---

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, 2011

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 files 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 Facsimile 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.

34,545,683 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.

---

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

|                |                                                                                    | PAGE
|--------------- | ---------------------------------------------------------------------------------- | ----
|                |                                                                                    |     
|PART
      1    |                                                                                    | 1   
|                |                                                                                    |     
|ITEM
      1.   | IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        | 1   
|                |                                                                                    |     
|ITEM
      2.   | OFFER
      STATISTICS AND EXPECTED TIMETABLE                                      | 1   
|                |                                                                                    |     
|ITEM
      3.   | KEY
      INFORMATION                                                              | 1   
|                |                                                                                    |     
|ITEM
      4.   | INFORMATION
      ON THE COMPANY                                                   | 9   
|                |                                                                                    |     
|ITEM
      5.   | OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS                                 | 47  
|                |                                                                                    |     
|ITEM
      6.   | DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES                                   | 60  
|                |                                                                                    |     
|ITEM
      7.   | MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 84  
|                |                                                                                    |     
|ITEM
      8.   | FINANCIAL
      INFORMATION                                                        | 90  
|                |                                                                                    |     
|ITEM
      9.   | THE
      OFFER AND LISTING                                                        | 92  
|                |                                                                                    |     
|ITEM
      10.  | ADDITIONAL
      INFORMATION                                                       | 94  
|                |                                                                                    |     
|ITEM
      11.  | QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 105 
|                |                                                                                    |     
|ITEM
      12.  | DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 106 
|                |                                                                                    |     
|ITEM
      13.  | DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES                              | 107 
|                |                                                                                    |     
|ITEM
      14.  | MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 107 
|                |                                                                                    |     
|ITEM
      15.  | CONTROLS
      AND PROCEDURES                                                      | 107 
|                |                                                                                    |     
|ITEM
      16   |                                                                                    | 108 
|                |                                                                                    |     
|ITEM
      16A. | AUDIT
      COMMITTEE FINANCIAL EXPERT                                             | 108 
|                |                                                                                    |     
|ITEM
      16B. | CODE
      OF ETHICS                                                               | 108 
|                |                                                                                    |     
|ITEM
      16C. | PRINCIPAL
      ACCOUNTANT FEES AND SERVICES                                       | 109 
|                |                                                                                    |     
|ITEM
      16D. | EXEMPTIONS
      FROM LISTING STANDARDS FOR AUDIT COMMITTEES                       | 109 
|                |                                                                                    |     
|ITEM
      16E. | PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS .     | 109 
|                |                                                                                    |     
|ITEM
      16F. | CHANGE
      IN REGISTRANT'S CERTIFYING ACCOUNTANT                                 | 109 
|                |                                                                                    |     
|ITEM
      16G. | CORPORATE
      GOVERNANCE                                                         | 109 
|                |                                                                                    |     
|ITEM
      17.  | FINANCIAL
      STATEMENTS                                                         | 110 
|                |                                                                                    |     
|ITEM
      18.  | FINANCIAL
      STATEMENTS                                                         | 110 
|                |                                                                                    |     
|ITEM
      19.  | EXHIBITS                                                                           | 111 

---

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.

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, 2011, 2010, 2009, the nine months
ended February 29, 2008 and the year ended May 31, 2007. 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.

---

 Page 2 

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.

|(In Canadian Dollars)           |   | As at       |   |   | As at       |   |   | As at       |   |   | As at       |   |   |                    |  
|------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | - | - | ----------- | - | - | ------------------ | -
|                                |   | February 28 |   |   | February 28 |   |   | February 28 |   |   | February 29 |   |   | As
      at May 31 |  
|Balance Sheet
      Data        |   | 2011        |   |   | 2010        |   |   | 2009        |   |   | 2008        |   |   | 2007               |  
|                                |   |             |   |   |             |   |   |             |   |   |             |   |   |                    |  
|Total assets (Cdn GAAP)         | $ | 110,183,714 |   | $ | 105,243,386 |   | $ | 106,362,416 |   | $ | 133,693,124 |   | $ | 129,606,383        |  
|Total assets (US GAAP)          |   | 110,183,714 |   |   | 105,243,386 |   |   | 106,362,416 |   |   | 133,693,123 |   |   | 130,135,690        |  
|Total liabilities (Cdn GAAP)    |   | 26,977,993  |   |   | 27,400,354  |   |   | 34,059,381  |   |   | 34,643,769  |   |   | 52,564,080         |  
|Total liabilities (US GAAP)     |   | 26,977,993  |   |   | 27,400,354  |   |   | 34,059,381  |   |   | 34,643,769  |   |   | 52,034,772         |  
|Share capital (Cdn GAAP)        |   | 135,989,508 |   |   | 127,999,040 |   |   | 119,952,532 |   |   | 112,095,390 |   |   | 88,903,530         |  
|Share capital (US GAAP)         |   | 135,989,508 |   |   | 127,999,040 |   |   | 119,952,532 |   |   | 112,095,390 |   |   | 88,903,530         |  
|(Deficit) (Cdn GAAP)            |   | (54,147,253 | ) |   | (49,020,317 | ) |   | (41,982,624 | ) |   | (29,006,662 | ) |   | (19,603,634        | )
|(Deficit) (US GAAP)             |   | (54,147,253 | ) |   | (49,020,317 | ) |   | (41,982,624 | ) |   | (29,006,662 | ) |   | (19,603,634        | )
|Shareholders equity (Cdn GAAP) |   | 82,558,314  |   |   | 77,194,091  |   |   | 70,421,026  |   |   | 87,114,807  |   |   | 71,592,842         |  
|Shareholders equity (US GAAP)  |   | 83,205,721  |   |   | 77,843,032  |   |   | 72,303,035  |   |   | 99,049,355  |   |   | 77,571,611         |  
|Weighted Average No. Shares(2)  |   | 34,545,683  |   |   | 17,810,954  |   |   | 15,861,610  |   |   | 13,095,237  |   |   | 3,694,549          |  

|                                                                               |   |             |  |   |             |  |   |             |  |   | Nine months |  |   |            | 
|------------------------------------------------------------------------------ | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | ---------- | 
|                                                                               |   | Year ended  |  |   | Year ended  |  |   | Year ended  |  |   | ended       |  |   | Year ended | 
|                                                                               |   | February 28 |  |   | February 28 |  |   | February 28 |  |   | February 29 |  |   | May 31     | 
|Statement of
      Operations Data                                             |   | 2011        |  |   | 2010        |  |   | 2009        |  |   | 2008        |  |   | 2007       | 
|                                                                               |   |             |  |   |             |  |   |             |  | $ | 36,038,106  |  |   |            | 
|Revenues (US and Cdn GAAP)                                                     | $ | 42,507,747  |  | $ | 29,776,933  |  | $ | 34,330,078  |  |   |             |  | $ | 10,103,328 | 
|Loss for the period(1)(Cdn GAAP)                                               |   | 5,126,936   |  |   | 7,037,693   |  |   | 12,975,962  |  |   | 9,403,028   |  |   | 6,365,142  | 
|Net loss for the period attributable to
      common shareholders (1)(US GAAP) |   | 5,126,936   |  |   | 7,037,693   |  |   | 12,975,962  |  |   | 9,403.028   |  |   | 6,365,142  | 
|Basic and diluted loss per share(2) (Cdn GAAP)                                 | $ | 0.15        |  | $ | 0.40        |  | $ | 0.82        |  | $ | 0.72        |  | $ | 1.72       | 
|Basic and diluted loss per
      share(2) (US GAAP)                            | $ | 0.15        |  | $ | 0.40        |  | $ | 0.82        |  | $ | 0.72        |  | $ | 1.72       | 

Note:

|(1) | Loss from continuing operations and loss for the period
      are the same for all periods presented.
|--- | -----------------------------------------------------------------------------------------------------
|(2) | Share information is post consolidation of share
      capital.                                      

No cash or other dividends have been declared.

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 Page 3 

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 29, 2011 the Bank of Canada noon rate for Canadian Dollars
was US$0.978: 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:

Exchange Rates

Years Ended February 28
      Nine
      YearsMonths
      Ended MayEnded
      31February 292011
      2010
      2009
      2008
      2007End of Period
      1.0268
      0.9596
      0.7870
      1.0206
      0.9347Average for Period
      0.9799
      0.8996
      0.9056
      0.9831
      0.8800High for Period
      1.0268
      0.9755
      1.0161
      1.0905
      0.9347Low for Period
      0.9278
      0.7692
      0.7711
      0.9298
      0.8437


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 2011
    1.0268
    1.0045March 2011
    1.0324
    1.0083April 2011
    1.0542
    1.0319May 2011
    1.0537
    1.0195June 2011
    1.0370
    1.0141July 2011
    1.0583
    1.0343


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

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 Page 4 

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.

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.

There is no assurance that Rockwell will be able to operate
  profitably.

Rockwell has experienced losses in each year of operations
since 2006. Although Rockwell has achieved an operating profit (calculated as
revenue less cost of sales), overall corporate profitability has not been
achieved and may never be achieved. Failure to be able to consistently produce a
profit in the long-term will mean the business can not be sustained and
investors could lose all or substantially all of their entire investment in
Rockwell shares.

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 or fails to achieve profitability, 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 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 as with
Saxendrift, there can be no assurance that the related property will be
profitably mined.

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

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 Page 5 

The commercial viability of an established deposit will depend
on a number of factors including, by way of example, the size, grade and other
attributes of the mineral deposit, the prevailing price per carat for the
resources, 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 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.

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 Republic of South African (RSA or South Africa). 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.

---

 Page 6 

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.

Diamond prices are subject to dramatic and unpredictable
fluctuations.

Rockwell expects to derive revenues from the extraction and sale
  of diamonds. The prices of raw 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 therefore the economic viability of any of Rockwell's projects,
  cannot accurately be predicted.

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

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.
The Company and its subsidiaries incurred losses of $5.1 million during the year
ended February 28, 2011, cumulative losses of over $50 million in the last 5
years and it has continued to incur losses subsequent to year end. The Companys
sales are irregular.

Based on the Companys cash resources and forecasts, the
Company will have sufficient working capital upon completion of the Daboll
Consultants Limited Financing described herein and reserves to maintain
operations through breakeven point and sufficient cash and working capital to
fund continuing losses for the foreseeable future. Future events beyond the
Companys control may change the Companys ability to continue as a going
concern.

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 James Campbell,
Rockwell's Chief Executive Officer, and Gerhard Jacobs, Chief Financial Officer,
Michael Stanley Hunt, Chief Operating Officer

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 Page 7 

and Glenn Norton, Mineral Resource Manager. The loss of any of
these key people could have a material adverse effect on Rockwell's
business.

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. 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 and Petroleum Resources 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 and Petroleum
Resources 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 and
Petroleum Resources 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 (ZAR), 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.

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 per share, its securities are classified as "penny stock". For
transactions involving a penny stock, brokers or dealers are required to approve
a previous

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 Page 8 

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 Industry 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.

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 Page 9 

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)                                                                                                                                                                                                                                                                                                                                                                                

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 Page 10 

| | (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
      (Proprietary) Limited (Rockwell RSA), would acquire through Trans Hexs
      wholly-owned subsidiary, Trans Hex Operations (Proprietary) Limited
      (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:
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |       | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

In April 2008 the Company completed the
MORO acquisition, including registration and transfer of Saxendrift Mine
(Proprietary) Limited 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 (Proprietary) Limited (AVR), the holding Company of Richtrau
      No 136 (Proprietary) 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 (Proprietary) 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 (Proprietary) 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 2008/2009 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 and February 28,
      2011. The contractually committed ZAR10.5 million due to VWDG has also not
      been received from AVR at this point in time.                                                                                                                                                                                                                                                                                                                                                             

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 Page 11 

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 (Proprietary) Limited, acquired a shareholding of an
effective 26% in the Saxendrift project by subscribing for shares in Saxendrift
Mines (Proprietary) 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 (Proprietary) Limited. As of February 28,
2011, 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, 2011, February 28,
      2010, February 28, 2009 and nine months ended February 29, 2008 and the
      year ended May 31, 2007 are as follows:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |      |  |                    |  |   |             |  |   |            |  |   | Exploration        |  |   |                  | 
| | ---- |  | ------------------ |  | - | ----------- |  | - | ---------- |  | - | ------------------ |  | - | ---------------- | 
| |      |  | Exploration        |  |   | Mineral     |  |   |            |  |   | Expenditures       |  |   |                  | 
| |      |  | Expenditures       |  |   | Property    |  |   | Property,  |  |   | Expensed           |  |   |                  | 
| |      |  | Deferred           |  |   | Acquisition |  |   | Plant and  |  |   | (excluding related |  |   |                  | 
| |      |  | (capitalized       |  |   | Cost        |  |   | Equipment  |  |   | stock-based        |  |   | Write down of    | 
| | Year |  | or
      invested) |  |   | Capitalized |  |   | Acquired   |  |   | compensation)      |  |   | Mineral Property | 
| | 2011 |  | nil                |  | $ | 845,773     |  | $ | 10,790,700 |  | $ | 49,184             |  |   | nil              | 
| | 2010 |  | nil                |  | $ | 1,703,195   |  | $ | 981,561,   |  | $ | 97,805             |  | $ | 657,634          | 
| | 2009 |  | nil                |  | $ | 5,351,500   |  | $ | 15,192,819 |  | $ | 498,739            |  |   | nil              | 
| | 2008 |  | nil                |  | $ | 1,822,138   |  | $ | 26,751,592 |  | $ | 604,169            |  |   | nil              | 
| | 2007 |  | 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 for nominal consideration by
      Hunter Dickinson Acquisitions Inc., a company with one director in common
      with Rockwell. No significant divestitures have occurred in the years
      presented.                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10. | Pending Acquisition- Etruscan Diamonds
    Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | On September 9, 2010, Rockwell Resources RSA
      (Proprietary) Limited signed a sale of shares and claims agreement with
      Etruscan Diamonds Bermuda Limited, Etruscan Diamonds Limited and Etruscan
      Resources Inc. whereby the Company proposes to purchase Etruscans Blue
      Gum diamond operation in the Ventersdorp region of South Africa. The
      acquisition is for 74% of the operation with the balance owned pursuant to
      South Africas BEE regime. The price to be paid to Etruscan is an amount
      not exceeding ZAR33.5 million (approximately $4.7 million) payable in
      pre-consolidation Rockwell shares valued at $0.068 each. The Company will
      also assume certain non-material property

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 Page 12 

maintenance obligations effective
immediately and other financial obligations upon completion of the acquisition.

The Company is awaiting approval from
the Industrial Development Corporations (IDC) to transfer the shares to
Etruscan and effect the transaction, as well as approval of the South African
Reserve Bank. No recognition has been given to this future transaction in the
financial statements included in this annual report.

|11. | Flawless Diamonds Trading House (Proprietary)
      Limited                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                    
|    | On April 21, 2010 the Company acquired a 20% shareholding
      in Flawless Diamonds Trading House (Proprietary) Limited (Flawless) from
      Hennie van Wyk, a former director, 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 equity accounts for the results of Flawless in fiscal 2011 from the
      effective date of acquiring its shareholding.                                                                                   

Summarized financial information of Flawless for the
      financial year ended February 28, 2011Financial Position as at February 28, 2011Total Assets
    
    9,690,007Total Liabilities
    
    8,969,428Net Assets
    
    703,579Financial Performance for the year ended
      February 28, 2011Total Revenue
    
    60,383,011Total profit for the period
    
    206,374Capital commitments and contingent
      liabilities of associate
    
    Nil


|12. | Share Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Effective July 11, 2011 the Company completed a
      consolidation of its outstanding Common Shares on the basis of 15
      pre-consolidated common shares for 1 post consolidated common share. As of
      August 4, 2011 there were 34,992,567 Common Shares issued and outstanding,
      each Common Share carrying the right to one vote. At a general meeting of
      the Company, on a show of hands, every shareholder present in person shall
      have one vote and, on a poll, every shareholder shall have one vote for
      each Common Share of which he is the holder. As at the date hereof there
      are no preferred shares issued or outstanding.

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 Page 13 

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 Mineral 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.
      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 preconsolidation
      Common Shares as settlement of its commitment and also 1,676,529 pre-consolidation
      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

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 Page 14 

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 both Parties have appeared before the Arbitration Tribunal
  at two sets of hearings in Brussels during March and May 2011 to present evidence
  and answer questions. Expert witnesses representing the Parties also presented
  evidence at these hearings. Simultaneous final written submissions were submitted
  to the Arbitration Tribunal on July 8, 2011. The Parties expect to receive a
  written award from the Arbitration Tribunal on or about October 17, 2011. The
  Company remains of the view that the claim against it is without merit. The
  Company has vigorously argued against the claims made by Midamines and has continued
  to vigorously defend its position.

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. On July 26, 2011, the
Company announced that it had sold the Makoenskloof property for C$0.9 million.

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 (Proprietary) 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.

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 Page 15 

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 then current harsh
financial constraints and depressed diamond prices. All the other rights have
been ceded to Saxendrift Mine (Proprietary) 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
(Proprietary) 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.

Black Economic Empowerment Holdings (BEE)

During the year ended May 31, 2007, Africa Vanguard Resources
(Proprietary) Limited (AVR), the holding Company of Richtrau No 136
(Proprietary) 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 (Proprietary)
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 (Proprietary) 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, 2011. The
contractually committed ZAR10.5 million due to VWDG has also not been received
from AVR to date.

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. 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 the legal firm Tabacks, pending conclusion of the
transaction.

Effective October 2, 2008, AVR via Liberty Lane Investments
(Proprietary) Limited, acquired a shareholding of an effective 26% in the
Saxendrift project by subscribing for shares in Saxendrift Mines (Proprietary)
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.
As of February 28, 2011, AVR has only paid an initial deposit of ZAR3
million

---

 Page 16 

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 one common director and provides the
services of Rockwells corporate secretary. It 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 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. The amount paid to HDSI for the fiscal year ended February 28, 2011
was $467,151.

C.          Organizational
  Structure

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."

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.

On December 29, 2004, Rockwell increased its authorized share
capital to consist of an unlimited number of Common Shares without par value.

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.

The Company changed its name from "Rockwell Ventures Inc." on
May 16, 2007 to "Rockwell Diamonds Inc."

Rockwells registered office is based in British Columbia,
Canada. It also has corporate offices located in Johannesburg, South Africa. As
at May 30, 2011, 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        

---

 Page 17 

| | c) | Rockwell Resources RSA (Proprietary) Limited (Rockwell
      RSA), a wholly owned subsidiary incorporated under the laws of South
      Africa of which N10C owns a direct 100% interest.                                                                                                                                                                                                                                                                
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | d) | Durnpike Investments (Proprietary) Ltd (Durnpike) a
      wholly owned subsidiary incorporated under the laws of South Africa of
      which Rockwell RSA owns a direct 100% interest.                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | e) | HC Van Wyk Diamonds Limited (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 Company. HC Van Wyk Diamonds Limited (HCVW) 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 Limited. (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 Limited 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 (Proprietary) Limited 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
      (Proprietary) Limited 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 (Proprietary) Limited 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 18 

The current organization structure of Rockwell is as follows:



The Companys legal registered office is in care of its
Canadian attorneys McMillan 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 Houghton, 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 15th Floor, 1040 West Georgia Street, Vancouver, British
Columbia, Canada V6E 4H8, telephone (604) 684-6365, facsimile (604) 684-8092.

In this Form on 20F, the terms Company or Rockwell refer to
Rockwell Diamonds Inc. and all its subsidiaries together unless the context
otherwise clearly requires. Certain terms used herein are defined in the
glossary of this Form on 20F.

---

 Page 19 

D.          Property,
Plant and Equipment

Rockwell has the following property, plant and equipment at
February 28, 2011.

| |                                                               |   | As at February 28, 2011 | 
| | ------------------------------------------------------------- | - | ----------------------- | 
| |                                                               |   |                         | 
| |                                                               |   |                         | 
| |                                                               |   |                         | 
| |                                                               |   | Cost                    | 
| | Land and buildings                                            | $ | 7,502,768               | 
| | Construction in progress (a)                                  |   | 6,282,698               | 
| | Processing plant and equipment                                |   | 84,028,081              | 
| | Processing plant and equipment under capital lease obligation |   | 1,017,514               | 
| | Office equipment                                              |   | 1,006,922               | 
| | Vehicles and light
      equipment                            |   | 1,594,663               | 
| |                                                               |   |                         | 
| |                                                               | $ | 101,432,646             | 

|(a) | Construction in progress includes $6,149,422 relating to
      the construction of the plant at Etruscans Blue Gum diamond operations in
      the Ventersdorp region. Refer to note 20(a) of the annual financial
      statements for additional information regarding the status of this pending
      acquisition.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

 Page 20 

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 20-F 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 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


---

 Page 21 

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.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

---

 Page 22 

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.

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

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.

