase its shareholding in the VWDG to 26% by subscribing for an
additional 11% of the shares in each of the entities comprising VWDG. The
additional 11% stake was acquired by another subsidiary of AVR, Georgia Avenue
Investments (Pty) Limited (Georgia), at a subscription price of ZAR17.5
million. The AVR group was also contractually committed to inject ZAR10.5
million in working capital into the VWDG.

As a result of the world wide credit contraction and economic
recession, depressed market conditions and decline 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 of fiscal 2009 that it was
unable to make outstanding payments to complete its financial obligations, and
that it was pursuing other funding mechanisms to meet its obligations. As at
February 28, 2009, AVR owed Rockwell approximately ZAR19 million to conclude the
Georgia transactions; this amount is still outstanding at February 28, 2010. The
contractually committed ZAR10.5 million due to VWDG has also not been received
from AVR at this point in time.

Rockwell RSA has, in conjunction with AVR, endeavoured to
identify alternate sources of funding to assist AVR to complete its investment
in the VWDG projects, and currently negotiations are being progressed with the
Industrial Development Corporation (IDC) of South Africa. Rockwell RSA is in
on-going discussions with AVR, and has also engaged with the Department of
Mineral Resources with the assistance of its legal counsel to address the
completion of the BEE participation in the share capital of the entities
comprising VWDG. The shares for the outstanding equity purchases are held in
trust by legal firm Tabacks pending conclusion of the transaction.

Effective October 2, 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 for an
amount of approximately ZAR26 million. This transaction was also conducted in
respect of the Minerals and Petroleum Resources Development Act and has been
structured via a loan structure underwritten by Rockwell Resources RSA (Pty)
Limited. As of February 28, 2010, AVR has only paid an initial deposit of ZAR3
million in respect of this transaction which is structured over a two year
period. Rockwell is also in discussion with AVR regarding the funding for the
outstanding amount of this transaction.

Hunter Dickinson Services Inc.

Hunter Dickinson Services Inc. ("HDSI") provides management
services to Rockwell, pursuant to a geological and administrative services
agreement dated January 1, 2001. HDSI has certain directors in common with the
Company and provides geological, corporate development, administrative and
management services to, and incurs third party costs on behalf of, the Company
on a full cost recovery basis per agreement. HDSI is one of the larger
independent mining exploration groups in North America and employs or retains
staff or service providers substantially on a full-time basis. These individuals
include professional technical staff (which include accredited professional
engineers and geoscientists), professionally accredited accountants and
administrative, office and field support staff.

HDSI has supervised mineral exploration projects throughout Canada
  and internationally in Brazil, Chile, China, the United States (Nevada and Alaska),
  Mexico and South Africa. HDSI allocates the costs of staff input into projects
  based on time records of involved personnel. Costs of such personnel and third
  party contractors are billed to the participating public companies on a full
  cost recovery basis (inclusive of HDSI staff costs and overhead) for amounts
  that are considered by Rockwell's management to be competitive with arm's-length
  suppliers.

---

 Page 20 

C.          
  Organizational Structure

Rockwell Diamonds Inc is based in British Columbia, Canada. It
also has corporate offices located in Johannesburg, South Africa. As at July 31,
2010, Rockwell had the following subsidiaries:

| | a) | N9C, a wholly owned subsidiary incorporated under the
      laws of the Cayman Islands of which Rockwell owns a direct 100%
      interest                                                                                                                                                                                                                                                                                                                              
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | b) | N10C, a wholly owned subsidiary incorporated under the
      laws of the Cayman Islands of which N9C owns a direct 100%
  interest                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | c) | Rockwell Resources RSA (Pty) Ltd. (Rockwell RSA), a
      wholly owned subsidiary incorporated under the laws of the South Africa of
      which N10C owns a direct 100% interest.                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | d) | Durnpike Investments (Pty) Ltd (Durnpike) a wholly
      owned subsidiary incorporated under the laws of the South Africa of which
      Rockwell Resources RSA owns a direct 100% interest.                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | e) | HC Van Wyk Diamonds Ltd (HCVW) is a subsidiary
      incorporated under the laws of the South Africa of which Rockwell
      Resources RSA owns a direct 51% interest and RDI holds a 23% interest in
      the Van Wyk Diamond Group (VWDG) assets. HC Van Wyk Diamonds Ltd is a
      diamond producer that conducts diamond exploration and mining on the
      Holpan/Klipdam properties, as well as mining on the Wouterspan and
      Makoenskloof properties.

A minority interest of 15% is
recognized with the consolidation of HCVW until such time as the outstanding
loan by the BEE group is fully repaid, at which time the Company will increase
the non-controlling interest to 26%. As a consequence the outstanding loan has
not been recognized as a receivable in the accounting records of the Group.

| | f) | Klipdam Mining Company Ltd. (Klipdam Mining) is a
      subsidiary incorporated under the laws of the South Africa of which
      Rockwell Resources RSA owns a direct 51% interest and RDI holds a 23%
      interest. Klipdam Mining Company Ltd is a diamond producer that conducts
      diamond exploration and mining on the Klipdam
property.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |    | A minority interest of 15% is recognized with the
      consolidation of Klipdam Mining until such time as the outstanding loan by
      the BEE group is fully repaid, at which time the Company will increase the
      non-controlling interest to 26%. As a consequence the outstanding loan has
      not been recognized as a receivable in the accounting records of the
      Group.                                                                
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | g) | Saxendrift Mine (Pty) Ltd a subsidiary incorporated under
      the laws of the Republic of South Africa in which Rockwell RSA acquired a
      74% interest in April 2008. Saxendrift Mine (Pty) Ltd is a diamond
      producer that conducts diamond exploration and mining on the Saxendrift
      and Niewejaarskraal properties.                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | No minority interest is recognized with the consolidation
        of Saxendrift Mine (Pty) Ltd until such time as the outstanding loan by
        the BEE group is fully repaid, at which time the Company will increase
        the non-controlling interest to 26% and consolidate 74% of the results
        of operations. As a consequence the outstanding loan has not been recognized
        as a receivable in the accounting records of the Group.

---

 Page 21 

| | h) | The current organization structure of Rockwell (should
        the BEE loans be paid) is as follows:
| | -- | ----------------------------------------------------------------------------------------------------



The Companys legal registered office is in care of its
Canadian attorneys Lang Michener LLP, Barristers & Solicitors, at Suite
1500, 1055 West Georgia Street, Vancouver, British Columbia, Canada V6E 4N7,
telephone (604) 689-9111, facsimile (604) 685-7084. The South African head
office of the Company is located at Level 1, Wilds View, Isle of Haughton, Cnr.
Carse OGowrie and Boundary Road, Houghton Estate, Johannesburg 2198, telephone
27 (11) 481-7250, facsimile 27 (11) 481-7247. The Canadian head office of
Rockwell is located at Suite 1020, 800 West Pender Street, Vancouver, British
Columbia, Canada V6C 2V6, telephone (604) 684-6365, facsimile (604) 684-8092.

---

 Page 22 

D.          
  Property, Plant and Equipment

Rockwell has plant and equipment located on its Holpan,
Klipdam, Wouterspan, Makoenskloof and Saxendrift properties as at February 28,
2010.

|                                                                    |   | As at February 28, 2010 | 
|------------------------------------------------------------------- | - | ----------------------- | 
|                                                                    |   | Cost                    | 
|                                                                    |   |                         | 
|                                                                    |   |                         | 
|                                                                    |   |                         | 
|Land and Buildings                                                  | $ | 7,226,428               | 
|Processing plant and equipment                                      |   | 66,230,352              | 
|Processing plant and equipment under capital
      lease obligation |   | 13,553,529              | 
|Office equipment                                                    |   | 946,759                 | 
|Vehicles and light equipment                                        |   | 1,675,705               | 
|                                                                    | $ | 89,632,773              | 

---

 Page 23 

Glossary of terms

Geological Terms

NI 43-101
      National Instrument 43-101,
          the national securities law instrument in Canada respecting standards
          of disclosure for mineral projects.Alluvial deposit
      Accumulation of mineralization as a result of deposition in a river
          or stream.Mineral Resource/Reserve
      A concentration or occurrence of diamonds, natural solid inorganic material,
          or natural solid fossilized organic material including base and precious
          metals, coal, and industrial minerals in or on the Earths crust
          in such form and quantity and of such a grade or quality that it has
          reasonable prospects for economic extraction. The location, quantity,
          grade, geological characteristics and continuity of a Mineral Resource
          are known, estimated or interpreted from specific geological evidence
          and knowledge. 
          The mineral deposit classifications in this annual report on Form 20F
          adheres to the resource/reserve definitions and classification criteria
          developed in 2005 by the Canadian Institute of Mining as required under
          NI 43-101. Estimated mineral resources fall into two broad categories
          dependent on whether their economic viability of them has been established
          and these are mineral namely resources (economic viability
          not established) and ore mineral reserves (viable economic
          production is feasible). Resources are sub-divided into categories depending
          on the confidence level of the estimate based on the level of detail
          of sampling and geological understanding of the deposit. The categories,
          from lowest confidence to highest confidence, are inferred resource,
          indicated resource and measured resource. Reserves are similarly sub-divided
          by order of confidence into probable (lowest) and proven (highest).Inferred Mineral Resource
      The part of a Mineral Resource for which quantity and grade or quality
          can be estimated on the basis of geological evidence and limited sampling
          and reasonably assumed, but not verified, geological and grade continuity.
          The estimate is based on limited information and sampling gathered through
          appropriate techniques from locations such as outcrops, trenches, pits,
          workings and drill holes.Indicated Mineral Resource
      The part of a Mineral Resource for which quantity, grade or quality,
          densities, shape and physical characteristics, can be estimated with
          a level of confidence sufficient to allow the appropriate application
          of technical and economic parameters, to support mine planning and evaluation
          of the economic viability of the deposit. The estimate is based on detailed
          and reliable exploration and testing information gathered through appropriate
          techniques from locations such as outcrops, trenches, pits, workings
          and drill holes that are spaced closely enough for geological and grade
          continuity to be reasonably assumed.Measured Mineral Resource
      The part of a Mineral Resource for which quantity, grade or quality,
          densities, shape, and physical characteristics are so well established
          that they can be estimated with confidence sufficient to allow the appropriate
          application of technical and economic parameters, to support production
          planning and evaluation of the economic viability of the deposit. The
          estimate is based on detailed and reliable exploration, sampling and
          testing information gathered through appropriate techniques from locations
          such as outcrops, trenches, pits, workings and drill holes that are
          spaced closely enough to confirm both geological and grade continuity.


---

 Page 24 

SAMREC
      South African Mineral Resource
          Code


Measurement

Conversion of metric units into imperial equivalents is as
follows:

Metric Units
      Multiply by
      Imperial Unitshectares
      2.471
      = acresmeters
      3.281
      = feetkilometers
      0.621
      = miles (5,280 feet)grams
      0.032
      = ounces (troy)tonnes
      1.102
      = tons (short) (2,000 lbs)grams/tonne
      0.029
      = ounces (troy)/ton


Mining in the Republic of South Africa

South Africa has recently undergone major constitutional
changes to effect majority rule, and also to effect mineral title. Accordingly,
many laws may be considered relatively new, resulting in risks such as possible
misinterpretation of new laws, modification of mining or exploration rights,
operating restrictions, increased taxes, environmental regulation, mine safety
and other risks arising out of a new sovereignty over mining, any or all of
which could have an adverse impact upon Rockwell. Rockwell's operations may also
be affected in varying degrees by political and economic instability, crime,
fluctuations in currency exchange rates and inflation.

Changes, if any, in mining or investment policies or shifts in
political attitude in South Africa may adversely affect Rockwell's operations or
likelihood of future profitability. Operations may be affected in varying
degrees by government regulations with respect to, but not limited to,
restrictions on production, price controls, export controls, currency
remittance, income taxes, expropriation of property, foreign investment,
maintenance of claims, environmental legislation, land use, land claims of local
people, water use and mine safety.

The political situation in South Africa introduces a certain
degree of risk with respect to Rockwell's activities. The Government of South
Africa exercises control over such matters as exploration and mining licensing,
permitting, exporting and taxation, which may adversely impact on Rockwell's
ability to carry out exploration, development and mining activities. Failure to
comply strictly with applicable laws, regulations and local practices relating
to mineral right applications and tenure could result in loss, reduction or
expropriation of entitlements or in the imposition of additional local or
foreign parties as joint venture partners with existing or other interests.

Government Regulation

The exploration and mining activities of Rockwell are subject
  to various South African national, provincial and local laws governing prospecting,
  development, production, taxes, labour standards and occupational health, mine
  safety, toxic substance and other matters. Exploration activities and mining
  are also subject to various national, provincial and local laws and regulations
  relating to the protection of the environment. These laws mandate, among other
  things, the maintenance of certain air and water quality standards, and land
  reclamation. These laws also set forth limitations on the generation, transportation,
  storage and disposal of solid and hazardous waste. Although Rockwell's activities
  are currently carried out in accordance with all applicable rules and regulations,
  to the best of its knowledge and belief no assurance can be given that new rules
  and regulations will not be enacted or that existing rules and regulations will
  not be applied in a manner which could limit or curtail production or development.
  Amendments to current laws and regulations governing operations and activities
  of exploration, mining and milling or more stringent implementation thereof
  could have a material adverse effect on Rockwell's business, results of operation
  and financial condition.

---

 Page 25 

The mining industry in South Africa, where the Company's projects
  are located, is subject to extensive regulation. The regulatory environment
  is developing, lacks clarity in a number of areas and is subject to interpretation,
  review and amendment as the mining industry is further developed and liberalized.
  In addition, the regulatory process entails a public comment process, which
  makes the outcome of legislation and regulatory controls uncertain and may cause
  delays in the regulatory process.

In October 2006, the Government of South Africa released the
Mineral and Petroleum Resources Royalty Bill 2006(the "Royalty Bill")
and the Diamond Export Levy Bill 2006(the "Export Levy Bill"). The
Royalty Bill requires that companies extracting diamonds pay a royalty 5% from
the sale of those diamonds, payable on gross revenue.

In order to address inequalities to Historically Disadvantaged
Persons ("HDP") engendered by South Africa's former apartheid system, the South
African government has initiated certain government empowerment initiatives (See
discussion in Risk Factors).

Basis for Unit of Production and Depletion of Mineral
Resources by Rockwell

The Indicated and Inferred Resource categories used by Rockwell
for its alluvial diamond deposits follow the CIM (Canadian Institute of
Metallurgy) definitions, as set forth in the table of geological terms
above.

Rockwell Resource Determination Methodology:

Rockwell Diamonds Inc utilises a matrix system to determine the
category a resource should be placed. It must be noted that Rockwell Resource
declarations are inclusive of mining dilution and process inefficiencies with a
2 mm bottom cut off. The value of the diamonds in the Resource declaration is
determined through the sale of the recovered diamonds and not through the
estimation of value by diamantiares. All Resources are for 100 percent of the
mineral area and not for the ownership percentage of Rockwell Diamonds Inc in
the underlying subsidiary.

The table below is a summary of what Rockwell will do to
determine the two resource categories

Procedure
      CommentsDesktop Studies
      Identification
          of an Area of Interest
      Typically
          the area of interest is in a well known alluvial
          diamond area or region with a history of past production
          (mining) and diamond salesField Studies
      Geological mapping
          Reconnaissance drilling Remote sensing studies
      To increase
          confidence in geological model, ascertain previous diamond
          information including grade and diamond value information.Inferred Resource Estimation
      Detailed Drilling on 100x100m
          grid
      To establish nature of
          geological units (stratigraphy) and estimate gravel volume


---

 Page 26 

Bulk-sampling minimum of 0.5% of intended declared
      resource
    To estimate gradeRecovery of 500 carats
    To estimate diamond value & size
      frequencyIndicated
      Resource Estimation
    Infill drilling on a close spacing (50mx50m)
    To improve geological knowledge, construct
      detailed 3-dimensonal resource models and improve the
      confidence in the estimate of gravel volumeBulk-sampling minimum of 5% of the intended declared
      resource
    To estimate gradeRecovery of 3,000  5,000 carats
    To estimate diamond value & size frequency-
      detailed size frequency analysis of stone sizes are
      conducted to characterize the overall diamond population
      characteristics particularly with respect to size


In conclusion Rockwell Diamonds Inc has sufficient confidence
in its approach to resource determination that the Company has mined since
inception in 2006 based on these resources and has demonstrated that the grades
and diamond quality remain fairly consistent.

Reserves:

It must be noted that Rockwell is dealing with a distinct
deposit-style. Other alluvial explorers and miners all exploit higher grade
deposits in central and western Africa and do not have to publicly list the
results of their resource determinations. Rockwell has not completed such
extensive bulk sampling over all the mineral areas due to the high cost and lack
of production capacity. This lack of sampling over the entire mineral area
provides less confidence that Rockwell would need to assess the sustainability
in diamond grade and values in order for a reserve to be declared. Over time
Rockwell bulksample and trial mine the various mineral areas and when sufficient
bulk samples (trial-mining) have been carried out over the entire mineral area
the Company could be in a position where the requirements for a pre feasibility
study can be met and the Company would be in such a position as to declare
probable reserves under the Canadian Standards.

Unit of Measurement:

Rockwell Diamonds Inc reports all resources in units of volume
(cubic metres) instead of units of weight (tonnes), because of the variable
nature of the composition of the alluvial deposits and therefore the specific
gravity throughout the resource area. This creates too many variables for the
Company to be satisfied in the accuracy of the numbers reported. On a bi weekly
basis, Rockwell surveys all excavations and stockpiles to determine the volume
of ore that has been processed through the processing plants. All survey data is
signed off by the Chief Surveyor as well as the Mineral Resource Manager, who is
a Qualified Person. This volumetric data and the accompanying diamond production
is reconciled bi weekly and entered into the Companys database. This database
is then used for the compilation of the annual and quarterly depletion of the
mineral resources.

---

 Page 27 

HCVW1and
Klipdam

Period
    Calculation
      (Production/Deemed Carats Available)
    Depletion
      PercentageFebruary 1, 2007 to May 2007
    7007 /387,921
    1.80%June 2007 to February 2008
    17,746 /387,921
    4.58%March 2008 to February 2009
    15,066 /387,921
    3.88%March 2009 to February 2010
    16,068 /387,921
    4.14%Total
    55,887 /387,921
    14.40%


Saxendrift

Period
    Calculation
      (Production/Deemed Carats Available)
    Depletion
      PercentageMarch 2008 to February 2009
    2,437 / 103,155
    2.36%March 2009 to February 2010
    8,834 / 103,155
    8.56%Total
    11,271/103,155
    10.92%


Annual Production (Carats)

Production Periods
    HCVW1&
      Klipdam
    Saxendrift
    Total ProductionFebruary 1, 2007 to May 2007
    7,007
    -
    7,007June 2007 to February 2008
    17,746
    -
    17,746March 2008 to February 2009
    15,066
    2,437
    17,503March 2009 to February 2010
    16,068
    8,834
    24,90255,887
    11,271
    67,158


Note: (1)HCVW are operations acquired from HC
van Wyk, including Holpan and Wouterspan mines and Makoenskloof project.

CAUTIONARY NOTE TO INVESTORS CONCERNING ESTIMATES OF
INDICATED RESOURCES

The following tables and discussion includes references to
"indicated resources". Rockwell advises investors that while this term is
recognized and required by Canadian securities regulations (under National
Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S.
Securities and Exchange Commission does not recognize it. Readers cannot assume
that all or any part of mineral deposits in this category will ever be converted
into reserves.

CAUTIONARY NOTE TO INVESTORS CONCERNING ESTIMATES OF INFERRED
RESOURCES

The following tables and discussion includes references to
"inferred resources". Rockwell advises investors that while this term is
recognized and required by Canadian securities regulations (under National
Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S.
Securities and Exchange Commission does not recognize it. Readers cannot assume
that all or any part of mineral deposits in this category will ever be converted
into reserves. In addition, "inferred resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to their economic
and legal feasibility. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or preliminary feasibility
studies, except in rare cases. Investors are cautioned not to assume that
part or all of an inferred resource exists, or is economically or legally
mineable.

---

 Page 28 

Deemed resources available at Rockwell Mines as at February
  28, 2010

Holpan and
        Klipdam Mineral ResourcesDeemed Carats
        AvailableDescription
        of Gravel Resource
      Inferred Resources
      Indicated Resources
      
      
      
      Inferred Resources
      Indicated Resources
      TotalVolume
      Volume
      Grade(cubic meters)
      (cubic meters)
      (carats/100 cubic
        meters)Holpan Fluvial- alluvial Gravel
      294,000
      
      0.74
      
      
      2,176
      
      2,176Holpan Rooikoppie gravel
      5,643,000
      1,137,273
      41,758
      8,416
      50,174Klipdam Fluvial- alluvial Gravel
      1,504,163
      
      0.91
      
      
      13,688
      
      13,688Klipdam Rooikoppie gravel
      1,312,000
      1,135,229
      11,939
      10,331
      22,270TOTAL
      8,753,163
      2,272,502
      0.84
      
      
      69,561
      18,747
      88,308


Wouterspan
        Mineral ResourcesDeemed Carats
        AvailableInferred Resources
      Indicated Resources
      
      
      
      Inferred Resources
      Indicated Resources
      TotalDescription of Gravel
        Resource
      Volume
      Volume
      Grade2(cubic meters)
      (cubic meters)
      (carats/100 cubic
        meters)Rooikoppie
      5,911,000
      716,769
      0.7
      
      
      41,377
      5,017
      46,394Fluvial- 
        alluvial
      31,863,000
      4,311,167
      223,041
      30,178
      253,219TOTAL
      37,774,000
      5,027,936
      0.7
      
      
      264,418
      35,195
      299,613333,979
      53,942
      387,921


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 Page 29 

Saxendrift Mineral
        ResourcesDeemed Carats
        AvailableMINING AREA
      RESOURCE
      Volume
      GradeCLASSIFICATI ON
      (cubic meters)
      (carats/100 cubic
        meters)
      
      
      Inferred Resources
      Indicated Resources
      TotalSaxendrift 
        Terrace A
      Indicated 1
      804,945
      1.32
      
      
      
      10,625
      10,625Indicated 2
      2,483,494
      0.8
      
      
      
      19,868
      19,868Saxendrift 
        Terrace B
      Indicated
      1,774,660
      1.15
      
      
      
      20,409
      20,409TOTAL Indicated
      
      5,063,099
      1.01
      
      
      
      
      -Saxendrift 
        Terrace A
      Inferred
      3,629,127
      0.8
      
      
      29,033
      
      29,033Saxendrift 
        Terrace B
      Inferred
      86,476
      0.68
      
      
      588
      
      588Stockpiles
      Inferred
      642,540
      0.29
      
      
      1,863
      
      1,863TOTAL Inferred
      
      4,358,143
      0.72
      
      
      31,484
      50,902
      82,386


Kwartelspan Mineral
        ResourcesDeemed Carats
        AvailableResource classification
      Volume
      Grade(cubic meters)
      (carats/100 cubic
        meters)
      
      
      
      Inferred Resources
      Indicated Resources
      TotalInferred
      1,384,577
      1.5
      
      
      
      20,768.66
      
      20,76952,253
      50,902
      103,155


Rockwells principal properties, Holpan, Klipdam and Saxendrift
(which are currently in production), Wouterspan (in production in fiscal 2009
but currently on care and maintenance) and Niewejaarskraal (planned for
development as funds are available) had detailed resource assessments completed
at February 28 2009. These estimates took into consideration archived data from
previous drilling programs, 2009 drilling and sampling if done, and results from
processing and depletion from mining to that time. This work was completed by
the Companys Resources Manager and reviewed by an independent expert (both are
qualified persons as defined under Canadian Securities legislation). Dr Tania
Marshall, PrSciNat, a qualified person who is independent of the Company, is
responsible for the estimates. The details of the assessment are included in
Technical Reports that were filed with the Companys year end materials in its
home jurisdiction (on www.sedar.com).

---

 Page 30 

Technical Summary

The following disclosure is derived from Rockwell files and
technical reports. Additional details can be found in technical reports on each
property filed on www.sedar.com.

Properties in South Africa

Figure 1 shows the location of Rockwells principle properties:
Holpan/Klipdam, Wouterspan and Saxendrift/Niewejaarskraal located in the
Republic of South Africa ("RSA" or "South Africa").

Figure 1. Location of the Holpan/Klipdam, Wouterspan and
Saxendrift/Niewejaarskraal Properties

---

 Page 31 

Climate and Topography

All of Rockwells principle properties are located in central
South Africa, an arid semi-arid area with low relief that forms part of the high
plateau (or highveld) region. Rainfall is about 200 mm per annum primarily
during the summer. Winter temperatures range from 0°C at night time to
approximately 14°C during the day; summer daytime temperatures may reach 45°C.

The Holpan/Klipdam Property

Location, Access and Infrastructure

The Holpan/Klipdam property is located 45 km from Kimberley in
the Northern Cape Province of central South Africa. Holpan and Klipdam are
adjacent properties that are accounted for separately because historically,
Holpan was mined by the Van Wyk Diamond Group and Klipdam was mined by Klipdam
Mining and each has its own processing facilities.

The property has ready access to all required infrastructure.
Operations are located next to an irrigation canal, so have year-round water
supply with necessary pumping stations and water supply pipelines in place. The
property is situated on a tarred road and is 45 km from Kimberley, a modern town
of 200,000 inhabitants with comprehensive mining support services, spares and
supplies. Kimberley has a regional airport and air service that links to all
major cities in South Africa. The property is connected to the national
electricity grid and the necessary transformers and supply lines are in place.
In fiscal 2008, the Company installed back-up generators.

Property Description and Ownership

The Holpan/Klipdam property consists of the adjacent Holpan 161
and Klipdam 157 farms, covering an area of 4,019.9 hectares. Details are
provided in Table 1.

Table 1: Summary of Holpan-Klipdam landholdings

Property Name
    Area (ha)
    Mineral Right
    Permit **Number**
    Renewal DateRemaining extent of Holpan 161
    2,370.0518
    Mineral Lease K55/2000S
    ML 1/2002
    09 November 2014 (Old Order
      ML conversion application lodged on 07 July 2008. Accepted by DME on 18
      July 2008  in progress)Remaining extent of Klipdam 157
    1,466.0095
    (NC)003MRC
    Protocol 266/2007
    06 December 2022 (This permit
      is currently under Section 11 cession from Klipdam Mining (Pty) Ltd to
      HCVWD. Submitted on 16 May 2008)Erf 1, Windsorton
    183.8177
    (NC) 30/5/1/1/2/119 3PR
    
    The Prospecting Right was granted
      on 07 November 2008, and extends to February 2011.


The surface rights (as well as the land ownership) of the farms
Holpan and Klipdam are held by HC Van Wyk and Klipdam Mining, respectively. The
surface and land rights of Erf 1 of Windsorton are held by a third party with
whom Rockwell has a land use agreement.

With respect to Holpan 161, royalties were paid to the State
  of 5% of gross proceeds of all diamonds sold up to 28 February 2010. From 1
  March 2010 the new Mineral and Petroleum Resources Royalty Act came into effect
  and royalties are payable at a minimum rate of 0.5% plus adjustments based on
  profitability. Estimates are that our liability will amount to an average of
  3.7% of gross proceeds.

---

 Page 32 

In addition to the royalty, historical annual royalty payments
of ZAR165,000 (approximately US$20,625) to the State are owed.

With respect to Erf 1 Windsorton, a prospecting right over the
Erf 1 Windsorton mineral area was issued which endures until the February 24,
2011. The prospecting right, granted in respect of diamonds, endures for a
period of two years which commenced on the February 25,2009.

Geology

A key factor in the origin of the extensive and rich alluvial
diamond deposits found in South Africa and Namibia is the existence of over 1000
diamond bearing kimberlites across southern Africa on the Kaapvaal Craton.
Kimberlite emplacement was followed by liberation and entrainment of diamonds
and deposition in terraces on the ancient Vaal and Orange Rivers between
approximately 4.8 million years ago (Ma) and 4 Ma.

The Holpan-Klipdam deposit comprises an extensive flat-lying
alluvial sequence located on the right bank of the modern Vaal River and 6 km
inland from a bend in the river known as "the Horseshoe". The sequence extends
across an area of approximately 5 km by 2.5 km. Economic concentrations of
diamonds within the sequence are found both in the deflational "Rooikoppie"
deposit and in well developed, clearly-defined palaeo-channels that were
preserved by a highly resistant calcrete cap. The palaeo-channels extend over
several km and are up to 500 m wide in places. At Holpan and Klipdam, the
bedrock consists of Archaean Ventersdorp lavas, and shales and diamictites of
the 300 to 250 million year old Dwyka Group of the Karoo Supergroup.

The Rooikoppie unit varies in thickness from a few centimeters
(cm) up to about 2 metres (m) and has an estimated average thickness in the
order of 1 m. Solution cavities up to 3 m deep in the calcretised bedrock form
sharp, discontinuous depressions and are filled with the overlying Rooikoppie
gravel. Since such cavities, when considered in a hydrodynamic context, have
very high diamond trapping potential and are of key economic importance. Given
the high incidence of pronounced solution features in the palaeo-land surface
underlying the Rooikoppie (as observed in current mine workings at
Holpan-Klipdam), this area is considered to be of high interest with regard to
its exploration potential.

The primary gravels found in the palaeo-channels typically
comprise the lower third of the sedimentary sequence and rest directly on the
bedrock. The thickness of the gravel bed varies from about 1 to 6 m and average
approximately 3 m thick. The primary gravels comprise a poorly sorted assemblage
of large boulders (up to 45 cm in diameter at the base of the unit), cobbles and
pebbles set in a sandy matrix that is considered to have been deposited by a
large, middle-stage, meandering river system.