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


---

 Page 23 

Inferred
      Resource Estimation
      Detailed Drilling on 100x100m grid
      To establish nature of geological
        units (stratigraphy) and estimate gravel volumeBulk-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-dimensional 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.

No Reserves Are Currently Determinable (Excluding
Saxendrift):

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 bulk sample 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 of those deposits 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 mineralized material 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 24 

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

HCVW1and
Klipdam

Period
    Calculation2
      (Production/Deem ed Carats
      Available)
    Depletion3
      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%March 2010 to October 2010
    16,683/387,921
    4.30%Total before
      re-estimation2
    72,570/387,921
    18.71%November 2010 to February 2011
    2,750/342,442
    0.80%Total after
      re-estimation2
    2,750 /342,442
    0.80%


Saxendrift

Period
    Calculation2
      (Production/Deem ed Carats
      Available)
    Depletion3
      PercentageMarch 2008 to February 2009
    2,437/103,155
    2.36%March 2009 to February 2010
    8,834/103,155
    8.56%March 2010 to October 2010
    5,744/103,155
    5.57%Total before
      re-estimation2
    17,015/103,155
    16,49%November 2010 to February 2011
    961/250,588
    0.38%Total after
      re-estimation2
    961/250,588
    0.38%


Annual Production (Carats)

Mineral Property
    Purchased resources
      per 43-101 (2009)
    Production February
      2010 to October 31, 2011
    Re-estimated resources
      per 43-101 November 1, 2011
    Production November
      2010 to February 2011
    Estimated net
      resources available February 28,
      2011HCVW1and Klipdam
    387,920
    16,683
    342,442
    2,750
    339,692Saxendrift
    103,155
    5,744
    250,588
    961
    249,627


---

 Page 25 

Notes:

|(1) | HCVW are operations acquired from HC van Wyk, including
      Holpan and Wouterspan mines and Makoenskloof project.                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The deemed carats available are based on resource
      estimates performed in the technical report dated February 28, 2009. These
      resource estimates have been updated in November 2010. Since November 2010
      no material transactions, events or activities have taken place which
      would indicate that these resource estimates need to be updated.
|(3) | Depletion for the period before re-estimation is
      calculated by applying the depletion percentage for that period to the
      cost of the specific mineral property. Depletion for the period after
      re-estimation is calculated by applying the depletion percentage for that
      period to the net book value of the specific mineral
  property.      

Rockwells principal properties, Holpan and Saxendrift (which
are currently in production), Wouterspan and Klipdam (currently on care and
maintenance) and Niewejaarskraal (planned for development as funds are
available) had detailed resource assessments completed at November 2010. 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 Glenn Norton, PrSciNat the
Companys Mineral 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 26 

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
principal 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 27 

Climate and Topography

All of Rockwells principal 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

Holpan and Klipdam are adjacent properties that are accounted
for separately because VWDG mined at Holpan and Klipdam was mined by Klipdam
Mining.

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 project is comprised of the Klipdam and Holpan mining
properties and the Erf 1 and Erf 2004 prospecting properties. Details are
provided in the table below.

PropertyName
      Area(ha)
      MineralRight
      Permit Number
      RenewalDateRemaining extent of Holpan 161
    2,370.0518
    Mining Right (HCVWD)
    Protocol 07/2010
      12 April2 020Remaining extent of Klipdam 157,
    1,466.0095
    Mining Right (KDMC)
    44/2008 CMR
    06 December 2022 (Thispermitiscurrentlyunder Section11cessionfrom KlipdamMining(Proprietary)
        LtdtoHCVWD.Submittedon 16May2008)Erf 1,
      Windsorton
    183.8177
    Prospecting Right
      
      (HCVWD)
    1193PR
    24 February 2010
      Applicationforrenewal acceptedatDMR16/02/2010 InProcessErf 2004, Windsorton
    587.7319
    Prospecting Right (Batla
      Resources)
    1787PR
    8 April 2015Erf 2004, Windsorton
    374.6630
    Prospecting Right (HCVWD)
    2131PR
    29 August 2013


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

---

 Page 28 

Geology

The bedrock in the area consists of ±2,700 million year old
Ventersdorp lavas overlain by younger Dwyka tillites and Ecca shales. Overlying
these rocks is a series of mostly Cainozoic gravel deposits that have long been
mined for their diamond content. Prior to the (Palaeozoic/Mesozoic) Karoo
period, the Vaal River cut a network of channels closely approximating the
present floodplain. These channels were later utilized by the Dwyka
(continental-type) glaciers and were filled with tillites and shales (at ±
280-250 million years). The post-Karoo Vaal River, subsequently, incised into
these formations and deposited gravels and large quantities of fine-grained
sediments in numerous cycles during the late Cretaceous to the Holocene.

Several levels of terrace development above the present Vaal
River have been recognized and subdivided into older terrace deposits and
younger gravels. In addition to the development of the primary, fluvial-alluvial
deposits, re-working of this material has resulted in the accumulation of
extensive Rooikoppie deposits. These deposits represent a derived- gravel and
consist mainly of sub-angular to well-rounded and polished siliceous pebbles and
reddish-coloured sand. The clastic material is believed to originate from the
fluvial alluvial gravel units and consists of chert, agate, jasper, quartzite
and vein quartz. Decomposition and winnowing of the less resistant clastic and
matrix material has caused substantial concentration of the more durable
components, including diamonds. Iron has stained the entire assemblage, giving
it a reddish colour (Rooikoppie means Red Gravels on a Hill). Rooikoppie
deposits can be formed during any cycle of landscape formation and any
pre-existing deposit may be re-mobilised several times. Consequently, it is
possible to have similarly looking Rooikoppie deposits developed across terraces
of different ages and in different locations.

The amount of outcrop on Klipdam, Holpan, Erf 2004 and Erf 1 is
minimal, because of the mature level of planation of the gravel surface and the
introduction of wind-blown sand. Where exposed, the bedrock is generally
Ventersdorp lava.

All of the properties are, typically, covered with Rooikoppie
gravels which can be underlain by varying thicknesses of fluvial-alluvial
deposits, except on Erf 1 and Erf 2004, on which fluvial-alluvial material shave
not been identified to date. Much of these deposits are underlain by glacial
valley tillites of the Dwyka Group, which have incised into the underlying
Ventersdorp lava bedrock. Dolerite dykes are known to intrude the entire
sequence.

The Rooikoppie units located on the Klipdam/Holpan properties
are mainly colluvial; the downcutting of the Vaal River has resulted in the
erosion of pre-existing gravels and their re-distribution across the landscape.
Two sub-varieties are recognized where (a) gravel has been deposited on
relatively flat, weathered bedrock and (b) the bedrock (Ventersdorp lava) has
been deeply weathered to produce large corestones, around which the younger,
diamond-bearing gravel has concentrated.

History

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 (ct).

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 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.

From 1994 to 2005 at Holpan-Klipdam, extensive mining of
Rooikoppie and primary gravels took place, as well as drilling and bulk testing.
Because the Primary gravels at Holpan-Klipdam are deeply buried, the

---

 Page 29 

thickness and distribution of the alluvial gravel deposits have
been investigated through systematic percussion drilling. A total of 3,243
boreholes totalling 14,486 m were drilled on the Holpan-Klipdam property between
1994 and 2005.

In March 2006, Rockwell commissioned an independent estimate of
the mineral resources for Holpan and Klipdam based on operational statistics,
drilling and other sampling completed to that time. Trial mining at the Holpan
and Klipdam properties was initiated in January 2006.

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

Mineral Resources

A total of 4,471 Reverse Circulation (RC) boreholes and
prospect pits have been drilled on Klipdam/Holpan, Erf 1 and Erf 2004 for a
total depth of 11,412.2 m. The boreholes were drilled on either a detailed
100x50 m or a reconnaissance 100x200 m grid. Drill results are used, primarily,
to define the presence of gravel units and to estimate their thicknesses. The
boreholes are all vertical and the gravel deposits are horizontal (since they
are very young, geologically, and are not affected by large scale
tectono-structural upheavals). Therefore, the gravel thicknesses (as determined
from drilling) are true thicknesses.

Since regional gravel grades are, typically, less than 0.5
ct/100 m3 and average diamond sizes are typically >1 carat per
stone (ct/st), boreholes are not sampled for diamonds. Furthermore, no other
minerals or elements that can be assayed are known to show positive (or
negative) relationships with diamonds in alluvial deposits. Consequently,
borehole samples are not collected for assay, nor are intersections
composited.

During February 2009 to November 2010, trial-mining operations
were conducted on the Klipdam/Holpan mine. During this period, some 3,177,851
m3 was processed for an average recovered grade of 0.99
ct/100m3. The sale of some 7,547.72 ct from Klipdam and 5,937.46 ct
from Holpan through 2010 resulted in a weighted average value of USD1,049/ct for
Klipdam and USD1,229/ct for Holpan.

Rockwell has estimated the following Indicated and Inferred
resources for the project as at 30 November 2010. They 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.R. Marshall, PhD, (Pr.
Sci. Nat.), a qualified person who is independent of the Company and is
responsible for the estimate.

---

 Page 30 

See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

Category
      Descriptiono fGravel
        Resource
      Volume*ofGravel (m3)
      Grade# (ct/100m3)
      Value (USD/ct)Indicated
    Holpan Fluvial-alluvial Gravel
    517,800
    0.95
    1,229Indicated
    Holpan Rooikoppie gravelIndicated
    Klipdam Fluvial-alluvial Gravel
    989,100
    1.21
    1,049Indicated
    Klipdam Rooikoppie gravel
    1,102,100Indicated
    Erf 2004, Windsorton
    404,700
    0.63
    986


See Cautionary Notes on page 1 about SEC non-recognition of
these Resources



Category
      DescriptionofGravel
        Resource
      Volume*ofGravel
        (m3)
      Grade# (ct/100m3)
      Value (USD/ct)Inferred
    Holpan Fluvial-alluvial
      Gravel
    527,000
    0.95
    1,229Inferred
    Holpan Rooikoppie gravelInferred
    Klipdam Fluvial-alluvial Gravel
    0
    1.21
    1,049Inferred
    Klipdam Rooikoppie gravel
    949,000Inferred
    Erf 2004, Windsorton
    127,000
    0.63
    986


|* | Volumes fully diluted of sampling and mining for the
      period 2008-Nov 2010 (Totals rounded off to reflect the fact that it is an
      approximation.)                                                                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|# | Grade estimated with bottom cut-off stone size at
    2mm                                                                                                                                                                                                                                                                                                                                                                                               
|# | Resources estimated as at November 30 2010. Subsequent to
      November 30, 2010, during December 2010 to February 28, 2011, the Company
      has processed 285,466 m3. The indicated resources for Holpan
      are 415,600 m3grading 0.95ct/100m3and the
      indicated resources for Klipdam are 1,907,900 m 3 grading 1.21ct/100m 3
      both as of February 28, 2011 after removing production from the resource
      information noted above.

Rockwell continually reconciles recovered grades with estimated
resource grades for all of their deposits and mines. The increasing recovered
mine grade in 2010 is a reflection of the fact that, in addition to
fluvial-alluvial gravels, only non-sandy colluvial (Rooikoppie) gravels are
currently being mined. Further, in comparison with 2009 data, the 2010 resource
inventory reflects a significant decrease in resources. As a result of the
trial-mining, Rockwell considers that the very sandy gravel (which requires
significant modifications to the plant) may never, in fact, be mined and the
volume of gravel has been reduced accordingly.

Plans for Fiscal 2012

Trial-mining of the main deposit at the Klipdam-Holpan mine, is
planned to continue during the rest of 2011. On-going technical and engineering
studies are being conducted so that a decision may be reached regarding whether
the sandy colluvial gravels can be processed commercially. Specific budgets for
these studies are not required since they are conducted as part of the
trial-mining (2011 trial-mining costs are budgeted at ZAR 53.5M for Klipdam and
ZAR 52.2M for Holpan).

---

 Page 31 

Bulk sampling will continue on Erf 2004 so that diamond grade
and value can be estimated with reasonable confidence, so as to allow for the
estimation of a resource by the end of calendar 2011. Further, 1,100 pits will
be excavated on Erf 1 to increase the confidence in the estimate of the volume
in order to estimate a resource for the property. ZAR 60,000 has been budgeted
for this exercise (a significant portion of the costs will be absorbed by the
current mining budget on Klipdam/Holpan mine.

Due to the lack of encouraging trial-mining results on Holpan,
the mine was placed on care and maintenance in May 2011.

The Saxendrift/Kwartelspan Property

Location, Access and Infrastructure

The Saxendrift property is located on the south bank of the
Orange River in the Herbert district of the Northern Cape Province, some 50km
southwest of Douglas and 160km from Kimberley (Figure 2). The Kwartelspan
prospect is located 4 km east of Saxendrift Mine.

A 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. To deal with power outages, maintenance is scheduled during
power outages and a 2 megawatt generator was acquired to run the plant. A backup
generator is 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.

Property Description

The Kwartelspan and Kransfontein properties are located east of
the Saxendrift.

The following permits are valid for the project:

PropertyName
      Area(ha)
      MineralRight Holder
      PermitTypeand
        Number
      RenewalDateSaxendrift 20 Re/Ptn
      1,368.2940
      Saxendrift 
        Mine
      (Proprietary) Ltd
      New Order Mining Right
      28/2008MR
      17 March 2018Annex Saxendrift 21 Re/Ptn, and Ptn (Ptn 1)Saxendrift2 0 Re/Ptn
      359.0000
      Saxendrift Mine (Proprietary) Ltd
      New Order Prospecting Right
      751/2006(PRC)
      29 Nov2 008 (Renewalacceptedby DMR2/9/2008).
        InprogressSaxendrift 20 Ptn 12, 13, 16, 24, 25
      1,873.6898
      HC van Wyk Diamonds Ltd
      New Order
        Prospecting Right
      (NC) 30/5/1/1/2/1284PR
      18 June 2010 (Renewalacceptedby DMR25/3/2010). Inprogress.Kransfontein 19 Ptn (Ptn 1)
      903.6500
      Saxendrift Mine
      New Order Prospecting Right
      11 April 2008 (Renewalacceptedby


---

 Page 32 

Kwartelspan 25 (Re/Ptn)
    
    (Proprietary) Ltd
    210/2006
      DMR23/4/2008). Inprogress.


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, and Rockwell has a surface use agreement with
him. A continued payment of a surface use rental by Rockwell has kept the
agreement in place while a new agreement is negotiated.

Geology

The Middle Orange River (MOR) displays a meandering channel
morphology, best developed in areas underlain by the Dwyka Group. Palaeochannel
depositional packages (terraces) of the Orange River are preserved at
different elevations above the present Orange River bed. The ages of the
terraces are younger at lower elevations; 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 20-70m above the river. The bedrock is well exposed
in the workings and shale and tillite of the Karoo age Dwyka Group are common.
The fluvial-alluvial gravels comprise a sequence of (basal) gravels 2-4m thick,
overlain by generally less than 5m of variably calcreted sands and silts, and
covered by a thin layer of soil and scree. 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.

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 braided 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 after a merger with GEM Diamond
Mining Limited, which held the mineral rights at that time.

Although TransHex operated in three areas at Saxendrift, one of
these  Brakfontein was not acquired by Rockwell. From commissioning to the end
of 2005, the Saxendrift Mine produced a total of 76,803 carats; the largest gem
quality stone produced was a 216 carat octahedron 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.

The Saxendrift Project was held by THO from 2000 until the sale
to Rockwell in 2007/2008. Limited mining production took place up until January
2007.

Mining and Processing

The upper 2-3m of the fluvial-alluvial sequence is calcreted to
varying degrees so the sample block needs to be blasted, typically on a 5 m x5m
grid, to break up the hard calcrete carapace without damaging diamonds. The
broken material is then stripped off using hydraulic excavators. As at
Wouterspan, varying depths of calcretisation has meant that some of the upper
gravel layers are also highly cemented so the gravels are ripped by one of two
bulldozers. The disaggregated material is then loaded by excavator, onto
articulated dump trucks and transported to the plant site for further
processing.

---

 Page 33 

During much of 2008, Rockwell processed gravels through an
existing 4 x 16 ft rotary pan plant. A new plant which has a design
plant-throughput of 500 tonnes per hour, and recovery through a bank of ten
Flowsort machines and an Optical Sorter came on stream in November 2008.

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.

Mineral Resources and Mineral Reserves

Rockwell acquired the property in April 2008 and initiated
bulk-sampling, with processing through the existing pan-plant. A new 800tph
rotary pan plant was built and commissioned during that year. From May 2008 to
the end of February 2009 some 2,436.73 carats (ct) were produced from 194,287
m3of gravels. During the period February 2009 and November 2010
Rockwell carried out a trial-mining programme, excavating 2,398,009
m3 of gravel from terrace A of the Saxendrift deposit. Some 14,073.49
ct were recovered for an average grade of 0.62 ct/100 m3. The
excavation of the gravel samples as well as the method of processing and the
final recovery of diamonds are, essentially, similar in both the bulk-sampling
and trial-mining programmes, except for the volumes processed. The information
obtained from the trial-mining operation forms the basis for the pre-feasibility
study on the Saxendrift Mine.

The mineral resources at 30 November 2010 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 Dr. T.R. Marshall, (Pr.
Sci. Nat.), a qualified person who is independent of the Company and is
responsible for the estimate.

See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

MININGAREA
      RESOURCE CLASSIFICATION
      VOLUME (m3)
      GRADE* (ct/100m3)
      Value# (USD/ct)Terrace A
      Indicated
      4,859,900
      0.50
      2,029Terrace B
      Indicated
      1,774,600
      1.15Total/AverageSaxendriftMineIndicated
      6,634,500
      0.66
      2,029


See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

MININGAREA
      RESOURCE CLASSIFICATION
      VOLUME (m3)
      GRADE* (ct/100m3)
      Value# (USD/ct)Terrace A
      Inferred
      5,400,000
      0.50
      2,029Terrace B
      Inferred
      86,000
      0.68Kwartelspan prospect
      Inferred
      500,000
      1.00Total/AverageSaxendriftInferred
      5,986,000
      0.56
      2,029


*      At 2mm cut-off
  Mineral
resources that are not mineral reserves do not have demonstrated economic
viability.

Trial-Mining and Pre-Feasibility Study

During 2009/2010 trial-mining was initiated on Saxendrift, as
part of a study to determine what portion of the gravel resource could be
converted to a reserve. Capital costs of plant and equipment was determined
through formal quotations acquired from suppliers. Operational parameters and
operating costs were determined both

---

 Page 34 

during the bulk-sampling and subsequent trial-mining phases on
Saxendrift and from Rockwell's experience on their other operational alluvial
diamond mine (Klipdam/Holpan). It is believed that the detail and accuracy of
this study is at a pre-feasibility level.

The mine plan involves continued mining on the Saxendrift A
terrace during 2011/2012 as well as detailed exploration of the C terrace. The
preferred method of mining the alluvial gravels on Saxendrift mine is by means
of strip-mining in a shallow, opencast operation. The diamondiferous alluvial
gravels are relatively thin, unconsolidated to semi-consolidated, tabular bodies
with generally less than 20m overburden and, accordingly, lend themselves to
opencast mining methods. The upper 2-3m of the fluvial-alluvial sequence is
calcreted to varying degrees  usually to laminar or hardpan levels. As a
result, prior to excavation, the sample block needs to be blasted. This has the
effect of breaking up the hard calcrete carapace without damaging diamonds. The
broken calcrete 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. If this material is
simply excavated and then loaded, large amounts of calcreted gravel chunks are
sent to the plant. Due to the nature of these chunks, unknown numbers of
diamonds would be locked up and lost to the recovery system. However, in order
to mitigate against this problem, prior to excavation, the gravels are ripped by
a bulldozer which effectively liberates the gravels (and the diamonds) from the
calcrete matrix. The disaggregated material is then loaded by excavator, onto
articulated dump trucks (ADTs) and transported to the screening plant where
some 23% of the gravel is removed (mostly sand).

The processing plant, which was commissioned in late 2008, is
comprised of four scrubbers followed by four 18 ft rotary pan-plants and has a
design plant-throughput of 800tph. With an expected annual treatment of 1,
800,000m3 some 9,000ct of diamonds are expected to be recovered
through a bank of ten FlowSort machines and an electronic grease table, as well
as final hand-sort in a glove-box under secure conditions. Access to all areas
of the final recovery is controlled and monitored by protection personnel while
closed circuit television (CCTV) is installed. A minimum of two Rockwell
personnel are present whenever diamonds are sorted. Quality assurance/quality
control (QA/QC) is maintained through the use of tracers  both bort diamonds
(supplied by Steinmetz) and ceramic balls. These tracers are introduced into
different parts of the plant to ensure optimum diamond recovery. Fluorescent
slingshot tracers and bort diamonds are used to continuously test for maximum
equipment performance. Daily, 20 tracers are inserted into each FlowSort
machine. Recoveries are monitored and problems with tracer recoveries are
reported immediately to the plant superintendent who deals with the matter
directly.

On the basis of the trial-mining on terrace A and subsequent
pre-feasibility study, the following probable mineral reserves were estimated
for the Saxendrift Mine. These probable reserves are included within the
indicated mineral resources in the table above.

MINING AREA
      RESERVE CLASSIFICATION
      VOLUME (m3)
      GRADE* (ct/100m3)
      CARATS
      Value# (USD/ct)Total/Average Saxendrift Mine Probable Reserve
      (Terrace A)
    
    4,859,900
    0.50
    24,299
    2,029


|* | At 2mm bottom (diamond size) cut-off                                                                                                                                                                                                                                                                                                 
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | This mineral reserve is as at November 30 2010 is
        included in the mineral resources in the previous table. Subsequent to
        November 30, 2010 during December 2010 to February 28, 2011, the Company
        has processed 289,540 m3, so the probable reserve at year
        end is 4,570,400 m3grading 0.5 ct/100 m3.

The life-of-mine, based on these Probable Reserves, at the proposed rate of
  mining of 150,000m3/month, is estimated at 2.7 years. Operating costs
  have been budgeted at ZAR 7.5M/month. All of the significant capital expenditures
  were made to establish the processing plant and mine fleet for trial mining.
  As a result, no additional capital expenditure has been budgeted for the outstanding
  life of mine. Only minor sustaining capital may be required and this expenditure
  is approved by the Board on an annual basis.

The key parameters and their results are tabulated below:

---

 Page 35 

KeyParameters
      KeyResultsAverage sales value (2011)
    USD 2,029/ctProposed monthly throughput
    150,000m3Proposed mine life (reserves only)
    2.7Operating Costs (2011)
    ZAR 43/m3Mining Royalties
    0.5-7%Capex required to bring mine into production
    N/AEarth moving fleet budget
    N/ATax
    28%Net Present Vales (NPV) (reserves only)10% 16% 19%
    ZAR 85,145,873 ZAR
      72,007,705 ZAR 66,457,596


A discounted cash flow was developed on the basis of the
reserves only at discounted at values of 10, 16 and 19%. The diamond price was
escalated by 10% per year from the average value of USD2029 received from sales
from trial mining over the past fiscal year. The results in Rand are presented
in the table below. The NPV at 16% discount rate is USD 10.4 million. There is
no IRR value because the capital expenditures have already been made.

The cash-flow is based upon probable reserves only. However,
the opportunity exists, through further planned work to convert the remaining
Indicated Resources to Probable Reserves over the short term and the Inferred
Resources to higher categories over the longer term that has excellent potential
to extend the mine life of the project.

Plans for Fiscal 2012

During fiscal 2012 (calendar 2011), Rockwell will continue to
mine gravels from the A terrace on Saxendrift mine. In addition, it is planned
to complete 1,120 drill holes on terrace C and the area to the south of the A
terrace currently being mined. This drilling will be split over the next two
years  so, only 560 holes (some 15 m/hole to a total of some 8,400 m) are
planned. Advancement to the subsequent phase of prospecting is contingent upon
positive results. No prospecting is currently planned for Kwartelspan. Total
exploration drilling costs have been budgeted at ZAR 4M for the program.

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 160 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.

---

 Page 36 

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
portions of the farm Lanyonvale 376.

Property
      Size(ha)
      Number
      ValidityPortion 16, portion of Portion 9
    188.7926
    HCVWD
      New Order Mining Right (NC)30/5/1/2/2/0208 MR
      Anapplication
        (208MR)to converttoa MiningRight,
        alongwiththe consolidationofall
        theWouterspan permits,was grantedon25 January2010but hasnotyetbeen executedPortion 14 (Stofdraai) Remainder of Portion
        9 (Wouter)
    1,640.6412 1,369.9544Portion 16 (portion of portion 9)
    240.4480Remainder of Portion 18 (portion of Portion
      10)
    271,5347Portion 7 Portion 11 (DeHoek)
    1,628,9209 1,288,5227Surveyed Portion of Remainder of Portion 9
      (Wouter)
    780.61
    New Order Prospecting Right
      Protocol 65/2006
      (Okapi Diamonds CC)
    Section 11 cession not yet
      finalised. This portion will then be incorporated into the HCVWD Mining
      right


Geology

The geology is similar to that at the Saxendrift property (see
description above).

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,
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. 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. Exploration drilling, bulk
sampling and trial mining took place between 2005 and 2008.

Mining and Processing

---

 Page 37 

The mine has been on care and maintenance since November 2008.
Since the upper 2-3m of the fluvial-alluvial sequence is calcreted to varying
degrees, the sample blocks need to be blasted, typically on a 5 m x5m grid, to
break up the hard calcrete carapace. Historically, the broken material was then
stripped off using hydraulic excavators. Varying depths of calcretisation has
meant that some of the upper gravel layers are also highly cemented so the
gravels have been ripped by one of two bulldozers. The disaggregated material
was then loaded by excavator, onto articulated dump trucks and transported to
the plant site for further processing. 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, were monitored by a
Closed Circuit Television unit. At least two Rockwell personnel are present
whenever diamonds are sorted.

During the period March - November 2008 (last period of trial
mining at Wouterspan), some 100,000 m3 of Rooikoppie and 452,293
m3 of calcreted fluvial-alluvial gravel for a total of 552,293
m3 was processed to recover 3,896.42 ct at an average grade of 0.70
ct/100m3.

Mineral Resources

The resource statement for Wouterspan reflects the situation as
at 30 November 2010. Note that no production has taken place on this mine since
end November 2008 when the mine was put on Care & Maintenance. The volumes
and grades reflect the bulk-sampling and trial-mining data up to that time. The
diamond value given in the statement is the average received for +5,500 of
diamonds sold from the adjacent (across the river) Saxendrift mine during
FY/2010. Since this does not represent a parcel derived from the Wouterspan mine
itself, the confidence level on this estimate is not as high as it would be
after the recovery of 3,000-5,000 ct from the mine. This figure will be adjusted
accordingly, once the mine is re-commissioned. Historically, diamond
characteristics and, therefore, diamond values, have been similar for the
Wouterspan and Saxendrift mines. In reality, all the Middle Orange River
deposits share similar diamond characteristics and values. Consequently it is
deemed appropriate to use current sales values from the Saxendrift mine as an
indicator of value for Wouterspan.

These mineral resources were estimated by Rockwells Manager,
Resources, G. A. Norton, (Pr. Sci. Nat.), a qualified person and reviewed by
T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of
the Company and is responsible for the estimate.

---

 Page 38 

See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

Category
      Gravel Description
      Volume (m3)
      AveGrade (ct/100m3)*
      AveValue (USD/ct)Indicated
    Rooikoppie
    714,400
    0.70
    2,029Indicated
    Fluvial-alluvial
    4,311,100Indicated
      TOTAL
    5,025,500
      0.70
      2,029


See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

Category
      Gravel Description
      Volume (m3)!
      AveGrade (ct/100m3)*
      AveValue (USD/ct)Inferred
    Rooikoppie
    5,911,000
    0.70
    2,029Inferred
    Fluvial-alluvial
    31,863,000Inferred
      TOTAL
      37,774,000
      0.70
      2,029


*At a bottom cut-off of 2 mm (based on the average grade of the
total sample mined to date)Total figures are rounded off Mineral
resources that are not mineral reserves do not have demonstrated economic
viability.

In addition to these estimated resources, a further +400ha of
terrace area had also been identified as exploration target for further
prospecting.

Preliminary Assessment

During fiscal 2011, Rockwell has proceeded with plans to
complete trial-mining and a pre-feasibility study once the mine is
re-commissioned. The Company also completed a preliminary assessment of the
project based on the indicated and inferred mineral resources above and the
plans to rebuild the processing plant.

The assessment is preliminary in nature, and includes inferred
mineral that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
mineral reserves, and there is no certainty that the preliminary assessment will
be realized.

Work done to date on the adjacent (across the river) Saxendrift
mine indicate that the entire sedimentary profile should be excavated and
processed  although this has the effect of decreasing the overall recovered
grade, the life of mine is significantly increased. Excavation of the gravels is
not planned to change from the standard techniques applied on all of Rockwell's
alluvial diamond mines  excavation by hydraulic excavator followed by transport
of gravel to the plant site in dump trucks.

The proposed processing plant will be a high-volume, low-cost
plant, specifically designed to deal with the peculiarities of the gravels being
processed. The plant will comprise 8 (or 12) 18 rotary pan plants and
trial-mining will investigate the efficiency of sending selected size fractions
to selected pans, namely +2-6mm, -6-12mm and +12-32mm. This is expected to
greatly improve the recovery efficiencies of the pans. The plant is planned to
be automated to the extent that optimal production, along with minimal downtime
and maintenance, can be attained. The mine plan has been developed to achieve at
throughput at some 340,000m3/month.

---

 Page 39 

Key results of the preliminary assessment are summarized below:

KeyParametersAverage sales value
      USD 2,029/ctProposed monthly throughput
      340,000m3Proposed mine life
      10Operating Costs
      ZAR 5.2/monthMining Royalties
      0.5-7%*Capital cost
      ZAR 122,000,000Tax
      28%


KeyResultsBase Case
      10%EscalatedPriceInternal Rate of Return (IRR)
      101%
      135%Net Present Value (NPV) at discount rates of:15%
      ZAR 482,000,000
      ZAR 1,990,000,00020%
      ZAR 363,000,000
      ZAR 885,000,00025%
      ZAR 279,000,000
      ZAR 667,000,000


*Royalties vary according to the profitability of the mining
company, subject to a minimum rate of 0.5%  and maximum rate 7.0%  for
diamonds.

The cash flows have been done at a static diamond price as a
base case (USD2,029 received from the sales at the nearby Saxendrift mine during
the most recently ended fiscal year) and an escalated diamond price (alternate
case) increased by 10% per year from the static price, and the results are
presented at discount rates of 15, 20 and 25% in Rand the table above. The study
determined the net present value of the project for the alternate case at a 20%
discount rate is USD128 million with an internal rate of return of 135%.

The Niewejaarskraal Property

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.

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.

---

 Page 40 

Property Description

The following permits are valid for the project:

PropertyName
    **Area**
    **(ha)**
      MineralRight
      PermitNumber
      RenewalDateNiewejaarskraal 40 Ptn (Ptn6)
    1766.390
    New Order Mining Right
    22/2006(MR)
      NIEWEJAARSKRAAL MR
    MR Conversion Granted
      12/04/06- valid until 11/04/16Niewejaarskraal 40 Ptn (Ptn4)Niewejaarskraal 40 Ptn (Ptn2)Viegulands Puts 39 PtnRe/farmViegulands Puts 39Ptn Re/farm
    324.105
    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 (Ptn6)
    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 geology is similar to that at the Saxendrift property (see
description above).

History

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

THO began trial-mining in 2001 and full-scale operations at
Niewejaarskraal in August 2002. Between then and December 2005, when the
operation was put on Care & Maintenance, a total of 0.76Mm3 gravel was
mined, and 0.8 Mt processed through the Niewejaarskraal Dense Media Separation
plant at an average recovered grade of 1.26ct/100m 3 (Venmyn, 2006).
Work by Rockwell on the neighbouring Saxendrift mine resulted in increased
diamond recoveries. As a result, the expected average grade increased from
0.8ct/100m 3 to an average of 1.3ct/100m 3. It is,
similarly, expected that the same improvements in diamond recovery will be
applied to the Niewejaarskraal operation and result in increased grades.
However, until a sufficiently large volume of gravel has been processed by
Rockwell the existing TransHex operations (THO) grades of 0.84ct/100m
3 will be applied to all the resources identified on
Niewejaarskraal.

---

 Page 41 

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 averaged USD1,375/ct
(Venmyn, 2006). During the same time period, the average price received for
diamonds from Terrace A on Saxendrift was USD1,404/ct and from Terrace B was USD
1,327/ct (Venmyn, 2007). These figures correlate well with the Niewejaarskraal
data, as would be expected from similar terraces on nearby 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 or 2011.

Mineral Resources

During 2008, Rockwell reprocessed the TransHex drilling data
and re-estimated the resources. The entire resource estimate was also
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 improvements made in diamond processing/recovery procedures which will
change the available diamond grade values.

Based on the criteria described above, the Inferred resources
(volume) present on Niewejaarskraal (Terraces A and B) were estimated (February
28, 2009).These figures represent volumes available in the ground, fully
depleted of material removed by THO. The mineral resources at were estimated by
Rockwells Manager, Resources, G. A. Norton, Pr. Sci. Nat), a qualified person
who is not independent of the Company and reviewed by Dr. T. R. Marshall, Pr.
Sci. Nat), a qualified person who is independent of the Company and is
responsible for the estimate.

Since no processing has taken place on Niewejaarskraal in the
period 2009-2010, the resource volume and grade figures remain unchanged as at
30 November 2010. However, during FY2010, Rockwell sold +5,500ct of diamonds
from the adjacent Saxendrift mine on the open market for USD2,029/ct. Until a
reasonable parcel of stones have been recovered from the Niewejaarskraal mine
and sold, this value will be accepted at an Inferred resource classification
level.

See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

CATEGORY
      MININGAREA
      GRAVELTYPE
      Volume(m3)
    Grade(ct/100m3)
    Value(USD/ct)Inferred
    TerraceA
    Fluvial-alluvial Rooikoppie
    11,831,500 1,840,000
    0.84
    2,029Inferred
    TerraceB
    Fluvial-alluvial Rooikoppie
    5,990,000 969,000
    0.84
    2,029Inferred
    Total
    
      20,630,500
    0.84
    2,029


* value received through the sale of +5,500ct from the
Saxendrift Mine. Historically, diamond characteristics and, therefore, diamond
values, have been similar for the Niewejaarskraal and Saxendrift mines.
Inreality, all the Middle Orange River deposits share similar diamond
characteristics and values. Consequently it is deemed appropriate to use current
sales values from the Saxendrift mine as an indicator of value for
Niewejaarskraal.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability.

Additional target areas are located on Terrace C. In addition,
other areas have been identified that potentially host terraces A, B, and C that
are targets for future geophysical and drilling surveys. All exploration
programs in these areas have, however, been deferred until the mine is
re-commissioned.

During 2009/2010 Rockwell has proceeded with plans to complete
trial-mining and other studies. Work done to date on the adjacent Saxendrift
mine indicate that the entire sedimentary profile should be excavated and
processed  although this has the effect of decreasing the overall recovered
grade, the life of mine is significantly increased. Excavation of the gravels is
not planned to change from the standard techniques

---

 Page 42 

applied on all of Rockwell's alluvial diamond mines 
excavation by hydraulic excavator followed by transport of gravel to the plant
site in dump trucks.

Preliminary Assessment

A preliminary economic assessmentwas done based on the Inferred
Resources tabulated above for the Niewejaarskraal Project. Under these
circumstances, however, it is fundamental to appreciate that the assessment is
preliminary in nature, that it includes inferred mineral that are considered too
speculative geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves, and there is no
certainty that the preliminary assessment will be realized.

A plant similar to that at the Saxendrift and Wouterspan mines
would be constructed at a capital cost of ZAR130M. The earthmoving fleet would
be accessed from other operations. The estimated operating cost of ZAR45/m. At a
proposed 340,000 m3/month at full production, the preliminary
estimation of mine life is 6 years. The key parameters and results are tabulated
below:

KeyParametersAverage sales value
      USD 2,029/ctProposed monthly throughput
      340,000m3Proposed mine life (inferred resources
      6yearsOperating Costs
      ZAR 45/m3Mining Royalties
      0.5-7%Capex required to bring mine into production
      ZAR 130,000,000Earth moving fleet budget
      N/ATax
      28%


KeyResultsBaseCase
      10%PriceEscalationInternal Rate of Return (IRR)
      123%
      183%Net Present Value (NPV) at discount values of:15%
      ZAR 450,000,000
      ZAR 1,067,000,00020%
      ZAR 369,000,000
      ZAR 869,000,00025%
      ZAR 304,000,000
      ZAR 715,000,000


The cash flows have been done at a static diamond price as a
base case (USD2,029 received from the sales at the nearby Saxendrift mine during
the most recently ended fiscal year) and an escalated diamond price (alternate
case) increased by 10% per year from the static price. Results are presented in
Rand the table above at discount rates of 15, 20 and 25%. The study determined
the net present value of the project for the alternate case at a 20% discount
rate is USD125.9 million with an internal rate of return of 183%.

CAUTIONARY NOTE TO INVESTORS CONCERNING PRELIMINARY ASSESSMENT

All information contained in this annual report relating to the
contents of the Preliminary Assessment on the Niewejaarskraal property included
for several of the Companys properties, including but not limited to statements
of the project's potential and information under the headings "Key Parameters
and Results" are "forward looking statements" within the definition of the
United States Private Securities Litigation Reform Act of 1995. The Preliminary
Assessment was prepared to broadly quantify the project's capital and operating
cost parameters and to provide guidance on the type and scale of future project
engineering and development work that will be needed to ultimately define the
project's likelihood of feasibility and optimal

---

 Page 43 

production rate. It was not prepared to be used as a valuation
of the project nor should it be considered to be a pre-feasibility study.

The following are the principal risk factors and uncertainties
which, in management's opinion, are likely to most directly affect the
conclusions of the Preliminary Assessment and the ultimate feasibility of the
project. The mineralized material is currently classified as Indicated and
Inferred resources. Although Indicated and Inferred resources were used in the
conceptual production plan, these are not mineral reserves. Final feasibility
work has not been done to confirm the mine design, mining methods, and
processing methods assumed in the Preliminary Assessment. Final feasibility
could determine that the assumed mine design, mining methods, and assumed
processing rates are not correct. Cost estimates have been developed in part
based on the expertise of the individuals participating in the preparation of
the Preliminary Assessment and on costs at projects believed to be comparable.
Costs, including design, procurement, construction, and on-going operating costs
and metal recoveries could be materially different from those contained in the
Preliminary Assessment. There can be no assurance that mining can be conducted
at the rates and grades assumed in the Preliminary Assessment. The Preliminary
Assessment assumes specified prices levels for diamonds. Historically, diamond
prices have been volatile, and the Company has no control of or influence on the
prices, which is determined in international markets. There can be no assurance
that the diamond prices will continue at current levels or that they will not
decline below the prices assumed in the Preliminary Assessment. The project will
require major financing, probably a combination of debt and equity financing.
Interest rates are at historically low levels. There can be no assurance that
debt and/or equity financing will be available on acceptable terms. A
significant increase in costs of capital could materially and adversely affect
the value of the projects. Other general risks include those ordinary to large
construction projects including the general uncertainties inherent in
engineering and construction cost, the need to comply with generally increasing
environmental obligations, and accommodation of local and community concerns.

Plans for Fiscal 2012

Ongoing review and updating of resources based on production
will be done by existing Rockwell staff (specifically G Norton, Rockwells
Mineral Resource Manager) and the independent QP, as necessary. Since Rockwell
has large amounts of existing drill data that it acquired from TransHex, much of
which still requires on-going and further rigorous analysis and integration with
mining results, no new drilling programmes have been planned for this property
for the fiscal 2012. Before any new drilling is planned and budgeted for on
Niewejaarskraal, Rockwell staff will complete supplementary field work,
geological mapping, and internal reinterpretation of existing data. No
additional costs have been budgeted for fiscal 2012 for this exercise as it will
take place within Rockwells existing M&A budgets.

The Trisano Property, South Africa

On March 11, 2010, Rockwell announced that it had signed a term
sheet with Etruscan Diamonds Limited (Etruscan) whereby the Company proposed
to purchase Etruscans Blue Gum (Tirisano) 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 ZAR 33.5 million
(approximately $4.65 million) payable in pre-consolidation common shares of the
Company valued at $0.068 each. The Company will also assume certain non-material
property maintenance obligations effective immediately and other financial
obligations upon completion of the acquisition.

Two conditions precedent remained at the Companys fiscal year
end, which now have been completed. The first was the Section-11 cession by the
Department of Mineral Resources (DMR), allowing Rockwell to take ownership of
the mining rights. The cession was received on August 5 2011. The other was the
restructuring of the senior debt provided by the Industrial Development
Corporation of South Africa Limited when the Tirisano mine was first developed,
which was completed in July 2011.

Property Description, Location and Access

The property is located some 35 km due north of the town of
Ventersdorp, in the Northwest Province of South Africa approximately 150 km west
of Johannesburg. It easily accessed via a network of regional tarred and gravel
roads, as well as farm tracks on the mine property. From the Ventersdorp office,
the mine is 30 km distant on a 25 km tarred and 5 km gravel road. Ventersdorp is
64 km from Klerksdorp and 50 km from Potchefstroom, the major population centres
in the NorthWest Province and some 100 km from Johannesburg.