High-resolution digital aerial photographs of the
Holpan-Klipdam properties clearly show the distribution of mine workings in the
area, including the adjacent Leicester kimberlite pipe. Tonal darkening, seen
immediately to the west of the Klipdam plant area, corresponds closely to a
buried palaeo-channel as defined by exploration drilling, and is interpreted to
be its surface expression.

History

In 1994, the Van Wyk family began operations on claims on the
Holpan property and shortly thereafter Sonora Gold Inc., started operating on an
adjacent part of the Holpan property. In 1996, Sonora Gold Inc. acquired Klipdam
Mining. Subsequently, in 1999, the company changed its name to Sonora Diamond
Corporation. During this time, the Van Wyks also acted as earth-moving
contractors to Sonora.

The Van Wyk operations (incorporated in the company HCVW in 2001)
  were initially small but, with the discovery of larger diamonds and the purchase
  of larger earth moving equipment, they were able to sustain and enlarge their
  operations. The HCVW operation grew steadily on Holpan, while the Sonora venture
  stuttered and eventually collapsed. Records show that, subsequent to 2000, HCVW
  had grown to a sizable operation on Holpan and acquired Sonora Diamonds, thereby
  expanding the companys presence on Holpan and Klipdam.

---

 Page 33 

Holpan and Klipdam have been the focus of intermittent mining
  since the early 1900s and have consistently been known for yielding large
  diamonds. In historic records, George Beet (1931) discusses the Broderick
  diamond  a perfect Cape white, weighing 412.5 carats.

From 1994 to 2005 at Holpan-Klipdam, extensive mining of
Rooikoppie and primary gravels took place, as well as drilling and bulk testing.
A high efficiency 200 tonnes per hour (tph) Dense Media Separation (DMS) plant
with X-ray Flowsort recovery and grease table final recovery apparatus began
operation in August 2005 and has been used for most of the processing since that
time. Forty-one units of Volvo and Komatsu equipment currently moves 159,000
cubic meters (m3) of gravel and overburden on a monthly basis.

Due to the significant burial depth of the Primary gravels at
Holpan-Klipdam, the thickness and distribution of the alluvial gravel deposits
have been investigated through systematic percussion drilling. A total of 3,243
boreholes totaling 14,486 m were drilled on the Holpan-Klipdam property between
1994 and 2005. Drill holes extended to bedrock in the majority of cases.
Boreholes were spaced at 50 m intervals along traverses 100 m apart. Chip
samples were collected at 1-m intervals and logged on site by a geologist.
Procedures were audited in conjunction with the original field logs under the
supervision of Rockwell's consultant in November 2005.

In March 2006, RH De Decker, Pr.Sci.Nat., an independent
qualified person, estimated the inferred mineral resources for Holpan and
Klipdam based on operational statistics, drilling and other sampling completed
to that time as 12,339,700 m3 grading 1.16 carats per 100
m3, with an average value of US$848/carat. De Decker also suggested
that 4,800,000 m2 of gravel, that is similar, visually, to the
Rooikoppie gravels, surrounds the area of the inferred resource and that this
gravel feature, readily identifiable from the prevalent red chert clasts
(pebbles) in the regolith, abandoned artisanal workings, and vegetation features
discernable from aerial photography, should be evaluated to determine its
diamond content. This area is being assessed by exploration work that began in
fiscal 2008 and is continuing in fiscal 2009.

Mining at the Holpan and Klipdam properties from January 2006
to March 2007 focused on the Rooikoppie gravels, and a volume of 1,889,308
m3 was mined and processed during the period. The total Holpan and
Klipdam inferred mineral resources as of March 31, 2007 were estimated to be
10,450,000 m3 grading 0.95 carats per 100 m3.

During the period of April 1, 2007 and February 29, 2008,
1,591,429 m3 were mined at Holpan and Klipdam. At February 29, 2008
the total inferred mineral resources were estimated to be 8,858,000
m3 grading 0.84 carats/100 m3.

During the period January 2008  February 2009, some 876,972
m3 of gravel was processed from Klipdam from which 8,066.34 carats
were extracted and 691,729 m3of gravel from Holpan from which
5,073.41 carats were extracted, for a total of 1,568,701 m3 and
13,139.75 carats, with average grade recoveries of 0.91 carat/100 m3
and 0.74 carat/100 m3, respectively.

During the period March 2009  February 2010, some 895,669
  m3 of gravel was processed from Klipdam from which 9,669.8 carats
  were extracted and 805,925 m3of gravel from Holpan from which 6,398.2
  carats were extracted, for a total of 1,701,594 m3 and 16,068 carats,
  with average grade recoveries of 0.79 carat/100 m3 and 1.08 carat/100
  m3, respectively.

Mining and Processing

The mining of the gravels at Holpan-Klipdam uses mechanized,
  shallow opencast earthmoving techniques. Topsoil (generally minimal) is removed
  and stored separately for use in later rehabilitation activities. The top layer
  of Rooikoppie gravel is then bulldozed onto stockpiles from which it is loaded
  into articulated dump trucks either by excavator or front-end loader for transport
  to the plant.

---

 Page 34 

The remaining Rooikoppie is then removed from the uneven calcrete
  substrate by means of an excavator. Calcretised overburden on top of the Primary
  gravel is removed so that the gravels are exposed and can be mined by bulldozers
  and excavators. The calcrete overburden is backfilled, side-cast or used in
  road-building. Care is taken to ensure the sterile excavation of the Primary
  gravels such that no contamination by the footwall lithologies occurs. Excavation
  continues to the base of the gravels where higher basal grades are expected
  to occur. Where the bedrock is soft, approximately 20 cm of bedrock is excavated
  with the gravels, so that any diamonds in the weathered rock will be recovered.

The Primary gravels are transported by truck to the diamond
recovery plants. Surveying of the box cuts is undertaken on a monthly basis by
the mine surveyor in order to obtain precise volumes for the Primary gravel, the
suspended gravel, the calcrete and the Rooikoppie, against which diamond
production could be reconciled and grade determined.

A double-18 ft rotary pan-plant system used to process gravels
on Klipdam and a Dense Media Separation (DMS) plant is used on Holpan.
Processing volumes (Run-of-Mine) on the two plants are approximately 350 tonnes
per hour and 380 tonnes per hour, respectively.

During 2006/2007 some 24,783.82 carats were sold from the
Klipdam and Holpan operations for an average of US$1,040/carat (this was an
increase from the US$848/carat received from the previous years production and
was the result of the improved market for larger stones). During 2008, over
7,000 carats were sold for over US$2,500/carat as a result of the positive
diamond market. In late 2008, diamond prices fell dramatically; average sales
prices for the market in February 2009 were US$130 to US$190/carat.

During 2009/2010 17,274.4 carats were sold from the Klipdam and
Holpan operations for an average of US$581.26/carat and US$492.09/carat
respectively. This decrease from the US$2471.44/carat received from the previous
years production is the result of the world wide economic downturn during in
the later half of 2008 and throughout 2009. No diamonds were sold from these
mines during November 2008 to February 2009. Prices were significantly lower as
a result of the negative diamond market.

Estimates of Mineralization

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 and is responsible for the
estimates. The most recent technical report entitled Revised Technical Report
on the Klipdam and Holpan Alluvial Diamond Properties, Barkley West District,
the Republic of South Africa, dated December 22, 2009, by Marshall and Norton
has been filed on www.sedar.com.

In the twelve months of the 2010 fiscal year, production at
Holpan was 6,398.2 carats from 805,925 cubic meters (1,490,961 tonnes) of gravel
processed. Production at Klipdam was 9,669.8 carats from 895,669 cubic meters
(1,656,987 tonnes) of gravel. The mineral resources in Table 2a below reflect
the depletion during fiscal 2010.

Cautionary Note to Investors Concerning Estimates of
Indicated Resources

The following table and discussion includes references to
"indicated resources". Rockwell advises investors that while this term is
recognized and required by Canadian securities regulations (under National
Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S.
Securities and Exchange Commission does not recognize it. Readers cannot assume
that all or any part of mineral deposits in this category will ever be converted
into reserves.

---

 Page 35 

Table 2a. Holpan and Klipdam Indicated Mineral Resources

Description ofGravel
      Resource
    RESOURCECLASSIFICATION
    Volume(1)(cubic meters)
    Grade(carats/100
      cubicmeters)
    Value(US$/carat)Holpan Rooikoppie gravel
    Indicated
    1,137,273
    0.74
    2008 -1,157
      2009(2)- 671Klipdam Rooikoppie gravel
    Indicated
    1,135,229
    0.91
    2008 - 3,892
        2009**(2)**- 915TOTAL
    Indicated
    2,272,502
    0.84


Notes:

|(1) | Volumes fully diluted of sampling and mining for the
      period 2008-Feb2009
|--- | ------------------------------------------------------------------------------
|(2) | Modelled values for 2009 (by Rockwell,
  2009)                                

Cautionary Note to Investors Concerning Estimates of Inferred
Resources

The following discussion includes references to "inferred
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into reserves.
In addition, "inferred resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or preliminary feasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred
resource exists, or is economically or legally mineable.

Table 2b. Holpan and Klipdam Inferred Mineral Resources

Description ofGravel
      Resource
    RESOURCECLASSIFICATION
    Volume(1)(cubic meters)
    **Grade****(carats/100 cubic****meters)**
    Value(US$/carat)Holpan Fluvial- alluvial Gravel
    Inferred
    294,000
    0.74
    2008 -1,157
      2009**(2)**- 671Holpan Rooikoppie gravel
    Inferred
    5,643,000Klipdam Fluvial- alluvial Gravel
    Inferred
    1,504,163
    0.91
    2008 - 3,892
      
        2009**(2)**- 915Klipdam Rooikoppie gravel
    Inferred
    1,312,000TOTAL
    Inferred
    8,753,163
    **0.84**


Notes:

|(1) | Volumes fully diluted of sampling and mining for the
      period 2009-Feb2010
|--- | ------------------------------------------------------------------------------
|(2) | Modelled values for 2010 (by Rockwell,
  2009)                                

Plans for Fiscal 2011

Rockwell Diamonds plans to prospect the remaining areas of the
Holpan and Klipdam mining rights and to bulk sample the areas determined to be
underlain by gravels.

Rockwell has proposed to make efficiency improvements at the
Klipdam Mine and to add an additional X-Ray sorting unit at the Holpan Mine.
There are no capital costs associated with these activities as they will be
undertaken through the operational budget. The X  Ray sorting machine is a
spare machine therefore no additional capital expenditure was incurred.

---

 Page 36 

Ongoing review and updating of resources based on production
(trial-mining) will be done by existing Rockwell staff and reviewed by the
independent qualified person, as necessary. This trial-mining will form the
basis of a Pre-Feasibility Study which will convert a portion of the Indicated
Resources to Probable Reserves

The Wouterspan Property

Location, Access and Infrastructure

The Wouterspan Property is located on the northern bank of the
Orange River, about 100 km west of Douglas in the Northern Cape Province, South
Africa.

The area has ready access to good infrastructure. Water is
available from the Orange River. The property is directly linked to an
all-weather gravel road. It is approximately 200 km from the town of Kimberley,
where comprehensive back up services for mining, spares and other supplies are
available.

Wouterspan is situated on the edge of the Karoo, an arid semi
desert that forms part of the high plateau (or highveld) of South Africa.
Rainfall is about 200 mm per annum primarily during the summer. Winter
temperatures range from 0°C at night time to approximately 14°C during the day;
summer daytime temperatures may reach 45°C.

The project area comprises a relatively flat raised terrace
adjacent to the modern day Orange River. The main relief features include a
gentle rise towards the western limit of the permit area, together with a sharp
topographic descent of approximately 12 m in the south-east, adjacent to the
Orange River, defining the limit of the terrace. Subtle hollows, some of which
host minor ephemeral drainages are also seen in the project area.

Property Description and Ownership

The Wouterspan project is comprised of the following individual
farm portions of the farm Lanyonvale 376.

---

 Page 37 

Table 3. Summary of Current Mineral and Surface Rights Holdings
on Wouterspan

Portion
    Permit/right holder
    Right/Number
    Surface right holder
    Size (hectares)Portion 16, a Portion of Portion 9
    Farhom Mining & Construction Ltd.
    Old order Mining Permit/ MP 144/2004 (1)
    HCVW
    188.7926A surveyed Portion of Remainder of Portion 9 (Wouter)
    Okapi Diamonds (Pty) Ltd
    New Order Prospecting Right/Protocol 65/2006
      (2)
    A C Vlok Trust
    780.61Portion 14 (Stofdraai)
    HCVW
    New order Prospecting Right/Protocol
      45/2005 (3)
    A C Vlok Trust
    1,369.9544Remainder of Portion 9 (Wouter)
    HCVW
    HCVW
    1,640.6412Portion 16 (a portion of Portion 9)
    HCVW
    New order Prospecting Right/Protocol 36/2007
      (4)
    HCVW
    240.4480Remainder of Portion 18
    HCVW
    New order Prospecting Right/(NC) 30/5/1/1/2/408
      PR (5)
    Johan Gerber
    271.5347Portion 7 Portion 11 (De Hoek)
    HCVW
    New order Prospecting Right/(NC)
      30/5/1/1/2/1127 PR (6)
    CJ Coetzee
    1,628.9209 1,288.5227


Notes:

| | (1) | A new order Mining Right was granted April 6, 2009 but
      has not yet been executed.                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                            
| | (2) | An application (208MR) to convert to a Mining Right,
      along with the consolidation of all the Wouterspan permits, was submitted
      to the DME on 21 November, 2008.
| |     |                                                                                                                                                                            
| | (3) | The renewal was accepted by the DME on 04/09/2007 and is
      being processed.                                                                                            
| |     |                                                                                                                                                                            
| | (4) | Granted. 08/08/2007-07/08/2009                                                                                                                                             
| |     |                                                                                                                                                                            
| | (5) | Granted. 08/08/2007-07/08/2009                                                                                                                                             
| |     |                                                                                                                                                                            
| | (6) | Granted. 09/11/2007 -08/11/2009                                                                                                                                            

Geology

Large areas of the terrace are covered by diamond bearing
surface deposits known as Rooikoppie gravels, often separated from the
underlying primary gravel by a hard layer of calcrete The basal gravels, termed
"Primary Gravels", are well exposed in the workings and shales and tillites of
the Dwyka Group, together with lava are common substrates of the gravels. The
bedrock displays gully and pothole features creating high diamond trapping
potential. At Wouterspan, the gravels occur 20 - 30 m above the Orange River and
appear to have been deposited in a braided river system. Suspended gravel
deposits found between the Rooikoppie and Primary gravels have also been shown
to contain diamonds.

The majority of the alluvial diamonds found in gravel deposits
along the Middle Orange River (MOR) are found in two distinct gravel horizons:
an upper deflation deposit called the Rooikoppie gravel and the basal Primary
gravels.

The Rooikoppie unit varies in thickness from a few cm up to
about 2 m and has an average thickness of about 1 m. The deposit typically rests
on sand, gravel or in places a hard, semi-continuous layer of calcrete and
silcrete. Solution cavities up to 2 m deep in the calcretised material form
sharp, discontinuous depressions that are filled with the overlying Rooikoppie
gravel.

The Primary gravel deposits comprise the lower half to one
third of the sedimentary sequence and rest directly on the bedrock. These
Primary gravels comprise a poorly sorted assemblage of large boulders (up to 45
cm in diameter at the base of the unit), cobbles and pebbles set in a sandy
matrix that is considered to have been deposited by a large, high-energy braided
system that would be readily capable of transporting diamonds. The total
sequence varies from about 8 m to 18 m in thickness.

---

 Page 38 

The Wouterspan alluvial deposits represent typical remnant
river terraces comprising gravel sequences formed, in large part, through
reworking of glacial outwash deposits and appear to have a common or similar
origin as seasonal flood deposits. The secondary or younger gravels represent
re-working of earlier deposits by late stage erosion and re-deposition as
sheetwash flood gravels in low level terraces often associated with river
damming situations and splays.

The surface deflation Rooikoppie deposits comprise a
diamond-bearing lag deposit created by erosion, winnowing and removal of light
components, and enrichment of heavy components including diamonds.

History

The first diamond discovered in South Africa was about 75 km
upstream of Wouterspan on the MOR, and led to the rapid proliferation of
small-scale artisanal mining activities.

Early mining concentrated on the surface deflation deposits,
known as Rooikoppie gravels. Rooikoppie gravels were mined extensively between
Douglas and Prieska from 1926 to 1936 and again during 1943 to 1945.

The MOR had not seen much prospecting and mining activity since
that time because large areas are covered by a very hard layer of calcrete, 0.5
m  3 m thick, which limits access to the underlying gravel horizons; and the
gravels contain a high percentage of banded ironstone clasts, which makes the
treatment and concentration of the gravels technically difficult when using the
traditional pan plant processes. More recently, the mining problem of the MOR
was solved by the use of blasting and heavy earthmoving equipment to rip and
remove the hard calcrete-silcrete layer. This new technology has resulted in the
area being effectively explored and mined for the first time.

A number of companies have been active in the area. The MOR
alluvial deposits have regularly yielded exceptional large diamonds such as a
211 carat stone recovered from a terrace on a high level terrace upstream from
Wouterspan and was reportedly sold for ZAR 28 million ($3.8 million); a 181
carat stone recovered from Terrace B on Saxendrift; a 205 carat stone recovered
by Trans Hex from Saxendrift and a 175 carat stone from Trans Hexs MOR
mine.

In 2005, drilling indicated an exploration target at Wouterspan
of gravel in the range of 30 million tonnes. Bulk sampling returned grades in
the order of 0.4 - 0.5 carats per 100 m3.

Between March 2005 and January 2006, a total of 513,892
m3 of Primary gravel and 24,013 m3 of Rooikoppie from 11
localities at Wouterspan property were tested during trial mining operations by
VWDG. Bulk sampling locations were selected according to the most well-developed
gravel assemblages both laterally and vertically as identified by drilling and a
series of box-cuts were excavated. This work indicated that the property hosts
an extensive alluvial deposit with a large average stone size within the
Rooikoppie and Primary gravel units. A volume of approximately 4,481,000
m3 of Rooikoppie gravel and 43,259,000 m3 of primary
gravel was indicated as exploration potential from this work.

Additional drilling was done in 2006, 2007 and 2008. An
independent resource estimate was done at February 2009, see Estimates of
Mineralization below.

---

 Page 39 

Mining and Processing

The upper 2-3 m of the fluvial-alluvial sequence is calcreted
to varying degrees so prior to excavation, the sample block needs to be blasted,
typically on a 5 m x 5 m grid, to break up the hard calcrete carapace. The
broken material is then stripped off using hydraulic excavators. In various
areas of the property varying depths of calcretisation has meant that some of
the upper gravel layers are also highly cemented so prior to excavation, the
gravels are ripped by one of two bulldozers, effectively liberating the gravels
(and the diamonds) from the calcrete matrix. The disaggregated material is then
loaded by excavator, onto articulated dump trucks and transported to the plant
site for further processing.

The gravels are fed into the processing plants by front end
loader. Twelve 16-ft rotary pan plants have been used to process gravels at
Wouterspan, with a combined processing capacity of 312 tonnes per hour. Once
processed, the concentrate is sent to the seven Flowsort recovery units on a
vibrating belt. The Flowsort units separate the concentrate into various size
fractions, which are all captured and placed in a twin-locked box before being
hand-sorted in a glove box. All steps in the final recovery, as well as access
to the final recovery area, are monitored by a Closed Circuit Television unit.
At least two Rockwell personnel are present whenever diamonds are sorted.

Wouterspan has been on care and maintenance since November 30,
2008, so there has not been any production in fiscal 2010.

Estimates of Mineralization

Since Indicated Resources are estimated, inter alia, by
defining an envelope of 250 m around/ahead of the current mining face, given
suitable geological conditions and drill spacing, after mining of the above
gravel from a previously identified indicated resource block, a new envelope was
modelled to contain an estimated 313,000 m3 of gravel derived from
forward modelling, which would be added to the final depleted resource estimate.
Further, a minor amount of gravel volume (some 300,000 m3) was added
to the inferred resource category by limited infill drilling completed in 2008.

The mineral resources at August 31, 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 and is responsible for the
estimate. The most recent technical report entitled Technical Report on the
Wouterspan Alluvial Diamond Property, Herbert District, the Republic of South
Africa, dated December 22, 2009, by Marshall and Norton has been filed on
www.sedar.com.

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 Page 40 

Cautionary Note to Investors Concerning Estimates of
Indicated Resources

The following table and discussion includes references to
"indicated resources". Rockwell advises investors that while this term is
recognized and required by Canadian securities regulations (under National
Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S.
Securities and Exchange Commission does not recognize it. Readers cannot assume
that all or any part of mineral deposits in this category will ever be converted
into reserves.

Table 4a. Wouterspan Indicated Mineral Resources

Description ofGravel
      Resource
    ResourceClassification
    Volume(cubic
      meters)
    Grade(2)(carats/100 cubicmeters)
    Value3(US$/carat)Rooikoppie
    INDICATED
    716,769
    0.70
    1,511Fluvial-alluvial
    INDICATED
    4,311,167TOTAL
    INDICATED
    5,027,936
    0.70
    1,511


Notes:

|(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 relates 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.

Cautionary Note to Investors Concerning Estimates of Inferred
Resources

The following discussion includes references to "inferred
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into reserves.
In addition, "Inferred resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or preliminary feasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred
resource exists, or is economically or legally mineable.

Table 4b. Wouterspan Inferred Mineral Resources

Description ofGravel
      Resource
    ResourceClassification
    Volume(cubic
      meters)
    Grade(2)(carats/100 cubicmeters)
    Value(3)(US$/carat)Rooikoppie
    INFERRED
    5,911,000
    0.70
    1,511Fluvial-alluvial
    INFERRED
    31,863,000TOTAL
    INFERRED
    37,774,000
    0.70
    1,511


Notes:

|(1) | Total figure rounded off in table 4a.                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                  
|(2) | Although the volumes of Rooikoppie and Fluvial-Alluvial
      gravels are estimated separately, the processing combines them, so
      separate grade determinations are not possible).                                          
|    |                                                                                                                                                                                                                                  
|(3) | The average diamond value given relates 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.

Plans for Fiscal 2011

During fiscal 2010 and early 2011, the mine has remained on care
  & maintenance. Subsequent to fiscal year end, the Company completed a rights
  offering and initiated plans to upgrade the processing plant facilities to provide
  greater volume capacity and more efficient recovery of smaller stones and the
  mine will be trial-mined in fiscal 2012.

---

 Page 41 

The total cost of this refurbishment, based on formal quotations
  from potential suppliers, is estimated to be about ZAR 45 million (approximately
  US$6 million). The trial-mining will form part of a planned Pre-Feasibility
  study to convert part of the estimated Indicated Resources to Probable Reserves.

The Saxendrift/Kwartelspan Property

Saxendrift

Location, Access and Infrastructure

The Saxendrift Mine area is accessed via a tarred road (route
R357) from Douglas to Prieska. A well-maintained network of high-speed gravel
roads and farm tracks provides ingress to all areas of the Saxendrift Mine and
prospecting area. Rockwell has built a bridge across the Orange River to allow
access between the operations on the south (Saxendrift) and north (Wouterspan)
sides of the river. Water for the Saxendrift Mine is pumped from the Orange
River. Power is accessed from the national power grid. Maintenance is done
during power outages and a 2 megawatt generator is available to run the plant
during these periods. A backup generator is also retained at the administration
centre in Barkley West. An unpaved airstrip and helipad are located on the
property. A large, national, airport is located at Kimberley. Labour and
services are available in Douglas and skilled labour and broader services are
available in Kimberley.

---

 Page 42 

Figure 2. Location map for the Saxendrift Project in relation to
known operations and other properties along the Middle Orange River.



Source: Technical Report

---

 Page 43 

Property Description

The Saxendrift project is comprised of the following
properties:

Saxendrift Mine
    Kwartelspan Project• Saxendrift 20 (Ptn 12, 13, 16, 20, 24, 25, Re/Farm,
        and Re/Ptn) 
        • Annex Saxesdrift 21 (Re/Ptn and PaardePan Ptn(Ptn 1)
    * Kransfontein 19 (Ptn (Ptn1))
      * Kwartelspan 25 (Re/Ptn)


Together the Saxendrift properties comprise 5,142.52 hectares.
The mining area of Saxendrift Mine constitutes 1,368.17 hectares.

The surface rights to the Saxendrift Mine properties are held
by Rockwell. The prospecting properties are owned by third parties with whom
land use agreements are negotiated. The prospecting rights on the Kwartelspan
Project cover some 903.65 hectares. Both Kwartelspan and Kransfontein properties
are co-owned by CEJ van Niekerk with whom Trans Hex Operations (Proprietary)
Limited (THO) has a surface use agreement. Although the agreement lapsed at
the end of February 2008, continued payment of a surface use rental by Rockwell
has kept the agreement in place until a new agreement is negotiated.

The following permits are valid for the project:

Table 5. Saxendrift Mineral Rights and Permits

Property Name
    Area (ha)
    Mineral Right Holder
    Permit Type and Number
    Renewal DateSaxendrift 20 Re/Ptn
    1,368.2940
    Saxendrift Mine (Pty)
      Ltd
    New Order Mining Right
      28/2008MR
    17 March 2018Annex Saxensdrift 21 Re/Ptn, and Ptn (Ptn 1)Saxendrift 20 Re/Ptn
    359.0000
    Saxendrift Mine (Pty) Ltd
    New Order Prospecting Right
      751/2006(PRC)
    29 Nov 2008 (Renewal submitted to DME on
      09/09/2008 and was accepted on 22/09/2008)Saxendrift 20 Ptn 12, 13, 16, 24, 25
    1873.6898
    HCVW
    New Order Prospecting Right (NC)
      30/5/1/1/2/1284PR
    Granted on 19 June 2008, until 18
      June 2010Kransfontein 19 Ptn (Ptn 1) Kwartelspan 25
      (Re/Ptn)
    903.6500
    Saxendrift Mine (Pty) Ltd
    New Order Prospecting Right
      210/2006
    11 April 2008 (Renewal was submitted to
      DME on 10 April 2008 and was accepted on 23 April 2008)


Geology

The present Orange River between Douglas and Prieska, generally
referred to as the Middle Orange River (MOR), displays a meandering channel
morphology, best developed in areas underlain by the Dwyka Group. Palaeochannel
depositional packages of the Orange River are preserved at different elevations
above the present Orange River bed. The ages of the terraces young with
decreasing elevation and, conversely, the probability of preservation decreases
with increasing age and elevation. The Saxendrift deposit comprises an extensive
flat lying alluvial sequence located on terraces developed on the left bank of
the present Orange River, approximately 20-70 m above the Orange River.

---

 Page 44 

The bedrock is well exposed in the workings and shale and
tillite of the Karoo age Dwyka Group, are common. The fluvial-alluvial gravels
comprise a sequence of (basal) gravels 2-4 m thick overlain by generally less
than 5 m of variably calcreted sands and silts and covered by a thin layer of
soil and scree. The cobble-sized clasts within the gravels consist mostly of
lava and quartzite with significant, if variable, amounts of Banded Iron
Formation (BIF), and minor amounts of limestone, tillite, and agate. The matrix
is sandy to gritty. As is usual with these types of deposits the degree of
calcretisation decreases downwards, from hardpan or laminar calcrete at the
surface to loosely cemented gravels at depth. The gravels are, generally, not
well sorted, and are typical of braid bars that migrate through sections of
river channels in response to variable water speed.

History

The Saxendrift area has had a long history of diamond
production dating back to the mid 1920s. An estimated 96,000 carats of diamonds
were extracted from the area between 1928 and 1964. Trans Hex commenced
exploration and mining in the area in 2000 through a merger with GEM Diamond
Mining Limited, which held the mineral rights to Saxendrift at that time.

While owned and operated by TransHex, Saxendrift comprised
three mining areas: Brakfontein, Saxendrift Terrace A and Saxendrift Terrace B.
Brakfontein was not included in the disposal to Rockwell. From commissioning to
the end of 2005, the Saxendrift Mine produced a total of 76,803 carats. The
largest gem quality stone ever produced by Trans Hex  a 216 carat octahedron 
was from the Saxendrift operation in 2001. Saxendrift also held the Trans Hex
record for the highest Dollar per carat price with a 9.22 -carat blue stone that
was sold in 2003 for in excess of US$45,000/carat. Production on Saxendrift was
achieved by open cast mining methods with processing and recovery being achieved
by a combination of rotary pan plants, Dense Media Separation and Flow-sort
X-ray recovery.

The Saxendrift Project was held by THO from 2000 until the sale
to Rockwell in 2007/2008. Although limited mining production took place up until
January 2007, the Saxendrift Mine had officially been put on care and
maintenance by THO during 2006 as a result of a variety of economic aspects.

Mining and Processing

The upper 2-3 m of the fluvial-alluvial sequence is calcreted
to varying degrees so prior to excavation, the sample block needs to be blasted,
typically on a 5 m x 5 m grid, which breaks up the hard calcrete carapace
without damaging diamonds. The broken material is then stripped off using
hydraulic excavators. In various areas of the property varying depths of
calcretisation has meant that some of the upper gravel layers are also highly
cemented so prior to excavation, the gravels are ripped by one of two
bulldozers, effectively liberating the gravels (and the diamonds) from the
calcrete matrix. The disaggregated material is then loaded by excavator, onto
articulated dump trucks and transported to the plant site for further
processing.

During much of 2008, Rockwell processed gravels through an
existing 4 x 18 ft rotary pan plant which was re-commissioned in April and used
as the primary processing plant until the new plant came on-stream during
November 2008. The new plant has a design plant-throughput of 500 tonnes per
hour, with an expected monthly treatment of 255,000 tonnes (based on the mining
of 340,000 tonnes), with recovery through a bank of ten Flowsort machines and an
Optical Sorter.