---

 Page 44 

The Tirisano property covers mineral concessions totalling
10,805.57 ha summarised in the table below:

Property
    Portion
    MineralRightNooitgedacht
    Portions 1, 2, 3, 5, 7, 8, 9, 11,
      R/Efarm
    MiningRight,2/2008
      NW30/5/1/2/2/345MPHartbeestlaagte
    1,2,3,Re/farm,DeproclaimedZwartrand
    Various


History

The total reported production from these diamond fields from
1904-1984 is estimated at 14.4 million carats, which would have a present day
value of over USD 5 Billion. Mining from the Tirisano project, by open cast
methods has taken place from 2002  2008 (intermittent prospecting and
bulk-sampling activities have been taking place since 1979).

The Tirisano Project is a past producer that has been on care
and maintenance since 2008.

Geology

Tirisano occurs in a karst environment. Gravel deposition is
related to periodic subsidence which has taken place since at least the Mesozoic
period, resulting in the build-up of a very thick sequence. The diamondiferous
deposits range from thin tabular horizons to thick (+60 metres) units, infilling
palaeokarst hollows and sinkholes. The preferred extraction method is open cast
mining.

Mineral Resources

The Blue Gum alluvial diamond deposit hosts the following
mineral resources as estimated at October 2009.

See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

Category
      Volume (m3)
      Grade (ct/100m3)
      Value (USD/ct)IndicatedResources
    25,279,800
    2.37
    606


See Cautionary Notes on page 1 about SEC non-recognition of
these Resources

Category
      Volume (m3)
      Grade (ct/100m3)
      Value (USD/ct)InferredResources
    15,334,000
    2.37
    606


Note: Mineral Resources which are not Mineral Reserves have no
  demonstrated economic viability

Recent Work

Rockwell commissioned mineralogical and metallurgical studies
to determine the most effective methods for processing clay-rich gravels within
the sequence that can cause recovery inefficiencies. The processing facility,
currently under construction, consists of eight 16-foot rotary pans with a front
end designed to break down the clay units. Since no diamonds have recently been
sold from the Tirisano mine, the early 2008 value of USD606 carat has been
applied for the base case; however, diamond sales values rom the district are in
the USD700 per carat range, and can be expected during 2011. A throughput of
180,000 cubic metres per month is planned.

An 180,000 cubic meters (m3) per month (324,000
tonnes) production facility at the site is being completely rebuilt. To date, a
total of $5.8 million has been invested, using funds raised in the market in
March 2010 as

---

 Page 45 

well as operational cash generated from the Northern Cape
Operations. Construction started in May 2010. Upon completion in the third
quarter of fiscal 2012, the new plant will comprise of four production streams,
each with a monthly capacity of 45,000 m3 (81,000 tonnes) which can
be run independently. It is being completed in-house, using existing plant and
machinery which was redeployed from Rockwells Wouterspan and other Northern
Cape mines.

The first line, which was recently commissioned, is being
fine-tuned by processing the stockpiles left by the previous operators on the
Tirisano mine. The objective is to reprocess the four 400,000 m3
stockpile at the mine and then to proceed with mining the shallow upper gravel
layer of the deposit. Rockwell, assisted by consultants from SRK South Africa
that conducted the geotechnical study, plans to complete a redesign and a new
detailed mine plan.

Preliminary Assessment

Rockwell commissioned a preliminary assessment of the Tirisano
project in the latter part of fiscal 2011. The preliminary assessment was based
on the October 2009 indicated and inferred mineral resource estimates and
includes the capital cost of the updates to the processing plant described
above. The assessment is preliminary in nature, and includes inferred mineral
that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
mineral reserves, and there is no certainty that the preliminary assessment will
be realized.

Key results are tabulated below:

KeyParametersAverage sales value
      USD 606/ctProposed monthly throughput
      180,000m3Proposed mine life
      18.8yearsOperating Costs
      ZAR 49/m3Mining Royalties
      0.5-7%*Capex required to bring mine into production
      ZAR 73,000,000Earth moving fleet budget
      N/ATax
      28%


KeyResultsBaseCase
      10%PriceEscalationInternal Rate of Return (IRR)
      59%
      83%Net Present Value (NPV)at discount values of:15%
      ZAR 223,000,000
      ZAR 1,084,000,00020%
      ZAR 153,000,000
      ZAR 645,000,00025%
      ZAR 105,000,000
      ZAR 406,000,000


*varies with profitability of the
company

At a proposed 180,000 cubic metres per month throughput, the
preliminary estimation of mine life is 11.7 years, based on indicated mineral
resources only. An additional 7.1 years may be added if inferred mineral
resources are included, resulting in a total expected mine life of 18.8
years.

The cash flows have been done at a static diamond price as the
base case (USD606/ct - price received from sales in the most recent production
in 2008) and an escalated diamond price (alternate case) of 10% per year from
the static price, and the results are presented in Rand the table above. The NPV
of the Tirisano project for the alternate case at a discount rate of 20% is
USD93.5 million with an internal rate of return of 83%.

T. Marshall, PhD, PrScNat, an independent qualified person, is
responsible for the preliminary assessment and the resource estimate.

---

 Page 46 

CAUTIONARY NOTE TO INVESTORS CONCERNING PRELIMINARY
ASSESSMENT

All information contained in this annual report relating to the
contents of the Preliminary Assessment on the Trisano property included for
several of the Companys properties, including but not limited to statements of
the project's potential and information under the headings "Key Parameters and
Results" are "forward looking statements" within the definition of the United
States Private Securities Litigation Reform Act of 1995. The Preliminary
Assessment was prepared to broadly quantify the project's capital and operating
cost parameters and to provide guidance on the type and scale of future project
engineering and development work that will be needed to ultimately define the
project's likelihood of feasibility and optimal production rate. It was not
prepared to be used as a valuation of the project nor should it be considered to
be a pre-feasibility study.

The following are the principal risk factors and uncertainties
which, in management's opinion, are likely to most directly affect the
conclusions of the Preliminary Assessment and the ultimate feasibility of the
project. The mineralized material is currently classified as Indicated and
Inferred resources. Although Indicated and Inferred resources were used in the
conceptual production plan, these are not mineral reserves. Final feasibility
work has not been done to confirm the mine design, mining methods, and
processing methods assumed in the Preliminary Assessment. Final feasibility
could determine that the assumed mine design, mining methods, and assumed
processing rates are not correct. Cost estimates have been developed in part
based on the expertise of the individuals participating in the preparation of
the Preliminary Assessment and on costs at projects believed to be comparable.
Costs, including design, procurement, construction, and on-going operating costs
and metal recoveries could be materially different from those contained in the
Preliminary Assessment. There can be no assurance that mining can be conducted
at the rates and grades assumed in the Preliminary Assessment. The Preliminary
Assessment assumes specified prices levels for diamonds. Historically, diamond
prices have been volatile, and the Company has no control of or influence on the
prices, which is determined in international markets. There can be no assurance
that the diamond prices will continue at current levels or that they will not
decline below the prices assumed in the Preliminary Assessment. The project will
require major financing, probably a combination of debt and equity financing.
Interest rates are at historically low levels. There can be no assurance that
debt and/or equity financing will be available on acceptable terms. A
significant increase in costs of capital could materially and adversely affect
the value of the projects. Other general risks include those ordinary to large
construction projects including the general uncertainties inherent in
engineering and construction cost, the need to comply with generally increasing
environmental obligations, and accommodation of local and community concerns.

ITEM 4AUNRESOLVED STAFF COMMENTS

Not applicable.

---

 Page 47 

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 years ended February 28,
2011, February 28, 2010 and February 28, 2009 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 principal 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 (''Canadian 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, 2011, the Company incurred
consolidated losses of $5.1 million and has incurred accumulated losses to date
of $54.1 million

In fiscal 2011, diamond prices have increased gradually from
US$1,010 for fiscal 2010 to US$1,365 for the year ending February 28, 2011, with
an average fourth quarter sales value of US$1,430.

At February 28, 2011, the Companys current assets exceeded its
current liabilities by $4.2 million and the Companys total assets exceeded its
total liabilities by $83.2 million. The Company has forecasted its cash flows
for the fiscal years 2012 and 2013 and these forecasts indicate that the Company
will continue as a going concern. The forecasts assume the plant operating at
85% of capacity, prices remaining at current levels and the South African Rand
remaining at current levels relative to the United States and Canadian
Dollars.

On the performance of the last quarters, the operations made a
positive contribution towards the cashflow. This is not sufficient to fund to
planned capital projects at Wouterspan and Tirisano. These expansion projects
will be funded by means of a planned private placement.

Based on the Companys cash resources (assuming the completion
of the Daboll Financing- See Related Party Transactions) and the above
forecasts, the Company has sufficient working capital and reserves to maintain
operations. 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. 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.

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 Page 48 

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, 2011. 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 2011, 2010 or 2009. The
Company's financial position and results of operations are summarized below:

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 Page 49 

|                                                 |  | As at             |  |  | As at             |  |  | As at             | 
|------------------------------------------------ |  | ----------------- |  |  | ----------------- |  |  | ----------------- | 
|Consolidated
      Balance Sheets                |  | February 28, 2011 |  |  | February 28, 2010 |  |  | February 28, 2009 | 
|Current assets                                   |  | 12,858,410        |  |  | 11,875,714        |  |  | 15,099,971        | 
|Mineral property interest                        |  | 29,565,304        |  |  | 30,850,998        |  |  | 28,894,477        | 
|Other assets                                     |  | 67,760,000        |  |  | 62,516,674        |  |  | 62,367,968        | 
|Total
      assets                               |  | 110,183,714       |  |  | 105,243,386       |  |  | 106,362,416       | 
|                                                 |  |                   |  |  |                   |  |  |                   | 
|                                                 |  |                   |  |  |                   |  |  |                   | 
|Current liabilities                              |  | 8,620,783         |  |  | 11,577,472        |  |  | 14,462,800        | 
|Other liabilities and non-controlling interest   |  | 19,004,617        |  |  | 16,471,823        |  |  | 21,478,590        | 
|Shareholders equity                             |  | 82,558,314        |  |  | 77,194,091        |  |  | 70,421,026        | 
|Total
      liabilities and shareholders equity |  | 110,183,714       |  |  | 105,243,386       |  |  | 106,362,416       | 

|                                                               |  | Year ended        |   |  | Year ended        |   |  | Year ended        |  
|-------------------------------------------------------------- |  | ----------------- | - |  | ----------------- | - |  | ----------------- | -
|Consolidated Statements of Operations and                      |  | February 28, 2011 |   |  | February 28, 2010 |   |  | February 28, 2009 |  
|Comprehensive
      Loss                                       |  |                   |   |  |                   |   |  |                   |  
|Revenue                                                        |  | 42,507,747        |   |  | 29,776,933        |   |  | 34,330,078        |  
|Cost of rough diamonds sales                                   |  | (28,079,696       | ) |  | (23,790,340       | ) |  | (25,113,363       | )
|Amortisation and depletion                                     |  | (10,407,037       | ) |  | (9,545,727        | ) |  | (11,287,197       | )
|Operating profit
      (loss)                                  |  | 4,021,014         |   |  | (3,559,134        | ) |  | (2,070,482        | )
|Expenses                                                       |  |                   |   |  |                   |   |  |                   |  
|Net reclamation obligation recognized (utilized)               |  | 1,809             |   |  | (394,409          | ) |  | 1,072,389         |  
|Exploration                                                    |  | 49,184            |   |  | 97,805            |   |  | 498,739           |  
|Foreign exchange loss (gain)                                   |  | 1,381             |   |  | 483,902           |   |  | (350,485          | )
|Legal, accounting and audit                                    |  | 1,211,186         |   |  | 1,389,272         |   |  | 1,863,261         |  
|Office and administration                                      |  | 3,428,769         |   |  | 3,367,240         |   |  | 3,380,710         |  
|Directors fees                                                 |  | 186,667           |   |  | 44,750            |   |  | 108,750           |  
|Shareholder communications                                     |  | 185,490           |   |  | 506,482           |   |  | 453,489           |  
|Stock-based compensation                                       |  | 884,886           |   |  | 335,358           |   |  | 1,834,422         |  
|Travel and conference                                          |  | 433,636           |   |  | 194,544           |   |  | 605,812           |  
|Transfer agent filings                                         |  | 99,416            |   |  | 246,866           |   |  | 250,878           |  
|Subtotal                                                       |  | 6,482,424         |   |  | 7,148,151         |   |  | 9,717,965         |  
|                                                               |  |                   |   |  |                   |   |  |                   |  
|Loss on disposal of equipment                                  |  | 296,510           |   |  | 36,720            |   |  | 364,918           |  
|Loss on disposal or write down of mineral
      properties     |  |                  |   |  | 657,634           |   |  | 203,339           |  
|Interest income                                                |  | (101,953          | ) |  | (466,688          | ) |  | (2,672,021        | )
|Interest on capital lease obligations                          |  | 119,286           |   |  | 969,530           |   |  | 1,592,001         |  
|Interest expense                                               |  | 329,717           |   |  | 576,272           |   |  | 3,009,680         |  
|Fair value adjustment to investments held                      |  | 31,920            |   |  |                  |   |  |                  |  
|Other income                                                   |  | (193,157          | ) |  | (513,338          | ) |  | (303,399          | )
|Share of profit from equity accounted
      associate          |  | (34,396           | ) |  |                  |   |  |                  |  
|Write down of property plant & equipment                       |  | 284,696           |   |  | 23,862            |   |  | 2,590,958         |  
|Write-off of receivables                                       |  |                  |   |  | 167,414           |   |  | 291,063           |  
|Subtotal                                                       |  | 732,623           |   |  | 1,451,406         |   |  | 5,076,539         |  
|                                                               |  |                   |   |  |                   |   |  |                   |  
|Loss before income taxes                                       |  | 3,194,033         |   |  | 11,282,350        |   |  | 16,864,986        |  
|Income tax expense                                             |  |                  |   |  | 18,946            |   |  | 7,000             |  
|Future income tax
      (recovery) expense                     |  | 2,021,000         |   |  | (2,645,000        | ) |  | (3,347,000        | )
|Loss before non-controlling interest                           |  | 5,215,033         |   |  | 8,656,296         |   |  | 13,524,986        |  
|Non-controlling
      interest                                 |  | (88,097           | ) |  | (1,618,603        | ) |  | (549,024          | )
|Loss for the period                                            |  | 5,126,936         |   |  | 7,037,693         |   |  | 12,975,962        |  
|Other
      comprehensive loss (income)                        |  | (1,615,805        | ) |  | (5,429,700        | ) |  | 13,409,383        |  
|Total comprehensive loss                                       |  | 3,511,131         |   |  | 1,607,993         |   |  | 26,385,345        |  
|                                                               |  |                   |   |  |                   |   |  |                   |  
|Basic and diluted loss per common share
      (1)              |  | 0.15              |   |  | 0.40              |   |  | 0.82              |  
|Weighted average
      number of common shares outstanding (1) |  | 34,545,683        |   |  | 17,810,954        |   |  | 15,861,610        |  

(1) Share information is post consolidation of share capital.

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 Page 50 

Production and Sales

The following is a comparison of the twelve months of fiscal
2011 (ended February 28, 2011) with the twelve months of fiscal 2010 ended
February 28, 2010.

PRODUCTIONOperation
      12 months ended February 28,
        2011
      12 months ended February 28,
        2010Volume (cubic
        metres)
      Carats
      Average grade (carats
        per 100 cubic metres)
      Volume (cubic
        metres)
      Carats
      Average grade (carats
        per 100 cubic metres)Holpan
      777,791
      7,469
      0.96
      805,925
      6,398
      0.79Klipdam
      891,609
      10,109
      1.13
      895,669
      9,670
      1.08Klipdam Ext.
      261,214
      1,855
      0.71
      -
      -
      -Wouterspan
      -
      -
      -
      -
      14
      -Saxendrift
      1,449,875
      6,705
      0.46
      1,216,503
      8,834
      0.73Other
      6,383
      27
      0.43
      -
      -
      -Total
      3,386,872
      26,165
      0.77
      2,918,097
      24,916
      0.85


*Included in the Klipdam sales are 283 carats at $173,472 from
ERF-2004 Windsorton, a prospecting right within the Holpan-Klipdam mining area.

SALES, REVENUE
        AND INVENTORIESOperation
      12 months ended February 28,
        2011
      12 months ended February 28,
        2010Sales (carats)
      Value of Sales
        (US$)
      Average value
        (US$ per carat)
      Inventories (carats)
      Sales (carats)
      Value of Sales
        (US$)
      Average value
        (US$ per carat)
      Inventories (carats)Holpan
      8,008
      9,622,911
      1,202
      241
      6,458
      3,166,842
      492
      780Klipdam *
      10,195
      11,409,098
      1,119
      509
      10,817
      6,301,240
      581
      595Wouterspan
      -
      -
      -
      -
      591
      280,193
      475
      -Klipdam Ext.
      1,831
      1,919,576
      1,048
      24
      -
      -
      -
      -Saxendrift
      6,956
      13,931,120
      2,003
      283
      8,667
      17,055,281
      1,968
      534Other
      27
      6,396
      234
      -
      -
      -
      -
      -Total
      27,017
      36,889,101
      1,365
      1,057
      26,533
      26,803,556
      1,010
      1,909


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 Page 51 

INVENTORIES (carats)Operation
      Rough Diamond Inventories
        Beginning of Period
      Production
      Rough Diamond Sales
      Rough Diamond Inventories
        End of PeriodHolpan
      780
      7,469
      8,008
      241Klipdam
      595
      10,109
      10,195
      509Klipdam Ext
      -
      1,855
      1,831
      24Saxendrift
      534
      6,705
      6,956
      283Other
      -
      27
      27
      -Total
      1,909
      26,165
      27,017
      1,057


Subsequent to the year end, the production for the five months
ended July 31, 2011 are tabulated below:

Operation
    Volume (cubic meters)
    Carats
    Average Grade (carats/100
      cubic meters)Holpan
    73,896
    903
    1.22Klipdam
    299,439
    2,926
    0.98Saxendrift
    565,491
    2,623
    0.46Total
    938,826
    6,452
    0.69


Fiscal 2011 compared to twelve months ended Fiscal 2010

The Company realized an operating profit of $4.0 million for
the fiscal year ended February 28, 2011 compared to operating losses of $3.5
million and $2.0 million for fiscal 2010 and 2009 respectively. This operating
profit is as a result of a significant increase in diamond prices.

The Company realized a loss of $5.1 million for the twelve
month period ended February 28, 2011 compared to a loss of $7.0 million for the
prior year. The loss was due to production only increasing slightly by 5% or
1,249 carats during fiscal 2011 and other expenses although decreasing to $6.9
million (2010 - $7.8) still at relatively high levels compared to sales amounts.
The loss was also affected by a future income tax expense of $2.0 million
compared to a future income tax recovery of $2.6 million in fiscal 2010.

There has been an overall improvement in prices of about 35%
from the recovering prices of fiscal 2010. The re-commissioning of the
Wouterspan Mine, which is still on care and maintenance, will coincide with the
expected current recovery of the demand for high quality stones in the third
quarter of fiscal 2012.

Proceeds from financing activities were used to repay short
term debt, finance lease obligations, fund diamond operations and fund capital
developments.

During the year ended February, 28, 2011, the Company realized
rough diamond sales of $42.5 million compared to $29.8 million in the prior
year. Sales were at an average price of US$1,365 per carat, 35% higher than the
price in the corresponding period of approximately US$1,010 per carat.

Diamond sales in the fourth quarter of fiscal 2011 achieved an
average value of US$1,430 per carat, an improvement of 24% from the fourth
quarter of fiscal 2010 value of US$1,154 per carat. The sales for the quarter
are characterised by a range of stones that are representative of the
operations production.

---

 Page 52 

Mining costs for the year ended February 28, 2011 amounted to
$28.1 million (February 28, 2010 - $23.8 million), which excludes amortisation
and depletion charges of $10.4 million (February 28, 2010 - $9.5 million).

Exploration expenses decreased to $49,184 for the year ended
February 28, 2011 compared to $97,805 in the prior year.

Office and administrative costs for year ended February 28,
2011 increased to $3.6 million from $3.4 million incurred in the prior year.
Travel and conference expenses amounted to $433,636 for the year ended February
28, 2011 compared to $194,544 in fiscal 2010. Legal, accounting and audit
expenses for the year ended February 28, 2011 amounted to $1,211,186 compared to
$1,389,272 incurred in fiscal 2010.

Stock-based compensation increased to $884,886 for the year
ended February 28, 2011 in comparison to $335,358 in the previous year.

Net interest expenses were $347,050 for February 28, 2011,
compared to $1,079,114 for the year ended February 28, 2010, due to the
reduction of the credit facility and outstanding capital lease obligations.
Interest expense on capital lease obligations were $119,286 (2010  $969,530),
interest expenses on credit facility were $329,717 (2010  $576,272) and
interest income was $101,953 (2010 - $466,688).

Pending Acquisition of Etruscan Diamonds (Blue Gum Property)

In March 2010 Rockwell announced that it had signed a term
sheet with Etruscan Diamonds Limited, whereby the Company proposes to purchase
74% of Etruscan Diamond (Proprietary) Ltd, giving it access to its subsidiary
Blue Gum Diamonds which owns the Tirisano mine operation in the Ventersdorp
region, South Africa. The Tirisano mine has been on care and maintenance since
October 2008. The balance will be 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 $4.65 million) payable in
pre-consolidation Rockwell shares valued at $0.068 each. The Company will also
assume certain non-material property maintenance obligations effective
immediately and other financial obligations upon completion of the
acquisition.

The Tirisano alluvial diamond deposit hosts an indicated
mineral resource of 25 million cubic metres with a grade of 2.37 carats/100
cubic metres and an inferred mineral resource of 15 million cubic metres with a
grade of 2.37 carats/100 cubic metres as estimated at October 2009. A technical
report has been filed on the Companys profile at www.sedar.com. (see Cautionary Notes on page 1 about
SEC non-recognition of these Resources)

The Company is awaiting approval from the Industrial
Development Corporations (IDC) to transfer the shares to Etruscan and effect
the transaction, as well as approval of the South African Reserve Bank. No
recognition has been given to this future transaction in these consolidated
financial statements.

The production facility at the site- is being completely
rebuilt. A total of $8.1 million has been invested, using funds raised in the
market in March 2010 as well as operational cash generated from the Northern
Cape Operations. Construction started in May 2010. Upon completion in the third
quarter of fiscal 2012, the new plant will comprise of four production streams,
each with a monthly capacity of 45,000 m3 (81,000 tonnes) which can
be run independently. It is being completed in-house, using existing plant and
machinery which was redeployed from Rockwells Wouterspan and other Northern
Cape mines.

The first line, which was recently commissioned, is being
fine-tuned by processing the ore dumps left by the previous operators on the
Tirisano mine. The objective is to reprocess the four 400,000 m3
dumps at the mine and then to proceed with mining the shallow upper gravel layer
of the deposit. Rockwell, assisted by consultants from SRK South Africa that
conducted the geotechnical study, plans to complete a redesign and a new
detailed mine plan.

---

 Page 53 

Rockwell commissioned a preliminary assessment of the Tirisano
project in the latter part of fiscal 2011. The preliminary assessment was based
on the October 2009 resource estimate and includes the capital cost of the
updates to the processing plant described above.

T. Marshall, PhD, PrScNat, an independent qualified person, is
responsible for the preliminary assessment and the resource estimate. A
technical report has been filed on the Companys profile at www.sedar.com.

Acquisition

On April 21, 2010 the Company acquired a 20% shareholding in
Flawless Diamonds Trading House (Proprietary) 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 has the ability to exercise
  significant influence over the operations of Flawless and as a result has equity
  account the results of Flawless in fiscal 2011 from the effective date of acquiring
  its shareholding.

Summarised
      financial information of associate
    
    As atFebruary 28,2011Financial PositionTotal Assets
    $
    9,690,007Total Liabilities
    
    8,969,428Net Assets
    
    703,579


Nine months endedFebruary 28,2011Financial PerformanceTotal Revenue
    $
    60,383,011Total net earnings for the year
    
    206,374Capital commitments and contingent
      liabilities of associate
    
    Nil


Corporate

William Fisher resigned as a director on March 25, 2010.Dr.
John Bristow resigned as a director on May 18, 2011.Yong Guo was appointed as a
director on January 6, 2010 and resigned as a director on June 28, 2010. Gary Wu
was appointed as a director on June 28, 2010.David Barber was appointed as a
director on September 10, 2010 and resigned as a director on December 21,
2010.James Campbell was appointed as a director, president and CEO on June 30,
2011.

The current Audit Committee is comprised of Messers W. Jacobs
and R. Linnell which is non-compliant with Canadian law as three independent
directors are required for the audit committee. The Company is in the process of
identifying and appointing additional independent directors to the Company and
to the Audit Committee.

In addition, the Company appointed Michael Hunt as its Chief
Operating Officer as of July 11, 2011.

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 Page 54 

B.          Liquidity
  and Capital Resources

Liquidity

At February 28, 2011, the Company had cash and cash equivalents
of $4.8 million (2010 - $2.5 million) and bank indebtedness of $1.8 million
(2010 - $0.7 million), for net cash holdings of $3 million (2010 - $1.8
million). The Company had net working capital (inclusive of cash and cash
equivalents) of $4.2 million (2010 -$0.3 million).

The Company had no long-term debt at February 28, 2011, other
than asset retirement obligations relating to its Klipdam, Holpan, Wouterspan
and Saxendrift mines and due to related parties of $0.4 million. The capital
lease obligations relating to mining equipment of only $0.1 million outstanding
at February 28, 2011 will be fully repaid early in fiscal 2012. The Companys
capital lease obligations are denominated in South African Rand (ZAR).

The operations are generating sufficient cash to cover
operating costs and direct overheads. Based on monthly production projections
the Company should hold adequate inventory that will generate sales revenue and
has adequate cash holdings as well as access to short-term debt facilities to
meet its working capital requirements. On the performance of the last two fiscal
quarters of 2011, the operations made a positive contribution towards cash flow.
This is not sufficient to fund the future capital projects at Wouterspan and
Tirisano. These expansion projects will be funded by means of a planned private
placement.

Capital Resources

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

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

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

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.

Furthermore, there can be no assurance that significant
fluctuations in the trading price of the Companys common shares will not occur,
or that such fluctuations will not materially adversely affect the Companys
ability to raise equity funding without significant dilution to its existing
shareholders.

During the year ended February 28, 2011, the Company did not
raise any debt financings. The Company anticipates that it has sufficient
funding facilities and funds available to meet its working capital requirements.
Provided that the diamond market maintains current price levels and the Company
continue to achieve average prices of over US$1,100 per carat, it will continue
generating positive operating cash flows.

As more particularly described in the Related Party
Transactions Rockwell has agreed to secure significant financing from a
principal shareholder, Daboll Consultants Limited;

---

 Page 55 

Financing

Of the $16.6 million proceeds of the capital raised in the 2011
and 2010 fiscal years, $8.0 million was utilised to settle debt and strengthen
the balance sheet and $4.7 million, with further capital investments of $10.4
million funded from operations, was invested in capital developments at
Saxendrift, Tirisano and Wouterspan. Although the funds raised had originally
been earmarked for the construction of a new production plant at Wouterspan, the
Board redirected these funds to Tirisano because of the consistent grades and
past production profile of Tirisano appeared to offer an opportunity for higher
near term potential for return on this project.

Financial Instruments

The Company's financial instruments consist of cash and cash
equivalents, restricted cash, amounts receivable, reclamation deposits, bank
indebtedness, 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.

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 $8.0 million
in a private placement and rights offering in the first quarter of fiscal 2011.
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 to maintain operations 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, 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 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

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 Page 56 

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.

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

On September 9, 2010 Rockwell Resources RSA (Proprietary) Ltd
has signed a sale of shares and claims agreement with Etruscan Diamonds Bermuda
Limited, Etruscan Diamonds Limited and Etruscan Resources Inc. whereby the
Company proposes to purchase Etruscans Blue Gum diamond operation in the
Ventersdorp region of South Africa. The acquisition is for 74% of the operation
with the balance owned pursuant to South Africas BEE regime. The price to be
paid to Etruscan is an amount not exceeding ZAR33.5 million (approximately $4.7
million) payable in pre-consolidation Rockwell shares valued at $0.068 each. The
Company will also assume certain non-material property maintenance obligations
effective immediately and other financial obligations upon completion of the
acquisition.

The Company is awaiting approval from the Industrial
Development Corporations (IDC) to transfer the shares to Etruscan and effect
the transaction, as well as approval of the South African Reserve Bank. No
recognition has been given to this future transaction in these consolidated
financial statements.

---

 Page 57 

Other than the above the Company had no material commitments
for capital expenditures as at February 28, 2011 and August 31, 2011.

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

Rockwell does not carry out any research or development
activities.

D.Trend Information

The diamond market continued to improve in the fourth quarter
of fiscal 2011, and prices have now fully recovered to 2008 levels. During the
2010 calendar year, prices increased for both rough and polished diamonds. The
strong demand for diamonds in the retail environment during the latter part of
the 2010 calendar year continued to support improved prices.

The increase in rough diamonds prices during the 2010 calendar
year resulted in levels comparable to those prevailing at the end 2007. Price
increases accelerated, particularly in the last two months of fiscal 2011, and
reached 2008 highs. The rough diamond supply of De Beers remained relatively low
during the first half of 2010 but subsequently increased to a total value of
approximately $600 million at the beginning of 2011. In addition, there was an
approximate 10% increase in prices, bringing prices for De Beers rough diamonds
in line with the bullish secondary market where buyers were prepared to pay
premiums on all boxes. Alrosa maintained its supply across all available
marketing channels, including the tender type sales. Although it is the
preferred sales channel among smaller producers, larger producers are
increasingly adopting tender sales as a suitable sales mechanism.

Although the pace of price increases for polished diamonds has
not matched that of rough diamonds, the trend has been positive. Christmas 2010
sales were strong, with internet sales showing double digit increases as
customers became more comfortable with shopping online. The growth in the Indian
and Chinese domestic markets has led to an increase in market share at the
retail consumer level, which includes accelerating online sales. Polished
diamond prices, in particular, increased by 5% during January and February 2011.

The high prevailing prices for rough diamonds has eroded
manufacturing margins, which were already tight. The price of polished diamonds
is expected to increase in the longer term, relieving margin pressure in the
manufacturing environment. The high pricing environment for rough diamonds is
limiting the quality of stones that manufacturers purchase in order to maintain
the utilisation of manufacturing employees and avoid further loss of skills to
other industries.

The profile of rough diamonds has evolved since the 2008 crash,
they are increasingly being considered as a commodity as well as an investment.
High net worth individuals and alternative investment institutions are
increasingly investing in polished diamonds, especially rare expensive polished
diamonds. It became apparent after the recession that polished prices dropped
because of more cautious spending habits among consumers. In contrast, the value
of large and expensive diamonds, particularly those of exceptionally rare
qualities and colors, have proved their investment worth with substantial
returns in value over the years. Diamonds are a depleting natural resource, with
no major discoveries of new deposits since the 1980s. As a result, investors
who appreciate diamonds as a store of value have become a strong force among
diamond buyers.

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 Page 58 



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 $0.1 million, with $0.1 million payable in the next 12 months,
with installments up to the year 2012 to various financial institutions for
plant and equipment.

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

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 Page 59 

Payments due by periodTotal
      Less than one
      1 to 3 years
      3-5 years
      More than 5 yearsyearContractual obligation
      Nil
      Nil
      Nil
      Nil
      NilCapital (Finance) Lease Obligations
      0.1m
      0.1m
      Nil
      Nil
      NilOperating lease obligations
      Nil
      Nil
      Nil
      Nil
      NilPurchase obligations
      Nil
      Nil
      Nil
      Nil
      NilReclamation Obligations
      3.8m
      Nil
      Nil
      Nil
      3.8mBank indebtedness
      1.8m
      1.8m
      Nil
      Nil
      NilOther Long-Term Liabilities Reflected on the Company's Balance
        Sheet under the GAAP of the primary financial statements
      Nil
      Nil
      Nil
      Nil
      NilTotal
      5.7m
      1.9m
      Nil
      Nil
      3.8m


Other than described above and in the notes of the audited
financial statements for the year ended February 28, 2011, 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.

---

 Page 60 

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, 2011.

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.

All information presented in ITEM 6  Directors, senior
manangement and employees below are presented after consolidation of share
capital.

Name, Position and Country of
      Residence
    Period as a Director of the
      Company
    Common Shares Beneficially
      Owned or Controlled(1)(12)Dr. Mark Bristow Director Mauritius
    Since March 2007
    481,816(5)+ 13,407
      (11)James Campbell President and Chief
      Executive Officer Johannesburg, South Africa
    Since June 2011
    8,032David J. Copeland Chairman and Director
      British Columbia, Canada
    Since September 2006
    96,919(6)Gary Wu Director Beijing, Peoples
      Republic of China
    Since August, 2010
    Nil(7)Dr. Willem Jacobs(2)(4)Director Pretoria, South Africa
    Since November, 2009
    12,963(8)(11)Richard Linnell(2)(3)(4)Director Randburg, South Africa
    Since November, 2009
    15,216(9)(11)Sandile Zungu(3)(4)Director
      British Columbia, Canada
    Since November 2008
    37,222(10)(11)


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 Page 61 

Name, Position and Country of
      Residence
    Period as a Director of the
      Company
    Common Shares Beneficially
      Owned or Controlled(1)(12)Gerhard Jacobs15Chief
      Financial Officer Johannesburg, South Africa
    Since July 2010
    53,000 OptionsGraham Chamberlain13Senior
      Mine Manager Cape Town, South Africa
    Since November 2009
    90,000 OptionsTrevor Thomas14Secretary
      Vancouver, British Columbia, Canada
    Since February 2008
    41,000 OptionsMichael Hunt Chief Operating Officer
      Johannesburg, South Africa
    Since July 2011
    Nil Options


Notes:

|(1)  | The information as to securities beneficially owned or
      controlled is not within the knowledge of management of the Company and
      has been furnished by the respective nominees and is based on insider
      reports filed on www.sedi.caas at July
      11, 2011.                                  
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Member of the Audit Committee.                                                                                                                                                                                                                                                                                 
|(3)  | Member of the Nominating and Governance
  Committee.                                                                                                                                                                                                                                                           
|(4)  | Member of the Compensation Committee.                                                                                                                                                                                                                                                                          
|(5)  | Dr. Bristow also holds options to purchase 29,967 Common
      Shares at $9.30 each, expiring September 24, 2012, options to purchase
      33,333 Common Shares at $0.90 each, expiring December 7, 2014, and options
      to purchase 50,000 Common Shares at $0.975 each, expiring October 8,
      2015.  
|(6)  | David Copeland also holds options to purchase 33,300
      Common Shares at $9.30 each, expiring September 24, 2012, options to
      purchase 40,000 Common Shares at $0.90 each, expiring December 7, 2014 and
      options to purchase 46,667 Common Shares at $0.975 each, expiring October
      8, 2015.
|(7)  | Gary Wu holds options to purchase 13,333 Common Shares at
      $0.975 each, expiring October 8, 2015.                                                                                                                                                                                                         
|(8)  | Dr. Jacobs also holds options to purchase 33,333 Common
      Shares at $0.90 each, expiring December 7, 2014 and options to purchase
      33,333 Common Shares at $0.975 each, expiring October 8, 2015.                                                                                                     
|(9)  | Richard Linnell also holds options to purchase 20,000
      Common Shares at $0.90 each, expiring December 7, 2014 and options to
      purchase 33,333 Common Shares at $0.975 each, expiring October 8,
    2015.                                                                                            
|(10) | Sandile Zungu holds options to purchase 20,000 Common
      Shares at $0.90 each, expiring December 7, 2014 and options to purchase
      16,667 Common Shares at $0.975 each, expiring October 8, 2015.                                                                                                       
|(11) | Directors Fees for the Companys 2009 financial year
      settled in Common Shares at $0.90 each.                                                                                                                                                                                                             
|(12) | Effective July 11, 2011 the Company completed a
      consolidation of its outstanding Common Shares on the basis of 15 pre-
      consolidated Common Shares for 1 post-consolidated Common Share.                                                                                                            
|(13) | Graham Chamberlain hold options to purchase 30,000 Shares
      at $0.90 per share expiring on December 7, 2014 and options to purchase
      60,000 shares at $0.975 per share expiring on October 8, 2015..                                                                                                  
|(14) | Trevor Thomas holds options to purchase 20,000 Shares at
      $0.90 per share expiring on December 7, 2014 and options to purchase 1,000
      Shares at $9.30 per share expiring on September 24, 2012 and options to
      purchase 20,000 shares $0.975 per share expiring on October 8,
  2015.           
|(15) | Gerhard Jacobs holds options to purchase 53,333 shares at
      $0.975 per share expiring on October 8, 2015.                                                                                                                                                                                                  

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 Page 62 

Principal Occupations and Other Information About Rockwells
Directors and Management

The following information as to principal occupation, business
or employment is not within the knowledge of the management of the Company and
has been furnished by the respective nominees. Each nominee has held the same or
a similar principal occupation with the organization indicated or a predecessor
thereof for the last five years.

Dr. Mark Bristow - Director

Dr. Bristow was appointed to the Board in October 2006. Dr.
Bristow has more than 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, and
in August 1995 he was appointed managing director. In October 1995, Dr. Bristow
was appointed CEO of Randgold Resources Limited, 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, 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. Until recently he was a director of 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. He is currently the Chairman of the SOMILO Board of Directors
(Loulo Gold Mining Company), and a non-executive Director of Morila Limited. He
is also a member of the President of Senegals Economic Advisory Committee as
well as the President of Malis advisory council. Dr. Bristow is a fellow of the
Geological Society of South Africa and 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 International
    Director
    November 2005
    PresentRandgold Resources Limited
    CEO and Director
    August 1995
    PresentRockwell Diamonds Inc.
    Director
    December 2006
    Present


James Andrew Hartley Campbell, President, CEO and
Director

Before joining Rockwell Diamonds as President and CEO on June
1, 2011, Mr. Campbell was Vice President New Business of Lucara Diamond Corp.,
following Lucaras acquisition of African Diamonds plc (AFD), where he was the
Managing Director for four years. During his tenure with AFD he was instrumental
in paving the way for the award of a Mining License for the AK6 project,
Lucaras flagship project in Botswana. Prior to joining AFD, Mr. Campbell was
with De Beers for over twenty years, culminating in his position as General
Manager responsible for advanced exploration and resource delivery in the Global
Mining and Exploration group. During his career with De Beers he also led a
number of diamond exploration and evaluation programmes and small-scale mine
development projects. He was also involved in corporate management and personal
assistant to Nicky Oppenheimer.

Mr. Campbell holds a degree in Mining and Exploration Geology
from the Royal School of Mines (Imperial College, London University) and an MBA
with distinction from Durham University. Mr. Campbell is a Fellow

---

 Page 63 

of the Institute of Mining, Metallurgy and Materials, Chartered
Engineer (UK), Chartered Scientist (UK), a Professional Natural Scientist (RSA)
and a member of the Institute of Directors of South Africa.

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

Company
    Positions Held
    From
    ToAfrican Diamonds plc
    Managing Director
    December 2006
    December 2010Rockwell Diamonds Inc.
    President and CEO
    June 2011
    PresentDirector
    June 2011
    PresentStellar Diamonds plc
    Non-Executive Director
    February 2010
    PresentSwala
    Director
    March 2007
    PresentWest African Diamonds plc
    Executive Deputy Chairman
    December 2006
    February 2010


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 Limited, 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. 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 Limited
    Director
    September 1995
    PresentContinental Minerals
      Corporation
    Director
    November 1995
    April 2011President & CEO
    January 2008
    April 2011Curis Resources Limited
    Director
    November 2010
    PresentFarallon Mining Limited
    Director
    December 1995
    April 2009Heatherdale Resources
      Limited
    Director
    November 2009
    PresentPresident & CEO
    November 2009
    October 2010Great Basin Gold Limited
    Director
    February 1994
    March 2008Northern Dynasty Minerals
      Limited
    Director
    June 1996
    June 2010Rockwell Diamonds
      Inc.
    Director
    September 2006
    PresentChief Executive Officer
    September 2006
    September 2007Chairman
    September 2007
    PresentTaseko Mines Limited
    Director
    March 1994
    June 2010


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 has been involved in Volvo Groups business development
in China. During the period working for Volvo, Mr. Wu led 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. He
started his venture as the Chairman and Chief Executive Officer of SureAuto
Corporation, a 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.

---

 Page 64 

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

Company
    Positions Held
    From
    ToAB Volvo Group Global
    Vice President of Volvo Group,
      Strategic Alliance
    April 2006
    September 2007Rockwell Diamonds Inc.
    Director
    July 2010
    PresentVolvo Trucks Corporation
    Executive Vice President, Area
      Asia President and CEO, Greater China
    November 2005
    April 2006


Dr. Willem Jacobs - Director

Dr. Jacobs has over 25 years experience in the engineering,
mining and investment sectors, including 20 years in executive, Chief Executive
and Chief Operating Officer, as well as board level positions 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 and legal
frameworks in North and South America, Australia, the Middle East and the Far
East including China, 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.

Dr. Jacobs career spans strategy, corporate finance, company
turnarounds and mergers and acquisitions. He has been CEO and COO of various
major companies over the last 20 years. He also has a D.Com degree in strategy.