Rockwell re-commissioned an existing small pan plant on the
property in the first quarter of fiscal 2009. A new high-volume wet rotary pan
plant was constructed during the year and full commissioning took place in the
third quarter of fiscal 2009.

---

 Page 45 

Estimates of Mineralization

During calendar 2008 Rockwell re-modelled the resources
according to the Company 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, resulting in an increase in the resources and a
decrease in the inferred resources at that time.

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 and is responsible for the
estimate. The most recent technical report entitled Revised Technical Report on
the Saxendrift Alluvial Diamond Project (Saxendrift Mine and Kwartelspan
Prospect), Hay District, the Republic of South Africa, dated December 22, 2009,
by Marshall and Norton has been filed on www.sedar.com.

Production at Saxendrift over the twelve months of fiscal 2010
was 8,833.8 carats from 1,216,503 cubic meters (2,554,656 tonnes) of gravel
processed. The mineral resources in Table 6a below reflect depletion from
production during the year.

Cautionary Note to Investors Concerning Estimates of
Indicated Resources

The following table and discussion includes references to
"indicated resources". Rockwell advises investors that while this term is
recognized and required by Canadian securities regulations (under National
Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S.
Securities and Exchange Commission does not recognize it. Readers cannot assume
that all or any part of mineral deposits in this category will ever be converted
into reserves

Table 6a. Saxendrift Mineral Resources

MINING AREA
    Resource
      Classification
    Volume (cubic
      meters)
    Grade(1) (carats/100
      cubic meters)
    Value
      (US$/carat)Saxendrift Terrace A
    Indicated 1
    804,945
    1.32
    2,154Saxendrift Terrace A
    Indicated 2
    2,483,494
    0.80
    2,154Saxendrift Terrace B
    Indicated
    1,774,660
    1.15
    1,075Total/Average Saxendrift Mine Indicated
    
    5,063,099
    1.01


Note: (1) At 2 mm cut-off

---

 Page 46 

Cautionary Note to Investors Concerning Estimates of Inferred
Resources

The following discussion includes references to "inferred
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into reserves.
In addition, "Inferred resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or preliminary feasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred
resource exists, or is economically or legally mineable.

Table 6b. Saxendrift Mineral Resources

MINING AREA
    Resource
      Classification
    Volume (cubic
      meters)
    Grade(1) (carats/100
      cubic meters)
    Value
      (US$/carat)Saxendrift 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/Average Saxendrift Mine Inferred
    
    4,358,143
    0.72


Note: (1) At 2 mm cut-off

Current exploration targets include the 1,430,810 m3
of material in the dumps as well as the mapped occurrences of Terrace C at
Ankerpaal.

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 as of March 2007 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.

---

 Page 47 

Cautionary Note to Investors Concerning Estimates of Inferred
Resources

The following discussion includes references to "inferred
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into reserves.
In addition, "Inferred resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or preliminary feasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred
resource exists, or is economically or legally mineable.

Table 7. Kwartelspan Mineral Resources

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


Plans for Fiscal 2011

Ongoing review and updating of resources based on production at
Saxendrift will be done by existing Rockwell staff and reviewed by an
independent qualified person, as necessary. Since Rockwell has large amounts of
existing drill data which it acquired from TransHex, and requires further
analysis and integration with mining results, no new drilling programs have been
planned for Saxendrift for fiscal 2011.

Before any new drilling is planned and budgeted for on
Kwartelspan, Rockwell staff will complete supplementary field work, geological
mapping, internal re-interpretation and remodelling of existing data. No
additional costs have been budgeted for 2010/2011 for this exercise as it will
take place within Rockwells existing operational budgets.

During calendar 2010, Rockwell proposes to upgrade the
screening and processing sections of the plant , as part of a Pre-Feasibility
Study, which will convert a portion of the estimated Indicated Resources to
Probable Reserves. Rockwell plans to install an in-pit screening plant to
decrease the quantity of ore that has to be moved from the pit to the processing
plant. This allows for an increase efficiency and utilisation of the mining
fleet. The Company continues to make efficiency modifications to the main
processing plant. The total capital expenditure is in the order of ZAR 7,000,000
or approximately US$ 1,000,000.

Niewejaarskraal

Location, Access and Infrastructure

The Niewejaarskraal project (comprised on the Niewejaarskraal
and Viegelandsput properties) is located along the south bank of the Orange
River between Douglas and Prieska in the Northern Cape Province. Douglas lies
110 km southwest of Kimberley. Niewejaarskraal is situated approximately 66km
southwest of Douglas, some 13 km beyond Saxendrift Mine (to the south).

The Niewejaarskraal project is comprised of the farms Niewejaarskraal
  40 (two separate surveyed portions of Ptn 6 and a portion of Ptn 4, and Portion
  of Portion 2) and re/farm and Portion of the Remainder Viegelandsput 39 in the
  Prieska district of the Northern Cape Province. The area covered by the Mining
  Right is 1,766.39 hectares. The surface rights are held by Die Nuwejaarskraal
  Testamentere Trust and Redivuvus Louw, with whom Rockwell has land-use agreements
  in place.

---

 Page 48 

The Niewejaarskraal Project area is accessed via tarred route
  R357 from Douglas to Prieska. A well-maintained network of high-speed gravel
  roads and farm tracks provides ingress to all areas of the property. Water can
  be pumped from the Orange River. The property is connected to the national electricity
  grid, and the Company retains a backup generator in the Barkly West area to
  supplement as necessary. An unpaved airstrip and helipad is situated on the
  Saxendrift property, some 24 km by road from the project site. A large, national,
  airport is located at Kimberley.

Property Description

The following permits are valid for the project:

Table 8. Niewejaarskraal Mineral Rights and Permits

Property Name
    Area (ha)
    Mineral Right
    Permit Number
    Renewal DateNiewejaarskraal 40 Ptn (Ptn 6)
    1766.390
    New Order Mining
      Right
    22/2006(MR)
      NIEWEJAARSKRAAL MR
    MR Conversion Granted
      12/04/06 - valid until 11/04/16Niewejaarskraal 40 Ptn (Ptn 4)Niewejaarskraal 40 Ptn (Ptn 2)Viegelandsput 39 Ptn Re/farmViegelandsput 39 Ptn Re/farm324.105
    New Order Prospecting Right
    (NC)30/5/1/1/2/465PR
      100/2007 (PR)
    Granted 30/11/06 - 29/11/08 Renewal was submitted 09/09/08
      Renewal accepted 22/09/08Niewejaarskraal 40 Ptn (Ptn 6)
    995.200
    New Order Prospecting
      Right
    (NC)30/5/1/1/2/209PR
      214/2007 (PR)
    Granted.30/11/06- 29/11/08
      Renewal Submitted 09/09/08 Renewal accepted 22/09/08


Geology

The present Orange River between Douglas and Prieska, generally
referred to as the Middle Orange River (MOR), displays a meandering channel
morphology, best developed in areas underlain by the Dwyka Group. Palaeochannel
depositional packages of the Orange River are preserved at different elevations
above the present Orange River bed. The ages of the terraces young with
decreasing elevation and, conversely, the probability of preservation decreases
with increasing age and elevation. The Saxendrift deposit comprises an extensive
flat lying alluvial sequence located on terraces developed on the left bank of
the present Orange River, approximately 20-70 m above the Orange River.

The bedrock is well exposed in the workings and shale and
tillite of the Karoo age Dwyka Group, are common. The fluvial-alluvial gravels
comprise a sequence of (basal) gravels 2-4 m thick overlain by generally less
than 5 m of variably calcreted sands and silts and covered by a thin layer of
soil and scree. The cobble-sized clasts within the gravels consist mostly of
lava and quartzite with significant, if variable, amounts of Banded Iron
Formation (BIF), and minor amounts of limestone, tillite, and agate. The matrix
is sandy to gritty. As is usual with these types of deposits the degree of
calcretisation decreases downwards, from hardpan or laminar calcrete at the
surface to loosely cemented gravels at depth. The gravels are, generally, not
well sorted, and are typical of braid bars that migrate through sections of
river channels in response to variable water speed.

---

 Page 49 

History

The Niewejaarskraal Project was held by THO from 2001 until the
sale to Rockwell in 2007/2008.

Trans Hex began development of the Niewejaarskraal Mine with a
bulk-sampling program in mid-2001. A DMS plant was erected on site and
full-scale production commenced in April 2002. This operation was suspended in
late 2006.

TransHex commissioned Venmyn to complete mineral resource
estimates in conjunction with its plans to sell the MORO properties.

Rockwell acquired the property in April 2008, subject to
cessation rights from the DME which were acquired in February 2009.

Data from the project was compiled and re-assessed in fiscal
2009 (see Estimates of Mineralization below). No work was carried out in fiscal
2010.

Estimates of Mineralization

In fiscal 2009, 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 been 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.

A total of 8,456 carats was recovered (by THO) from
Niewejaarskraal (Terrace A Rooikoppie gravels) during the period from mid-2001
to 2005 and sold on the open market. The recovered prices varied from
US$13-2,373/carat(1), with a weighted average of US$1,375/carat.
During the same time period, the average price received for diamonds from
Terrace A on Saxendrift was US$1,404/carat and from Terrace B was
US$1,327/carat. These figures correlate well with the Niewejaarskraal data, as
would be expected from similar terraces on nearby properties. During May through
to October 2008, the average sales value for diamonds recovered from Saxendrift
Mine was US$2,154/carat. A single sale of diamonds in February 2009 (a parcel of
some 500 carats sold for US$700/carat) indicates the dramatic collapse in rough
diamond prices that has taken place in the latter part of 2008 and early 2009.
In order to deal with the vagaries of the current diamond market, Rockwell has
modelled US$1,075/carat as the figure expected (at an inferred resource
classification) for the Niewejaarskraal production during 2009 (in fact this
figure will be used by Rockwell as the expected sales value for all the Orange
River deposits during 2009). This data will be updated as actual production and
sales take place from these properties.

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 and is responsible for the
estimate. The most recent technical report entitled Revised Technical Report on
the Niewejaarskraal Alluvial Diamond Project, Hay District, the Republic of
South Africa, dated December 22, 2009, by Marshall and Norton is filed on
www.sedar.com.

---

 Page 50 

Cautionary Note to Investors Concerning Estimates of Inferred
Resources

The following discussion includes references to "inferred
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into reserves.
In addition, "Inferred resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or preliminary feasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred
resource exists, or is economically or legally mineable.

Table 9. Niewejaarskraal Mineral Resources

**Area**
    Gravel Type
    Resource
      Classification
    Volume (cubic
      meters)
    Grade
      (carats/100 cubic meters)
    Value(1) (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
    1,075**Total**
      
    INFERRED
    20,630,500
    0.84
    1,075


Note: (1) Value modelled by Rockwell for 2009.

*Planned program for Fiscal 2011*

Similar mining operations to those at Saxendrift are planned
for Niewejaarskraal.

Rockwell does not plan any development at the Niewejaarskraal
mine for fiscal 2011. All care and maintenance costs are covered under the
Saxendrift mine operational budget.

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 Page 51 

Other Properties

Klipdam Extension Property and Bulk Sampling Program

Klipdam Extension is situated east of the Klipdam mine. The
Company has established a low costs mobile processing and final recovery plant
and mining fleet (utilizing spare earth moving equipment owned by the Company to
undertake a bulk sampling project on this property. The processing plant was
commissioned at the end of the first quarter of fiscal 2011.

Zwemkuil-Mooidraai Project

Property Description

The other prospects on the MOR acquired through the Trans Hex
transaction known as the Zwemkuil-Mooidraai Project are:

Table 10. Other MOR Prospects Mineral Rights

FARM NAME
    PORTION
    SIZE
      (Hectares)
    STATUSHolsloot 47
    Ptn Of Ptn 3
    1049.590
    Transferred April 2008Zwemkuil-Mooidraai Project
    Zwemkuil 37
    Ptn Of Rem
    2488.124Mooidraai 36
    Ptn Of Rem
    2901.000


Ptn - portion

Location and Access

The Zwemkuil 37, Mooidrai 36 and Holsloot 47 farms are
accessible by secondary gravel roads approximately 10 km, 17 km and 16 km,
respectively, from the Niewejaarskraal Project.

History

During its tenure of the MOR operations, Trans Hex also
conducted exploration and evaluation work on several large alluvial gravel
terraces to the north east of Saxendrift, namely Kwartelspan, and to the south
west of Niewejaarskraal, namely Vieglandsput, Zwemkuil-Mooidraai and
Remhoogte-Holsloot. Exploration work conducted on the adjacent properties
included reverse circulation drilling, trenching and bulk sampling.

Mineral Resources

The Mineral Resources on the Zwemkuil-Mooidrai Project 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.

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 Page 52 

Cautionary Note to Investors Concerning Estimates of Inferred
Resources

The following discussion includes references to "inferred
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into reserves.
In addition, "Inferred resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or preliminary feasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred
resource exists, or is economically or legally mineable.

Table 11. Other MORO Properties Mineral Resources

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


Prospecting Permits

In August 2008, the Company acquired eight new prospecting
permits from the DME. These new prospecting permits are located in the MOR 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.

Table 12. Other Mineral Rights

PROSPECTING RIGHT
    PROPERTY
    STATUSHC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/193 PR
    Remainder of Portion 9 (Wouter)
      (1369,9544 ha) and Portion 14 (Stofdraai) (1640,6412 ha) of the
      farm Lanyon Vale 376, Hay
    Granted. 22/11/2005 - 21/11/2007
      Renewal lodged on 21/08/2007 Accepted on 04/09/2007HC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/197 PR
    Portion 16 (a portion of Portion
      9) of the farm Lanyon Vale 376, Hay (240,4480 ha)
    Granted. 08/08/2007- 07/08/2009HC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/309 PR
    Remainder of Portion 1 Zweet
      Fontein 76 (92,8077 ha) Portion 2 (a portion of Portion 1)
      Zweet Fontein 76(9,4219 ha) Portion 3 Zweet
      Fontein 76(11,3365 ha) Portion 5 of the farm Zweet Fontein
      76(293,8018 ha) Remainder of Portion 1 Of the farm
      Blaaubosch Drift 78(1418,0758 ha) Portion 3 of the farm
      Blaaubosch Drift 78(219,6875 ha)
    Granted. 08/08/2007- 07/08/2009HC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/408 PR
    Remainder of Portion 18 (a
      portion of Portion 10) of the farm Lanyon Vale 376, Hay
      (271,5347 ha)
    Granted. 08/08/2007- 07/08/2009HC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/1127 PR
    Portion 7 (1628,9209 ha) &
      Portion 11 (1288,5227 ha) of the farm Lanyon Vale 376, Hay
    Granted. 09/11/2007- 08/11/2009


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 Page 53 

HC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/1247 PR
    Portion 20 (Eben) Reads Drift
      74, Herbert (1713,0640 ha) 38 (a portion of Portion 18) of the
      farm Reads Drift 74, Herbert (513,9192 ha)
    Granted. 25/04/2008 24/04/2010HC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/1257 PR
    The Remaining Extent (889,8725
      ha), Portion 1 (Bredenhands Pan) (894,5363 ha) and Portion 2
      (Lentvort) (894,7719 ha) of the farm Diamond Valley 29,
      Hopetown
    Granted. 25/04/2008  24/04/2010HC van Wyk Diamonds Ltd (NC) 30/5/1/1/2/1284 PR
    Portion 12 (63,0360 ha), of the
      farm Saxendrift 20, Hopetown Portion 13 (63,0360 ha) of the
      farm Saxendrift 20, Hopetown Portion 16 (1545,4884 ha) of
      the farm Saxendrift 20, Hopetown Portion 24 (95,1727 ha)
      & Portion 25 (106,9567 ha) of the farm Saxendrift 20,
      Hopetown
    Granted.19/06/2008 - 18/06/2010


Lanyonvale Project: The Lanyonvale properties are
situated adjacent to and downstream of Rockwells Wouterspan Mine on the MOR.
This project will recommence upon the completion of the new Wouterspan
plant.

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 MOR, downstream of Makoenskloof where Rockwell performed bulk
sampling in 2007, producing some diamonds. The 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 km
south of the modern day Orange River and at the same general elevation as the
Companys Saxendrift project located about 15 km 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 m above the
current river, whereas Terrace A is some 120 m above the present day river, and
Terrace B is situated between A and C.

Makoenskloof Project

Property Agreement

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 ZAR19 million
($2.7 million) for the property and associated equipment.

Location and Access

The Makoenskloof project is located on the north bank of the
MOR, approximately 20 km from the town of Douglas, South Africa and 40 km from
Wouterspan. The property is accessible by road from Douglas.

---

 Page 54 

Property Description

The Makoenskloof Project is a Portion 22 of Reads Drift 74
farm, located in the Herbert District of the Northern Cape Province of the
Republic of South Africa. The property is 1,808.08 hectares in size.

Geology

The Makoenskloof deposit comprises an extensive flat lying
alluvial sequence located on a terrace developed on the right bank of the
present Orange River. The bedrock is well exposed in the workings and shale and
tillite of the Karoo age Dwyka Group are common. Also visible in outcrop are
limestone and siltstone (flagstone) of the Griqualand West Group (Transvaal
Supergroup). The bedrock characteristically displays an irregular erosional
surface with gully and pothole features creating high diamond trapping
potential. At Makoenskloof, the gravel terrace occurs approximately 20 to 40 m
above the Orange River and appears to have been deposited in a braided river
environment. These terraces may be classified as Lower to Intermediate deposits,
presumably of Plio-Pleistocene age.

Only small isolated outcrops of Rooikoppie gravels are known
from the property. The fluvial-alluvial gravels on Makoenskloof comprise a
sequence of (basal) gravels 2-4 m thick overlain by generally less than 5 m of
variably calcreted sands and silts and covered by a thin layer of soil and
scree. The cobble sized clasts within the gravels consist mostly of lava and
quartzite, with minor limestone, chert, tillite, agate and banded iron formation
(BIF). The matrix is sandy to gritty. As is usual with these types of deposits
the degree of calcretisation decreases downwards, from hard pan or laminar
calcrete at the surface to loosely cemented gravels at depth.

The gravels are, generally, not well sorted, massive to
horizontally - bedded and more matrix - supported. The larger clasts are,
generally, in the 300 - 500 mm range. They are typical of braid bars that
migrate through sections of river channels in response to variable water speed.
Numerous sand-silt lenses (0.5 1.5 m thick) are also present, indicative of
relatively low energy environments such as are found on bar tails. However,
incised into the sequence are scour channels filled with clast supported, large
cobble to boulder units. These are locally referred to as high speed channels
that reflect deposition in a much higher energy environment. It is, typically,
from these higher energy environments, especially where incised into the bedrock
that the larger diamonds are recovered.

Makoenskloof gravel has minimal BIF, so processing and
metallurgy is less complicated and overall mining costs are lower, thereby
compensating for potentially low grades.

Recent Work

Bulk sampling and processing was conducted during fiscal 2008.
Diamonds recovered were sold in tender sales in October and November 2007 and
January 2008. No further work has taken place since that time and none is
currently planned.

ITEM 4AUNRESOLVED STAFF COMMENTS

Not applicable as the Company is a non-accelerated filer.

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 Page 55 

**ITEM
5.**          **OPERATING AND FINANCIAL REVIEW AND PROSPECTS**

The following discussion and analysis of Rockwell's financial
condition and results of operations for the fiscal year ended February 28, 2010
and February 28, 2009 and the nine months ended February 29, 2008 should be read
in conjunction with the Company's consolidated financial statements and related
notes included in this Annual Report on Form 20-F. The consolidated financial
statements included in this Annual Report on Form 20-F were prepared in
accordance with Canadian GAAP. For a reconciliation of the Canadian GAAP to US
GAAP, see note 17 to the consolidated financial statements.

Overview

Rockwell is engaged in the business of alluvial diamond
production. The Company is focused on acquiring additional operating diamond
properties or projects that have near-term potential for alluvial diamond
production, as described in detail under ITEM 4B Business Overview.

Going Concern

Rockwell Diamonds Inc. (Rockwell or the Company) is
incorporated under the British Columbia Business Corporations Act
(formerly the Company Act of British Columbia), and is engaged in the
business of diamond production and the acquisition and exploration of natural
resource properties. The Companys mineral property interests are located in
South Africa.

The accompanying consolidated financial statements have been
prepared on a going concern basis in accordance with Canadian generally accepted
accounting principles (''GAAP''). The going concern basis of presentation
assumes that Rockwell will continue in operation for the foreseeable future and
will be able to realise its assets and discharge its liabilities and commitments
in the normal course of business.

For the year ended February 28, 2010 the Company incurred
consolidated losses of $7.0 million and has incurred accumulated losses to date
of $49.1 million. In response to the economic crisis that started in 2009, the
Company reduced costs in order to respond to reduced demand and prices for the
Companys diamonds. In fiscal 2010, diamond prices have increased gradually from
US$585 at the beginning of the year to US$1,269 at February 28, 2010. Analyst
forecasts as of March 1, 2010 project prices of US$1,143 per carat in the next
twelve months and US$1,425 in the following twelve months. The Company expects
to pass breakeven point in September 2010.

At year end, the Companys current assets exceeded its current
liabilities by $0.3 million and the Companys total assets exceeded its total
liabilities by $77.8 million. The Company has forecasted its cash flows for the
fiscal years 2011 and 2012 and these forecasts indicate that the Company will
continue as a going concern. The forecasts assume the plant operating at 85% of
capacity, prices remain at current levels, which are 33% below pre-crisis levels
and the South African Rand remains at current levels relative to the United
States and Canadian Dollar.

In order to increase cash resources and fund current year
losses, the Company raised equity of $8.6 million in a private placement at the
end of the current year and a further $8.0 million subsequent to the year end.

Based on the Companys cash resources and the above forecasts,
the Company has sufficient working capital and reserves to maintain operations
through breakeven point and sufficient cash and working capital to fund the
continuing losses until then. Accordingly, the financial statements have been
prepared on the basis of accounting policies applicable to a going concern.
Future events beyond the Companys control may change the Companys ability to
continue as a going concern.

---

 Page 56 

If the going concern concept was no longer appropriate,
significant adjustments would be required to the carrying value of assets and
liabilities and would be recorded at that time.

Critical Accounting Policies

The Company's significant accounting policies are presented in
note 3 of the accompanying audited consolidated financial statements for the
year ended February 28, 2010. A reconciliation of material measurement
differences between these principles and accounting principles generally
accepted in the United States is shown in note 17. The preparation of
consolidated financial statements in conformity with Canadian and US generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting periods. The Company evaluates its
estimates on an ongoing basis and bases them on various assumptions that are
believed to be reasonable under the circumstances. The Company's estimates form
the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. Such
estimates and assumptions include the estimation of mineral resources and
reserves, the carrying values of mineral properties, the carrying values of
property, plant and equipment, the assumptions used in determining the
reclamation obligation, and the valuation of stock-based compensation expense.

**A.**         
  **Operating Results**

Rockwell's annual and quarterly operating results are primarily
affected by the level of operations activity associated with its mineral
property interests. Economic factors such as foreign exchange fluctuations,
mineral prices and regulatory development may also affect the Company's
operating results and the volatility of the trading price of its common stock.
To management's knowledge, there are no governmental, economic, fiscal, monetary
or political policies or factors that have materially affected, or could
materially affect, directly or indirectly, the Company's operations that are not
disclosed in this Annual Report. Inflationary factors have not had a material
impact on the Company's operating results for fiscal 2010, 2009 or 2008. The
Company's financial position and results of operations are summarized below:

|                                                            |  | As at        |  |  | As at        |  |  | As at        | 
|----------------------------------------------------------- |  | ------------ |  |  | ------------ |  |  | ------------ | 
|                                                            |  | February 28, |  |  | February 28, |  |  | February 29, | 
|Balance Sheet                                               |  | 2010         |  |  | 2009         |  |  | 2008         | 
|Current assets                                              |  | 11,875,714   |  |  | 15,099,971   |  |  | 38,596,562   | 
|Mineral properties                                          |  | 30,850,998   |  |  | 28,894,477   |  |  | 25,247,937   | 
|Other assets                                                |  | 62,516,674   |  |  | 62,367,968   |  |  | 69,848,625   | 
|Total assets                                                |  | 105,243,386  |  |  | 106,362,416  |  |  | 133,693,124  | 
|                                                            |  |              |  |  |              |  |  |              | 
|                                                            |  |              |  |  |              |  |  |              | 
|Current liabilities                                         |  | 11,577,472   |  |  | 14,462,800   |  |  | 12,502,301   | 
|Other liabilities (including non-controling
      interest) |  | 16,471,823   |  |  | 21,478,590   |  |  | 34,076,016   | 
|Shareholders equity                                        |  | 77,194,091   |  |  | 70,421,026   |  |  | 87,114,807   | 
|Total liabilities and shareholders equity                  |  | 105,243,386  |  |  | 106,362,416  |  |  | 133,693,124  | 

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 Page 57 

|                                                           |  |              |   |  |              |   |  | Nine months  |  
|---------------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ------------ | -
|                                                           |  | Year ended   |   |  | Year ended   |   |  | ended        |  
|                                                           |  | February 28, |   |  | February 28, |   |  | February 29, |  
|Statements of Operations                                   |  | 2010         |   |  | 2009         |   |  | 2008         |  
|Revenue                                                    |  | 29,776,933   |   |  | 34,330,078   |   |  | 36,038,106   |  
|Mine site operating costs                                  |  | (22,913,999  | ) |  | (25,113,363  | ) |  | (22,730,271  | )
|Amortization and depletion                                 |  | (9,545,727   | ) |  | (11,287,197  | ) |  | (6,533,941   | )
|Operating profit (loss)                                    |  | (2,682,793   | ) |  | (2,070,482   | ) |  | 6,773,894    |  
|                                                           |  |              |   |  |              |   |  |              |  
|Expenses                                                   |  |              |   |  |              |   |  |              |  
|Accretion of reclamation
      obligation                  |  | 481,932      |   |  | 1,072,389    |   |  | 464,316      |  
|Exploration                                                |  | 97,805       |   |  | 498,739      |   |  | 604,169      |  
|Foreign exchange loss (gain)                               |  | 483,902      |   |  | (350,485     | ) |  | (751,315     | )
|Legal, accounting and audit                                |  | 1,389,272    |   |  | 1,863,261    |   |  | 790,725      |  
|Office and administration                                  |  | 3,411,990    |   |  | 3,489,460    |   |  | 2,697,077    |  
|Shareholder communications                                 |  | 506,482      |   |  | 453,489      |   |  | 198,985      |  
|Stock-based compensation                                   |  | 335,358      |   |  | 1,834,422    |   |  | 1,826,315    |  
|Travel and conference                                      |  | 194,544      |   |  | 605,812      |   |  | 654,705      |  
|Transfer agent filings                                     |  | 246,866      |   |  | 250,878      |   |  | 544,232      |  
|                                                           |  | 7,148,151    |   |  | 9,717,965    |   |  | 7,029,209    |  
|Other Items                                                |  |              |   |  |              |   |  |              |  
|Loss on disposal of equipment                              |  | 36,720       |   |  | 364,918      |   |  | 402,411      |  
|Write-down or loss on
      disposal of mineral properties |  | 657,634      |   |  | 203,339      |   |  |             |  
|Interest (income)                                          |  | (466,688     | ) |  | (2,672,021   | ) |  | (1,118,396   | )
|Interest on capital leases                                 |  | 969,530      |   |  | 1,592,001    |   |  | 1,289,385    |  
|Convertible note accretion and interest
      expense      |  | 576,272      |   |  | 3,009,680    |   |  | 270,976      |  
|Other income                                               |  | (513,338     | ) |  | (303,399     | ) |  | (111,202     | )
|Write down of assets                                       |  | 23,862       |   |  | 2,590,958    |   |  |             |  
|Write-off of amounts
      receivable                      |  | 167,414      |   |  | 291,063      |   |  | 18,360       |  
|Write-down of marketable securities                        |  |             |   |  |             |   |  |             |  
|                                                           |  | 1,451,406    |   |  | 5,076,539    |   |  | 751,534      |  
|                                                           |  |              |   |  |              |   |  |              |  
|Loss before income
      taxes                             |  | 11,282,350   |   |  | 16,864,986   |   |  | 1,006,849    |  
|Income tax expense                                         |  | 18,946       |   |  | 7,000        |   |  | 179,290      |  
|Future income tax (recovery) expense                       |  | (2,645,000   | ) |  | (3,347,000   | ) |  | 2,261,110    |  
|Loss before non-controlling interest                       |  | 8,656,296    |   |  | 13,524,986   |   |  | 3,447,249    |  
|Non-controlling interest                                   |  | (1,618,603   | ) |  | (549,024     | ) |  | 5,955,779    |  
|Loss for the period                                        |  | 7,037,693    |   |  | 12,975,962   |   |  | 9,403,028    |  
|Other comprehensive loss                                   |  | (5,429,700   | ) |  | 13,409,383   |   |  |             |  
|Total comprehensive loss                                   |  | 1,607,993    |   |  | 26,385,345   |   |  | 9,403,028    |  
|                                                           |  |              |   |  |              |   |  |              |  
|Basic and diluted loss per common share                    |  | 0.03         |   |  | 0.05         |   |  | 0.05         |  
|Weighted average number of
      common shares outstanding |  | 267,164,309  |   |  | 237,924,152  |   |  | 196,428,551  |  

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 Page 58 

Production and Sales

The following is a comparison of the twelve months of fiscal
2010 (ended February 28, 2010) with the twelve months of fiscal 2009 ended
February 28, 2009.