Dr. 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
    2010Europe Minerals BV
    Non Executive Director
    2001
    2007Randgold Resources Limited
    General Manager: Central and East
      Africa
    February 2010
    PresentRockwell Diamonds Inc.
    Director
    October 2009
    PresentTeal Mining and Exploration
    Country Manager
    May 2007
    December 2008


Richard J. Linnell - Director

Richard has been active in the resource metals field for nearly
forty years and has significant global experience in the development and
marketing of resources and commodities. After a period as a geologist he became
involved in the establishment of Delta Manganese Project (now MMC) in Nelspruit.

After the commissioning of the Delta Project, he attended
Henley Management College in the United Kingdom before assuming General
Management positions with Delta. Thereafter, he was involved in the
establishment of Murray & Roberts Industrial Corporation, the industrial
holdings Company of the Murray & Roberts Construction Group.

He then joined Middelburg Steel & Alloys as Marketing
Manager for the Stainless Steel division and was subsequently involved in the
establishment of the Columbus Stainless Steel Project. Mr. Linnell 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.

While involved with
  the Manganese Division of Samancor, Mr. Linnell was active in the Ukraine,
  Georgia, India, China, Latin America, as well as with the major steel producing
  countries of the world, including the USA, Japan and the EU. He then became
  responsible for Billiton Plcs Exploration and Development activities

---

 Page 65 

within Africa, and has guided detailed discussions in Guinea,
Mauritania, Sudan, Morocco, and Democratic Republic of Congo and Zambia, as well
as South Africa.

Over the past ten years since retirement from a full time role
at BHP Billiton, he has been intensely involved in risk management in the
African context and has interacted with the World Bank and its associates, the
IFC and MIGA.

In this mode, he was the originator of the Bakubang Initiative,
a Forum designed to revive the SA Mining Industry which lead to the
establishment of the New Africa Mining Fund.

He has retired as a non-executive director of BHP Billiton SA
Ltd (where he consulted on issues in the public domain such as the New Mineral
and Petroleum Development Act).

He is now active in the Junior Mining Sector and is on the
boards of Rockwell Diamonds, (SA), Sacoil (DRC and Tunisia), Mag Industries
(Roc) and Coal of Africa (SA), amongst others.

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

Company
    Positions Held
    From
    ToBrinkley Mining Company Limited
    Chairman
    2008
    2009Chrome Corporation Limited
    Chairman
    2007
    2009Coal of Africa Limited
    Chairman
    2001
    PresentAMEC Minproc Limited
    Director
    2008
    PresentIPSA Ltd
    Non Executive Chairman
    2010
    PresentMag Industries Corporation
    Director
    2006
    PresentMaghreb Minerals Plc
    Chairman
    2008
    2011Moydoy Mines International Inc
    Director
    2007
    PresentNamakwa Diamonds Limited
    Director
    2003
    2006Rockwell Diamonds Inc.
    Director
    October 2009
    PresentSacoil Holdings Limited
    Chairman
    2004
    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:

---

 Page 66 

Company
    Positions Held
    From
    ToRockwell Diamonds Inc.
    Director
    November 2008
    PresentZungu Investments Company (Proprietary) Limited
    Executive Chairman
    February 2002
    Present


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 Limited
    Secretary
    February 2008
    PresentAmarc Resources Limited
    Secretary
    February 2008
    PresentAnooraq Resources Corporation
    Asst Secretary
    November 2007
    PresentContinental Minerals Corporation
    Secretary
    February 2008
    PresentFarallon Resources Limited
    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.

Michael Hunt  Chief Operating Officer

Joined Rockwell Diamonds on July 11th 2011. He has
over 30 years experience in the diamond mining industry. Michael started his
career in the UK working as a consultant for an industrial diamond company and
moved the South Africa in 1979 to work for the De Beers Diamond Research
Laboratory. He held several portfolios, moving from metallurgical foreman at
Finsch diamond mine to Assistant Research Manager. In his last role he was
project manager for the development of the Fully Integrated Sort House which is
now housed at Jwaneng Mine in Botswana and sorts 33 million carats a year in a
secure, hands off mode. In 1997 Michael moved to the Mines, holding posts that
included metallurgical manager at Freegold, Welkom; metallurgical manager at
Central Mines, Kimberley; mine manger at The Oaks Mine ( De Beers Smallest
diamond ), Limpopo province; assistant general manager at Orapa (the worlds
largest diamond mine), Botswana. In 2007 Michael joined

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 Page 67 

Pangea Diamond Fields as group metallurgical manager and
operations manager for Angola and the Central African Republic.

He holds a Masters degree in advanced Chemical Engineering,
1977 from Georgia Institute of Technology, USA and Loughborough University of
Technology, UK and is a Professional Engineer. Michael completed the Global
Executive Development programme at the Gordon Institute of Business Science,
University of Pretoria and received a Management Advancement Programme
certificate from the University of Witwatersrand. He has represented the
companies at conferences (papers and presentations) in several countries
including Australia and Germany

Graham Chamberlain  Senior Mine Manager

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

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                                                                                                                                                                                          

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 Page 68 

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);

(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, 2011.

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, 2011

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.

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 Page 69 

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 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.

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 Page 70 

Report on Executive Compensation

The Valuation Report on executive compensation has been
authorized by the compensation committee. 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 Companys executive officers. In addition, the Board
reviews the methodology utilized by the Company for setting salaries of
employees throughout the organization.

The compensation committee receives competitive market
information on compensation levels for executives.

Mr. James Campbell, President and CEO, Mr. Gerhard Jacobs, the
CFO, and Mr. Michael Stanley Hunt, the Chief Operating Officer, serve the
Company on a full-time basis. Dr. John Bristow resigned as President and Chief
Executive Officer of the Company with effect from December 14, 2010 and he
resigned his position as director of the Company on May 18, 2011. James Andrew
Hartley Campbell was appointed as President and CEO on June l, 2011 and was
appointed as a director on June 30, 2011.

Graham Chamberlain stepped down as Chief Operating Officer on
July 8, 2011 and Michael Stanley Hunt was appointed as Chief Operating Officer
with effect from July 11, 2011.

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.

Base Salary

In the Boards view, paying base salaries that are competitive
in the markets in which the Company operates is a first step to attracting and
retaining talented, qualified and effective executives. Competitive salary
information on comparable companies within the industry is compiled from a
variety of sources, including surveys conducted by independent consultants and
national and international publications.

Bonus 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.

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 Page 71 

Equity Participation

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.

Given the evolving nature of the Companys business, the Board
continues to review and redesign the overall compensation plan for senior
management so as to continue to address the objectives identified above.

Compensation of the Chief Executive Officer

Under the Manual, the compensation of the CEO is to be approved
by the Board. Base salary and bonus levels are determined taking into account
independent market survey data.

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.

As noted above under Bonus Compensation,incentive that
may be paid to the CEO and any other member of the Executive or senior
management team are determined in respect of the individuals and management team
achieving strategic objectives and milestones which are set at the beginning of
each year by the compensation committee and approved by the Board. No 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.

Performance Graph

The Company commenced trading on the Toronto Stock 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, 2006
until February 28, 2011 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.

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 Page 72 

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 attempt 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.

Actions, Decisions or Policies Made after February 28, 2011

Given the evolving nature of the Companys business, the Board
and its compensation committee continue to review and redesign the overall
compensation plan for senior management so as to continue to address the
objectives identified above. No actions, decisions or policies have been made
since February 28, 2011 that would affect a readers understanding of NEO
compensation, except for the following:

| | (a) | Dr. John W. Bristow resigned as President and CEO on
      December 14, 2010 and he resigned his position as Director on May 18,
      2011;                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                               
| | (b) | James Andrew Hartley Campbell was appointed as President
      and CEO on June l, 2011 and was appointed as a director on June 30, 2011.
      Mr. Campbell signed an employment agreement with the Company on May 5,
      2011 and commenced employment on June 1, 2011; and
| |     |                                                                                                                                                                                                                                                                               
| | (c) | Graham Chamberlain resigned as Chief Operating Officer on
      July 8, 2011; and Michael Stanley Hunt was appointed Chief Operating
      Officer effective July 11, 2011.                                                                                                   

Option Based Awards

The Company has in place a share option plan dated for
reference August 13, 2008 (the Plan). Under TSX policies the Plan must
be submitted to shareholders for renewal every three years. 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. See Adoption of New Share Option Plan under Particulars of Other
Matters to be Acted Upon below.

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 provider (inclusive of management company employees),
as the case may be, of the Company or any subsidiary;

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 Page 73 

(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 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.

The Plan has the following restrictions, which restrictions may
only be superseded by the Company obtaining approval of the disinterested
shareholders (defined below) of the Company in each instance:

(i)         Common Shares
being issuable to Insiders under the Plan, when combined with all of the
Companys other share compensation arrangements, exceeding 10% of the
outstanding Common Shares;

(ii)        Common Shares to be
issued to Insiders under the Plan, when combined with all of the Companys other
share compensation arrangements, exceeding 10% of the outstanding Common Shares
in any 12 month period;

(iii)     
 Common Shares being issuable to independent directors under the Plan, when
combined with all of the Companys other share compensation arrangements,
exceeding 1% of the outstanding Common Shares of the Company; and

(iv)        a reduction in the
exercise price of an option granted hereunder to an Insider or an extension of
the term of an option granted hereunder benefiting an Insider.

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.

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 Page 74 

SUMMARY COMPENSATION TABLE

The compensation paid to the NEOs during the Companys three
most recently completed financial years ended February 28, 2009, February 28,
2010 and February 28, 2011 is as set out below:

Name andprincipal position
      **Year**
      Salary(1)($)
      Share-basedawards($)
      Option-basedawards(2)($)
      Non-equityincentive
        plancompensation(3)**($)**
      Pensionvalue($)
      All othercompen-sation($)
      Totalcompen-sation($)Annual**incentive**plans(3)
      Long-term**incentive**plansJohn Bristow(4)
        former President 
        and CEO
      2011 
        2010 
        2009
      352,753 
        346,030 
        333,455
      Nil 
        Nil 
        Nil
      58,500 
        32,000 
        121,900
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      411,253 
        378,030 
        455,355DesmondMorgan
        former CFO(5)
      2011 
        2010 
        2009
      47,622 
        124,571 
        44,043
      Nil 
        Nil 
        Nil
      Nil 
        24,000 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      47,622 
        148,571 
        44,043Gerhard Jacobs(5)
        CFO
      2011
      191,133
      Nil
      52,000
      Nil
      Nil
      Nil
      Nil
      243,133GrahamChamberlain(6)
        COO
      2011 
        2010
      211,652 
        69,206
      Nil 
        Nil
      58,500 
        24,000
      10,441 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      280,593 
        93,206


|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 7.0871 (2010: ZAR 7.2248 and
      2009: ZAR 7.872) the average monthly rate in effect for the year ended
      February 28, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2)    | These amounts represent the dollar amount based on the
      grant date fair value of the award for the year ended February 28, 2011.
      The options granted in the Companys financial year ended February 28,
      2011 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 October 8, 2010 was 86% of the option exercise
      price.
|(3)    | These amounts include annual non-equity incentive plan
      compensation, such as bonuses and discretionary amounts for the year ended
      February 28, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4)    | Mr. Bristow resigned from the position of President and
      CEO on December 14, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(5)    | Mr. Morgan resigned as CFO on July 16, 2010. Mr. Jacobs
      was appointed as CFO on July 19, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6)    | Graham Chamberlain commenced employment with the Company
      and was appointed Chief Operating Officer on November 1,
  2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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, 2011, for each NEO:

Option-based AwardsName
      Number of securitiesunderlying unexercisedoptions(#)
      Option exerciseprice($)
      Option expirationdate
      Value of unexercisedin-the-money options($)**(1)**John Bristow 
        former President and 
        CEO
      39,967 
        20,000 
        40,000 
        60,000
      9.30 
        6.75 
        0.90 
        0.975
      Sept 24, 2012 
        June 20, 2011 
        December 7, 2014 
        October 8, 2015
      Nil 
        Nil 
        Nil 
        Nil


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 Page 75 

Option-based AwardsName
      Number of securitiesunderlying unexercisedoptions(#)
      Option exerciseprice($)
      Option expirationdate
      Value of unexercisedin-the-money options($) (1)Gerhard Jacobs(2)
        CFO
      53,333
      0.975
      October 8, 2015
      NilGraham Chamberlain 
        COO
      30,000 
        60,000
      0.90 
        0.975
      December 7, 2014 
        October 8, 2015
      Nil 
        NilDesmond Morgan(2)
        former CFO
      Nil
      Nil
      Nil
      Nil


|Notes: |                                                                                                                                                                                                                                                                            
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)    | The value at February 28, 2011 is calculated by
      determining the difference between the closing price of the Companys
      Common Shares at February 28, 2011 ($0.05 per Common Share) underlying the
      option on the TSX and the exercise price of the options.
|(2)    | Mr. Jacobs was appointed as the new CFO effective July
      19, 2010. Mr. Morgan resigned as CFO effective July 16, 2010 and any
      options held by Mr. Morgan expired unexercised.                                                                                    

Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets out all incentive plan awards (value
vested or earned) during the year ended February 28, 2011, for each NEO:

Name
    Option-based awards  Valuevested during the year(1)($)
    Non-equity incentive plan compensation Value earned during the year($)John Bristow, former President and CEO
    Nil
    NilDesmond Morgan, former CFO
    Nil
    NilGerhard Jacobs, CFO
    Nil
    NilGraham Chamberlain, COO
    Nil
    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.

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

Termination and Change of Control Benefits

As at February 28, 2011 there were no written employment
contracts between the Company and any NEO except the agreement with Gerhard
Jacobs dated August 1, 2010, and the agreement with Graham Chamberlain dated
November 21, 2009.

Under these agreements Gerhard Jacobs and Graham Chamberlain
are 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, as well as other standard benefits made available by the Company.
Please see Summary Compensation Table above.

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

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 Page 76 

Potential Payments upon Termination

The following table provides information concerning the value
of payments and benefits following termination of employment of each NEO under
various circumstances. Payments vary based on the reason for termination and the
timing of a departure. The amounts below are calculated as if the NEOs
employment had been terminated on February 28, 2011. 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
      Nil
      NilBonus
      Nil
      NilOptions
      Nil
      NilGerhard Jacobs(1)(2)
      Salary
      150,696
      301,392Bonus
      Nil
      NilOptions
      Nil
      NilGraham Chamberlain
      Salary
      105,826
      211,652Bonus
      Nil
      NilOptions
      Nil
      Nil


|Notes: |                                                                                                                                                                                                                   
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)    | Mr. Jacobs was appointed as CFO on July 19,
  2010.                                                                                                                                                               
|(2)    | Compensation of the Companys South African executives
      (including Mr. Chamberlain) was paid to them in South African Rand (ZAR).
      In the above table, an exchange rate of CDN$1 = ZAR 7.143 was
  used.

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 Table

Each 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.

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, 2011 is:

Name
    Fees earned ($)
    Share- based
      Awards ($)
    Option- based
      awards ($)
    Non-equity incentive plan
      compensation ($)
    Pension value
      ($)
    All other compensation
      ($)
    Total ($)David Copeland(1)
    25,601
    Nil
    45,500
    Nil
    Nil
    Nil
    71,101Mark Bristow
    20,000
    Nil
    48,750
    Nil
    Nil
    Nil
    68,750William Fisher(2)
    2,333
    Nil
    Nil
    Nil
    Nil
    Nil
    2,333Sandile Zungu
    26,000
    Nil
    16,250
    Nil
    Nil
    Nil
    42,250Richard John Linnell
    31,000
    Nil
    32,500
    Nil
    Nil
    Nil
    63,500Willem Jacobus Jacobs
    28,000
    Nil
    32,500
    Nil
    Nil
    Nil
    60,500Yong Guo(3)
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    NilGary Wu(4)
    11,667
    Nil
    13,000
    Nil
    Nil
    Nil
    24,667


---

 Page 77 

|Notes: |                                                                                                              
|------ | -------------------------------------------------------------------------------------------------------------
|(1)    | Fees paid to Mr. Copeland via CEC Engineering are based
      on time spent working on the Companys matters.
|(2)    | Mr. Fisher resigned as a director on March 25, 2010 and
      all his outstanding options expired.           
|(3)    | Mr. Guo resigned as a director on June 28, 2010 and all
      his outstanding options expired unexercised.   
|(4)    | Mr. Wu was appointed as a director on June 28,
    2010.                                                     

The following table sets out all share-based awards and
option-based awards outstanding as at February 28, 2011, 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 unexercisedoptions (#)
      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
      33,300 
        40,000 
        46,667
      9.30 
        0.90 
        0.975
      Sept 24, 2012 
        Dec 7, 2014 
        Oct. 8, 2015
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilMark Bristow
      29,967 
        33,333 
        50,000
      9.30 
        0.90 
        0.975
      Sept 24, 2012 
        Dec 7, 2014 
        Oct. 8, 2015
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilSandile Zungu
      20,000 
        16,667
      0.90 
        0.975
      Dec 7,2014 
        Oct. 8, 2015
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        NilRichard John Linnell
      20,000 
        33,333
      0.90 
        0.975
      Dec 7, 2014 
        Oct. 8, 2015
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        NilWillem Jacobus Jacobs
      33,333 
        33,333
      0.90 
        0.975
      Dec 7, 2014 
        Oct. 8, 2015
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        NilGary Wu
      13,333
      0.975
      Oct. 8, 2015
      Nil
      Nil
      Nil


|Note: |                                                                                                                                                                                                                                                                            
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)   | The value at February 28, 2011 is calculated by
      determining the difference between the closing price of the Companys
      Common Shares at February 28, 2011 ($0.05 per Common 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 Companys fiscal year ended February 28, 2011.

Securities Authorized for Issuance under Equity Compensation
Plans

The following table sets out equity compensation plan information
  for the fiscal year ended February 28, 2011.

---

 Page 78 

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 security holders -
      (the Plan)
    1,184,938
    $0.90
    2,269,630Equity compensation plans not approved by security holders
    Nil
    Nil
    NilTotal
    1,184,938
    $0.90
    2,269,630


C.         
Board Practices

All directors were either elected at the annual general meeting
held in September 2010 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 2011. 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 James Campbell and 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.

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):

---

 Page 79 

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 80 

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.

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.

---

 Page 81 

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, 2011, Rockwell has 627 direct employees. The
Company's administrative and operational functions are primarily administered in
South Africa.

---

 Page 82 

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, 2011.

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 83 

The continuity of share purchase options as at May 31, 2011 is
as follows stated in post-consolidation terms:

Exercise
      
      
      Feb 28,
      
      
      Granted/
      
      
      
      
      
      Expired/
      
      
      May 31,Expiry date
      price
      
      
      2011
      
      
      Issued
      
      
      Exercised
      
      
      cancelled
      
      
      2011September 24, 2012
      $ 9.30
      
      
      392,767
      
      
      
      
      
      
      
      
      
      
      
      392,767November 14, 2012
      $ 9.45
      
      
      72,433
      
      
      
      
      
      
      
      
      
      
      
      72,433June 20, 2011
      $ 6.75
      
      
      63,333
      
      
      
      
      
      
      
      
      
      
      
      63,333December 7, 2014
      $ 0.90
      
      
      912,173
      
      
      
      
      
      
      
      
      (1,100
      )
      
      911,073January 18, 2015
      $ 1.05
      
      
      40,000
      
      
      
      
      
      
      
      
      
      
      
      40,000October 8,2015
      $0.98
      
      
      1,002,800
      
      
      
      
      
      
      
      
      
      
      
      1,002,8002,483,506
      
      
      
      
      
      
      
      
      (1,100
      )
      
      2,482,406Weighted average exercise price
      
      
      $
      2.7
      
      $
      
      
      $
      
      
      $
      2.7
      
      $
      2.85Weighted
        average fair value of stock options granted during the period
      
      
      
      
      
      
      
      $
      


As at May 31, 2011, 2,148,139 of the stock options outstanding
with a weighted average exercise price of $2.85 per share have vested with
grantees.

---

 Page 84 

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, 2011, Rockwell had
authorized an unlimited number of common shares without par value of which
34,545,683 were issued and outstanding.

Effective July 11, 2011 the Company completed a consolidation
of its outstanding Common Shares on the basis of 15 pre-consolidated common
shares for 1 post consolidated common share. As of August 4, 2011 there were
34,992,567 Common Shares issued and outstanding, each Common Share carrying the
right to one vote. At a general meeting of the Company, on a show of hands,
every shareholder present in person shall have one vote and, on a poll, every
shareholder shall have one vote for each Common Share of which he is the holder.
As at the date hereof there are no preferred shares issued or outstanding.