PRODUCTIONOperation
      12 months ended February 28, 2010
      12 months ended February 28, 2009Volume (cubic meters)
      Carats
      Average grade (carats per 100
        cubic meters)
      Volume (cubic meters)
      Carats
      Average grade (carats per 100
        cubic meters)Holpan
      805,925
      6,398.2
      0.79
      561,583
      4,127.40
      0.73Klipdam
      895,669
      9,669.8
      1.08
      711,924
      7,041.81
      0.99Wouterspan
      -
      14.1
      -
      552,293
      3,897.06
      0.71Saxendrift
      1,216,503
      8,833.8
      0.73
      194,287
      2,436.73
      1.18Total
      2,918,097
      24,915.9
      0.85
      2,020,087
      17,503.00
      0.87


SALES, REVENUE AND INVENTORYOperation
      12 months ended February 28, 2010
      12 months ended February 28, 2009Sales (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
      6,457.7
      3,166,842
      492.09
      780.3
      3,741.08
      4,272,511
      1,142.05
      839.82Klipdam
      10,816.7
      6,301,240
      581.26
      595.4
      5,656.97
      18,954,292
      3,350.61
      1,742.31Wouterspan
      591.0
      280,193
      475.32
      -
      3,640.81
      4,698,121
      1,290.41
      576.85Makoenskloof
      -
      -
      -
      -
      212.00
      1,500,119
      7,076.03
      -Saxendrift
      8,667.1
      17,055,281
      1,967.81
      533.9
      2,069.54
      3,656,268
      1,766.71
      367.21Total
      26,532.5
      26,803,556
      1,010.21
      1,909.6
      15,320.40
      33,081,311
      2,159.30
      3,526.19


*Included in the Klipdam sales are 322.02 carats at $122,973
from ERF-1 Windsorton, a prospecting right within the Holpan-Klipdam mining area

INVENTORIES (carats)Operation
      Rough Diamond Inventories
        Beginning of Period*
      Production
      Rough Diamond Sales
      Rough Diamond Inventories
        End of PeriodHolpan
      839.8
      6,398.16
      6,457.7
      780.32Klipdam
      1,742.3
      9,669.82
      10,816.7
      595.43Wouterspan
      576.9
      14.08
      591.0
      -Saxendrift
      367.2
      8,833.84
      8,667.1
      533.91Total
      3,526.2
      24,915.90
      26,532.5
      1,909.66


*Included in the Klipdam inventories are 322.02 carats from
ERF-1 Windsorton, a prospecting right within the Holpan-Klipdam mining area.

---

 Page 59 

Subsequent to the year end, the production for the five months
ended July 31, 2010 are tabulated below:

Mine
    Volume (cubic meters)
    Carats
    Average Grade (carats/100
      cubic meters)Holpan
    355,459
    3,678.41
    1.03Klipdam
    383,194
    4,236.80
    1.11Klipdam Extention
    62,576
    369.59
    0.59Saxendrift
    611,505
    3,527.89
    0.58Total
    1,412,734
    11,812.69
    0.82


Fiscal 2010 compared to twelve months ended Fiscal 2009

The Company realized a loss of $7.0 million for the twelve
month period ended February 28, 2010 compared to a loss of $13.0 million for the
prior year. The loss was due to the collapse in the diamond market and
precipitous decline in diamond prices that commenced in the fourth quarter of
fiscal 2009 due to the ongoing global credit crisis and economic recession. This
resulted in on-going weakness of diamond prices through the first two quarters
of fiscal 2010 and the slow recovery in the third and fourth quarters. Though
prices remained weak during this period there has been an overall improvement in
prices of about 49% from the initial sharp fall in prices of about 50% in the
last quarter of fiscal 2009. Operations at the Wouterspan Mine are still on care
and maintenance in order to preserve the Companys cash reserves. Proceeds from
the capital raise will be used to upgrade the plant at Wouterspan, the
re-commissioning of which will coincide with the forcasted recovery of the
demand for high quality stones in the final quarter of fiscal 2011.

During the twelve months ended February 28, 2010, the Company
realized rough diamond sales of $29.8 million compared to $34.3 million for the
comparable period in the prior year. Sales in March 2009 were at US$531.43 per
carat, 35% of the pre-October 2008 average sales prices achieved of about
US$1,800 per carat. Prices have gradually recovered, climbing to US$1,090.55 per
carat in July 2009, US$862.36 per carat in August/September 2009 tenders,
US$1,434.33 in November 2009 and US$1,154.11 in the January/February 2010
tender. The lower price per carat received in August and January/February was
related to lower grade mixes of stones sold in July and November 2009.

As noted above, the credit crunch and ensuing recession
resulted in diamond prices falling sharply in late calendar 2008 (fourth quarter
of fiscal 2009). Sales prices achieved in the first quarter of fiscal 2010 were
below the cost of production; however, prices achieved in the second quarter
covered the cost of production, but were not sufficient to cover fixed overheads
in full and lease payments. As the Company was required to maintain liquidity,
sales were made below production cost. This resulted in the Company invoking the
payment deferral with Komatfin, which ended on November 1, 2009.

Income generated in November 2009 was sufficient to cover all
the third quarter costs and significant arrear creditors, including ZAR11.4
million ($1.6 million) for outstanding royalties. The November income resulted
in a third quarter operating profit.

Mining costs for the twelve months ended February 28, 2010
amounted to $22.9 million (twelve months ended February 28, 2009 - $25.1
million), which excludes amortization and depletion charges of $9.5 million
(twelve months ended February 28, 2009  $11.3 million). The Wouterspan mine was
placed on care and maintenance, and this resulted in less costs being incurred
in the current year.

Exploration expenses (excluding stock-based compensation)
decreased to $97,805 for the twelve months ended February 28, 2010 compared to
$498,739 for the same period in the prior year as a result of the diminished
exploration activity due to the recession.

Office and administrative costs for the twelve months ended February
  28, 2010 decreased to $3.4 million from $3.5 million incurred for the same period
  in the prior year. This decrease was primarily the result of controlling costs
  and reducing overheads.

---

 Page 60 

Travel and conference expenses amounted to $194,544 for the
  twelve months ended February 28, 2010 compared to $605,812 for the same period
  in the previous year. Legal, accounting and audit expenses for the twelve months
  ended February 28, 2010 amounted to $1.4 million compared to $1.9 million incurred
  for the same period in the prior year. The Company has experienced significant
  legal costs due to the unsolicited bid by Pala and the capital raising exercise.

Stock-based compensation decreased to $0.3 million for the
twelve months ended February 28, 2010 in comparison to $1.8 million for the same
period in the previous year as a result of less options being granted, lower
share prices, the effect of cancelled share options and the vesting of 2007
options.

Net interest expenses were $1.1 million for the twelve months
ended February 28, 2010, compared to $1.9 million for the twelve months ended
February 28, 2009, due to the use of the credit facility in fiscal 2009 to
maintain working capital and the deferred lease payments.

Potential Acquisition

CAUTIONARY NOTE TO INVESTORS CONCERNING ESTIMATES OF
INDICATED RESOURCES

The following discussion includes references to "indicated
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into
reserves.

CAUTIONARY NOTE TO INVESTORS CONCERNING ESTIMATES OF INFERRED
RESOURCES

The following discussion includes references to "inferred
resources". Rockwell advises investors that while this term is recognized and
required by Canadian securities regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), the U.S. Securities and
Exchange Commission does not recognize it. Readers cannot assume that all or any
part of mineral deposits in this category will ever be converted into reserves.
In addition, "inferred resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or preliminary feasibility studies, except in rare cases.
Investors are cautioned not to assume that part or all of an inferred
resource exists, or is economically or legally mineable.

In March 2010, the Company announced that it has signed a term
sheet with Etruscan Diamonds Limited whereby the Company proposes to purchase
Etruscans Blue Gum diamond operation in the Ventersdorp region, South Africa.
The acquisition is for 74% of the operation with the balance owned pursuant to
South Africas Black Economic Empowerment initiative. The price to be paid to
Etruscan is an amount not exceeding ZAR33.5 million (approximately $4.65
million) payable in Rockwell shares valued at $0.068 each. The Company will also
assume certain non-material property maintenance obligations effective, on
signature of the term sheet on March 10, 2010, and other financial obligations
upon completion of the acquisition.

The Blue Gum alluvial diamond deposit hosts estimated mineral
resources of 25 million cubic meters (indicated) with a grade of 2.37 carats/100
cubic metres and 15 million cubic meters (inferred) with a grade of 2.37
carats/100 cubic metres as at October 2009. Tania Marshall, PhD., Pr.Sci.Nat.,
an independent Qualified Person, is responsible for the resource estimate. A
technical report has been filed on the Companys profile at www.sedar.com.

---

 Page 61 

Completion of the acquisition is subject to a number of
conditions including South African mining ministry consent, securities
regulatory approvals including TSX, satisfactory due diligence and project
development financing and electric power negotiations. The Rockwell shares to be
issued will be subject to escrow, resale and voting restrictions and will not
materially affect control. Completion is targeted for the third calendar quarter
of 2010.

Acquisition

On April 21, 2010 the Company acquired a 20% shareholding in
Flawless Diamonds Trading House (Pty) Limited from Hennie van Wyk for the amount
of $95,686. Flawless is a registered diamond broker which provides specialist
diamond valuation, marketing and tender sales services to the Company.

Through its shareholding, Rockwell will have the ability to
exercise significant influence over the operations of Flawless and as a result
will equity account the results of Flawless in fiscal 2011 from the effective
date of acquiring its shareholding.

Summarised financial information of FlawlessFinancial Position as at February 28, 2010Total Assets
    
    5,159,027Total Liabilities
    
    4,672,164Net Assets
    
    486,863Financial Performance for the year ended
      February 28,2010Total Revenue
    
    36,813.912Total profit for the period
    
    168,712Capital commitments and contingent
      liabilities of associate
    
    Nil


Corporate

On April 29, 2009, Pala Investments Holdings Limited (Pala)
called a special shareholders meeting of the Company. The meeting was called to
remove certain directors of the Company, to appoint and elect certain new
directors and to amend and terminate the Companys shareholders rights plan.
The special shareholders meeting was held on June 17, 2009 and the proposed
resolutions to reconstitute the Board and amend and terminate the shareholders
rights plan were not approved by the shareholders. Subsequently, two of the
Companys independent directors and Audit Committee members, Messers G. Radke
and T. Janes resigned from the Board.

During the third quarter of fiscal 2010, Messers W. Jacobs and
R. Linnell were appointed to the Board of Directors.

In the fourth quarter of fiscal 2010, Mr W. Fisher resigned
from the board and Mr G. Yong was appointed to the Rockwell Board of Directors.

The current Audit Committee is comprised of Messers W. Jacobs
and R. Linnell. The Company is in the process of identifying and appointing
additional independent directors to the Company and to the Audit Committee.

---

 Page 62 

In addition, the Company appointed Graham Chamberlain as its
Chief Operating Officer as of November 1, 2009.

Fiscal 2009 compared to nine months ended Fiscal 2008

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 ended 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 on 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. Amortization 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.

Expenses before other items for fiscal 2009 increased to $9.7
million in comparison to $7 million incurred for fiscal 2008 ($9.3 million
annualized). 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 included:Loan by DME for reclamation
    $0.5 MillionProcessing Plant
    $1.6 MillionMineral Rights
    $0.3 MillionMine buildings
    $0.2 Million


---

 Page 63 

**B.**         
  **Liquidity and Capital Resources**

Liquidity

At February 28, 2010, the Company had cash of $2.5 million and
an overdraft balance of $0.7 million, a net balance of $1.8 million and a
working capital of $0.3 million, as compared to cash of $4.0 million, an
overdraft of $3.5 million and working capital of $0.6 million at February 28,
2009.

The Company had no long-term debt at February 28, 2010, 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
7.3153, the closing rate in effect on February 28, 2010.

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.

The Company continues to review its capital expenditure program
for 2010, non-core activities and all service provider contracts. Management
continues to focus on improved 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 cash equivalents will be
sufficient to fund current operations and settle obligations as they fall 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 availability of credit and capital markets.

The Company has an overdraft facility available for its
operation of ZAR28 million ($3.8million) of which $0.7million have been utilized
at February 28, 2010. Current operating income is being used to service this
facility. This facility has an interest cost based on prime and is reviewed
periodically.

As of May 31, 2010, the Company has unrestricted cash of $8.6
million and has utilized $2.0 million of the $3.8 million overdraft facility to
maintain its operational requirements.

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.

---

 Page 64 

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 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.

Financing

During the fourth quarter of fiscal 2010, the Company raised
$8.6 million from a private placement to new and existing shareholders. Of this
amount, $6.0 million was utilised in fiscal 2010 to strengthen the Companys
balance sheet and was allocated as follows:

- Repayment of a four month payment deferral (capital portion of lease
  payments) from Komatfin, the institution that finances the Mobile Production
  Vehicles (yellow fleet). This deferral had run from July until November 1,
  2009, and provided short term financing of $2.2 million.
- Repayment of the short term, partially secured, borrowing facility of $3.8
  million.

Subsequent to February 28, 2010, the Company raised
approximately $4.6 million through a fully subscribed rights offering. Further
to the rights offering and a Standby Agreement entered into at the outset of the
rights offer, funds of $3.4 million were received from Daboll Consultants
Limited by way of a private placement. Overall in fiscal 2010, the Company
successfully raised a total amount of $16.6 million through the combined private
placements and rights offer. The majority of the funds raised by Rockwell will
be allocated to further optimize, modernize and re-commission existing
operations. Growth and expansion to take advantage of the recovering diamond
market is a key priority for Rockwell.

Other than already described above, the Company had no other
lines of credit or other sources of financing.

Financial Instruments

The Company's financial instruments consist of cash and cash
equivalents, restricted cash, amounts receivable, reclamation deposits, accounts
payable and accrued liabilities and capital lease obligations. The Company has
not entered into any derivative or other financial instruments. The fair values
of these financial instruments approximate their carrying values, unless
otherwise noted.

The Company is exposed in varying degrees to a variety of
financial instrument related risks. The Board approves and monitors the risk
management processes, including treasury policies, counterparty limits,
controlling and reporting structures, credit risk, liquidity risk, currency
risk, interest risk and diamond price risk.

---

 Page 65 

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, restricted cash, accounts
receivable and trade receivable from a related party. The carrying values of the
Companys cash and cash equivalents, accounts receivable and trade receivable
from a related party represents the maximum exposure to credit risk.

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 does not have financial assets that are
invested in asset backed commercial paper.

The Company minimizes its credit risk by reducing credit terms
to 30 days on its sales.

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 raised $8.6 million
in a private placement at the end of the current year and a further $8.0 million
subsequent to the year end. 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 cash 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.

Currency 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 ZAR. As a result, the Company is subject to currency 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.

Interest Rate Risk

The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. The Companys policy is to invest
cash at floating rates of interest and cash reserves are to be maintained in
cash equivalents in order to maintain liquidity, while achieving a satisfactory
return for shareholders. Fluctuations in interest rates when the cash
equivalents mature impact interest income earned.

---

 Page 66 

The Company has capital lease obligations with several
financial institutions. The capital leases bear interest at rates linked to the
prevailing prime rate of the relative financial institution, and are subject to
interest rate change risk.

Diamond price risk

The value of the Company's mineral resource properties is
dependent on the price and the outlook of diamonds. 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.

The profitability of the Company's operations is highly
correlated to the market price of diamonds. If diamond prices decline for a
prolonged period below the cost of production of the Company's operating mines,
it may not be economically feasible to continue production.

Material Commitments for Capital Expenditures

The Company has signed a term sheet on March 10, 2010 with
Etruscan diamonds Limited whereby the Company proposes to purchase Etruscans
Blue Gum diamond operation in the Ventersdorp region, South Africa. The
acquisition is for 74% of the operation with the balance owned pursuant to South
Africas Black Economic Empowerment initiative. The price to be paid to Etruscan
is an amount not exceeding ZAR33.5 million (approximately $4.7 million) payable
in Rockwell shares valued at $0.068 each. The Company will also assume certain
non-material property maintenance obligations effective from March 10, 2010 and
other financial obligations upon completion of the acquisition.

Other than the above the Company had no material commitments
for capital expenditures as at February 28, 2010 and August 31, 2010.

**C.**         
**Research and Development, Patents and License, etc.**

Rockwell does not carry out any research or development
activities

**D.**          **Trend Information**

Following the drastic decline in international diamond prices
in late 2008 and the negative impact of the world economic recessions, the
prices of rough diamonds have returned to mid 2008 values. During the first two
quarters of fiscal 2010, the market experienced shortages due to limited supply
of rough diamonds from the larger producers. Subsequently De Beers increased the
prices on their boxes and further to this increase sight holders were selling
their DTC boxes (Diamond Trading Company) for a premium of single and low
double digit percentages; this will result in producers increasing their prices
until such time as the premiums have been absorbed. The demand for larger stones
has improved.

Following a drastic 50% decline in diamond prices in the last
  quarter of fiscal 2009, rough diamond prices have showed an improvement in price
  during the last two quarters of fiscal 2010. The effects of the diamond price
  decline in the first part of fiscal 2009, and the subsequent improvement in
  prices during the last two quarters are reflected in prices achieved by Rockwell
  over the fiscal year. The Company sold parcels of diamonds in March, May, June,
  July, August/September and November 2009, and January/February 2010.

---

 Page 67 

Prices were weak in the first two quarters of fiscal 2010 and
  strengthened in the last two quarters as indicated in the following average
  sales prices. The average price per carat received was US$531.43 in March, US$584.69
  in May, US$699.75 in June, US$807.20 in early July, US$1,090.55 on July 27,
  US$862.36 in the August/September, US$1,416.40 in the November, and US$1,154.11
  in the January/February sales. The average price received from sales in the
  fourth quarter of fiscal 2010 was US$1,154.11 per carat, a decrease of 9% from
  the average price of US$1,268.83 per carat received in the third quarter of
  fiscal 2010. The decrease was due to a parcel of moderate-quality stones being
  tendered in February compared to the previous quarter which included several
  large, high quality gems.

Polished prices showed increases in the latter part of fiscal
2010, although at smaller percentages compared to rough price increases, but
these prices are expected to show larger increases consistently throughout the
year as the demand at retail level increases. The retail sector has shown year
on year increase in trade but still has to show further strengthening to reach
the levels from 2008. Margins on polished are still small as a result of the
high prices paid for rough diamonds. Credit terms have been reduced in the
industry from the exceptional high credit levels that existed prior to the
credit crisis of late 2008 which is positive for the business.

The downstream sector of the diamond trade is presently seeing
increased activity from Indian traders which are becoming the largest buyers of
rough diamonds on the market. This is a result of support from their banks as
well as the government which appreciates the importance of supporting their
diamond industry. The caution is that speculation on rough diamonds continues to
drive the prices of rough, which although a positive for producers in the short
term, could possibly be detrimental to the market in the long term.

Overall rough diamond prices showed a strong rebound in the
latter half of fiscal 2010 which was important for Rockwell and its financial
performance. This situation has persisted into the early part of fiscal 2011.
The view of most diamond market analysts, including the likes of Des Kilalea at
Royal Bank of Canada (RBC) Capital Markets and Ed Sterck of Bank of Montreal
(BMO), is that the diamond market will continue to show improvement and
resilience during calendar 2010 and that in the long term declining supply, and
increasing demand related to improvement in world economic conditions, diamond
prices will rise to their previous strong levels and show long term growth.

---

 Page 68 



**E.**          **Off-Balance Sheet Arrangements**

Rockwell does not have any off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on its
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.

**F.**         
**Tabular Disclosure of Contractual Obligations**

The Company has the following payment commitments: (a) minimum
lease payments of $3.3 million, with $3.1 million payable in the next 12 months,
with installments up to the year 2012 to various financial institutions for
plant and equipment.

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 Page 69 

The following are the contractual maturities of contractual
obligations (in thousands of Canadian Dollars):

Payments due by periodTotal
      Less than one year
      1 to 3 years
      3-5 years
      More than 5 yearsContractual obligation
      Nil
      Nil
      Nil
      Nil
      NilLong term debt obligations
      3.3m
      3.2m
      0.1m
      Nil
      NilOperating lease obligations
      Nil
      Nil
      Nil
      Nil
      NilPurchase obligations
      Nil
      Nil
      Nil
      Nil
      NilReclamation Obligations
      3.7m
      Nil
      Nil
      Nil
      3.7mOther Long-Term Liabilities Reflected on the Company's Balance
        Sheet under the GAAP of the primary financial statements
      Nil
      Nil
      Nil
      Nil
      NilTotal
      7.0m
      3.2m
      0.1m
      Nil
      3.7m


Other than described above and in the notes of the audited
financial statements for the year ended February 28, 2010, 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.

**G.**         
**Safe Harbor**

The safe harbor provided in Section 27A of the Securities Act
and Section 21E of the Exchange Act applies to forward-looking information
provided pursuant to Item 5.E and F above.

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 Page 70 

**ITEM
6.**         
**DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**

**A.**          **Directors and Senior Management**

The following section sets out the names of members of the
Board of Directors, all major offices and positions with the Company and any of
its significant affiliates each now holds, each director's principal occupation,
the period of time during which each has been a director of the Company and the
number of Common Shares beneficially owned by each, directly or indirectly, or
over which each exercised control or direction, as at August 31, 2010.

The names and municipalities of residence of the directors and
senior officers of the Company, their principal occupations during the past five
years, and the period of time they have served as directors or officers of
Rockwell are as follows. Except where indicated, each director and senior
officer of Rockwell has held the same or similar principal occupation with the
organization indicated or a predecessor thereof for the last five years.

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 Page 71 

Name, Position and Country of
      Residence
    Period a Director ofRockwell
    Securities BeneficiallyOwned or
      Controlled(1)Mark Bristow 6Director
      Johannesburg, South Africa
    Since March 2007
    7,227,242 Common Shares
      949,500 OptionsJohn Bristow 5President,
      Chief Executive Officer and Director Pretoria, South Africa
    Since August 2006
    1,544,107 Common Shares
      1,199,500 OptionsDavid Copeland7Chairman and
      Director Vancouver, British Columbia, Canada
    Since September 2006
    1,453,288 Common Shares
      1,099,500 OptionsRichard J Linnell 2, 3, 4, 9Director Johannesburg, South Africa
    Since November 2009
    300,000 OptionsWillem Jacobs 2, 4, 8Director
      Pretoria, South Africa
    Since November 2009
    500,000 OptionsGary Wu Director Beijing, Peoples
      Republic of China
    Since August 5, 2010
    NilSandile Zungu 3, 4, 10Director Bryanston, South Africa
    Since November 2008
    300,000 OptionsGerhard Jacobs Chief Financial Officer
      Johannesburg, South Africa
    Since July 2010
    NilGraham Chamberlain11Chief
      Operating Officer Cape Town, South Africa
    Since November 2009
    450,000 OptionsTrevor Thomas12Secretary
      Vancouver, British Columbia, Canada
    Since February 2008
    315,000 Options


Notes:

|1.  | The information as to securities beneficially owned or
      controlled is not within the knowledge of the management of the Company
      and has been furnished by the respective nominees and is based on insider
      reports filed on www.sedi.caas at
      August 31, 2010.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | Member of the Audit Committee                                                                                                                                                                                                                                                      
|3.  | Member of the Nominating and Corporate Governance
      Committee                                                                                                                                                                                                                  
|4.  | Member of the Compensation Committee                                                                                                                                                                                                                                               
|5.  | John Bristow holds options to purchase 599,500 Shares at
      $0.62 per share expiring on September 24, 2012 and holds options to
      purchase 600,000 Shares at $0.06 per share expiring on December 7,
      2014.                                                            
|6.  | Mark Bristow holds options to purchase 449,500 Shares at
      $0.62 per share expiring on September 24, 2012 and holds options to
      purchase 500,000 Shares at $0.06 per share expiring on December 7,
      2014.                                                            
|7.  | David Copeland holds options to purchase 499,500 Shares
      at $0.62 per share expiring on September 24, 2012 and holds options to
      purchase 600,000 Shares at $0.06 per share expiring on December 7,
      2014.                                                          
|8.  | Willem Jacobs holds options to purchase 500,000 Shares at
      $0.06 per share expiring on December 7, 2014..                                                                                                                                                                     
|9.  | Richard Linnell holds options to purchase 300,000 Shares
      at $0.06 per share expiring on December 7, 2014.                                                                                                                                                                    
|10. | Sandile Zungu holds options to purchase 300,000 Shares at
      $0.06 per share expiring on December 7, 2014.                                                                                                                                                                      
|11. | Graham Chamberlain hold options to purchase 450,000
      Shares at $0.06 per share expiring on December 7,
2014.                                                                                                                                                                  

---

 Page 72 

|12. | Trevor Thomas holds options to purchase 300,000 Shares at
      $0.06 per share expiring on December 7, 2014 and options to purchase
      15,000 Shares at $0.62 per share expiring on September 24, 2012.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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Principal Occupations and Other Information About Rockwells
Directors and Management

DAVID COPELAND, P.Eng.  Chairman and Director

David Copeland is a geological engineer who graduated in
economic geology from the University of British Columbia. With over 30 years of
experience, Mr. Copeland has undertaken assignments in a variety of capacities
in mine exploration, discovery and development throughout the South Pacific,
Africa, South America and North America, including alluvial bulk sampling and
alluvial start-up operations in the Northwest Territories, Canada. His principal
occupation is President and Director of CEC Engineering Ltd., a consulting
engineering firm that directs and co-ordinates advanced technical programs for
exploration and development on behalf of companies for which Hunter Dickinson
Services Inc. (formerly Hunter Dickinson Inc.) provides services. He is also a
director of Hunter Dickinson Services Inc.

Mr. Copeland is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToAmarc Resources Ltd.
    Director
    September 1995
    PresentContinental Minerals Corporation
    Director
    November 1995
    PresentPresident & CEO
    January 2008
    PresentFarallon Resources Ltd.
    Director
    December 1995
    April 2009Heatherdale Resources Inc
    CEO, President and Director
    November 2009
    PresentGreat Basin Gold Ltd.
    Director
    February 1994
    March 2008Northern Dynasty Minerals Ltd.
    Director
    June 1996
    PresentRockwell Diamonds Inc.
    Director
    September 2006
    PresentChief Executive Officer
    September 2006
    September 2007Chairman
    September 2007
    PresentTaseko Mines Limited
    Director
    March 1994
    Present


DR. JOHN BRISTOW  President, Chief Executive Officer and
Director

John Bristow holds a PhD degree in geology from the University
of Cape Town and has over 30 years experience in the diamond business,
encompassing the exploration, evaluation, and mining of kimberlite and alluvial
diamond deposits in Africa and internationally. His career began with De Beers
in 1983 in Kimberley and moved to Johannesburg in 1990 where he was Manager of
the Anglo American Research Laboratories, prior to establishing an independent
international diamond consultancy in 1994.

---

 Page 73 

He was employed by the Anglo AmericanandDe Beers
Group of companies for 12 years from 1983  1994. He served as Head of
International Research with De Beers in Kimberley (South Africa), and was
subsequently Head of the Geology Laboratory at the Anglo American Research
Laboratories in Johannesburg. Thereafter he moved to the New Projects
Division of the Anglo American Research Laboratories.

In 1994 John started an international diamond consultancy, and
helped establish the Minerals and Energy Policy (MEPC)Johannesburg. This
non-Governmental Organization (NGO) was created to build capacity in minerals
and mining skills amongst previously disadvantaged role players. In 1996 he
raised Cdn$3 million for the MEPC minerals and mining capacity building program.

During 1996  1997 he served as technical director to
Moonstone Diamonds (an Australian junior), and from 1996 - 1998 was
diamond analyst for financial securities company Huysamer Stals - ABN  Amro.

In 1998 John played a key role in creating and listing
successful alluvial diamond producer Gem Diamond Mining Corporationon
the Johannesburg Stock Exchange, in which Tokyo Sexwales Mvelaphanda
Diamonds subsequently acquired an interest. Gem Diamonds Saxendrift
mining operation consistently produced amongst the worlds highest value alluvial
diamonds, and was merged with the Trans Hex Group in 2000.

From 2002 he was a Director and CEO of Kalahari Diamonds
Limitedand its subsidiary Sekaka Diamonds (Pty) Limitedin Botswana
until Kalahari was merged with Petra Diamonds in late 2005.

He has provided consulting and contracting services to the
local and international minerals industry, specializing in diamonds, and has
considerable local (Southern African and African) and international experience
in the exploration, prospecting, evaluation and mining of kimberlites, and land
and marine alluvial diamond deposits. He has wide ranging management and
corporate experience, and has been active in Black Empowerment business ventures
in South Africa.

Most recently he was CEO of Kalahari Diamonds plc in Botswana,
which successfully merged with Petra Diamonds in 2005.

Dr. Bristow is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToRockwell Diamonds Inc.
    Director
    August 2006
    PresentPresident
    August 2006
    PresentChief Operating Officer
    August 2006
    November 2009Chief Executive Officer
    September 2007
    PresentOropa Limited
    Director
    December 2000
    April 2004


DR. MARK BRISTOW  Director

Dr. Mark Bristow was appointed to the Companys Board of
  Directors in October 2006. Dr. Bristow comes to Rockwell with 20 years experience
  in exploration, development, project and corporate finance and management in
  the mining sector in Africa.

From 1992 to 1995, Dr. Bristow had executive responsibility for
  the exploration and new business activities of Randgold & Exploration. In
  August 1995 he was appointed managing director and subsequently, in October
  1995, CEO of Randgold Resources, which he helped establish as Randgold &
  Explorations international mining and exploration subsidiary and subsequently
  built it into an independent, public gold mining and exploration company which
  is listed on the London Stock Exchange as well as NASDAQ in New York. He has
  held director positions on the boards of: Harmony Gold Mining Company Limited;
  Durban Roodepoort Deep Limited; Blyvooruitzicht Gold Mining Company Limited;
  Buffelsfontein Gold Mines Limited; and The Grootvlei Proprietary Mines Limited
  and until recently AFPLATS Plc., the AIM listed, junior Platinum company. Besides
  his affiliation with Randgold, Dr. Bristow was the Chairman of SOMISY (Syama)
  until that company was sold to Resolute in 2004.

---

 Page 74 

He is currently the Chairman of the SOMILO Board of Directors
  (Loulo Gold Mining Company), a non-executive Director of Morila Limited and
  a member of the President of Senegals Economic Advisory Committee as well
  as the President of Malis advisory council. He is also a fellow of the
  Geological Society of South Africa and he holds a PhD in geology from Natal
  University.

Dr. Bristow has been CEO of Randgold Resources, a
publicly-traded company since it was incorporated in 1995. He currently is, or
was within the past five years, an officer and/or director of the following
public companies:

Company
    Positions Held
    From
    ToMidway Resources Intl.
    Director
    November 2005
    PresentRandgold Resources Limited
    CEO and Director
    August 1995
    PresentRockwell Diamonds Inc.
    Director
    December 2006
    Present


GARY WU - Director

Mr. Wu is the managing partner of Godia Capital Partners, one
of the first Chinese private equity funds created to focus on investment
opportunities in resource projects in Africa. Mr. Wu and his investment partners
also have a sound knowledge of the emerging Chinese diamond manufacturing sector
and, over the past year, have done an extensive assessment of mining
opportunities in southern Africa.

Mr. Wu has been involved in the successful launch and
management of Volvo Group. During the period working for Volvo, Mr. Wu pioneered
the path for Volvo commercial vehicles to play a major role in China and he was
legendary for improving the brand recognition for Volvo commercial vehicles and
Volvos brand rank. Meanwhile, regarded as a scholar in trade wars, Mr. Wu
created a series of modern success theories including Opportunity is enemy, the
theory of When Channel is ready, the water will be there, and his philosophy
system of Total Success Theory. By practicing these revolutionary theories, he
started his new venture as the Chairman and Chief Executive Officer of SureAuto
Corporation, which was the first and has become the largest big box retailer in
Chinas used car market.

Mr. Wu has been studying in Department of International
Marketing, Arizona State University of US and obtained his degree in EMBA of
Rutgers New Jersey, US.

Mr. Wu is, or was within the past five years, an officer and/or
director of the following public companies:

Company
    Positions Held
    From
    ToVolvo Trucks Corporation
    Executive Vice President, Area
      Asia President and CEO, Greater China
    November 2005
    April 2006AB Volvo
    Vice President of Volvo Group,
      Strategic Alliance
    April 2006
    September 2007


RICHARD J LINNELL - Director

Richard has been active in the mineral resources business for
  nearly 40 years and has significant global experience in the development and
  marketing of resources and commodities. He joined Middelburg Steel & Alloys
  as Marketing Manager for the Stainless Steel division in 1985 and was subsequently
  involved in the establishment of the Columbus Stainless Steel Project. He then
  became General Manager of the Manganese Division of Samancor, a joint venture
  between the then Billiton Plc and the Anglo American Corporation. Samancor had
  a dominant position globally in manganese and chrome markets. He then moved
  to head Billiton Plcs Exploration and Development activities within Africa,
  and gained considerable experience in Guinea, Mauritania, Sudan, Morocco, Democratic
  Republic of Congo, Zambia, as well as South Africa.

---

 Page 75 

Richard retired from BHP Billiton in 2001 and made a successful
  transition to the junior exploration and mining sector where he has been involved
  in the creation, raising of funds, development, and management of several private
  and listed junior and mid-tier exploration and mining companies, including the
  roles of non-Executive Chairman and Director of companies listed on the Sydney,
  Toronto, London and Johannesburg stock exchanges.

He is currently Non Executive Chairman of Coal of Africa Ltd,
Sacoil Holdings Limited, Brinkley Mining Company and Maghreb Minerals Plc. He is
non-Executive Director of Centebale Resources limited, GRD Minproc Ltd, GRD
Minproc SA Ltd, Mag Industries Corporation Inc, Cuco Resources Ltd, Moydow Mines
International Inc, New Kush Exploration and Mining, VML Resources, and Nimag Pty
Ltd.

Aside from his direct interests in mineral exploration and
mining Companys Richard was the originator of the Bakubang Initiative, a Forum
designed to revive the South African Junior Mining Industry which lead to the
establishment of the New Africa Mining Fund and is currently the Chairman of the
Trustees of the New Africa Mining Fund. He was also a member of the Electricity
Council (representing the mining industry) which was the forerunner of Eskom Ltd
before corporatisation.

Richard has a BSc (Hons) London External Degree from the
University College of Rhodesia and Nyasaland, which was then an External London
College.

Mr. Linnell is, or was within the past five years, an officer
and/or director of the following companies:

Company
    Positions Held
    From
    ToCoal of Africa Limited
    Chairman
    2001
    PresentMag Industries Corporation
    Director
    2006
    PresentChrome Corporation Limited
    Chairman
    2007
    2009Moydoy Mines International Inc
    Director
    2007
    PresentMaghreb Minerals Plc
    Chairman
    2008
    PresentBrinkley Mining Company Limited
    Chairman
    2008
    2009Sacoil Holdings Limited
    Chairman
    2004
    PresentGRD Minproc Limited
    Director
    2008
    PresentNamakwa Diamonds Limited
    Director
    2003
    2006Rockwell Diamonds Inc
    Director
    October 2009
    PresentIPSA Ltd
    Non Executive Chairman
    2010
    Present


WILLEM J JACOBS - Director

Willem has over 25 years experience in the engineering, mining
and investment sectors, including 20 years in executive, Chief Executive and
Chief Operating Officer, and Board Level of private and public companies. His
experience includes an excellent track record in the Industrial Minerals
industry, including mining and production of low grade deposits, marketing,
product development, and product and company positioning. He has worked and
operated globally in complex and multi-cultural environments which includes
seasoned working knowledge of people, systems, legal frameworks in North and
South America, Australia, the Far East including China, the Middle East, Japan
and India. He also has extensive experience and a proven track record in
corporate turnarounds, mergers and acquisitions, and post acquisition alignment
and optimizations of combined business entities.

---

 Page 76 

He joined Price Waterhouse in 1984 as a Principal Consultant
and managed the Strategy and Corporate Finance Practice in Johannesburg, prior
to becoming Executive Director of Cullinan Holdings Limited from 1990 to 1995.
During this period he was also the CEO of Cullinan Precision Engineering,
Chairman of Cullinan Minerals, and Chairman of Sud Chemie (SA), a joint venture
between Sud Chemie (Germany) and Cullinan Holdings Limited. From 1996 to 1998 he
was Managing Director of ABB Flexible Automation (Southern Hemsiphere), and
thereafter the CEO of IMERYS Africa and Australia from 1998 to March 2001. He
subsequently served as a non-Executive Director and Chairman of various private
resource investment and industrial minerals companys, and in May 2007 assumed
the role of Country Manager of all Teal Mining and Exploration activities in the
Democratic Republic of Congo until December 2008. He is currently a Director of
Congo Supply and Maintenance s.p.r.l.

Willem completed a BPL Honours degree at the University of the
Orange Free State in 1982, a Master of Commerce at Rand Afrikaans University in
1985, and a PhD in Economics at the University of South Africa in 1998.
Research, study and course work towards his Masters in Commerce and PhD degrees
was completed at Duke University and the Wharton Business School in the USA
respectively. He further completed specialist courses at Wharton Business School
in the areas of mergers and acquisitions as well as strategy.

Willem Jacobs is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToCongo Supply and Maintenance
    Director
    January 2009
    PresentTeal Mining and Exploration
    Country Manager
    May 2007
    December 2008Europe Minerals BV
    Non Executive Director
    2001
    2007Rockwell Diamonds Inc
    Director
    October 2009
    PresentRandgold Resources
    General Manager
    February 2010
    Present


SANDILE ZUNGU  Director

Mr. Sandile Zungu, a mechanical engineer with an MBA and a
founding member of Zungu Investments Company (Proprietary) Limited ("Zico"), a
diversified investment company which is the majority shareholder of Rockwell's
empowerment partner Africa Vanguard Resources ("AVR"), has joined the Board as
an independent director.

Sandile Zungu is founder, Chairman and majority shareholder of
Zico, a broad-based black empowerment company. Mr. Zungu spent six years in
engineering and production at Richards Bay Minerals, Engen Refinery, National
Sorghum Breweries and South African Breweries. He subsequently joined the
corporate finance division of African Merchant Bank, following which he played a
key role in the formation of Sarhwu Investment Holdings growing it from a zero
asset base to more than ZAR400 million in the net asset value. Thereafter he
assumed the role of Executive Director for Strategy and Empowerment at New
Africa Investments Limited. He created Zico in 2002, a broad based and
diversified industrial holding organization with interests in financial
services, media, health care, and resources, the latter being held in AVR. AVR
is Rockwell's empowerment partner and holds 26% of the prospecting and mining
rights held in South Africa, with Rockwell holding the remaining 74%. Sandile
completed a mechanical engineering degree at the University of Cape Town and an
MBA at the Graduate School of Business, University of Cape Town.

Mr Zungu is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToZungu Investments Company (Proprietary) Ltd.
    Executive Chairman
    February 2002
    PresentRockwell Diamonds Inc
    Director
    November 2008
    Present


---

 Page 77 

TREVOR THOMAS, LLB  Secretary

Trevor Thomas has practiced in the areas of corporate
commercial, corporate finance, securities and mining law since 1995, both in
private practice environment as well as in-house positions and is currently
in-house legal counsel for Hunter Dickinson Services Inc. Prior to joining
Hunter Dickinson Services Inc., he served as in-house legal counsel with Placer
Dome Inc.

Company
    Positions Held
    From
    ToNorthern Dynasty Minerals Ltd.
    Secretary
    February 2008
    PresentAmarc Resources Ltd.
    Secretary
    February 2008
    PresentAnooraq Resources Corporation
    Asst Secretary
    November 2007
    PresentContinental Minerals Corporation
    Secretary
    February 2008
    PresentFarallon Resources Ltd.
    Secretary
    December 2007
    PresentHeatherdale Resources Inc
    Secretary
    Novemer 2009
    PresentRockwell Diamonds Inc.
    Secretary
    February 2008
    PresentTaseko Mines Limited
    Secretary
    August 1, 2008
    Present


GERHARD JACOBS  Chief Financial Officer

Joined Rockwell Diamonds on July19, 2010 as Chief Financial
Officer. He has over 20 years experience in the mining industry. He began his
accounting career at Fisher Hoffman Stride in 1985. In 1990, he moved into
mining where he fulfilled various accounting, management and consultancy
positions within the Billiton group in the Gold, Ferrochrome and Aluminium
divisions. In 2002 Gerhard was appointed Financial and Administration
Superintendent / Manager of the Placer Dome Western Areas Joint Venture where he
assumed sole responsibility for the financial, information technology and
commercial functions. He was seconded to Vancouver where he led the roll-out of
the business improvement process and implementation of Sarbanes Oxley. He joined
Simmers in November 2005 as Chief Financial Officer and Financial Director and
played a key role in the recapitalization process at Simmers as well as with the
listing of First Uranium on the TSX in 2006. He holds a B.Acc and MBA both from
North West University and a MDP from Unisa.

GRAHAM CHAMBERLAIN  Chief Operating Officer

Graham Chamberlain is a mining engineer with mineral resource
and financial skills and some 26 years of engineering, operational and
management experience in the mining industry. He was employed by the Anglo
American Group of Companies from 1982 to 2002 and, during this period, gained
extensive experience in various engineering fields pertaining to gold and base
metal mining, primarily in underground mines.

Graham completed a Higher Diploma in Mining Engineering in 1988
from Technicon of the Witwatersrand and a Master of Science in Mineral
Economics, from the then University of the Witwatersrand in 1998. Further to
this, he has a Management diploma from the University of South Africa (1993) and
an Advanced Management Diploma from the Gordon Institute of Business Science
(2003).

Cease Trade Orders, Bankruptcies, Penalties and Sanctions

---

 Page 78 

Within the last 10 years no director or executive officer of
the Company was a director, chief executive officer, or chief financial officer
of any company (including in respect of the Company) that was:

(a)          
subject to an order that was issued while the director or executive officer was
acting in the capacity as director, chief executive officer or chief financial
officer; or

(b)          
subject to an order that was issued after the director or executive officer
ceased to be a director, chief executive officer, or chief financial officer and
which resulted from an event that occurred while that person was acting in the
capacity as director, chief executive officer or chief financial officer,

except as disclosed under General Development of the Business
 Recent Developments  Late Filing of Audited Financial Statements.

Except as set out below, no director or executive officer, or a
shareholder holding a sufficient number of securities of the Company to affect
materially the control of the Company, is, at the date of this Annual
Information Form, or has been within 10 years before the date of the Annual
Information Form, a director or executive officer of any company (including in
respect of the Company) that:

|(a) | while that person was acting in that capacity, or within
      a year of ceasing to act in that capacity, became bankrupt, made a
      proposal under any legislation relating to bankruptcy or insolvency, or
      was subject to or instituted any proceedings, arrangement, or compromise
      with creditors, or had a receiver, receiver manager, or trustee appointed
      to hold its assets; or
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | became bankrupt, made a proposal under any legislation
      relating to bankruptcy or insolvency, or become subject to or instituted
      any proceedings, arrangement or compromise with creditors, or had a
      receiver, receiver manager, or trustee appointed to hold the assets of the
      director, executive officer or shareholder                                                          

POTENTIAL CONFLICTS OF INTEREST

Several Directors of Rockwell also serve as directors of other
similar companies involved in natural resource development. Accordingly, it may
occur that properties will be offered to both Rockwell and such other companies.
Furthermore, those other companies may participate in the same properties as
those in which Rockwell has an interest. As a result there may be situations
which involve a potential conflict of interest or issues in connection with the
doctrine of corporate opportunity. In that event, a financially interested
director would not be entitled to vote at meetings of directors in respect of a
transaction involving the Company if it evokes any such conflict. The directors
will attempt to avoid dealing with such other companies in situations where
conflicts or corporate opportunity issues might arise and will at all times use
their best efforts to act in the best interests of Rockwell.

**B.**         
  **Compensation**

GENERAL PROVISIONS

Named Executive Officer (NEO) means each of the following
individuals:

(a)          
the Chief Executive Officer (CEO);

(b)          
the Chief Financial Officer (CFO);

---

 Page 79 

(c)          
each of the three most highly compensated executive officers, or the three most
highly compensated individuals acting in a similar capacity, other than the CEO
and CFO, at the end of the most recently completed financial year whose total
compensation was, individually, more than $150,000 for that financial year; and

(d)          
each individual who would be a NEO under paragraph (c) but for the fact that the
individual was neither an executive officer of the company, nor acting in a
similar capacity, at February 28, 2010.

The following disclosure sets out the compensation that the
Board intended to pay, make payable, award, grant give or otherwise provide to
each NEO and director for the financial year ended February 28, 2010.

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Committee

The Board had established a Compensation Committee consisting
of Mr. Richard Linnell, Mr. Sandile Zungu and Mr. Willem Jacobs. The
Compensation Committee recommends compensation for the directors and executive
officers of the Company. The charter for the Compensation Committee plan was
adopted on February 28, 2008 as part of the Companys Corporate Governance
Policies and Procedures Manual (the Manual). This charter as well as the
Manual are available for viewing at the Companys website at
www.rockwelldiamonds.com.

The function of the Compensation Committee is to review, on an
annual basis, the compensation paid to the Companys executive officers and
directors, to review the performance of the Companys executive officers and to
make recommendations on compensation to the Board.

The Compensation Committee periodically considers the grant of
stock options. Options have been granted to the executive officers and directors
and certain other service providers taking into account competitive compensation
factors and the belief that options help align the interests of executive
officers, directors and service providers with the interests of shareholders.

The purposes and responsibilities of the Compensation Committee
with respect to compensation matters are to assist the Board of Directors in
carrying out its responsibilities relating to executive and director
compensation. In furtherance of this purpose, the Compensation Committee has the
following duties, responsibilities and authority:

(a) The Committee shall recommend to
the Board of Directors the form and amount of compensation to be paid by the
Company to directors for service on the Board and on Board committees. The
Committee shall review director compensation at least annually.

(b) The Committee shall annually review
the Companys base compensation structure and the Company's incentive
compensation, stock option and other equity-based compensation programs and
recommend changes in or additions in such structure and plans to the Board of
Directors as needed.

(c) The Committee shall recommend to
the Board of Directors the annual base compensation of the Company's executive
officers and senior managers (collectively the "Officers").

(d) The Committee shall recommend to
the Board of Directors the range of increase or decrease in the annual base
compensation for non-Officer personnel providing services to the Company.

(e) The Committee shall recommend to
the Board of Directors annual corporate goals and objectives under any incentive
compensation plan adopted by the Company for Officers and non-Officer personnel
providing services to the Company, and recommend incentive compensation
participation

---

 Page 80 

levels for Officers and non-Officer
personnel providing services to the Company under any such incentive
compensation plan. In determining the incentive component of compensation, the
Committee will consider the Companys performance and relative shareholder
return, the values of similar incentives at comparable companies and the awards
given in past years.

(f) The Committee shall evaluate the
performance of Officers generally and in light of annual corporate goals and
objectives under any incentive compensation plan.

(g) The Committee shall periodically
review with the Chairman and Chief Executive Officer their assessments of
corporate officers and senior managers and succession plans, and make
recommendations to the Board regarding appointment of officers and senior
managers.

(h) The Committee shall provide
oversight of the performance evaluation and incentive compensation of
non-Officer personnel providing services to the Company.

(i) The Committee shall administer the
Company's stock option and other equity based compensation plans and determines
the annual grants of stock options and other equity based compensation.

(j) The Committee shall recommend to
the Governance and Nominating Committee the qualifications and criteria for
membership on the Committee.

Report on Executive Compensation

The Board assumes responsibility for reviewing and monitoring
the long-range compensation strategy for the senior management of the Company
although the Compensation Committee guides it in this role. As part of its
mandate, the Board determines the type and amount of compensation for the
President and Chief Executive Officer and other executive officers.

The Companys Compensation Committee receives independent
competitive market information on compensation levels for executives, if
necessary, in determining the level of compensation for the executive officers
and directors.

Mr. Copeland does not serve the Company solely on a full-time
basis, and his compensation from the Company is allocated based on the estimated
amount of time spent providing services to the Company. Dr. John Bristow, Mr.
Gerhard Jacobs (Previously Mr Desmond Morgan) and Mr. Brenner work on the
Company's activities on a full-time basis. The Companys compensation policies
and programs are designed to be competitive with similar junior mining
exploration companies and to recognize and reward executive performance
consistent with the success of the Companys business.

Philosophy and Objectives

The compensation program for the senior management of the
Company is designed to ensure that the level and form of compensation achieves
certain objectives, including:

(a) attracting and retaining talented,
qualified and effective executives; (b) motivating the short and long-term
performance of these executives; and
  (c) better aligning their interests with those of the Companys shareholders.

In compensating its senior management, the Company has employed
a combination of base salary, bonus compensation and equity participation
through its stock option plan.

---

 Page 81 

Base Salary

In the Boards view, paying base salaries which are competitive
in the markets in which the Company operates is a first step to attracting and
retaining talented, qualified and effective executives. The NEOs are paid a
salary in order to ensure that the compensation package offered by the company
is in line with that offered by other companies in our industry, and as an
immediate means of rewarding the NEO for efforts expended on behalf of the
company.

The salary to be paid to a particular NEO is determined by
gathering competitive salary information on comparable companies within the
industry from a variety of sources, including surveys conducted by independent
consultants and national and international publications. Payment of a cash
salary fits within the objective of the compensation program since it rewards
the NEO for performance of his or her duties and responsibilities.

The compensation of the Chief Executive Officer is approved
annually by the Board. Base salary and bonus levels are determined taking into
account independent market survey data.

Bonus Incentive Compensation

The Company's objective is to achieve certain strategic
objectives and milestones. The Board will consider executive bonus compensation
dependent upon the Company meeting those strategic objectives and milestones and
sufficient cash resources being available for the granting of bonuses. Bonuses
are awarded at the discretion of the Board. The Board approves executive bonus
compensation dependent upon compensation levels based on recommendations of the
Compensation Committee, and such recommendations are generally based, if
necessary, on survey data provided by independent consultants. There were no
bonuses awarded in the financial year.

Equity Participation

The Company has in place a share option plan dated for
reference August 14, 2008 (the Plan). The Plan has been established to provide
incentive to qualified parties to increase their proprietary interest in the
Company, encourage the alignment of interests with its shareholders and foster
their continued association with the Company.

The Company believes that encouraging its executives and
employees to become Shareholders is the best way of aligning their interests
with those of its Shareholders. Equity participation is accomplished through the
Companys stock option plan. Stock options are granted to senior executives
taking into account a number of factors, including the amount and term of
options previously granted, base salary and bonuses and competitive factors.
Options are generally granted to senior executives and vest on terms established
by the Compensation Committee.

At least annually, the Compensation Committee reviews the
grants of stock options to directors, management, employees and consultants.
Options have been granted in prior years taking into account competitive
compensation factors and the belief that options help align the interests of
such persons with the interests of Shareholders.

---

 Page 82 

Performance Graph

The Company commenced trading on the TSX Exchange (the TSX)
on February 22, 2008. Prior thereto it was listed on the TSX Venture Exchange
(the TSXV). In 2007 the Company changed its year end from May 31 to February
28. The following graph compares the cumulative total return to a shareholder
who invested $100 in Common Shares of the Company on May 31, 2005 until February
28, 2010 with the cumulative total return of the TSX and TSXV.



The Companys compensation policies and programs are designed
to be competitive with similar junior mining exploration companies and to
recognize and reward executive performance consistent with the success of the
Companys business.

As a result of the credit crisis, commodities prices collapsed,
with diamonds being particularly hard hit. This, coupled with uncertainty raised
from an unsolicited take over attempts resulted in a collapse in the share
price.

The performance of management cannot be measured on the share
price, but in maintaining liquidity, increasing production and reducing costs.
The fact that the company is still in operation where many of its peers have
failed completely is evidence of the commitment and creativity of management in
ensuring that the company is still operational.

No salary increases, bonuses or incentives of any nature have
been awarded in the past financial year due to the financial challenges faced by
the Company as a consequence of the economic recession and sharp decline in
diamond prices.

The Company has not declared or paid a dividend on its Common
Shares.

Option Based Awards

The Company has in place a share option plan dated for
reference August 14, 2008 (the Plan). The Plan has been established to
provide incentive to qualified parties to increase their proprietary interest in
the Company and thereby encourage their continuing association with the Company.
The maximum aggregate number of Common Shares that may be reserved for issuance
under the Plan at any point in time is 10% of the outstanding Common shares at
the time the options are granted, less any Common Shares reserved for issuance
under any other arrangements. The Plan is administered by the Compensation
Committee of the Company. The Plan provides that options will be issued pursuant
to option agreements to directors, officers, employees or consultants of the
Company or a subsidiary of the Company. All options expire on a date not later
than five years after the issuance of such option. Previous grants of
option-based awards are taken into account when considering new grants of
options. Subject to the requirements of the policies of the TSX and the prior
receipt of any necessary regulatory approval, the Board may, in its absolute
discretion, amend or modify the Plan or any outstanding option granted under the
Plan, as to the provisions set out in the Plan.

The following is a summary of the material terms of the Plan:

| | (a) | Currently all options granted under the Plan are
      non-assignable and non-transferable and are issuable for a period of up to
      five years;                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                             
| | (b) | for stock options granted to employees or service
      providers (inclusive of management company employees), the Company must
      ensure that the proposed optionee is a bona fide employee or
  service

---

 Page 83 

| |     | provider (inclusive of management company employees),
        as the case may be, of the Company or any subsidiary;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | if an optionee ceases to be employed by the Company
        (other than as a result of termination with cause) or ceases to act as
        a director or officer of the Company or a subsidiary of the Company, any
        option held by such optionee may be exercised within 90 days after the
        date of such optionee ceases to be employed as an officer or director
        or, as the case may be;                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | if an optionee dies, any vested option held by him at
        the date of death will become exercisable by the optionees lawful
        personal representatives, heirs or executors until the earlier of one
        year after the date of death of such optionee and the date of expiration
        of the term otherwise applicable to such option;                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (e) | in the case of an optionee being dismissed from employment
        or service for cause, such optionees options, whether or not vested
        at the date of dismissal, will immediately terminate without right to
        exercise same;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (f) | the minimum exercise price of an option granted under
        the Plan must not be less than the Market Price calculated the day before
        the grant (as defined in the Plan);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (g) | vesting of options shall be in accordance with the option
        commitment in the New Option Plan or otherwise, at the discretion of the
        Board, and will generally be subject to: (i) the service provider remaining
        employed by or continuing to provide services to the Company or any of
        its affiliates as well as, at the discretion of the Board, achieving certain
        milestones which may be defined by the Board from time to time or receiving
        a satisfactory performance review by the Company or any of its affiliates
        during the vesting period; or (ii) the service provider remaining as a
        director of the Company or any of its affiliates during the vesting period;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (h) | the maximum aggregate number of shares issuable upon
        exercise of options to non-employee directors must not exceed 1% of the
        total common shares of the Company outstanding at any time and no more
        than $100,000 in total award value per non-employee director on an annual
        calendar basis; and                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (i) | the Board reserves the right in its absolute discretion
        to terminate the Plan with respect to all Plan shares in respect of options
        which have not yet been granted hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Options are generally granted to corporate executives in the
first quarter of each year as part of the annual compensation review. Any
special compensation is typically granted in the form of options. Options are
granted at other times of the year to individuals commencing employment with the
Company. The exercise price for the options is based on the volume weighted
average of the closing price of the shares of the Company on the TSX for the 5
days prior to the date of grant.

The Company is of the view that the Plan provides the Company
with the flexibility necessary to attract and maintain the services of senior
executives and other employees and reflects in competing compensation to other
companies in the industry.

The Plan also provides that:

| | (a) | All outstanding but unvested options will vest
      immediately prior to completion of a Change in Control (as defined in the
      Plan);                                                                                                                                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (b) | If an option which has been previously granted is set to
      expire during a period in which trading in securities of the Company by
      any participant is restricted by a black-out, or any such blackout extends
      to a date which is within five business days of the expiry of the option,
      the exercise date will be extended to ten business days after the trading
      restrictions are lifted; and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (c) | The Plan and outstanding options may be amended by the
      Board without shareholder approval in the following
  circumstances:                                                                                                                                                                                                                                                                                         

---

 Page 84 

| | (i)   | it may make amendments which are of a typographical,
      grammatical or clerical nature only;                                                                                                                                   
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                   
| | (ii)  | it may change the vesting provisions of an option or the
      Plan;                                                                                                                                                              
| |       |                                                                                                                                                                                                                                   
| | (iii) | it may change the termination provision of an option or
      the Plan which does not entail an extension beyond the original Expiry
      Date of an Option;                                                                     
| |       |                                                                                                                                                                                                                                   
| | (iv)  | it may add a cashless exercise feature payable in cash or
      shares to the Plan;                                                                                                                                               
| |       |                                                                                                                                                                                                                                   
| | (v)   | it may make amendments necessary as a result of changes
      in securities laws applicable to the Company;                                                                                                                       
| |       |                                                                                                                                                                                                                                   
| | (vi)  | if the Company becomes listed or quoted on a stock
      exchange or stock market senior to the TSX, it may make such amendments as
      may be required by the policies of such senior stock exchange or stock
      market; and
| |       |                                                                                                                                                                                                                                   
| | (vii) | it may make such amendments as reduce, and do not
      increase, the benefits of the Plan to potential
  optionees.                                                                                                              

The full text of the Plan is available for download at
www.sedar.com.