The board of directors (the Board) of the Company has
fixed July 11, 2011 as the record date (the Record Date) for determination of
persons entitled to receive notice of the Meeting. Only shareholders of record
on the close of business on the Record Date who either personally attend the
Meeting or who complete and deliver a proxy in the manner and subject to the
provisions set out under the heading Appointment and Revocation of Proxies above
will be entitled to have his or her Common Shares voted at the Meeting or any
adjournment thereof.

To the knowledge of the directors and executive officers of the
Company, the only person or corporation that beneficially owned, directly or
indirectly, or exercised control or direction over, Common Shares carrying more
than 10% of the voting rights attached to all outstanding Common of the Company
as at July 31, 2011 is:

Shareholder Name
    Number of Common Shares Held
    Percentage of Issued Common
      SharesDaboll Consultants Limited
    3,533,333
    10.09%Godia Capital
    3,958,333
    11.31%


|Note: |                                                                                                                                   
|----- | ----------------------------------------------------------------------------------------------------------------------------------
|(1)   | The above information was supplied to the Company by the
      shareholders and from the insider reports available at www.sedi.ca.
|(2)   | Daboll has agreed to subscribe for a convertible note for
      $2 million and 6,666,667 shares at $0.75 each
see_)               

"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 5 days
of a trade in Rockwell's securities. Copies of such reports are available at
Canadian Securities Administrators website for Insiders' Disclosure,
www.sedi.ca.

---

 Page 85 

The Companys Annual Information Form (AIF) filed on www.sedar.com on May 30, 2011 with the securities
commissions or similar regulatory authority in British Columbia, Alberta and
Ontario is specifically incorporated by reference into, and forms an integral
part of, this Information Circular. A copy of the AIF may be accessed at
www.sedar.com or upon request by a shareholder
without charge from the Companys Corporate Communications department at
15th Floor, 1055 West Georgia Street, Vancouver, British Columbia,
V6E 4H8, telephone number: 604-684-6365 or fax number 604-681-2741.

As at July 31, 2011, 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
    
    89.63%United States
    
    2.15%Republic of South Africa
    
    8.11%Other countries
    
    0.11%Total
    
    100.00%


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

Refinancing and Potential Change of Control

(i)    Summary

On June 10, 2011 the Company announced that it was seeking to
recapitalize the Company by seeking up to $35 million of new funding through a
combination private placement financing and/or shareholder or public financing.
Rockwell has approached investors and securities dealers in Canada, South
Africa, the United States, China, Europe and the Middle East, but to the date
hereof the Company has secured only one significant subscription and that is
from Daboll Consultants Limited, (Daboll) an existing Insider of the Company
holding 10.09% of Rockwells Common Shares. Daboll is an affiliate of the
Steinmetz Diamond Group, and its subscription commitment (the Daboll
Subscription) is in addition to a $2 million convertible bridge loan ( Daboll
Loan) recently obtained from Daboll (also announced June 10, 2011). The Daboll
Subscription is for $5 million of pre-consolidation Common Shares at a price of
$0.75 per share.

The Daboll Loan bears interest at a rate of 5% p.a. and is
unsecured. If the Daboll Loan is not repaid after 12 months it will become
convertible into post-consolidation Common Shares of the Company at $0.5625 per
Common Share (all figures herein are post the July 11, 2011 15:1 share
consolidation). Although Daboll is currently an Insider of Rockwell, the Daboll
Loan was exempt from the minority shareholder approval and valuation
requirements under Canadian securities policy Multilateral Instrument 61-101
(Special Transactions) because the loan represented less than 25% of
Rockwells then capitalization. Conversion of the Daboll Loan is limited under
TSX rules to a maximum of 3.49 million Common Shares or 10% of Rockwells
currently issued share capital of 34.99 million Common Shares unless shareholder
approval is obtained for any excess. Given the small amount of share
convertibility (approximately 66,000 Common Shares) represented by the excess
shareholder approval is not being sought.

Rockwell has a long standing partnership with Steinmetz,
formalized in October 2007 through a marketing agreement focused on adding value
to selected large and special high value stones. The arrangement pays Rockwell
90% of the prevailing rough diamond price, with the other 10% being on risk. It
also provides for the Company to participate in 50% of the downstream added
value from polishing and marketing. Proceeds from the private placement will be
added to the Companys existing funds in order to augment its ability to achieve
its target to increase the Companys production profile to 10,000 carats per
month within six years. The

---

 Page 86 

Company will invest the proceeds from the Daboll Subscription
and any funds of other investors in the private placement in the ongoing
development of the Tirisano mine and a new plant at Wouterspan.

The private placement Common Shares were priced at $0.75 which
represents a premium to the current market for Rockwell shares however
shareholder approval is required for the Daboll Subscription because Daboll is a
related party of the Company. Although it is currently expected that other
investors will participate in the private placement there can be no assurance of
that and most likely Dabolls subscription will give it an effective voting
control position in the Company. It is unlikely in the Boards view that any
other third party participation in the placement will be of a sufficient level
so that Dabolls shareholdings would decrease below the threshold requiring that
shareholder approval be obtained. Daboll currently owns 3,533,333 Common Shares
(10.09%) which it acquired as part of a private placement combined with a
shareholder rights offering in early 2010. If Daboll were to be the only
investor in the private placement it would acquire a further 6,666,667 Common
Shares under the Daboll Subscription ($5 million @ $0.75) which together with
the 3,499,256 Common Shares potentially issuable to it under the Daboll Loan,
would make for aggregate holdings for Daboll of 13,699,256 shares (30.34%) out
of a then outstanding Rockwell share capital of 45,158,490 Common Shares
(34,992,567 +6,666,667+ 3,499,256). Dabolls participation would represent a
maximum of 19.05% of the Companys Common Shares however in light of
participation planned by insiders (see below) and some other arms-length
investors, the Daboll participation will be somewhat less than the foregoing
maximums (which also presume the exercise of Dabolls convertible loan which is
far from certain). If the participation of the other insiders (see below) is
included, insiders will purchase a maximum of 7,666, 667 Common Shares (or 21.9%
of the currently outstanding Common Shares ).

Daboll, as an insider is also considered a related party to
Rockwell and the Daboll Subscription is a related party transaction. As a
related party transaction of over 25% of Rockwells current capitalization,
Dabolls subscription requires compliance with both MI 61-101 which mandates
certain minority shareholders protections in the case of a related party
transaction and with TSX policies. In particular MI 61-101 requires that
Rockwell provide shareholders with the results of a formal valuation and that
the resolution for approval of the Daboll Subscription exclude the votes of
Daboll. In connection with the Daboll subscription, Rockwell obtained a formal
valuation which is discussed below. The formal valuation estimates that the
value of Rockwells Common Shares could be as high as about $2.00 however the
Company has, despite approaches to several investors and at least two securities
dealers, so far only attracted the Daboll Subscription at the $0.75 level. Under
TSX policies disinterested shareholder approval of the private placement is
required because the transaction involves insiders purchasing Common Shares in
excess of 10% of the Companys Common Shares in a six month period and because
the investment by Daboll will likely materially affect control of Rockwell.

Participation of certain directors and officers in the proposed
private placement is as follows:

Shares OwnedShares Currently
    
    
    after PrivateOwned
    
    Shares to be
    PlacementPosition
    number (%)
    Value (C$)
    Purchased
    number (%)David Copeland
    Director
    96,919 (0.27%)
    $150,000
    200,000
    296,919 (0.70%)Mark Bristow
    Director
    495,223 (1.42%)
    $361,362
    481,816
    977,039 (2.29%)James Campbell
    Officer
    8,032(0.0002%)
    $ 21,429
    28,571
    36,603(0.07%)****Subtotal:
    
    600,174 (1.69%)
    $532,791
    710,387
    1,310,561(3.05%)Other possible Insider
    N/A
    Nil
    $217,209
    289,613
    N/ATotal
    
    592,142 (1.69%)
    $750,000
    1,000,000
    1,592,142 (3.73%)


Common Shares owned after the private placement is based on a
maximum of 42,659,238 Common Shares outstanding after the private placement.
There is no certainty any other insiders will participate. Shareholders should
only vote for the requested resolution if they are prepared to cede effective
control to Daboll (assuming no other investor elects to participate to a large
enough extent to effectively change that result). Shareholders

---

 Page 87 

will be asked to approve an ordinary resolution of
disinterested shareholders, defined above (i.e. excluding the votes of Daboll),
with or without variation as follows:

Resolved, as an ordinary resolution,
that the Board of Directors of the Company be authorized to conclude a private
placement of 6,666,667 common shares in the capital stock of the Company at a
price of $0.75 per common share to Daboll Consultants Limited, and to allow the
participation of other insiders to the extent of up to 1,000,000 shares
($750,000) as more particularly described in the Companys Information Circular
having an information date of August 4, 2011.

An ordinary resolution is a resolution passed by the
shareholders of the Company at a general meeting by a simple majority of the
votes cast in person or by proxy. The 13,699,256 Common Shares currently held by
Daboll and the Common Shares held by the above insiders will accordingly not be
voted on the resolution. The directors have unanimously recommended that
shareholders vote in favour of the resolution on the basis that the Company
requires these funds for development of its properties and that it has
thoroughly canvassed the market for additional investors before concluding the
transaction with Daboll.

(ii)   Formal Valuation

Evans & Evans, Inc. (Evans & Evans) was engaged by
the Company to prepare a Comprehensive Valuation Report (the Report) with
respect to the fair market value of 100% of the issued and outstanding shares of
the Company as at June 15, 2011 (the Valuation Date). Evans & Evans is
headquartered in Vancouver, British Columbia and its team of Chartered Business
Valuators (CBVs) has provided business valuation services for over eighteen
years to the public and private sectors. For more information about the
valuators see: http://evansevans.com/. The
responsible partner of Evans & Evans is Ms. Jennifer Lucas who is a graduate
of the University of Saskatchewan (1993) with a Bachelor of Commerce degree and
the University of British Columbia (1995) with a Masters in Business
Administration degree. She holds the professional designations of Chartered
Business Valuator and Accredited Senior Appraiser and is a member of the
Canadian Institute of Chartered Business Valuators and the American Society of
Appraisers. Ms. Lucas has been employed as an analyst and valuator with Evans
& Evans, Inc. since 1997 and possesses several years of relevant experience
as an analyst in the public and private sector in British Columbia and
Saskatchewan. Her background includes working for the Office of the
Superintendent of Financial Institutions of British Columbia as a Financial
Analyst. At Evans & Evans she has been involved in writing and reviewing
over 500 valuation and due diligence reports for public and private
transactions. Over the past five years she has examined and provided valuations
on numerous mineral properties around the world. She is of the view that she
qualifies as a Qualified Valuator as outlined in Canadian Institute of Mining,
Metallurgy and Petroleum (CIM) valuation committee (CIMVAL). A full copy of
the Valuation Report has been filed and is available for download at www.sedar.com. The following excerpted narratives are
qualified in their entirety by the full contents of the publicly filed Valuation
Report. The Valuation Report relies to a large degree on the Companys Canadian
National Instrument 43-101 (Disclosure Standards for Resource Projects)
technical reports authored by Dr. Tania Marshall and Glenn Norton which are also
publicly filed at www.sedar.com.

---

 Page 88 

B.          Related
  Party Transactions

Since the beginning of Rockwells last fiscal year ended
February 28, 2011. 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, 2011 |  |   | February 28, 2010 | 
|Banzi Trade 26 (Proprietary)
      Ltd (e) | $ | 34,385            |  | $ | 603               | 
|Hunter Dickinson Services
      Inc. (a)   |   | 34,113            |  |   | 627,435           | 
|Flawless
      Diamonds Trading House (d)  |   | 3,566             |  |   |                  | 
|Seven Bridges Trading (c)                  |   |                  |  |   | 13,285            | 
|Current balances payable                   | $ | 72,064            |  | $ | 641,323           | 
|                                           |   |                   |  |   |                   | 
|Liberty Lane (g)                           | $ | 424,572           |  | $ | 414,566           | 
|Longterm balances payable                 | $ | 424,572           |  | $ | 414,566           | 
|                                           |   |                   |  |   |                   | 
|Balances receivable                        |   |                   |  |   |                   | 
|Banzi Trade 26 (Proprietary) Ltd
      (e) | $ | 92,398            |  | $ | 46,108            | 
|Current balances receivable                | $ | 92,398            |  | $ | 46,108            | 

|                                                 |   | Year
      ended |  |   | Year
      ended |  |   | Year
      ended | 
|------------------------------------------------ | - | ---------------- |  | - | ---------------- |  | - | ---------------- | 
|Transactions                                     |   | February 28      |  |   | February 28      |  |   | February 28      | 
|                                                 |   | 2011             |  |   | 2010             |  |   | 2009             | 
|                                                 |   |                  |  |   |                  |  |   |                  | 
|Services rendered and
      expenses reimbursed: |   |                  |  |   |                  |  |   |                  | 
|Hunter Dickinson Services
      Inc. (a)         | $ | 467,151          |  | $ | 961,042          |  | $ | 1,280,316        | 
|CEC
      Engineering (b)                        |   | 23,331           |  |   | 17,818           |  |   | 26,904           | 
|Seven Bridges Trading (c)                        |   | 134,483          |  |   | 139,789          |  |   |                 | 
|Cashmere
      Trading (h)                       |   |                 |  |   |                 |  |   | 18,808           | 
|Banzi Trade 26 (Proprietary) Ltd (e)             |   | 165,077          |  |   | 17,688           |  |   | 29,768           | 
|Jakes
      Tyres (f)                            |   |                 |  |   |                 |  |   | 440,283          | 
|Diacor CC (i)                                    |   |                 |  |   |                 |  |   | 39,510           | 
|Flawless
      Diamonds Trading House (d)        |   | 420,006          |  |   | 316,081          |  |   | 346,768          | 
|                                                 |   |                  |  |   |                  |  |   |                  | 
|Sales rendered to:                               |   |                  |  |   |                  |  |   |                  | 
|Banzi Trade 26 (Proprietary) Ltd (e)             | $ | 879              |  | $ | 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 ad hoc basis.

Likewise security of product 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.

---

 Page 89 

|(a) | Daboll Consultants Ltd as per above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) | 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.                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(c) | CEC Engineering Limited 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) | Seven Bridges Trading 14 (Proprietary) 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                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(e) | Flawless Diamonds Trading House (Proprietary) 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. During
      fiscal 2011 the Company acquired a 20% shareholding in Flawless Diamonds
      Trading House (Proprietary) Limited (refer note 12). 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.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(f) | Banzi Trade 26 (Proprietary) 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
      building materials at market rates.                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(g) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(h) | Liberty Lane is the BEE partner of the Saxendrift
      property and has certain directors in common with the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(i) | Cashmere Trade 19 (Proprietary) 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 products 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.                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(j) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

C.         
Interest of Experts and Council

Not Applicable.

---

 Page 90 

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 that was constituted
by an agreement (Midamines Agreement) which was concluded between Durnpike
and Midamines SPRL (Midamines), the holder of the permit for the Kwango
River Project, during 2006, in terms of which Durnpike was 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
certain 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, as escalated in accordance with the Midamines Agreement
(commencing on December 31, 2007). During the first quarter of 2008, pursuant to
an amendment to the Midamines Agreement (contained in the Fifth Addendum
thereto), 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 above mentioned 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 not withstanding notice to do so, Durnpike
and/or Rockwell cancelled the Midamines Agreement and/or the Fifth Addendum
thereto. 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 by Rockwell
and Durnpike of compensation in the amount of US$41.8 million (while reserving
the right to increase the claim to US$68.073 million if the DRC authorities
cancel Midamines permit for the Kwango Project) plus interest. Durnpike and/or
Rockwell have defended the claim and have, in turn, instituted a counter-claim
in the estimated and provisional amounts of approximately ZAR25.4 million for
equipment purchased to undertake exploration and feasibility work, C$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 $164.3 million) as
an initial estimate of possible lost earnings.

Comprehensive documentation has been filed by the parties and
both Parties have appeared before the Arbitration Tribunal at two sets of
hearings in Brussels during March and May 2011 to present evidence and answer
questions. Expert witnesses representing the Parties also presented evidence at
these hearings. Simultaneous final written submissions were submitted to the
Arbitration Tribunal on July 8, 2011, and then Parties expect to receive a
written award from the Arbitration Tribunal on or about October 17, 2011. The
Company remains of the view that the claim against it is without merit. The
Company has vigorously argued against the claims made by Midamines and has
continued to vigorously defend its position.

Action by Michel Zoumis

Michel Zoumis, as plaintiff, has filed an action for
unspecified damages in the Vancouver Registry, Supreme Court of British
Columbia, on June 26, 2008 under action number S-084587. Mr. Zoumis claims that
he was the founder and a major shareholder of Midamines, and that the Midamines
Agreement relates to certain

---

 Page 91 

diamond concessions that he claims to own personally. Although
Mr. Zoumis has brought action in his personal capacity, it is based on an
alleged breach of the Midamines Agreement. Rockwell has filed a defence in which
it asserts that the diamond concessions were properly conveyed to it and/or
Durnpike, that Mr. Zoumis has no personal claim, and that he is not a proper
party to bring an action. The Company has filed a counterclaim against Mr.
Zoumis for unspecified damages for abuse of process, alleging that he brought
the action simply to extract an economic advantage. The Company has heard
nothing further from Mr. Zoumis, and it believes that the action is unlikely to
result in material damages being awarded against the Company.

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

Effective July 11, 2011 the Company completed a consolidation
of its outstanding Common Shares on the basis of 15 pre-consolidated common
shares for 1 post consolidated common share. As of August 4, 2011 there were
34,992,567 Common Shares issued and outstanding, each Common Share carrying the
right to one vote. At a general meeting of the Company, on a show of hands,
every shareholder present in person shall have one vote and, on a poll, every
shareholder shall have one vote for each Common Share of which he is the holder.
As at the date hereof there are no preferred shares issued or outstanding.

There have been no significant changes to the accompanying
financial statements since February 28, 2011, except as disclosed above and in
this Annual Report on Form 20-F.

---

 Page 92 

ITEM 9.           
  THE OFFER AND LISTING

A.           
  Offer and Listing Details

Trading Markets

|                                | TSX Exchange |       | OTC Bulletin Board | JSE  
|------------------------------- | ------------ | ----- | ------------------ | -----
|                                | RDI          |       | RDIAF              | RDI  
|                                | High         | Low   |                    | High 
|                                | CAD          | CAD   |                    | USD  
|                                |              |       |                    |      
|Annual                          |              |       |                    |      
|Fiscal 2007                     | $0.85        | $0.38 |                    | $1.98
|Fiscal 2008                     | $0.80        | $0.50 |                    | $0.75
|Fiscal 2009                     | $0.64        | $0.03 |                    | $0.70
|Fiscal 2010                     | $0.12        | $0.03 |                    | $0.10
|Fiscal 2011                     | $1.13        | $0.53 |                    | $0.08
|                                |              |       |                    |      
|Fiscal 2010                     |              |       |                    |      
|Quarter ended May 31, 2009      | $0.08        | $0.03 |                    | $0.07
|Quarter ended August 31, 2009   | $0.12        | $0.03 |                    | $0.10
|Quarter ended November 30, 2009 | $0.10        | $0.05 |                    | $0.10
|Quarter ended February 28, 2010 | $0.09        | $0.05 |                    | $0.09
|                                |              |       |                    |      
|Fiscal 2011                     |              |       |                    |      
|Quarter ended May 31, 2010      | $1.13        | $0.90 |                    | $0.08
|Quarter ended August 31, 2010   | $1.13        | $0.90 |                    | $0.07
|Quarter ended November 30, 2010 | $1.05        | $0.90 |                    | $0.07
|Quarter ended February 28, 2011 | $1.05        | $0.53 |                    | $0.08
|                                |              |       |                    |      
|Monthly                         |              |       |                    |      
|February 2011                   | $0.90        | $0.53 |                    | $0.06
|March 2011                      | $0.83        | $0.68 |                    | $0.06
|April 2011                      | $0.83        | $0.68 |                    | $0.06
|May 2011                        | $0.83        | $0.68 |                    | $0.06
|June 2011                       | $0.75        | $0.45 |                    | $0.06
|July 2011                       | $0.66        | $0.47 |                    | $0.65

---

 Page 93 

Effective July 11, 2011 the Company completed a consolidation
of its outstanding Common Shares on the basis of 15 pre-consolidated common
shares for 1 post consolidated common share. As of August 4, 2011 there were
34,992,567 Common Shares issued and outstanding, each Common Share carrying the
right to one vote. At a general meeting of the Company, on a show of hands,
every shareholder present in person shall have one vote and, on a poll, every
shareholder shall have one vote for each Common Share of which he is the holder.
As at the date hereof there are no preferred shares issued or outstanding.

The transfer of the Company's common shares is managed by its
transfer agent, Computershare Trust Company of Canada of Vancouver. And by
Computershare Investor Services 2004 (Proprietary) Limited (Registration
number 2004/0036471/07) Ground Floor, 70 Marshall Street Johannesburg,
2001 South Africa

B.         
Plan of Distribution

Not applicable.