SUMMARY COMPENSATION TABLE

The compensation paid to the NEOs during the Companys two most
recently completed financial years of February 28 is as set out below and
expressed in Canadian Dollars unless otherwise noted:

Name and principal position
      Year
      Salary(1) ($)
      Share-
        based awards(2) ($)
      Option-
        based awards(2) ($)
      Non-equity incentive plan compensation(3) **($)**
      **Pension** value(5)
        ($)
      All
        other compensation(6) ($)
      Total compensation(7)
        ($)Annual incentive
        plans(3)
      Long-termincentive
        plans(4)John Bristow(10) President and CEO
      2010 
        2009
      290,665 
        333,455
      Nil 
        Nil
      32,000 
        121,900
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      322,665 
        455,355Desmond Morgan 
        CFO (8)(10)
      2010 
        2009
      124,571 
        44,043
      Nil 
        Nil
      24,000 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      148,571 
        44,043Jeffrey Brenner 
        Manager  Diamond 
        Marketing and Sales
      2010 
        2009
      212,580 
        206,470
      Nil 
        Nil
      24,000 
        81,266
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      236,580 
        287,736Graham Chamberlain 
        COO
      2010 
        2009
      69,206 
        Nil
      Nil 
        Nil
      24,000 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      93,206 
        Nil


Notes:

| | (1) | The Companys South African executives are compensated in
      South African Rand (ZAR) and have been presented in Canadian
      Dollars at an exchange rate of 1 Canadian Dollar = ZAR 7.2248 (2009 
      7.872) the average yearly rate in effect for the year ended February 28,
      2010.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                      
| | (2) | This amount represents the Dollar amount based on the
      grant date fair value of the award for the year ended February 28,
      2010.                                                                                                                                                           

---

 Page 85 

| | (3)  | These amounts include annual non-equity incentive plan
      compensation, such as bonuses and discretionary amounts for the year ended
      February 28, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (4)  | These amounts include non-equity incentive plan
      compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (5)  | These amounts include all compensation relating to all
      benefit and contribution plans and include all service costs and other
      compensatory items.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (6)  | These amounts cover compensation other than amounts
      already set out in the table for the year ended February 28,
  2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (7)  | These amounts include all amounts set out in table form
      for each NEO and executive officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (8)  | Mr. Morgan commenced employment with the Company on
      October 13, 2008 and was appointed Chief Financial Officer on October 20,
      2008. The salary in the table above reflects the pro-rata portion of his
      annual base salary of $116,491 (ZAR 900,000) for year ended February 28,
      2009 and $124,571 (ZAR900,000) for year ended February 28, 2010.                                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (9)  | Compensation of the Companys South African executives
      (Mr. Bristow, Mr. Morgan and Mr. van Wyk) is paid to each executive in
      South African Rand (ZAR) at an exchange rate of 1 Canadian Dollar
      = ZAR 7.872, being the average monthly rate for the year ended February
      28, 2009.                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (10) | The options granted in the 2009 financial year were
      granted pursuant to the Stock Option Plan. For compensation purposes, the
      Black-Scholes option valuation model has been used to determine the fair
      value on the date of grant. The Black-Scholes option valuation is
      determined using the expected life of the stock option, expected
      volatility of the Companys common share price, expected dividend yield,
      and risk-free interest rate. The Black-Scholes grant date fair value for
      awards granted on December, 2009 was 90% of the option exercise
    price.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (11) | Graham Chamberlain commenced employment with the Company
      on November 1, 2009 and was appointed Chief Operating
  Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

INCENTIVE PLAN AWARDS

Outstanding Option-based Awards

The following table sets out all share-based awards and option-based
  awards outstanding as at February 28, 2010, for each NEO:

Option-based AwardsName
      Number of securities underlying unexercised options (#)
      Option exercise price
        ($)
      Option expiration
        date
      Value of unexercised in-the-
        money options ($)(1)John Bristow 
        President and CEO
      599,500 
        600,000
      0.62 
        0.06
      Sept 24, 2012 
        Dec 7, 2014
      Nil 
        6000Desmond 
        Morgan 
        CFO
      450,000
      0.06
      Dec 07, 2014
      4,500Jeffrey Brenner 
        Manager  Diamond 
        Marketing and Sales
      450,000 
        350,000 
        200,000
      0.06 
        0.62 
        0.45
      Dec 7, 2014 
        Sept 24, 2012 
        June 20, 2011
      4,500 
        Nil 
        NilGraham Chamberlain 
        COO
      450,000
      0.06
      Dec 07, 2014
      4,500Gerhard Jacobs 
        CFO
      Nil
      Nil
      Nil
      Nil


---

 Page 86 

Notes:

| | (1) | The value at February 28, 2010 is calculated by
      determining the difference between the closing price of the Companys
      common shares at February 28, 2010 ($0.075/share) underlying the option on
      the TSX and the exercise price of the options.      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                        
| | (2) | Mr. Morgan resigned as CFO effectively July 16, 2010 and
      under the terms of the Companys Share Option Plan two thirds of these
      options that had vested at that date shall expire on October 16, 2010 with
      the remainder expiring on his resignation.
| |     |                                                                                                                                                                                                                                                                        
| | (3) | Gerhard Jacobs was appointed as the new CFO effectively
      July 19, 2010.                                                                                                                                                                                           

Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets out all incentive plan (value vested
or earned) during the year ended February 28, 2010, for each NEO:

Name
    Option-based awards  Value vested
      during the year(1) ($)
    Non-equity incentive plan compensation
       Value earned during the year ($)John Bristow President, CEO and COO
    $10,636
    NilDesmond Morgan CFO
    $7,977
    NilGraham Chamberlain COO
    $7,977
    NilJeffrey Brenner Manager  Diamond
      Marketing and Sales
    $7,977
    Nil


Note:

| | (1) | These amounts represent the aggregate Dollar value that
      would have been realized if the options under the option-based award had
      been exercised on the vesting date. The value of each amount has been
      determined by taking the difference between the market price of the option
      at date of exercise and the exercise or base price of the option under the
      option-based award on the vest date.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PENSION PLAN BENEFITS

The Company has no pension plans for its directors, officers or
employees.

TERMINATION AND CHANGE OF CONTROL BENEFITS

There are written employment contracts between the Company and
every NEO.

Dr. John W. Bristows employment commenced effective January 1,
2007, , Jeffrey Brenners employment commenced effective November 21, 2007,
Graham Chamberlain employment commenced effective November 1, 2009 and Gerhard
Jacobs employment commenced effective July 19, 2010. Desmond Morgans employment
commenced effective October 17, 2008 and he resigned on July 16, 2010.

Under these agreements they are required to work full time for
the Company and are eligible to receive stock options and a performance based
bonus at the discretion of the Compensation Committee and the Board and other
standard benefits made available by the Company.

There are no other compensatory plans or arrangements, with
respect to the NEO resulting from the resignation, retirement or any other
termination of employment of the officers employment or from a change of any
NEOs responsibilities following a change in control.

Potential Payments upon Termination

The following table provides information concerning the value
of payments and benefits following the termination of employment of the NEOs
under various circumstances. Payments vary based on the reason for termination
and the timing

---

 Page 87 

of a departure. The below amounts are calculated as if the
NEOs employment had been terminated on February 28, 2010. Receipt of payments
on termination is contingent on the NEO delivering a release to the Company.

NEO
      Termination Without Cause
      Change of ControlJohn Bristow
      Salary
      $271,128
      $271,128Bonus
      Nil
      NilOptions
      Nil
      NilDesmond Morgan
      Salary
      $38,732
      $116,198Bonus
      Nil
      NilOptions
      Nil
      NilJeffrey Brenner
      Salary
      $51,617
      $206,470Bonus
      Nil
      NilOptions
      Nil
      NilGerhard Jacobs
      Salary
      $137,888
      $275,775Bonus
      Nil
      NilOptions
      Nil
      NilGraham Chamberlain
      Salary
      $96,831
      $193,663Bonus
      Nil
      NilOptions
      Nil
      Nil


Notes:

| | (1) | Compensation of the Companys South African executives
      (John Bristow, Desmond Morgan, Gerhard Jacobs, Graham Chamberlain) was
      paid to each executive in South African Rand (ZAR). For the
      purposes of the table above, an exchange rate of 1 Canadian Dollar = ZAR
      7.745 was used.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                             
| | (2) | Mr Morgan resigned as CFO effectively July 16,
    2010.                                                                                                                                                                                                                                                    

Except as outlined above, there are no contracts, agreements,
plans or arrangements that provide for payments to an NEO at, following or in
connection with any termination (whether voluntary, involuntary or
constructive), resignation, retirement, a change in control of the Company or a
change in an NEOs responsibilities.

DIRECTOR COMPENSATION

Director Compensation TableEach independent
director of the Company, who is not an executive officer, is paid an annual
directors fee of $20,000. Each director who is a member of a committee receives
either an additional $5,000 for acting as Chairperson or $3,000 for being a
member of a committee.

---

 Page 88 

The compensation provided to the directors, excluding a
director who is included in disclosure for an NEO for the Companys most
recently completed financial year of February 28, 2010 is:

Name
    Fees earned
      ($)
    Share- based
      Awards ($)
    Option- based
      awards ($)
    Non-equity incentive
      plan compensation ($)
    Pension value
      ($)
    All other
      compensation ($)
    Total ($)David Copeland(1)
    17,818
    Nil
    31,999
    Nil
    Nil
    Nil
    49,817Mark Bristow
    21,750
    Nil
    26,666
    Nil
    Nil
    Nil
    48,416Terrence Janes(2)
    9,333
    Nil
    Nil
    Nil
    Nil
    Nil
    9,333William Fisher(3)
    30,917
    Nil
    Nil
    Nil
    Nil
    Nil
    30,917Greg Radke(4)
    8,667
    Nil
    Nil
    Nil
    Nil
    Nil
    8,667Sandile Zungu
    27,167
    Nil
    15,999
    Nil
    Nil
    Nil
    43,166Richard John
      Linnell(5)
    12,917
    Nil
    15,999
    Nil
    Nil
    Nil
    28,916Willem Jacobus
      Jacobs(6)
    11,667
    Nil
    26,666
    Nil
    Nil
    Nil
    38,333Yong Guo(7)
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    NilGary Wu(8)
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil


Notes:

|(1) | Fees paid to Mr. Copeland via CEC Engineering are based
      on time spent working on the Companys matters.
|--- | -------------------------------------------------------------------------------------------------------------
|(2) | Mr. Janes resigned as a director on June 23,
  2009.                                                         
|(3) | Mr.Fisher resigned as a director on June 23,
  2009.                                                         
|(4) | Mr.Radke resigned as a director on June 18,
  2009.                                                          
|(5) | Mr. Linnell was appointed as a director on October 30,
      2009.                                           
|(6) | Mr. Jacobs was appointed as a director on October 30,
      2009.                                            
|(7) | Mr. Guo was appointed as a director on January 6, 2010
      and resigned on June 28, 2010.                  
|(8) | Mr Wu was appointed as a director on August 5,
    2010.                                                     

The following table sets out all share-based awards and
option-based awards outstanding as at February 28, 2010, for each director,
excluding a director who is already set out in disclosure for a NEO for the
Company:

Option-based Awards
      Share-based AwardsName
      Number of securities
        underlying unexercised options (#)
      Option exercise
        price ($)
      Option expiration
        date
      Value of unexercised
        in-the-money options ($)(1)
      Number of shares
        or units of shares that have not
        vested (#)
      Market or payout value of share- based awards that have not
        vested ($)David Copeland
      499,500 
        600,000
      0.62 
        0.06
      Sept 24, 2012 
        Dec 7, 2014
      Nil 
        6,000
      Nil 
        400,000
      Nil 
        4,000Mark Bristow
      449,500 
        500,000
      0.62 
        0.06
      Sept 24, 2012 
        Dec 7, 2014
      Nil 
        5,000
      Nil 
        333,333
      Nil 
        3,333Sandile Zungu
      300,000
      0.06
      Dec 7, 2014
      3,000
      200,000
      2,000Richard John Linnell
      300,000
      0.06
      Dec 7, 2014
      3,000
      200,000
      2,000Willem Jacobjus Jacobs
      500,000
      0.06
      Dec 7, 2014
      5,000
      333,333
      3,333Gary Wu
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil


---

 Page 89 

Notes:

| | (1) | The value at February 28, 2010 is calculated by
      determining the difference between the closing price of the Companys
      common shares at February 28, 2010 ($0.075/share) underlying the option on
      the TSX and the exercise price of the options.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There was no value vested or earned under any incentive plan
during the year ended February 28, 2010.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS

See heading Option Based Awards for disclosure on the
Companys Plan.

The following table sets out equity compensation plan
information for the year ended February 28, 2010.

Equity Compensation Plan Information

Number of securities to
      be issued upon exercise of outstanding options
      Weighted-average
      exercise price of outstanding options
      Number of securities remaining
      available for future issuance under equity
      compensation plans (excluding securities reflected
      in column (a))Plan Category
    (a)
    (b)
    (c)Equity compensation plans approved by securityholders -
      (the Plan)
    22,818,890
    $0.39
    14,264,417Equity compensation plans not approved by securityholders
    Nil
    Nil
    NilTotal
    22,818,890
    $0.39
    14,264,417


C.          
Board Practices

All directors were either elected at the annual general meeting
held in November 2009 or were appointed by the directors after such meeting to
fill vacancies in the board, and have a term of office expiring at the next
annual general meeting of Rockwell expected to be held in September 2010. There
are no contracts or arrangements under which directors are compensated or
provided benefits upon termination of employment.

1. Board of Directors

Directors are considered to be independent if they have no
direct or indirect material relationship with the Company. A "material
relationship" is a relationship which could, in the view of the Companys board
of directors, be reasonably expected to interfere with the exercise of a
directors independent judgment.

The Board facilitates its independent supervision over
management in a number of ways including: by holding regular meetings without
the presence of management; by retaining independent consultants; and by
reviewing corporate developments with larger shareholders, analysts and
potential industry partners, where it deems necessary.

The directors of the Company, except Dr. John Bristow and Mr
David Copeland are independent. The Company is taking steps to ensure that the
duties generally performed by independent directors are being performed by the
current directors. The Board members have extensive experience as directors of
public companies and are sensitive to the related corporate governance and
financial reporting obligations associated with such positions. Thus the Board
members are reasonably well versed in the obligations of directors and the
expectations of independence from management.

---

 Page 90 

The following committees have been established by the members
of Rockwells board of directors. The mandate of each committee is included in
the Companys corporate governance manual and can be viewed on the Companys
website (www.rockwelldiamonds.com):

Committee
    MembershipAudit Committee
    Willem Jacobs Richard LinnellNominating and Governance Committee
    Richard Linnell Sandile ZunguCompensation Committee
    Willem Jacobs Richard Linnell
      Sandile Zungu


The audit committee is selected annually by the directors of
Rockwell at the first meeting of the Board held after Rockwell's annual general
meeting. Its primary function is to review the financial statements of the
Company before they are submitted to the Board for approval and the audit
committee is also available to assist the Board if required with matters
relating to the appointment of Rockwell's auditor and the overall scope and
results of the audit, internal financial controls, and financial information for
publication for various purposes.

2. Other Directorships

The section entitled Item 6  Directors,
Senior Management and Employees in this Annual Report gives details
of other reporting issuers of which each director is a director or officer.

3. Orientation and Continuing Education

The Company has traditionally retained experienced mining
people as directors and hence the orientation needed is minimized. When new
directors are appointed, they are acquainted with the Companys mineral project
and the expectations of directors. Board meetings generally include
presentations by the Companys senior management and project staff in order to
give the directors full insight into the Companys operations.

4. Ethical Business Conduct

The Board has adopted an ethics policy which is available on
the Companys website, www.rockwelldiamonds.com. The Board also understands
that the fiduciary duties placed on individual directors by the Companys
governing corporate legislation and the common law and the restrictions placed
by applicable corporate legislation on an individual directors participation in
decisions of the Board in which the director has an interest have been
sufficient to ensure that the Board operates independently of management and in
the best interests of the Company.

5. Nomination of Directors

The Board considers its size each year when it considers the
  number of directors required, taking into account the number required to carry
  out the Boards duties effectively and to maintain a diversity of views
  and experience. The Board has a Nominating and Governance Committee, though
  the full Board retains responsibility for the recommendation of directors to
  the Shareholders for election.

---

 Page 91 

6. Compensation

The Compensation Committee considers compensation for the
directors and senior executive officers and submits its compensation
recommendations to the Board for approval.

7. Other Board Committees

The Board has no committees other than the Audit Committee,
Nominating and Governance Committee and Compensation Committee.

8. Assessments

The Board monitors the adequacy of information given to
directors, communication between the Board and management and the strategic
direction and processes of the Board and its committee.

AUDIT COMMITTEE

The Audit Committees Charter

The audit committee has adopted a charter that sets out its
mandate and responsibilities. A copy of the audit committee charter is available
at www.sedar.com and the Companys website,
www.rockwelldiamonds.com.

Composition of the Audit Committee

The current members of the audit committee are Mr. Willem
Jacobs and Mr Richard Linnell. All members are and were considered to be
financially literate and are independent members of the audit committee. The
Company is currently in the process of searching for additional audit committee
members

A member of the audit committee is independent if the member
has no direct or indirect material relationship with the Company. A material
relationship means a relationship which could, in the view of the Companys
Board of Directors, reasonably interfere with the exercise of a members
independent judgment.

---

 Page 92 

Relevant Education and Experience

As a result of their education and experience, each member of
the audit committee has familiarity with, an understanding of, or experience
in:

- the accounting principles used by the Company to prepare its financial
  statements, and the ability to assess the general application of those
  principles in connection with estimates, accruals and reserves;
- reviewing or evaluating financial statements that present a breadth and
  level of complexity of accounting issues that are generally comparable to the
  breadth and complexity of issues that can reasonably be expected to be raised
  by the Company's financial statements, and
- an understanding of internal controls and procedures for financial
  reporting.

A member of the audit committee is considered financially
literate if he or she has the ability to read and understand a set of financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of the issues that
can reasonably be expected to be raised by the Company.

Audit Committee Oversight

The audit committee has not made any recommendations to the
Board to nominate or compensate any external auditor that was not adopted by the
Board.

The Companys auditors, KPMG Inc., have not provided any
material non-audit services.

Pre-Approval Policies and Procedures

The Company has adopted specific policies and procedures for
the review and pre-approval of any services performed by its auditors. The
procedures require that all proposed engagements of its auditors for audit and
non-audit services be submitted to the audit committee for approval prior to the
beginning of any such services. The audit committee considers such requests,
and, if acceptable to a majority of the audit committee members, pre-approves
such audit and non-audit services by a resolution authorizing management to
engage the Companys auditors for such audit and non-audit services, with set
maximum Dollar amounts for each itemized service. During such deliberations, the
audit committee assesses, among other factors, whether the services requested
would be considered "prohibited services" as contemplated by the regulations of
the US Securities and Exchange Commission, and whether the services requested
and the fees related to such services could impair the independence of the
auditors.

D.          
Employees

At February 28, 2010, Rockwell has 447 direct employees. The
Company's administrative and operational functions are primarily administered in
South Africa.

---

 Page 93 

E.          
  Share Ownership

See the table in Item 6.A above for beneficial share ownership
information of our executive officers and directors as of July 31, 2010.

Share Option Plan

At the Company's Annual and Extraordinary General Meeting held
in August 2008, shareholders of the Company approved a Share Incentive Plan (the
Plan) in accordance with the policies of the TSX.

Incentive stock options may be issued to directors, officers,
employees or consultants of the Company at the discretion of the board of
directors, subject to an aggregate maximum of 10% of the issued capital of the
Company. This type of share option plan is called a rolling plan. Pursuant to
the Plan, if outstanding options are exercised, or expire, or the number of
issued and outstanding common shares of the Company increases, the number of
options available to grant under the Plan increases proportionately. Options can
have a maximum term of five years and typically terminate 90 days following the
termination of the optionee's employment or engagement, except in the case of
retirement or death. Vesting of options is at the discretion of the board of
directors at the time the options are granted.

The Option Plan is subject to restrictions that:

| | (a) | the number of shares issuable to insiders as a group
      under the Option Plan, when combined with shares issuable to insiders
      under all the Companys other security based compensation plans, may not
      exceed 10% of the Companys issued shares; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                     
| | (b) | no exercise price of an option granted to an insider may
      be reduced nor an extension to the term of an option granted to an insider
      extended without further approval of the disinterested shareholders of the
      Company.                           

Options under the Option Plan must be granted at a price no
lower than the five day volume weighted average trading price of the shares,
which is calculated by dividing the total value of the securities traded for the
relevant period by the total volume. Where appropriate, the TSX may exclude
internal crosses and certain other special terms trades from the calculation.

---

 Page 94 

The continuity of share purchase options as at May 31, 2010 is
as follows:

| |                                                                              | Exercise |  |   | Feb 28,    |  |   | Granted/ |  |   |           |  |   | Expired/  |   |   | May 31,    | 
| | ---------------------------------------------------------------------------- | -------- |  | - | ---------- |  | - | -------- |  | - | --------- |  | - | --------- | - | - | ---------- | 
| | Expiry date                                                                  | price    |  |   | 2010       |  |   | Issued   |  |   | Exercised |  |   | cancelled |   |   | 2010       | 
| | September 24,
      2012                                                     | $ 0.62   |  |   | 5,896,500  |  |   |         |  |   |          |  |   |          |   |   | 5,896,500  | 
| | November 14, 2012                                                            | $ 0.63   |  |   | 1,101,500  |  |   |         |  |   |          |  |   | (15,000   | ) |   | 1,086,500  | 
| | June 20, 2011                                                                | $ 0.45   |  |   | 950,000    |  |   |         |  |   |          |  |   |          |   |   | 950,000    | 
| | December 7, 2014                                                             | $ 0.06   |  |   | 14,270,890 |  |   |         |  |   |          |  |   | (95,600   | ) |   | 14,175,290 | 
| | January 18, 2015                                                             | $ 0.07   |  |   | 600,000    |  |   |         |  |   |          |  |   |          |   |   | 600,000    | 
| |                                                                              |          |  |   | 22,818,890 |  |   |         |  |   |          |  |   | (110,600  | ) |   | 22,708,290 | 
| |                                                                              |          |  |   |            |  |   |          |  |   |           |  |   |           |   |   |            | 
| | Weighted average exercise price                                              |          |  | $ | 0.25       |  | $ |         |  | $ |          |  | $ | 0.14      |   | $ | 0.25       | 
| | Weighted average fair value of stock options
      granted during the period |          |  |   |            |  |   |          |  |   |           |  |   |           |   |   |           | 

As at May 31, 2010, 12,563,296 of the stock options outstanding
with a weighted average exercise price of $0.39 per share have vested with
grantees.

---

 Page 95 

ITEM
7.           MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.          
Major Shareholders

Rockwell's securities are recorded on the books of its transfer
agent in registered form, however, the majority of such shares are registered in
the name of intermediaries such as brokerage houses and clearing houses on
behalf of their respective brokerage clients, and Rockwell does not have
knowledge of or access to information about of the beneficial owners thereof. To
the best of its knowledge, Rockwell is not directly or indirectly owned or
controlled by a foreign government. As of February 28, 2010, Rockwell had
authorized an unlimited number of common shares without par value of which
370,843,069 were issued and outstanding.

"Beneficial ownership" means the sole or shared power to vote
or direct the voting or to dispose or direct the disposition of any security. A
person is deemed to have beneficial ownership of any securities that such person
has a right to acquire within 60 days of the fiscal period through the exercise
of any option or warrant. Any security that any person has the right to acquire
within 60 days is deemed outstanding for the purpose of calculating the
ownership of such person, but is not deemed to be outstanding for the purpose of
calculating the ownership percentage of any other person.

Under the British Columbia Securities Actinsiders
(generally officers, directors, and holders of 10% or more of Rockwell's shares)
are required to file insider reports of changes in their ownership within ten
days of a trade in Rockwell's securities. Copies of such reports are available
for public inspection at the offices of the British Columbia Securities
Commission, 9th Floor, 701 West Georgia Street, Vancouver, British Columbia V7Y
1L2 (phone (604) 899-6500) or at Canadian Securities Administrators website for
Insiders' Disclosure, www.sedi.ca.

As at July 31, 2010 the current registered filed shareholding
positions of greater than 5% are:.

Percentage ofName
    Location
    total sharesGodia Capital Partners
      Limited
    China
    11.46%Daboll Consultants Limited
    British Virgin Islands
    10.23%LLB Vaduz
    Liechtenstein
    5.27%


As of July 31, 2010, directors and officers of Rockwell in
total (10 persons) own or control an aggregate of 10,224,637 common shares of
the Company (1.97%) . These directors or officers do not have any different
voting rights with respect to the common shares held by them. Under the British
Columbia Securities Act, insiders (generally officers, directors, holders
of 10% or more of the Company's shares) are required to file insider reports of
changes in their ownership in the first 10 days following a trade in Rockwell's
securities. Under British Columbia securities laws, insider trading information
is available at www.sedi.ca

---

 Page 96 

As at July 31, 2010, to the best of the Company's knowledge,
the following is the geographic distribution of shareholders. Shares registered
in intermediaries were assumed to be held by residents of the same country in
which the clearing house was located.

Percentageof totalLocation
    sharesCanada
    69.20%United States
    6.17%Republic of South Africa
    0.25%Other countries
    24.38%Total
    100%


To management's knowledge, there are no arrangements of which
may at a subsequent date result in a change of control.

B. Related Party Transactions

Since the beginning of Rockwells last fiscal year ended
February 28, 2010. no director or senior officer, and no associate or affiliate
of the foregoing persons, and no insider has or has had any material interest,
direct or indirect, in any other transactions, or in any other proposed
transaction, which in either such case has materially affected or will
materially affect Rockwell or its predecessors except as follows:

| | Balances payable                         |   | As
      at       |  |   | As
      at       | 
| | ---------------------------------------- | - | ----------------- |  | - | ----------------- | 
| |                                          |   | February 28, 2010 |  |   | February 28, 2009 | 
| | Jeffrey B
      Traders CC (d)           | $ |                  |  | $ | 7,890             | 
| | Jakes Tyres (i)                          |   |                  |  |   | 5,498             | 
| | Banzi
      Trade 26 (Pty) Ltd (h)       |   | 603               |  |   | -                 | 
| | Hunter Dickinson Services
      Inc. (a) |   | 627,435           |  |   | 180,267           | 
| | Seven Bridges Trading (e)                |   | 13,285            |  |   | -                 | 
| | Current balances payable                 | $ | 641,323           |  | $ | 193,655           | 
| |                                          |   |                   |  |   |                   | 
| |                                          |   |                   |  |   |                   | 
| | Liberty Lane (l)                         |   | 414,566           |  |   | 383,330           | 
| |                                          |   |                   |  |   |                   | 
| | Longterm balances payable               | $ | 414,566           |  | $ | 383,330           | 
| |                                          |   |                   |  |   |                   | 
| |                                          |   |                   |  |   |                   | 
| | Balances receivable                      |   |                   |  |   |                   | 
| | Banzi Trade 26
      (Pty) Ltd (h)       |   | 46,108            |  |   | 19,547            | 
| | Diacor CC (k)                            |   |                  |  |   | 29,668            | 
| |                                          | $ | 46,108            |  | $ | 49,215            | 

---

 Page 97 

| |                                                  |   | Year
      ended |  |   | Year
      ended |  |   | Nine
      Months | 
| | ------------------------------------------------ | - | ---------------- |  | - | ---------------- |  | - | ----------------- | 
| | Transactions                                     |   | February 28      |  |   | February 28      |  |   | February 29       | 
| |                                                  |   | 2010             |  |   | 2009             |  |   | 2008              | 
| |                                                  |   |                  |  |   |                  |  |   |                   | 
| | Services rendered and
      expenses reimbursed: |   |                  |  |   |                  |  |   |                   | 
| | Hunter Dickinson Services
      Inc. (a)         | $ | 961,042          |  | $ | 1,280,316        |  | $ | 863,861           | 
| | Euro-American Capital Corporation (b)            |   |                 |  |   |                 |  |   | 14,393            | 
| | CEC Engineering (c)                              |   | 17,818           |  |   | 26,904           |  |   | 39,766            | 
| | Jeffrey B
      Traders CC (d)                   |   |                 |  |   |                 |  |   | 52,740            | 
| | Seven Bridges Trading (e)                        |   | 139,789          |  |   |                 |  |   | 57,952            | 
| | Cashmere
      Trading (f)                       |   |                 |  |   | 18,808           |  |   | 353,736           | 
| | Banzi Trade 26 (Pty) Ltd
      (h)               |   | 17,688           |  |   | 29,768           |  |   | 47,575            | 
| | Jakes
      Tyres (i)                            |   |                 |  |   | 440,283          |  |   | 1,141,454         | 
| | AA Van Wyk (j)                                   |   |                 |  |   |                 |  |   | 148,658           | 
| | Diacor CC
      (k)                              |   |                 |  |   | 39,510           |  |   | 3,888             | 
| | Flawless Diamonds Trading
      House (g)        | $ | 316,081          |  | $ | 346,768          |  | $ | 362,255           | 
| |                                                  |   |                  |  |   |                  |  |   |                   | 
| | Sales rendered to:                               |   |                  |  |   |                  |  |   |                   | 
| | Banzi Trade 26 (Pty) Ltd (h)                     |   | 1,989            |  |   | 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.

All related party transactions are arms length transaction in
the normal course of business.

| | (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.                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (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 14 (Pty) Ltd (Seven Bridges
      Trading) is a wholly owned subsidiary of Randgold Resources Ltd, 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.

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 Page 98 

| | (f) | Cashmere Trade 19 (Pty) Ltd (Cashmere Trade) is a private
      company owned by Hennie Van Wyk, a former 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 (Pty) Ltd (Flawless
      Diamonds Trading House) 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 former 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 a former directors and officer of the Company, which provided contract
      mining services at market rates.                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (k) | Diacor CC is a private company of which H C van Wyk, a
      former director and officer of the Company, is a director from which the
      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.                                                                                                                                                                                                                                                                                                                                                                                                              

C.          
Interest of Experts and Council

Not Applicable.

---

 Page 99 

ITEM
8.           FINANCIAL
INFORMATION

A.          
Consolidated Statements and Other Financial Information

See Item 17 Financial Statements.

Legal Proceedings

Kwango River Project, Democratic Republic of
Congo

Rockwells subsidiary, Durnpike Investments (Proprietary)
Limiteds (Durnpike) 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 independent contractor on behalf of Midamines to manage and carry out
exploration activities and potentially, mining activities. 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$1.2
million per annum (commencing on December 31, 2007). During the first quarter of
2008, pursuant to an amendment to the Midamines Agreement, Durnpike paid
consideration of US$600,000 to Midamines as compensation for access to the
entire concession area (Permit 331), as opposed to the limited contract area. As
part of such amendment, Midamines waived its right to payment of the
abovementioned US$1.2 million royalty payment due on December 31, 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
and/or Rockwell cancelled the Midamines Agreement. Midamines thereafter disputed
the entitlement of Durnpike and/or Rockwell to cancel the Midamines Agreement.
It has referred to arbitration a dispute against Durnpike and Rockwell, in which
it claims payment of an estimated and provisional amount of $41.8 million.
Durnpike and/or Rockwell have, in turn, instituted a counter-claim in the
estimated and provisional amounts of approximately ZAR25.4 million for equipment
purchased by Rockwell to undertake exploration and feasibility work, $1.6
million for start-up and acquisition costs in the DRC, and US$20 million (while
reserving the right to increase the counter-claim to at least $164.9 million) as
an initial estimate of possible lost earnings.

Comprehensive documentation has been filed by the parties and
arbitration proceedings are pending in Belgium. The Company remains of the view
that the claim against it is without merit and will vigorously defend against
it.

Niewejaarskraal

During the course of 2008 and 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 to progress 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 being 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
  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.

---

 Page 100 



Dividend Policy

Rockwell has not paid any dividends on its outstanding common
shares since its incorporation and does not anticipate that it will do so in the
foreseeable future. All funds of the Company are being retained for exploration
of its projects.

B.          
  Significant Changes

There have been no significant changes to the accompanying
financial statements since February 28, 2010, except as disclosed in this Annual
Report on Form 20-F.

---

 Page 101 

ITEM
9.           THE OFFER AND
LISTING

A.          
Offer and Listing Details Trading Markets

TSX Exchange
      OTC Bulletin Board
      JSERDI
      RDIAF
      RDIHigh
      Low
      High
      Low
      High
      LowCAD
      CAD
      USD
      USD
      ZAR
      ZARAnnualFiscal 2006
      $0.70
      $0.28
      $0.64
      $0.22
      
      Fiscal 2007
      $0.85
      $0.38
      $1.98
      $0.25
      
      Fiscal 2008
      $0.80
      $0.50
      $0.75
      $0.30
      R4.50
      R4.00Fiscal 2009
      $0.64
      $0.03
      $0.70
      $0.03
      R4.25
      R0.30Fiscal 2010
      $0.12
      $0.03
      $0.10
      $0.02
      R0.99
      R0.23Fiscal 2009Quarter ended May 31, 2008
      $0.64
      $0.42
      $0.70
      $0.35
      R4.25
      R3.33Quarter ended August 31, 2008
      $0.54
      $0.16
      $0.53
      $0.16
      R4.00
      R1.45Quarter ended November 30, 2008
      $0.34
      $0.03
      $0.32
      $0.03
      R3.01
      R0.75Quarter ended February 28,
        2009
      $0.08
      $0.03
      $0.09
      $0.04
      R0.90
      R0.30Fiscal 2010Quarter ended May 31, 2009
      $0.08
      $0.03
      $0.07
      $0.05
      R0.47
      R0.23Quarter ended August 31, 2009
      $0.12
      $0.03
      $0.10
      $0.02
      R0.99
      R0.23Quarter ended November 30, 2009
      $0.10
      $0.05
      $0.10
      $0.04
      R0.65
      R0.40Quarter ended February 28, 2010
      $0.09
      $0.05
      $0.09
      $0.04
      R0.58
      R0.32MonthlyFebruary 2010
      $0.08
      $0.07
      $0.07
      $0.06
      R0.56
      R0.45March 2010
      $0.08
      $0.07
      $0.08
      $0.06
      R0.50
      R0.35April 2010
      $0.08
      $0.07
      $0.08
      $0.07
      R0.50
      R0.42May 2010
      $0.07
      $0.06
      $0.07
      $0.05
      R0.50
      R0.45June 2010
      $0.07
      $0.06
      $0.07
      $0.06
      R0.50
      R0.30July 2010
      $0.08
      $0.06
      $0.07
      $0.06
      R0.50
      R0.35


The transfer of the Company's common shares is managed by its
transfer agent, Computershare Trust Company of Canada of Vancouver.

B.          
Plan of Distribution

Not applicable.

---

 Page 102 

C.          
Markets

The shares of Rockwell trade in Canada on the TSX Venture
Exchange ("TSX Venture"), under the trading symbol RDI, in South Africa on the
Johannesburg Stock Exchange (JSE) and are quoted on the National Association
of Securities Dealers Over-The-Counter Bulletin Board ("OTCBB").

D.          
Selling Shareholders

Not applicable.

E.          
Dilution

Not applicable.

F.          
Expenses of the Issue

Not applicable.

---

 Page 103 

ITEM
10.           ADDITIONAL
INFORMATION

A.          
Share Capital

Not applicable.

B.          
Notice of Articles and Articles

Copies of Rockwell's memorandum and articles of incorporation,
as registered with the British Columbia Registrar of Companies under Corporation
No. 354545, were filed with the Company's initial registration statement on Form
20-F filed in 2000. The Business Corporations Act(British Columbia) (the
"BCA") came into force on March 29, 2004. As a result, the Company Act
(British Columbia) was repealed, and the Company became a "pre-existing company"
subject to the provisions of the BCA. Every pre-existing company is required
under the BCA to file a Transition Application containing a notice of articles
with the British Columbia Registrar of Companies, as a result of which the
notice of articles supersedes and replaces the company's memorandum. The Company
has caused a Transition Application to be filed with the British Columbia
Registrar of Companies, and its notice of articles and the related articles are
being filed as exhibits to this Annual Report.

A discussion of the notice of articles and articles of Rockwell
follows:

Objects and Purposes

Rockwell's Notice of Articles do not specify objects or
purposes. Under British Columbia law, a British Columbia corporation has all the
legal powers of a natural person; however corporations may not undertake certain
limited business activities such as operating as a trust company or railroad
without alterations to its form of articles and specific government consent.

Directors  Powers and Limitations

Rockwell's articles do not specify a maximum number of
directors (the minimum under British Columbia law for a public company is
three). The articles specify that the number of directors shall be the number of
directors fixed by shareholders annually or the number that are actually elected
at a general shareholders meeting. The number of directors is determined
annually by shareholders at the annual Shareholders meeting and all directors
are elected at that time, there are no staggered directorships. Under the
articles the directors are entitled between successive annual general meeting to
appoint one or more additional directors but not more than one-third of the
number of directors fixed at a shareholders meeting or actually elected at the
preceding annual general meeting. Directors automatically retire at the
commencement of each annual meeting subject to being re-elected.

Under the articles, a director who is any way directly or
indirectly interested in a proposed contract or transaction with Rockwell or who
holds any office or possesses any property whereby directly or indirectly a duty
might be created which would conflict with his duty or interest as a director
shall declare the nature and extent of such interest in such contract or
transaction. A director shall not vote in respect of any such contract or
transaction if the company in which he is interested and if he should vote his
vote shall not be counted but shall be counted in the quorum present at the
meeting. Similarly, under the BCA directors are obligated to abstain from voting
on matters in which they may be financially interested after fully disclosing
such interest. Directors must abstain in such circumstances both under the
articles and under the BCA.

Directors must be of the age of majority (18), and meet
eligibility criteria including not being mentally infirm, an undischarged
bankrupt and no fraud related convictions in the previous five years. There is
no mandatory retirement age either under Rockwell's articles or under the
BCA.

---

 Page 104 

The directors may from time to time at their discretion
authorize the Company to borrow any sum of money for the purposes of the Company
and may raise or secure the repayment of that sum in such manner upon such terms
and conditions, in all respects, as they think fit, and in particular, and
without limiting the generality of the foregoing, by the issue of bonds or
debentures, or any mortgage or charge, whether specific or floating, or other
security on the undertaking or the whole or any part of the property of the
Company, both present and future. Directors need not own any shares of the
Company in order to qualify as directors.

Rights and Restrictions attached to Shares

The directors may declare dividends and fix the date of record
therefore and the date for payment thereof. No notice need be given of the
declaration of any dividend.

Subject to the terms of shares with special rights or
restrictions, all dividends shall be declared according to the number of shares
held and no dividend shall bear interest against Rockwell.

The directors may direct payment of any dividend wholly or
partly by the distribution of specific assets or of paid-up shares, bonds,
debentures or other debt obligations of Rockwell, or in any one or more of those
ways, and where any difficult arises in regard to the distribution, the
directors may settle the same as they think expedient, and in particular may fix
the value for distribution of specific assets or of paid-up shares, bonds,
debentures or other debt obligations of Rockwell, or in any one or more of those
ways, and, where any difficulty arises in regard to the distribution, the
directors may settle the same as they think expedient, and in particular may fix
the value for distribution of specific assets, and may determine the cash
payments shall be made to a member upon the basis of the value so fixed in place
of fractional shares, bonds, debentures or other debt obligations in order to
adjust the rights of all parties, and may vest any of those specific assets in
trustees upon such trusts for the persons entitled as may seem expedient to the
directors.

Notwithstanding anything contained in Rockwell's articles the
directors may from time to time capitalize any undistributed surplus on hand of
Rockwell and may from time to time issue as fully paid and non-assessable any
unissued shares or any bonds, debentures or other debt obligations of Rockwell
as a dividend representing such undistributed surplus on hand or any part
thereof.

Any dividend, interest or other moneys payable in cash in
respect of shares may be paid by cheque or warrant sent through the post
directed to the registered address of the holder, or, in the case of joint
holders, to the registered address of that one of the joint holders who is first
named on the register or to such person and to such address as the holder or
joint holders may in writing direct. Every such cheque or warrant shall be made
payable to the order of the person to whom it is sent. Any one of two or more
joint holders may give effectual receipts for any dividends, bonuses or other
moneys payable in respect of the shares held by them as joint holders.

A transfer of a share shall not pass the right to any dividend
declared thereon before the registration of the transfer in the register.

Notwithstanding any other provisions of the articles should any
dividend result in any shareholders being entitled to a fractional part of a
share of Rockwell, the directors shall have the right to pay such shareholders
in place of that fractional share, the cash equivalent thereof calculated on the
par value thereof, or in the case of shares without nominal or par value,
calculated on the price or consideration for which such shares were or were
deemed to be issued, and shall have the further right and complete discretion to
carry out such distribution and to adjust the rights of the shareholders with
respect thereto on as practical and equitable a basis as possible including the
right to arrange through a fiscal agent or otherwise for the sale, consolidation
or other disposition of those fractional shares on behalf of those shareholders
of Rockwell.

The directors may, before declaring any dividend, set aside out
  of the profits of Rockwell such sums as they think proper as appropriations
  from income which shall at the discretion of the directors, be applicable for
  meeting contingencies, or for equalizing dividends, or for any other purpose
  to which the profits of Rockwell may be properly applied, and pending such application
  may, either be employed in the business of Rockwell or be invested in such investments
  as the directors in their discretion may from time to time determine.

---

 Page 105 

Changes to Rights of Common Shareholders

Changes to the articles and memorandum of Rockwell can be
changed by a "special resolution", being a resolution passed by not less than
75% of the shares voted in person or by proxy at a duly convened shareholders
meeting. Some corporate changes including amalgamation with another company,
sale of substantially all of Rockwell's assets, re-domiciling out of the
jurisdiction of British Columbia, creation of new classes of shares not only
require such 75% approval but generally also give rise to a dissent right which
is the right to be paid the fair value of the stockholder's shares in cash if
the required special resolution is actually passed and Rockwell elects to
proceed with the matter notwithstanding receipt of dissent notices. A notice of
a shareholders meeting at which such an action is intended to be effected must
include a prominent notice of the dissent right. Dissent provisions governed by
the BCA and not by the articles of Rockwell.

Shareholders Meetings

Shareholders meetings are only peripherally governed by the
articles of Rockwell with most shareholder protections contained in the
Securities Act (British Columbia) and the BCA. The articles provide that
Rockwell will hold an annual general meeting, will provide at least 21 days'
notice and will provide for certain procedural matters and rules of order with
respect to conduct of the meeting. The Securities Act (British Columbia)
and the BCA superimpose requirements that generally provide that shareholders
meetings require not less than a 60 day period from initial public notice that
Rockwell makes a thorough advanced search of intermediary and brokerage
registered shareholdings to ascertain location of beneficial shareholders so
that materials can be sent, the form and content of information circulars and
proxies and like matters typically governed by such securities legislation. This
legislation specifies the disclosure requirements for various corporate actions,
background information on the nominees for election for director, executive
compensation paid in the previous year and full details of any unusual matters.
Rockwell must hold an annual shareholders meeting within 13 months of the
previous annual shareholders meeting and must present audited statements that
are no more than 180 days old at that meeting.

Redemption

Subject to the special rights and restrictions attached to any
class of shares, Rockwell may, by a resolution of the directors and in
compliance with the BCA, redeem any of its shares that have a right of
redemption attached thereto at the price and upon the terms specified in such
resolution and where Rockwell purposes to redeem some, but not all, of its
shares of a particular class or kind, it shall not be obligated to redeem them
pro rata but may redeem them in any manner the directors in their absolute
discretion may deem fit.

Rockwell has no redeemable securities authorized or issued.

Pre-emptive Rights

There are no pre-emptive rights applicable to Rockwell which
provide a right to any person to participate in offerings of Rockwell's
securities

---

 Page 106 

Liquidation

All common shares of Rockwell participate ratably in any
available assets in the event of a winding up or other liquidation.

No Limitation on Foreign Ownership

There are no limitations under Rockwell's Articles or in the
BCA on the right of persons who are not citizens of Canada to hold or vote
common shares. (See also "Exchange Controls"  below.)

Dividends

Dividends may be declared by the Board out of available assets
and are paid rateably to holders of common shares. No dividend may be paid if
Rockwell is, or would thereby become, insolvent.

Voting Rights

Each Rockwell share is entitled to one vote on matters to which
common shares ordinarily vote including the election of directors, appointment
of auditors and approval of corporate changes and other matters requiring
shareholder approval.

Change in Control

Rockwell has not implemented any shareholders' rights against
possible take-overs. Rockwell does not have any agreements which are triggered
by a take-over or other change of control. There are no provisions in its
articles triggered by or affected by a change in outstanding shares which gives
rise to a change in control.

Share Ownership Reporting

The articles of Rockwell do not require disclosure of share
ownership. Share ownership of director nominees must be reported annually in
proxy materials sent to Rockwell's shareholders. There are no requirements under
British Columbia corporate law to report ownership of shares of Rockwell but the
British Columbia Securities Act requires disclosure of trading by insiders
including holders of 10% of voting shares within 10 days of the trade.
Controlling shareholders (generally those in excess of 20% of outstanding
shares) must provide seven days advance notice of share sales.

C.          
Material Contracts

Rockwell's had no material contracts for the fiscal year of
February 28, 2010.

D.          
Exchange Controls

Rockwell is a Canadian corporation incorporated under the laws
of British Columbia. There is no law or governmental decree or regulation in
Canada that restricts the export or import of capital, or affects the remittance
of dividends, interest or other payments to a non-resident holder of Common
Shares, other than withholding tax requirements. Any such remittances to United
States residents are generally subject to withholding tax. See "Taxation" below.

There is no limitation imposed by the laws of Canada or by the
charter or other constituent documents of Rockwell on the right of a
non-resident to hold or vote the Common Shares, other than as provided in the
Investment Canada Act (Canada) (the "Investment Act"). The
following discussion summarizes the material features of the Investment
Act for a non-resident who proposes to acquire a controlling number of
Common Shares. It is general only, it is not a substitute for independent advice
from an investor's own advisor, and it does not anticipate statutory or
regulatory amendments. Rockwell does not believe the Investment Act will
have any affect on it or on its non-Canadian shareholders due to a number of
factors including the nature of its operations and Rockwell's relatively small
capitalization.

---

 Page 107 

The Investment Act generally prohibits implementation of
a reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture (each an "entity") that is not
a "Canadian" as defined in the Investment Act (a "non-Canadian"), unless
after review the Director of Investments appointed by the minister responsible
for the Investment Act is satisfied that the investment is likely to be
of net benefit to Canada. The size and nature of a proposed transaction may give
rise to an obligation to notify the Director to seek an advance ruling. An
investment in the Common Shares by a non-Canadian other than a "WTO Investor"
(as that term is defined in the Investment Act and which term includes
entities which are nationals of or are controlled by nationals of member states
of the World Trade Organization) when Rockwell was not controlled by a WTO
Investor, would be reviewable under the Investment Act if it was an
investment to acquire control of Rockwell and the value of the assets of
Rockwell, as determined in accordance with the regulations promulgated under the
Investment Act, was $5 million or more, or if an order for review was made by
the federal cabinet on the grounds that the investment related to Canada's
cultural heritage or national identity, regardless of the value of the assets of
Rockwell. An investment in the Common Shares by a WTO Investor, or by a
non-Canadian when Rockwell was controlled by a WTO Investor, would be reviewable
under the Investment Act if it was an investment to acquire control of
Rockwell and the value of the assets of Rockwell, as determined in accordance
with the regulations promulgated under the Investment Act, was not less than a
specified amount, which for 2005 exceeds $250 million. A non-Canadian would
acquire control of Rockwell for the purposes of the Investment Act if the
non-Canadian acquired a majority of the Common Shares. The acquisition of less
than a majority but one-third or more of the Common Shares would be presumed to
be an acquisition of control of Rockwell unless it could be established that, on
the acquisition, Rockwell was not controlled in fact by the acquiror through the
ownership of the Common Shares.

The foregoing assumes Rockwell will not engage in the
production of uranium or own an interest in a producing uranium property in
Canada, or provide any financial service or transportation service, as the rules
governing these businesses are different.

Certain transactions relating to the Common Shares would be
exempt from the Investment Act, including

(a)****
an acquisition of the Common Shares by a person in the ordinary course of that
person's business as a trader or dealer in securities,

(b)****
an acquisition of control of Rockwell in connection with the realization of
security granted for a loan or other financial assistance and not for a purpose
related to the provisions of the Investment Act, and

(c) ****an acquisition of control of Rockwell by reason of an amalgamation,
merger, consolidation or corporate reorganization following which the ultimate
direct or indirect control in fact of Rockwell, through the ownership of the
Common Shares, remained unchanged.

E.          
Taxation

Material Canadian Federal Income Tax Consequences for United
States Residents

The following, in management's understanding, summarizes the
  principal Canadian federal income tax consequences generally applicable to the
  holding and disposition of Common Shares by a holder (in this summary, a "U.S.
  Holder") who, at all relevant times, (a) for the purposes of the Income Tax
  Act (Canada) (the "Tax Act"), is not resident in Canada, deals at arm's
  length with Rockwell, holds the Common Shares as capital property and does not
  use or hold the Common Shares in the course of carrying on, or otherwise in
  connection with, a business in Canada, and (b) for the purposes of the Canada-United
  States Income Tax Convention, 1980 (the "Treaty"), is a resident solely of the
  United States, has never been a resident of Canada, and has not held or used
  (and does not hold or use) Common Shares in connection with a permanent establishment
  or fixed base in Canada. This summary does not apply to traders or dealers in
  securities, persons who acquired their Common Shares in a transaction considered
  for purposes of the Tax Act to be an adventure or concern in the nature of trade,
  limited liability companies, tax-exempt entities, insurers, financial institutions
  (including those to which the mark-to-market provisions of the Tax Act apply),
  or any other U.S. Holder to which special considerations apply.

---

 Page 108 

This summary is based on the current provisions of the Tax Act
  including all regulations there under, the Treaty, all proposed amendments to
  the Tax Act, the regulations and the Treaty publicly announced by or on behalf
  of the Minister of Finance to the date hereof, and the current published administrative
  practices of the Canada Customs and Revenue Agency. It has been assumed that
  all currently proposed amendments will be enacted as proposed and that there
  will be no other relevant change in any governing law or administrative practice,
  although no assurances can be given in these respects. This summary does not
  take into account provincial, U.S., state or other foreign income tax law or
  practice. The tax consequences to any particular U.S. Holder will vary according
  to the status of that holder as an individual, trust, corporation or other entity,
  the jurisdictions in which that holder is subject to taxation, and generally
  according to that holder's particular circumstances. Accordingly, this summary
  is not, and is not to be construed as, Canadian tax advice to any particular
  U.S. Holder. U.S. Holders should consult with their own tax advisors for advice
  with respect to their own particular circumstances.

Dividends

Dividends paid or credited or deemed to be paid or credited to
a U.S. Holder by Rockwell will normally be subject to Canadian withholding tax.
Under the Treaty, the rate of withholding tax on dividends paid to a U.S. Holder
that beneficially owns such dividends is generally limited to 15% of the gross
amount of the dividend (or 5% if the U.S. Holder is a corporation and
beneficially owns at least 10% of Rockwell's voting shares). Rockwell will be
required to withhold the applicable withholding tax from any such dividend and
remit it to the Canadian government for the U.S. Holder's account.

Disposition

A U.S. Holder is not subject to tax under the Tax Act in
respect of a capital gain realized on the disposition of a Common Share provided
that the share is not "taxable Canadian property" to the holder thereof. If the
Common Shares are listed on a prescribed stock exchange, which currently
includes the American Stock Exchange, a Common Share generally will not be
taxable Canadian property to a U.S. Holder if, at any time during the 60 months
preceding the disposition, the U.S. Holder or persons with whom the U.S. Holder
did not deal at arm's length alone or together owned, or had an interest or
option in respect of 25% or more of Rockwell's issued shares of any class or
series.

A U.S. Holder whose Common Shares do constitute taxable
Canadian property, and who might therefore be liable for Canadian income tax
under the Tax Act on a disposition or deemed disposition of such shares, will
generally be relieved from such liability under the Treaty unless the value of
the shares of the Company at the time of disposition is derived principally from
real property situated in Canada within the meaning of the Treaty. Management of
Rockwell believes that the value of Rockwell's Common Shares is not currently
derived principally from real property situated in Canada. U.S. Holders whose
Common Shares are taxable Canadian property should consult their own advisors
regarding filing and other Canadian federal tax considerations.

United States Tax Consequences

United States Federal Income Tax Consequences

The following is, in the opinion of Rockwell after consultation
  with its professional advisors, a general discussion of material United States
  federal income tax consequences, under current law, generally applicable to
  a U.S. Holder (as hereinafter defined) of common shares of Rockwell. This discussion
  does not address all potentially relevant federal income tax matters and it
  does not address consequences peculiar to persons subject to special provisions
  of federal income tax law, such as those described below as excluded from the
  definition of a U.S. Holder.

---

 Page 109 

In addition, this discussion does not cover any state, local
  or foreign tax consequences, (see Item 10E "Taxation  Material Canadian
  Federal Income Tax Consequences for United States Residents" above). Accordingly,
  holders and prospective holders of common shares of Rockwell are urged to consult
  their own tax advisors about the specific federal, state, local, and foreign
  tax consequences to them of purchasing, owning and disposing of common shares
  of Rockwell, based upon their individual circumstances.

The following discussion is based upon the sections of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
published Internal Revenue Service ("IRS") rulings, published administrative
positions of the IRS and court decisions that are currently applicable, any or
all of which could be materially and adversely changed, possibly on a
retroactive basis, at any time and which are subject to differing
interpretations. This discussion does not consider the potential effects, both
adverse and beneficial, of any proposed legislation which, if enacted, could be
applied, possibly on a retroactive basis, at any time.

U.S. Holders

As used herein, a "U.S. Holder" means a holder of common shares
of Rockwell who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, an entity created or
organized in or under the laws of the United States or of any political
subdivision thereof which has elected to be treated as a corporation for United
States federal income tax purposes (under Treasury Regulation Section 301.7701
-3), an estate whose income is taxable in the United States irrespective of
source or a trust subject to the primary supervision of a court within the
United States and control of a United States fiduciary as described in Section
7701(a)(30) of the Code. This summary does not address the tax consequences to,
and U.S. Holder does not include, persons subject to specific provisions of
federal income tax law, such as tax-exempt organizations, qualified retirement
plans, individual retirement accounts and other tax-deferred accounts, financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, broker-dealers, non-resident alien individuals, persons or
entities that have a "functional currency" other than the U.S. Dollar,
shareholders subject to the alternative minimum tax, shareholders who hold
common shares as part of a straddle, hedging or conversion transaction, and
shareholders who acquired their common shares through the exercise of employee
stock options or otherwise as compensation for services. This summary is limited
to U.S. Holders who own common shares as capital assets and who own (directly
and indirectly, pursuant to applicable rules of constructive ownership) no more
than 5% of the value of the total outstanding stock of Rockwell. This summary
does not address the consequences to a person or entity holding an interest in a
shareholder or the consequences to a person of the ownership, exercise or
disposition of any options, warrants or other rights to acquire common shares.
In addition, this summary does not address special rules applicable to United
States persons (as defined in Section 7701(a)(30) of the Code) holding common
shares through a foreign partnership or to foreign persons holding common shares
through a domestic partnership.

Distribution on Common Shares of Rockwell

To the extent that a distribution paid to a U.S. holder on its
  common stock is not an excess distribution and is not a non-taxable distribution
  paid from earnings and profits previously included in income by a U.S. holder
  that has made a QEF election, the gross amount of such distribution (including
  any amount deducted in respect of withholding taxes) will generally be subject
  to U.S. federal income tax as foreign source ordinary dividend income to the
  extent such a distribution is paid out of the Company's current or accumulated
  earnings and profits. Such Canadian tax withheld may be credited, subject to
  certain limitations, against the U.S. Holder's federal income tax liability
  or, alternatively, may be deducted in computing the U.S. Holder's federal taxable
  income by those who itemize deductions. (See more detailed discussion at "Foreign
  Tax Credit" below). To the extent that distributions exceed current or accumulated
  earnings and profits of Rockwell, they will be treated first as a return of
  capital up to the U.S. Holder's adjusted basis in the Common Shares and thereafter
  as gain from the sale or exchange of property. Preferential tax rates for long-term
  capital gains are applicable to a U.S. Holder which is an individual, estate
  or trust. There are currently no preferential tax rates for long-term capital
  gains for a U.S. Holder which is a corporation.

---

 Page 110 

In the case of foreign currency received as a dividend that is
not converted by the recipient into U.S. Dollars on the date of receipt, a U.S.
Holder will have a tax basis in the foreign currency equal to its U.S. Dollar
value on the date of receipt. Generally any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. Dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, provided that there are no expenses associated with the transaction that
meet the requirements for deductibility as a trade or business expense (other
than travel expenses in connection with a business trip) or as an expense for
the production of income.

Dividends paid on the common shares of Rockwell generally will
not be eligible for the dividends received deduction provided to corporations
receiving dividends from certain United States corporations. A U.S. Holder which
is a corporation and which owns shares representing at least 10% of the voting
power and value of Rockwell may, under certain circumstances, be entitled to a
70% (or 80% if the U.S. Holder owns shares representing at least 20% of the
voting power and value of Rockwell) deduction of the United States source
portion of dividends received from Rockwell (unless Rockwell qualifies as a
"foreign personal holding company" or a "passive foreign investment company," as
defined below). Rockwell does not anticipate that it will earn any United States
income, however, and therefore does not anticipate that any U.S. Holder will be
eligible for the dividends received deduction.

Under current Treasury Regulations, dividends paid on
Rockwell's common shares, if any, generally will not be subject to information
reporting and generally will not be subject to U.S. backup withholding tax.
However, dividends and the proceeds from a sale of Rockwell's common shares paid
in the U.S. through a U.S. or U.S. related paying agent (including a broker)
will be subject to U.S. information reporting requirements and may also be
subject to the 28% U.S. backup withholding tax, unless the paying agent is
furnished with a duly completed and signed Form W-9. Any amounts withheld under
the U.S. backup withholding tax rules will be allowed as a refund or a credit
against the U.S. Holder's U.S. federal income tax liability, provided the
required information is furnished to the IRS.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions)
Canadian income tax with respect to the ownership of common shares of Rockwell
may be entitled, at the option of the U.S. Holder, to either receive a deduction
or a tax credit for such foreign tax paid or withheld. Generally, it will be
more advantageous to claim a credit because a credit reduces United States
federal income taxes on a Dollar-for-Dollar basis, while a deduction merely
reduces the taxpayer's income subject to tax. This election is made on a
year-by-year basis and generally applies to all foreign taxes paid by (or
withheld from) the U.S. Holder during that year. There are significant and
complex limitations which apply to the credit, among which is the general
limitation that the credit cannot exceed the proportionate share of the U.S.
Holder's United States income tax liability that the U.S. Holder's foreign
source income bears to his or its worldwide taxable income. In the determination
of the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern this
classification process. In addition, this limitation is calculated separately
with respect to specific classes of income such as "passive income," "high
withholding tax interest," "financial services income," "shipping income," and
certain other classifications of income. Dividends distributed by Rockwell will
generally constitute "passive income" or, in the case of certain U.S. Holders,
"financial services income" for these purposes. The availability of the foreign
tax credit and the application of the limitations on the credit are fact
specific, and U.S. Holders of common shares of Rockwell should consult their own
tax advisors regarding their individual circumstances.

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Disposition of Common Shares of Rockwell

In general, U.S. Holders will recognize gain or loss upon the
sale of common shares of Rockwell equal to the difference, if any, between (i)
the amount of cash plus the fair market value of any property received, and (ii)
the shareholder's tax basis in the common shares of Rockwell. Preferential tax
rates apply to long-term capital gains of U.S. Holders that are individuals,
estates or trusts. In general, gain or loss on the sale of common shares of
Rockwell will be long-term capital gain or loss if the common shares are a
capital asset in the hands of the U.S. Holder and are held for more than one
year. Deductions for net capital losses are subject to significant limitations.
For U.S. Holders that are not corporations, any unused portion of such net
capital loss may be carried over to be used in later tax years until such net
capital loss is thereby exhausted. For U.S. Holders that are corporations (other
than corporations subject to Subchapter S of the Code), an unused net capital
loss may be carried back three years and carried forward five years from the
loss year to be offset against capital gains until such net capital loss is
thereby exhausted.

Other Considerations

Set forth below are certain material exceptions to the
above-described general rules describing the United States federal income tax
consequences resulting from the holding and disposition of common shares:

Passive Foreign Investment Company

United States income tax law contains rules governing "passive
foreign investment companies" ("PFIC") which can have significant tax effects on
U.S. Holders of foreign corporations. These rules do not apply to non-U.S.
Holders. Section 1297 of the Code defines a PFIC as a corporation that is not
formed in the United States if, for any taxable year, either (i) 75% or more of
its gross income is "passive income," which includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if the corporation is not publicly traded and either is a controlled
foreign corporation or makes an election, by adjusted tax basis), of its assets
that produce or are held for the production of "passive income" is 50% or more.
In the event that Rockwell qualifies as a PFIC for the fiscal year ending
February 28, 2009 as well as in future fiscal years each U.S. Holder of Rockwell
is urged to consult a tax advisor with respect to how the PFIC rules affect such
U.S. Holder's tax situation.

Each U.S. Holder who holds stock in a foreign corporation
during any year in which such corporation qualifies as a PFIC is subject to
United States federal income taxation under one of three alternative tax regimes
at the election of such U.S. Holder. The following is a discussion of such
alternative tax regimes applied to such U.S. Holders of Rockwell. In addition,
special rules apply if a foreign corporation qualifies as both a PFIC and a
"controlled foreign corporation" (as defined below) and a U.S. Holder owns,
actually or constructively, 10% or more of the total combined voting power of
all classes of stock entitled to vote of such foreign corporation (See more
detailed discussion at "Controlled Foreign Corporation" below).

A U.S. Holder who elects to treat Rockwell as a qualified
electing fund ("QEF") will be subject, under Section 1293 of the Code, to
current federal income tax for any taxable year to which the election applies in
which Rockwell qualifies as a PFIC on his pro rata share of Rockwell's (i) "net
capital gain" (the excess of net long-term capital gain over net short-term
capital loss), which will be taxed as long-term capital gain, and (ii) "ordinary
earnings" (the excess of earnings and profits over net capital gain), which will
be taxed as ordinary income, in each case, for the shareholder's taxable year in
which (or with which) Rockwell's taxable year ends, regardless of whether such
amounts are actually distributed. A U.S. Holder's tax basis in the common shares
will be increased by any such amount that is included in income but not
distributed.

The procedure a U.S. Holder must comply with in making an effective
  QEF election, and the consequences of such election, will depend on whether
  the year of the election is the first year in the U.S. Holder's holding period
  in which Rockwell is a PFIC. If the U.S. Holder makes a QEF election in such
  first year, i.e., a "timely" QEF election, then the U.S. Holder may make the
  QEF election by simply filing the appropriate documents at the time the U.S.
  Holder files his tax return for such first year. If, however, Rockwell qualified
  as a PFIC in a prior year during the U.S. Holder's holding period, then, in
  order to avoid the Section 1291 rules discussed below, in addition to filing
  documents, the U.S. Holder must elect to recognize under the rules of Section
  1291 of the Code (discussed herein), (i) any gain that he would otherwise recognize
  if the U.S. Holder sold his stock on the qualification date or (ii) if Rockwell
  is a controlled foreign corporation, the U.S. Holder's pro rata share of Rockwell's
  post-1986 earnings and profits as of the qualification date.

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The qualification date is the first day of Rockwell's first
  tax year in which Rockwell qualified as a QEF with respect to such U.S. Holder.
  For purposes of this discussion, a U.S. Holder who makes (i) a timely QEF election,
  or (ii) an untimely QEF election and either of the above-described gain-recognition
  elections under Section 1291 is referred to herein as an "Electing U.S. Holder."
  A U.S. Holder who holds common shares at any time during a year of Rockwell
  in which Rockwell is a PFIC and who is not an Electing U.S. Holder (including
  a U.S. Holder who makes an untimely QEF election and makes neither of the above-described
  gain-recognition elections) is referred to herein as a "Non-Electing U.S. Holder".
  An Electing U.S. Holder (i) generally treats any gain realized on the disposition
  of his Company common shares as capital gain; and (ii) may either avoid interest
  charges resulting from PFIC status altogether, or make an annual election, subject
  to certain limitations, to defer payment of current taxes on his share of Rockwell's
  annual realized net capital gain and ordinary earnings subject, however, to
  an interest charge. If the U.S. Holder is not a corporation, any interest charge
  imposed under the PFIC regime would be treated as "personal interest" that is
  not deductible.

In order for a U.S. Holder to make (or maintain) a valid QEF
election, Rockwell must provide certain information regarding its net capital
gains and ordinary earnings and permit its books and records to be examined to
verify such information. Rockwell intends to make the necessary information
available to U.S. Holders to permit them to make (and maintain) QEF elections
with respect to Rockwell. Rockwell urges each U.S. Holder to consult a tax
advisor regarding the availability of, and procedure for making, the QEF
election.

A QEF election, once made with respect to Rockwell, applies to
the tax year for which it was made and to all subsequent tax years, unless the
election is invalidated or terminated, or the IRS consents to revocation of the
election. If a QEF election is made by a U.S. Holder and Rockwell ceases to
qualify as a PFIC in a subsequent tax year, the QEF election will remain in
effect, although not applicable, during those tax years in which Rockwell does
not qualify as a PFIC. Therefore, if Rockwell again qualifies as a PFIC in a
subsequent tax year, the QEF election will be effective and the U.S. Holder will
be subject to the rules described above for Electing U.S. Holders in such tax
year and any subsequent tax years in which Rockwell qualifies as a PFIC. In
addition, the QEF election remains in effect, although not applicable, with
respect to an Electing U.S. Holder even after such U.S. Holder disposes of all
of his or its direct and indirect interest in the shares of Rockwell. Therefore,
if such U.S. Holder reacquires an interest in Rockwell, that U.S. Holder will be
subject to the rules described above for Electing U.S. Holders for each tax year
in which Rockwell qualifies as a PFIC.

In the case of a Non-Electing U.S. Holder, special taxation
rules under Section 1291 of the Code will apply to (i) gains realized on the
disposition (or deemed to be realized by reasons of a pledge) of his Rockwell
common shares and (ii) certain "excess distributions," as defined in Section
1291(b), by Rockwell.

A Non-Electing U.S. Holder generally would be required to pro
  rate all gains realized on the disposition of his Rockwell common shares and
  all excess distributions on his Rockwell common shares over the entire holding
  period for the common shares. All gains or excess distributions allocated to
  prior years of the U.S. Holder (excluding any portion of the holder's period
  prior to the first day of the first year of Rockwell (i) which began after December
  31, 1986, and (ii) for which Rockwell was a PFIC) would be taxed at the highest
  tax rate for each such prior year applicable to ordinary income. The Non-Electing
  U.S. Holder also would be liable for interest on the foregoing tax liability
  for each such prior year calculated as if such liability had been due with respect
  to each such prior year. A Non-Electing U.S. Holder that is not a corporation
  must treat this interest charge as "personal interest" which, as discussed above,
  is wholly non-deductible. The balance, if any, of the gain or the excess distribution
  will be treated as ordinary income in the year of the disposition or distribution,
  and no interest charge will be incurred with respect to such balance. In certain
  circumstances, the sum of the tax and the PFIC interest charge may exceed the
  amount of the excess distribution received, or the amount of proceeds of disposition
  realized, by the U.S. Holder.

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 Page 113 

If Rockwell is a PFIC for any taxable year during which a Non-Electing
  U.S. Holder holds Rockwell common shares, then Rockwell will continue to be
  treated as a PFIC with respect to such Rockwell common shares, even if it is
  no longer definitionally a PFIC. A Non-Electing U.S. Holder may terminate this
  deemed PFIC status by electing to recognize gain (which will be taxed under
  the rules discussed above for Non-Electing U.S. Holders) as if such Rockwell
  common shares had been sold on the last day of the last taxable year for which
  it was a PFIC.

Effective for tax years of U.S. Holders beginning after
December 31, 1997, U.S. Holders who hold (actually or constructively) marketable
stock of a foreign corporation that qualifies as a PFIC may elect to mark such
stock to the market annually (a "mark-to-market election"). If such an election
is made, such U.S. Holder will generally not be subject to the special taxation
rules of Section 1291 discussed above. However, if the mark-to-market election
is made by a Non-Electing U.S. Holder after the beginning of the holding period
for the PFIC stock, then the Section 1291 rules will apply to certain
dispositions of, distributions on and other amounts taxable with respect to
Rockwell common shares. A U.S. Holder who makes the mark-to-market election will
include in income for each taxable year for which the election is in effect an
amount equal to the excess, if any, of the fair market value of the common
shares of Rockwell as of the close of such tax year over such U.S. Holder's
adjusted basis in such common shares. In addition, the U.S. Holder is allowed a
deduction for the lesser of (i) the excess, if any, of such U.S. Holder's
adjusted tax basis in the common shares over the fair market value of such
shares as of the close of the tax year, or (ii) the excess, if any, of (A) the
mark-to-market gains for the common shares in Rockwell included by such U.S.
Holder for prior tax years, including any amount which would have been treated
as a mark-to-market gain for any prior tax year but for the Section 1291 rules
discussed above with respect to Non-Electing U.S. Holders, over (B) the
mark-to-market losses for shares that were allowed as deductions for prior tax
years. A U.S. Holder's adjusted tax basis in the common shares of Rockwell will
be adjusted to reflect the amount included in or deducted from income as a
result of a mark-to-market election. A mark-to-market election applies to the
taxable year in which the election is made and to each subsequent taxable year,
unless Rockwell common shares cease to be marketable, as specifically defined,
or the IRS consents to revocation of the election. Because the IRS has not
established procedures for making a mark-to-market election, U.S. Holders should
consult their tax advisors regarding the manner of making such an election. No
view is expressed regarding whether common shares of Rockwell are marketable for
these purposes or whether the election will be available.

Under Section 1291(f) of the Code, the IRS has issued Proposed
Treasury Regulations that, subject to certain exceptions, would treat as taxable
certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally
not otherwise taxed, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death. Generally, in such cases the basis of
Rockwell common shares in the hands of the transferee and the basis of any
property received in the exchange for those common shares would be increased by
the amount of gain recognized. Under the Proposed Treasury Regulations, an
Electing U.S. Holder would not be taxed on certain transfers of PFIC stock, such
as gifts, exchanges pursuant to corporate reorganizations, and transfers at
death. The transferee's basis in this case will depend on the manner of the
transfer. In the case of a transfer by an Electing U.S. Holder upon death, for
example, the transferee's basis is generally equal to the fair market value of
the Electing U.S. Holder's common shares as of the date of death under Section
1014 of the Code. The specific tax effect to the U.S. Holder and the transferee
may vary based on the manner in which the common shares are transferred. Each
U.S. Holder of Rockwell is urged to consult a tax advisor with respect to how
the PFIC rules affect his or its tax situation.

Whether or not a U.S. Holder makes a timely QEF election with
  respect to common shares of Rockwell, certain adverse rules may apply in the
  event that both Rockwell and any foreign corporation in which Rockwell directly
  or indirectly holds shares is a PFIC (a "lower-tier PFIC"). Pursuant to certain
  Proposed Treasury Regulations, a U.S. Holder would be treated as owning his
  or its proportionate amount of any lower-tier PFIC shares, and generally would
  be subject to the PFIC rules with respect to such indirectly-held PFIC shares
  unless such U.S. Holder makes a timely QEF election with respect thereto. Rockwell
  intends to make the necessary information available to U.S. Holders to permit
  them to make (and maintain) QEF elections with respect to each subsidiary of
  Rockwell that is a PFIC.

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Under the Proposed Treasury Regulations, a U.S. Holder who does
  not make a timely QEF election with respect to a lower-tier PFIC generally would
  be subject to tax (and the PFIC interest charge) on (i) any excess distribution
  deemed to have been received with respect to his or its lower-tier PFIC shares
  and (ii) any gain deemed to arise from a so-called "indirect disposition" of
  such shares. For this purpose, an indirect disposition of lower-tier PFIC shares
  would generally include (i) a disposition by Rockwell (or an intermediate entity)
  of lower-tier PFIC shares, and (ii) any other transaction resulting in a diminution
  of the U.S. Holder's proportionate ownership of the lower-tier PFIC, including
  an issuance of additional common shares by Rockwell (or an intermediate entity).
  Accordingly, each prospective U.S. Holder should be aware that he or it could
  be subject to tax even if such U.S. Holder receives no distributions from Rockwell
  and does not dispose of its common shares. Rockwell strongly urges each prospective
  U.S. Holder to consult a tax advisor with respect to the adverse rules applicable,
  under the Proposed Treasury Regulations, to U.S. Holders of lower-tier PFIC
  shares.

Certain special, generally adverse, rules will apply with
respect to Rockwell common shares while Rockwell is a PFIC unless the U.S.
Holder makes a timely QEF election. For example under Section 1298(b)(6) of the
Code, a U.S. Holder who uses PFIC stock as security for a loan (including a
margin loan) will, except as may be provided in regulations, be treated as
having made a taxable disposition of such shares.

Controlled Foreign Corporation

If more than 50% of the total combined voting power of all
classes of shares entitled to vote or the total value of the shares of Rockwell
is owned, actually or constructively, by citizens or residents of the United
States, United States domestic partnerships or corporation, or estates or trusts
other than foreign estates or trusts (as defined by Code Section 7701(a)(31)),
each of which own, actually or constructively, 10% or more of the total combined
voting power of all classes of shares entitled to vote of Rockwell ("United
States Shareholder"), Rockwell could be treated as a controlled foreign
corporation ("CFC") under Subpart F of the Code. This classification would
effect many complex results, one of which is the inclusion of certain income of
a CFC which is subject to current U.S. tax. The United States generally taxes
United States Shareholders of a CFC currently on their pro rata shares of the
Subpart F income of the CFC. Such United States Shareholders are generally
treated as having received a current distribution out of the CFC's Subpart F
income and are also subject to current U.S. tax on their pro rata shares of
increases in the CFC's earnings invested in U.S. property. The foreign tax
credit described above may reduce the U.S. tax on these amounts. In addition,
under Section 1248 of the Code, gain from the sale or exchange of shares by a
U.S. Holder of common shares of Rockwell which is or was a United States
Shareholder at any time during the five-year period ending on the date of the
sale or exchange is treated as ordinary income to the extent of earnings and
profits of Rockwell attributable to the shares sold or exchanged. If a foreign
corporation is both a PFIC and a CFC, the foreign corporation generally will not
be treated as a PFIC with respect to United States Shareholders of the CFC. This
rule generally will be effective for taxable years of United States Shareholders
beginning after 1997 and for taxable years of foreign corporations ending with
or within such taxable years of United States Shareholders. Special rules apply
to United States Shareholders who are subject to the special taxation rules
under Section 1291 discussed above with respect to a PFIC. Because of the
complexity of Subpart F, a more detailed review of these rules is outside of the
scope of this discussion. Rockwell does not believe that it currently qualifies
as a CFC. However, there can be no assurance that Rockwell will not be
considered a CFC for the current or any future taxable year.

F.        Dividends and
  Paying Agents

Not applicable.

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G.        Statement by
Experts

Not applicable.

H.        Documents on
Display

Exhibits attached to this Form 20-F are also available for
viewing at the offices of Rockwell, Suite 1020  800 West Pender Street,
Vancouver, British Columbia V6C 2V6 or on request of Rockwell at 604-684-6365.
Copies of Rockwell's financial statements and other continuous disclosure
documents required under the British Columbia Securities Act are
available for viewing on the internet at www.sedar.com.

I.        Subsidiary Information

The corporate structure is presented in Item 4.C of this Form
20-F.

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 Page 116 

ITEM
11.           QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

(a)        Transaction
Risk and Currency Risk Management

The Company's operations do not employ financial instruments or
derivatives that are market sensitive and the Company does not have financial
market risks.

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, restricted cash, accounts
receivable and trade receivable from a related party. The carrying values of the
Companys cash and cash equivalents, accounts receivable and trade receivable
from a related party represents the maximum exposure to credit risk.

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 does not have financial assets that are
invested in asset backed commercial paper.

The Company minimizes its credit risk by reducing credit terms
to 30 days on its sales.

(b)        Exchange Rate
  Sensitivity

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 ZAR. As a result, the Company is subject to currency 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.

(c)        Interest Rate
  Risk and Equity Price Risk

The Company is equity financed and does not have any debt which
would be subject to interest rate change risks other than capital lease
obligations secured over plant and equipment.

The Company has capital lease obligations with several
financial institutions.. The capital leases bear interest at rates linked to the
prevailing prime rate of the relative financial institution, and are subject to
interest rate change risk.

The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. The Companys policy is to invest
cash at floating rates of interest and cash reserves are to be maintained in
cash equivalents in order to maintain liquidity, while achieving a satisfactory
return for shareholders. Fluctuations in interest rates when the cash
equivalents mature impact interest income earned.

(d)        Diamond Price
  Risk

The value of the Company's mineral resource properties is dependent
  on the price and the outlook of diamonds. 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.

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The profitability of the Company's operations is highly correlated
  to the market price of diamonds. If diamond prices decline for a prolonged period
  below the cost of production of the Company's operating mines, it may not be
  economically feasible to continue production.

(e)        Exchange Controls

The Company operates in South Africa, and like other foreign
entities operating there, is subject to currency exchange controls administered
by the South African Reserve Bank, the country's central bank. A significant
portion of the Company's funding structure for its South African operations
consists of advancing loans to its subsidiaries incorporated in South Africa.
The Company's ability to repatriate such funds once those subsidiaries are able
to repay the loans, or to repatriate other funds such as operating profits
should any develop, may be adversely affected by such exchange controls.

ITEM
12.           DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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PART II

ITEM
13.           DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM
14.           MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS ANDUSE OF PROCEEDS

Not applicable.

ITEM
15.           CONTROLS AND
PROCEDURES

A.wDisclosure Controls and Procedures

Disclosure controls and procedures means controls and other
procedures that are designed to ensure that information required to be disclosed
by our Company in reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that such information is accumulated and communicated to our
companys management, including our companys principal executive officer and
principal financial officer, to allow timely decisions regarding required
disclosure.

As required by paragraph (b) of Rules 13a-15 or 15d-15 under
the Exchange Act, our Chief Executive Officer and Chief Financial Officer
evaluated our Companys disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered
by this annual report on Form 20-F. Based on this evaluation, these officers
concluded that as of the end of the period covered by this Annual Report on Form
20-F, our disclosure controls and procedures were effective.

Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues,
if any, within our company have been detected.

B. Managements Report on Internal Control Over Financial
Reporting

Our Companys management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our
companys internal control over financial reporting is designed to provide
reasonable assurance, regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles in Canada.

Internal control over financial reporting includes those
policies and procedures that: (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our companys assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles in
Canada, and that our companys receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and (iii)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets that could have a
material effect on our financial statements.

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Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. In addition,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions
and that the degree of compliance with the policies or procedures may
deteriorate.

Our management, including our Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the design and operation of our
internal control over financial reporting as of February 28, 2010 based on the
criteria set forth in Internal Control  Integrated Frameworkissued by
the Committee of Sponsoring Organizations of the Treadway Commission. This
evaluation included review of the documentation of controls, evaluation of the
design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation.

At February 28, 2010, management evaluated the effectiveness of
the Companys internal control over financial reporting and concluded that such
internal control over financial reporting was effective and there were no
material weaknesses identified by management.

C. Changes in Internal Control Over Financial Reporting

There were changes in internal control over financial reporting
in the year ended February 28, 2010 that have materially affected or are
reasonably likely to materially affect internal control over financial
reporting.

Management remediated the material weakness that existed as at
February 28, 2009 during the period ended February 28, 2010 by implementing the
following remediation plans:

- Recruitment of qualified and experienced members to the accounting team.
  The Company contracted the additional services of an accountant with
  experience in the diamond industry to assist in the rigorous review of
  procedures and to assist with addressing backlogs and changes in reporting.
- Enhancing controls around the timing and level of review of accounting
  schedules and calculations that support significant financial statement
  accounts.
- The CFO, Group Financial Manager and Rockwell staff implemented a review of
  the financial reporting procedures and continue to implement further
  improvements to ensure sufficient, appropriate and timely review of the
  financial information to mitigate any potential future delays.
- Continuous review, improvement and re-engineering of financial processes to
  meet the Companys financial reporting and disclosure obligations.
- Appropriate training of accounting personnel regarding the Companys period
  end financial reporting processes and procedures.

These programs were designed to reduce, although they may not
completely eliminate, the risk of a material misstatement. The full effect of
the extent of these measures will only be fully realised in the 2011 financial
year.

Management is of the opinion that by implementing the above
items and other actions it has taken to improve internal control over financial
reporting, the material weaknesses in the Companys internal control over
financial reporting identified in the Companys Annual Report on Form 20-F for
the year ended February 28, 2009 have been remediated.

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 Page 120 

ITEM 16

ITEM
16A.        AUDIT COMMITTEE FINANCIAL
EXPERT

The current members of the audit committee are Mr. Willem
Jacobs and Mr Richard Linnell The Board of Directors has determined that each of
the members of the audit committee qualifies as a financial expert under the
rules of the Securities and Exchange Commission, based on his education and
experience. Each member of the audit committee is independent, as that term is
defined in Section 803 of the NYSE Amex Company Guide. The Company is currently
in the process of searching for additional audit committee members.

ITEM 16B.        CODE OF
ETHICS

Rockwell has adopted a code of ethics that applies to
Rockwell's chief executive officer, the chief financial officer, and other
members of senior management, which can be viewed at the Companys website
www.rockwelldiamonds.com.

ITEM 16C.       
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table discloses the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
Company's audit firm for various services.

Year ended
    
    
      Year endedServices:
    
      February 28, 2010
    
    
      February 28, 2009Audit Fees
    $
      482,173
    
    $
      322,000Audit-Related Fees
    
      -
    
    
      -Tax Fees
    
      -
    
    
      -All
      Other Fees
    
      -
    
    
      -$
      482,173
    
    $
      322,000


Management of the Company requests approval from the audit
committee for all audit and non-audit services to be provided by the Company's
auditors. The audit committee pre-approves all such services with set maximum
dollar amounts for each itemized service. During such deliberations, the audit
committee assesses, among other factors, whether the services requested would be
considered "prohibited services" as contemplated by the US Securities and
Exchange Commission, and whether the services requested and the fees related to
such services could impair the independence of the auditors.

ITEM
16D.        EXEMPTIONS FROM LISTING
STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM
16E.        PURCHASES OF EQUITY
SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

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 Page 121 

ITEM
16F.        CHANGE IN REGISTRANT'S
CERTIFYING ACCOUNTANT

As previously disclosed in the Companys Annual Report on Form
20-F for its fiscal year ended February 28, 2009, on December 16, 2008 the Board
of Rockwell Diamonds Inc. resolved:

|1. | The resignation Davidson and Company, Chartered
      Accountants (Davidson & Co.), effective December 16, 2008, as
      auditor of the Company be accepted, and                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                         
|2. | KPMG Inc. (KPMG), be appointed as auditor of the
      Company to be effective December 16, 2008, to hold office until the next
      annual meeting at a remuneration to be fixed by the
  directors.

Davidson & Co. was asked to resign as auditor of the
Company to facilitate the appointment of KPMG South Africa. Neither of Davidson
& Co.s reports on the Companys financial statements for either of the past
two years in which it provided such a report contained an adverse opinion or a
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope, or accounting principles. The resignation of Davidson & Co. and
appointment of KPMG as auditor of the Company was considered and approved by the
Audit Committee of the Company. During the Companys two most recent fiscal
years any subsequent interim period preceding such resignation, there were no
disagreements between the Company and Davidson & Co. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.

ITEM
16G.        CORPORATE GOVERNANCE

Not applicable.

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 Page 122 

PART III

ITEM
17.           FINANCIAL
STATEMENTS

The following attached financial statements are incorporated
herein:

|(1) | Report of KPMG Inc. Independent Registered Public
      Accounting Firm on the consolidated balance sheets as as of February 28,
      2010 and 2009, and the related consolidated statements of operations and
      comprehensive loss, accumulated comprehensive loss and deficit,
      shareholders equity, and cash flows for the years then ended.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                           
|(2) | Report of Davidson &  Co. Chartered Accountants, on the consolidated balance  sheets as at February 29, 2008 and May 31, 2007; consolidated statements  of  operations and comprehensive loss,  shareholders’ equity and cash flows  for the nine month period ended February 29, 2008 and the years ended May 31,  2007 and 2006;                        
|    |                                                                                                                                                                                                                                                                                                                                                           
|(3) | Consolidated balance sheets as at February 28, 2010 and
      February 28, 2009;                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                           
|(4) | Consolidated statements of operations and comprehensive
      loss for the years ended February 28, 2010 and February 28, 2009 and nine
      months ended February 29, 2008;                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                           
|(5) | Consolidated Statement of Comprehensive Loss and Deficit
      for the years ended February 28, 2010 and February 28, 2009 and nine
      months ended February 29, 2008;                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                           
|(6) | Consolidated statements of cash flows for the years ended
      February 28, 2010 and February 28, 2009 and nine months ended February 29,
      2008;                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                           
|(7) | Consolidated statements of shareholders equity for the
      years ended February 28, 2010 and February 28, 2009 and nine months ended
      February 29, 2008;                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|(8) | Notes to the consolidated financial statements referred
      for the years ended February 28, 2010 and February 28, 2009 and nine
      months ended February 29, 2008;                                                                                                                                                                                  

ITEM
18.           FINANCIAL
STATEMENTS

Not applicable. See Item 17.

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 Page 123 

ITEM
19.           EXHIBITS

| | Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                  
| | ------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                              
| | 1.1     | Notice of Articles *                                                                                                                                                                                                                                                                                                                                                                             
| | 1.2     | Articles *                                                                                                                                                                                                                                                                                                                                                                                       
| | 4.1     | Subscription agreement amongst Richtrau no 139
      (Proprietary) Limited The Trustees of the H C van Wyk Diamante Trust
      Durnpike Investments (Proprietary) Limited Georgia Venue Investments 14
      (Proprietary) Limited Klipdam Diamond Mining Company Limited Rockwell
      Diamonds Inc H C van Wyk Diamonds Limited and Africa Vanguard Resources
      (Proprietary) Limited (1)
| | 4.2     | Exchange Agreement between Rockwell Diamonds Inc and
      Georgia Avenue Investments 14 (Proprietary) Limited (1)                                                                                                                                                                                                                                                                               
| | 4.3     | Exchange Agreement between Rockwell Diamonds Inc and
      Richtrau no 139 (Proprietary) Limited (1)                                                                                                                                                                                                                                                                                             
| | 4.4     | Exchange Agreement between Rockwell Diamonds Inc and
      Georgia Avenue Investments 14 (Proprietary) Limited Klipdam Diamond Mining
      Company Limited Rockwell Diamonds Inc H C van Wyk Diamonds Limited and
      Africa Vanguard Resources (Proprietary) Limited (1)                                                                                                                     
| | 4.5     | Loan Agreement amongst Georgia Avenue Investments 14
      (Proprietary) Limited Africa Vanguard Resources (Proprietary) Limited and
      Rockwell Resources RSA (Proprietary) Limited (1)                                                                                                                                                                                                      
| | 4.6     | Loan Agreement amongst Richtrau no 139 (Proprietary)
      Limited and Rockwell Resources RSA (Proprietary) Limited (1)                                                                                                                                                                                                                                                                          
| | 4.7     | Sales of Shares and Claims Agreement between Rockwell
      Resources RSA (Proprietary) Limited Liberty Lane Trading 167 (Proprietary)
      Limited and Saxendrift Mine (Proprietary) Limited (1)                                                                                                                                                                                               
| | 4.8     | Loan Agreement amongst Rockwell Resources RSA
      (Proprietary) Limited, Africa Vanguard Resources (Proprietary) Limited and
      Niewejaarskraal (Proprietary) Limited (1)                                                                                                                                                                                                                   
| | 4.9     | Sale of Understanding amongst Rockwell Resources RSA
      (Proprietary) Limited and Zwemkuil (Proprietary) Limited (1)                                                                                                                                                                                                                                                                          
| | 4.10    | Shareholders agreement amongst Rockwell Resources RSA
      (Proprietary) Limited, Liberty Lane Trading 167 (Proprietary) Limited and
      Saxendrift Mine (Proprietary) Limited (1)                                                                                                                                                                                                           
| | 4.11    | Shareholders agreement amongst Rockwell Resources RSA
      (Proprietary) Limited and Zwemkuil (Proprietary) Limited (1)                                                                                                                                                                                                                                                                        
| | 4.12    | Consent of Tania R. Marshall,
        PhD., Pr. Sci. Nat*                                                                                                                                                                                                                                                                                                                                        
| | 4.13    | Consent of Glenn Norton, Pr.
        Sci. Nat*                                                                                                                                                                                                                                                                                                                                                   
| | 8.1     | List of Subsidiaries (See Item 4.C of this Form 20-F)                                                                                                                                                                                                                                                                                                                                            

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 Page 124 

| | Exhibit |                                                                                                                                                                                                                                                                                                              
| | ------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number  | Exhibit Description                                                                                                                                                                                                                                                                                          
| | 12.1    | Certification of Chief Executive
      Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                  
| | 12.2    | Certification of Chief Financial Officer pursuant
      to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002 *                                                                                                                                  
| | 13.1    | Certification of Chief Executive
      Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      *                                                                                                 
| | 13.2    | Certification of Chief Financial Officer pursuant
      to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *                                                                                                       
| | 99.1    | Audited consolidated balance sheets
      as at February 28, 2010 and February 28, 2009 and consolidated statements
      of operations, equity, and cash flows for the periods then ended, including
      the notes thereto and report of our independent registered public accounting
      firm thereon *
| | 99.2    | Managements Discussion and Analysis of financial
      condition and results of operations for the period ended February 28, 2010*                                                                                                                                                                          
| | 99.2    | HCVW and Rockwell share exchange agreement to acquire an
      additional 23% of the Van Wyk Diamond Group assets. (2)                                                                                                                                                                                       
| | 99.3    | Acquisition Agreement between Trans Hex Group Limited and the Company to
      acquire the Saxendrift Mine. (2)                                                                                                                                                                                              
| | 99.4    | Consent of previous Auditors, Davidson & Company LLP *                                                                                                                                                                                                                                                       
| | 99.5    | Auditors report of Davidson & Company LLP for the year ending February 29, 2008 *                                                                                                                                                                                                                            

Notes:

|*   | Filed herewith.                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed as an exhibit to the Companys Annual Report on
      Form 20-F for the year ended February 28, 2009, and incorporated herein by
      reference.
|(2) | Filed as an exhibit to the Companys Annual Report on
      Form 40-F for the year ended February 29, 2008, and incorporated herein by
      reference.

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 Page 125 

SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.

ROCKWELL DIAMONDS INC.

Per:

DATED:          
August 31, 2010

---