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 94 

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 95 

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.

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 66
2/3% 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 66 2/3% 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

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.

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.)

---

 Page 96 

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, 2011.

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.

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)

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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.

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

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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.

Certain United States Federal Income Tax Considerations

The following is a general summary of certain material U.S.
federal income tax considerations applicable to a U.S. Holder (as defined below)
arising from and relating to the acquisition, ownership, and disposition of
Common Shares.

This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential U.S. federal
income tax considerations that may apply to a U.S. Holder arising from and
relating to the acquisition, ownership, and disposition of Common Shares. In
addition, this summary does not take into account the individual facts and
circumstances of any particular U.S. Holder that may affect the U.S. federal
income tax consequences to such U.S. Holder, including without limitation
specific tax consequences to a U.S. Holder under an applicable tax treaty.
Accordingly, this summary is not intended to be, and should not be construed as,
legal or U.S. federal income tax advice with respect to any U.S. Holder. This
summary does not address the U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and foreign tax consequences to U.S.
Holders of the acquisition, ownership, and disposition of Common Shares. Each
U.S.

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Holder should consult its own tax advisor regarding the U.S.
federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S.
state and local, and foreign tax consequences relating to the acquisition,
ownership, and disposition of Common Shares.

No legal opinion from U.S. legal counsel or ruling from the
Internal Revenue Service (the IRS) has been requested, or will be obtained,
regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares. This summary is not binding on the
IRS, and the IRS is not precluded from taking a position that is different from,
and contrary to, the positions taken in this summary. In addition, because the
authorities on which this summary is based are subject to various
interpretations, the IRS and the U.S. courts could disagree with one or more of
the conclusions described in this summary.

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as
amended (the Code), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the IRS, published administrative positions of
the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
(the Canada-U.S. Tax Convention), and U.S. court decisions that are applicable
and, in each case, as in effect and available, as of the date of this document.
Any of the authorities on which this summary is based could be changed in a
material and adverse manner at any time, and any such change could be applied on
a retroactive or prospective basis which could affect the U.S. federal income
tax considerations described in this summary. This summary does not discuss the
potential effects, whether adverse or beneficial, of any proposed legislation
that, if enacted, could be applied on a retroactive or prospective basis.

U.S. Holders

For purposes of this summary, the term "U.S. Holder" means a
beneficial owner of Common Shares acquired pursuant to this offering that is for
U.S. federal income tax purposes:

- an individual who is a citizen or resident of the U.S.;
- a corporation (or other entity taxable as a corporation for U.S. federal
  income tax purposes) organized under the laws of the U.S., any state thereof
  or the District of Columbia;
- an estate whose income is subject to U.S. federal income taxation
  regardless of its source; or
- a trust that (1) is subject to the primary supervision of a court within
  the U.S. and the control of one or more U.S. persons for all substantial
  decisions or (2) has a valid election in effect under applicable Treasury
  Regulations to be treated as a U.S. person.

Non-U.S. Holders

For purposes of this summary, a non-U.S. Holder is a
beneficial owner of Common Shares that is not a U.S. Holder. This summary does
not address the U.S. federal income tax consequences to non-U.S. Holders arising
from and relating to the acquisition, ownership, and disposition of Common
Shares. Accordingly, a non-U.S. Holder should consult its own tax advisor
regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and foreign tax consequences (including
the potential application of and operation of any income tax treaties) relating
to the acquisition, ownership, and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed

This summary does not address the U.S. federal income tax
considerations applicable to U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, the following: (a) U.S. Holders
that are tax-exempt organizations, qualified retirement plans, individual
retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are
financial institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies; (c) U.S. Holders that are
broker-dealers, dealers, or

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traders in securities or currencies that elect to apply a
mark-to-market accounting method; (d) U.S. Holders that have a functional
currency other than the U.S. dollar; (e) U.S. Holders that own Common Shares as
part of a straddle, hedging transaction, conversion transaction, constructive
sale, or other arrangement involving more than one position; (f) U.S. Holders
that acquired Common Shares in connection with the exercise of employee stock
options or otherwise as compensation for services; (g) U.S. Holders that hold
Common Shares other than as a capital asset within the meaning of Section 1221
of the Code (generally, property held for investment purposes); or (h) U.S.
Holders that own or have owned (directly, indirectly, or by attribution) 10% or
more of the total combined voting power of the outstanding shares of the
Company. This summary also does not address the U.S. federal income tax
considerations applicable to U.S. Holders who are: (a) U.S. expatriates or
former long-term residents of the U.S.; (b) persons that have been, are, or will
be a resident or deemed to be a resident in Canada for purposes of the Tax Act;
(c) persons that use or hold, will use or hold, or that are or will be deemed to
use or hold Common Shares in connection with carrying on a business in Canada;
(d) persons whose Common Shares constitute taxable Canadian property under the
Tax Act; or (e) persons that have a permanent establishment in Canada for the
purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to
special provisions under the Code, including, but not limited to, U.S. Holders
described immediately above, should consult their own tax advisor regarding the
U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift,
U.S. state and local, and foreign tax consequences relating to the acquisition,
ownership and disposition of Common Shares.

If an entity or arrangement that is classified as a partnership
(or pass-through entity) for U.S. federal income tax purposes holds Common
Shares, the U.S. federal income tax consequences to such partnership and the
partners of such partnership generally will depend on the activities of the
partnership and the status of such partners (or owners). This summary does not
address the tax consequences to any such partner. Partners of entities or
arrangements that are classified as partnerships for U.S. federal income tax
purposes should consult their own tax advisors regarding the U.S. federal income
tax consequences arising from and relating to the acquisition, ownership, and
disposition of Common Shares.

Ownership and Disposition of Common Shares

The following discussion is subject to the rules described
below under the heading Passive Foreign Investment Company Rules.

Taxation of Distributions

A U.S. Holder that receives a distribution, including a
constructive distribution, with respect to a Common Share will be required to
include the amount of such distribution in gross income as a dividend (without
reduction for any foreign income tax withheld from such distribution) to the
extent of the current or accumulated earnings and profits of the Company, as
computed for U.S. federal income tax purposes. To the extent that a distribution
exceeds the current and accumulated earnings and profits of the Company, such
distribution will be treated first as a tax-free return of capital to the extent
of a U.S. Holder's tax basis in the Common Shares and thereafter as gain from
the sale or exchange of such Common Shares (see  Sale or Other Taxable
Disposition of Common Shares below). However, the Company may not maintain the
calculations of earnings and profits in accordance with U.S. federal income tax
principles, and each U.S. Holder should therefore assume that any distribution
by the Company with respect to the Common Shares will constitute ordinary
dividend income. Dividends received on Common Shares generally will not
constitute qualified dividend income eligible for the dividends received
deduction.

For tax years beginning before January 1, 2013, a dividend paid
by the Company to a U.S. Holder who is an individual, estate or trust generally
will be taxed at the preferential tax rates applicable to long-term capital
gains if the Company is a qualified foreign corporation (QFC) and certain
holding period requirements for the Common Shares are met. The Company generally
will be a QFC as defined under Section 1(h)(11) of the Code if the Company is
eligible for the benefits of the Canada - U.S. Tax Convention or its shares are
readily tradable on an established securities market in the U.S. However, even
if the Company satisfies one or more of these requirements, the Company will not
be treated as a QFC if the Company is a passive foreign investment

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company (or PFIC, as defined below) for the tax year during
which it pays a dividend or for the preceding tax year. See the section below
under the heading Passive Foreign Investment Company Rules below.

If a U.S. Holder is not eligible for the preferential tax rates
discussed above, a dividend paid by the Company to a U.S. Holder generally will
be taxed at ordinary income tax rates (and not at the preferential tax rates
applicable to long-term capital gains). The dividend rules are complex, and each
U.S. Holder should consult its own tax advisor regarding the application of such
rules.

Sale or Other Taxable Disposition of Common Shares

A U.S. Holder will recognize gain or loss on the sale or other
taxable disposition of Common Shares in an amount equal to the difference, if
any, between (a) the amount of cash plus the fair market value of any property
received and (b) such U.S. Holders tax basis in such Common Shares sold or
otherwise disposed of. Any such gain or loss generally will be capital gain or
loss, which will be long-term capital gain or loss if, at the time of the sale
or other disposition, such Common Shares are held for more than one year.
Preferential tax rates apply to long-term capital gains of a U.S. Holder that is
an individual, estate, or trust. There are currently no preferential tax rates
for long-term capital gains of a U.S. Holder that is a corporation. Deductions
for capital losses are subject to significant limitations under the Code.

Passive Foreign Investment Company Rules

If the Company were to constitute a PFIC for any year during a
U.S. Holders holding period, then certain different and potentially adverse
rules would affect the U.S. federal income tax consequences to a U.S. Holder
resulting from the acquisition, ownership and disposition of Common Shares. In
addition, in any year in which the Company is classified as a PFIC, such holder
would be required to file an annual report with the IRS containing such
information as Treasury Regulations and/or other IRS guidance may require. This
new filing requirement is in addition to pre-existing reporting obligations that
may apply to a U.S. Holder if the Company were classified as a PFIC. Pursuant to
recent IRS guidance, this new filing requirement has been temporarily suspended
in certain (but not all) cases pending release of revised IRS Form 8621.
Additional guidance is also expected regarding the specific information that
will be required to be reported on revised IRS Form 8621. U.S. Holders should
consult their own tax advisors regarding the requirements of filing such
information returns under these rules, including the requirement to file a
revised IRS Form 8621 (after such form is released) for prior taxable years in
which the obligation to file such form was suspended.

The Company generally will be a PFIC under Section 1297 of the
Code if, for a tax year, (a) 75% or more of the gross income of the Company for
such tax year is passive income (the income test) or (b) 50% or more of the
value of the Companys assets either produce passive income or are held for the
production of passive income (the asset test), based on the quarterly average
of the fair market value of such assets. Gross income generally means all
sales revenues less the cost of goods sold, and passive income generally
includes, for example, dividends, interest, certain rents and royalties, certain
gains from the sale of stock and securities, and certain gains from commodities
transactions. Active business gains arising from the sale of commodities
generally are excluded from passive income if substantially all (85% or more) of
a foreign corporations commodities are stock in trade or inventory, depreciable
property used in a trade or business or supplies regularly used or consumed in a
trade or business.

In addition, for purposes of the PFIC income test and asset
test described above, if the Company owns, directly or indirectly, 25% or more
of the total value of the outstanding shares of another corporation, the Company
will be treated as if it (a) held a proportionate share of the assets of such
other corporation and (b) received directly a proportionate share of the income
of such other corporation. In addition, for purposes of the PFIC income test and
asset test described above, passive income does not include any interest,
dividends, rents, or royalties that are received or accrued by the Company from
a related person (as defined in Section 954(d)(3) of the Code), to the extent
such items are properly allocable to the income of such related person that is
not passive income.

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Under certain attribution rules, if the Company is a PFIC, U.S.
Holders will be deemed to own their proportionate share of any subsidiary of the
Company which is also a PFIC (a Subsidiary PFIC), and will be subject to
U.S. federal income tax on (i) a distribution on the shares of a Subsidiary PFIC
or (ii) a disposition of shares of a Subsidiary PFIC, both as if the holder
directly held the shares of such Subsidiary PFIC.

The Company does not believe that it was a PFIC during the tax
year ended February 28, 2011, and based on current business plans and financial
expectations, the Company does not believe that it will be a PFIC for the
current tax year. However, PFIC classification is fundamentally factual in
nature, generally cannot be determined until the close of the tax year in
question, and is determined annually. Additionally, the analysis depends, in
part, on the application of complex U.S. federal income tax rules, which are
subject to differing interpretations. Consequently, there can be no assurance
that the Company has never been and will not become a PFIC for any tax year
during which U.S. Holders hold Common Shares.

If the Company were a PFIC in any tax year and a U.S. Holder
held Common Shares, such holder generally would be subject to special rules with
respect to excess distributions made by the Company on the Common Shares and
with respect to gain from the disposition of Common Shares. An excess
distribution generally is defined as the excess of distributions with respect
to the Common Shares received by a U.S Holder in any tax year over 125% of the
average annual distributions such U.S. Holder has received from the Company
during the shorter of the three preceding tax years, or such U.S. Holders
holding period for the Common Shares. Generally, a U.S. Holder would be required
to allocate any excess distribution or gain from the disposition of the Common
Shares ratably over its holding period for the Common Shares. Such amounts
allocated to the year of the disposition or excess distribution would be taxed
as ordinary income, and amounts allocated to prior tax years would be taxed as
ordinary income at the highest tax rate in effect for each such year and an
interest charge at a rate applicable to underpayments of tax would apply.

While there are U.S. federal income tax elections that
sometimes can be made to mitigate these adverse tax consequences (including,
without limitation, the QEF Election under Section 1295 of the Code and the
Mark-to-Market Election under Section 1296 of the Code), such elections are
available in limited circumstances and must be made in a timely manner.

U.S. Holders should be aware that, for each tax year, if any,
that the Company is a PFIC, the Company can provide no assurances that it will
satisfy the record keeping requirements of a PFIC, or that it will make
available to U.S. Holders the information such U.S. Holders require to make a
QEF Election with respect to the Company or any Subsidiary PFIC. U.S. Holders
are urged to consult their own tax advisors regarding the potential application
of the PFIC rules to the ownership and disposition of Common Shares, and the
availability of certain U.S. tax elections under the PFIC rules.

Additional Considerations

Additional Tax on Passive Income

For tax years beginning after December 31, 2012, certain
individuals, estates and trusts whose income exceeds certain thresholds will be
required to pay a 3.8% Medicare surtax on net investment income including,
among other things, dividends and net gain from disposition of property (other
than property held in a trade or business). U.S. Holders are urged to consult
with their own tax advisors regarding the effect, if any, of this tax on their
ownership and disposition of Common Shares.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in foreign
currency, or on the sale, exchange or other taxable disposition of Common
Shares, generally will be equal to the U.S. dollar value of such foreign
currency based on the exchange rate applicable on the date of receipt
(regardless of whether such foreign currency is converted into U.S. dollars at
that time). A U.S. Holder will have a basis in the foreign currency equal to its
U.S. dollar value on the date of receipt. Any U.S. Holder who converts or
otherwise disposes of the foreign currency after the date of receipt may have a
foreign currency exchange gain or loss that would be treated as ordinary income
or loss, and generally will be U.S. source income or loss for foreign tax credit
purposes. Each

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U.S. Holder should consult its own U.S. tax advisor regarding
the U.S. federal income tax consequences of receiving, owning, and disposing of
foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above, a U.S. Holder that
pays (whether directly or through withholding) Canadian income tax with respect
to dividends paid on the Common Shares generally will be entitled, at the
election of such U.S. Holder, to receive either a deduction or a credit for such
Canadian income tax paid. Generally, a credit will reduce a U.S. Holders U.S.
federal income tax liability on a dollar-for-dollar basis, whereas a deduction
will reduce a U.S. Holders income subject to U.S. federal income tax. This
election is made on a year-by-year basis and applies to all foreign taxes paid
(whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a U.S. Holders U.S. federal income tax liability that such U.S. Holders
foreign source taxable income bears to such U.S. Holders worldwide taxable
income. In applying this limitation, a U.S. Holders various items of income and
deduction must be classified, under complex rules, as either foreign source or
U.S. source. Generally, dividends paid by a foreign corporation should be
treated as foreign source for this purpose, and gains recognized on the sale of
stock of a foreign corporation by a U.S. Holder should be treated as U.S. source
for this purpose, except as otherwise provided in an applicable income tax
treaty, and if an election is properly made under the Code. However, the amount
of a distribution with respect to the Common Shares that is treated as a
dividend may be lower for U.S. federal income tax purposes than it is for
Canadian federal income tax purposes, resulting in a reduced foreign tax credit
allowance to a U.S. Holder. In addition, this limitation is calculated
separately with respect to specific categories of income. The foreign tax credit
rules are complex, and each U.S. Holder should consult its own U.S. tax advisor
regarding the foreign tax credit rules.

Backup Withholding and Information Reporting

Under U.S. federal income tax law and Treasury Regulations,
certain categories of U.S. Holders must file information returns with respect to
their investment in, or involvement in, a foreign corporation. For example, U.S.
return disclosure obligations (and related penalties) are imposed on individuals
who are U.S. Holders that hold certain specified foreign financial assets in
excess of $50,000. The definition of specified foreign financial assets includes
not only financial accounts maintained in foreign financial institutions, but
also, unless held in accounts maintained by a financial institution, any stock
or security issued by a non-U.S. person, any financial instrument or contract
held for investment that has an issuer or counterparty other than a U.S. person
and any interest in a foreign entity. U. S. Holders may be subject to these
reporting requirements unless their Common Shares are held in an account at a
domestic financial institution. However, pursuant to recent IRS guidance, these
new reporting requirements have been temporarily suspended pending release of
IRS Form 8938. Additional guidance is also expected regarding the specific
information that will be required to be reported on IRS Form 8938. Penalties for
failure to file certain of these information returns are substantial. U.S.
Holders should consult with their own tax advisors regarding the requirements of
filing information returns under these rules, including the requirement to file
an IRS Form 8938 (after such form is released) for prior tax years in which the
obligation to file such form was suspended.

Payments made within the U.S. or by a U.S. payor or U.S.
middleman, of dividends on, and proceeds arising from the sale or other taxable
disposition of, Common Shares will generally be subject to information reporting
and backup withholding tax, at the rate of 28% (and increasing to 31% for
payments made after December 31, 2012), if a U.S. Holder (a) fails to furnish
such U.S. Holders correct U.S. taxpayer identification number (generally on
Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c)
is notified by the IRS that such U.S. Holder has previously failed to properly
report items subject to backup withholding tax, or (d) fails to certify, under
penalty of perjury, that such U.S. Holder has furnished its correct U.S.
taxpayer identification number and that the IRS has not notified such U.S.
Holder that it is subject to backup withholding tax. However, certain exempt
persons generally are excluded from these information reporting and backup
withholding rules. Any amounts withheld under the U.S. backup withholding tax
rules will be allowed as a

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credit against a U.S. Holders U.S. federal income tax
liability, if any, or will be refunded, if such U.S. Holder furnishes required
information to the IRS in a timely manner. Each U.S. Holder should consult its
own tax advisor regarding the information reporting and backup withholding
rules.

F.         
Dividends and Paying Agents

Not applicable.

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 105 

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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 Page 106 

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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 Page 107 

PART II

ITEM
13.          DEFAULTS, DIVIDEND
ARREARAGES AND DELINQUENCIES

Not applicable.

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

Not applicable.

ITEM
15.          CONTROLS AND
PROCEDURES

A .Disclosure 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.

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

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 Page 108 

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, 2011 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, 2011, 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.

This annual report does not include an attestation report of
the companys registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by the
companys registered public accounting firm pursuant to rules of the Securities
and Exchange Commission that permit the company to provide only managements
report in this annual report.

C.   Changes in Internal Control Over Financial
Reporting

There were no changes in internal control over financial
reporting in the year ended February 28, 2011 that have materially affected or
are reasonably likely to materially affect internal control over financial
reporting.

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 Canadian National Instrument 52-110 (Audit Committees) 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.

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 Page 109 

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, 2011
    
    
    February 28, 2010Audit Fees
    $
    453,474
    
    $
    482,173Audit-Related Fees
    $
    21,144
    
    
    -Tax Fees
    
    -
    
    
    -All
      Other Fees
    
    -
    
    
    -$
    474,618
    
    $
    482,173


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.

ITEM 16F.       CHANGE IN
REGISTRANT'S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G.       CORPORATE
GOVERNANCE

Not applicable.

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 Page 110 

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 of February 28, 2011
      and 2010 and the related consolidated statements of operations and
      comprehensive loss, accumulated comprehensive loss and deficit,
      shareholders equity, and cash flows for the three years then ended
      February 28, 2011.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                     
|(2) | Consolidated balance sheets as at February 28, 2011 and
      February 28, 2010;                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                     
|(3) | Consolidated statements of operations and comprehensive
      loss for the years ended February 28, 2011 February 28, 2010 and February
      28, 2009;                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                     
|(4) | Consolidated Statement of Accumulated Comprehensive Loss
      and Deficit for the years ended February 28, 2011 February 28, 2010 and
      February 28, 2009;                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                     
|(5) | Consolidated statements of cash flows for the years ended
      February 28, 2011, February 28, 2010 and February 28, 2009;                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                     
|(6) | Consolidated statements of shareholders equity for the
      years ended February 28, 2011, February 28, 2010 and February 28,
    2009;                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                     
|(7) | Notes to the consolidated financial statements referred
      for the years ended February 28, 2011, February 28, 2010 and February 28,
      2009;                                                                                                                                                                                                                                 

ITEM
18.          FINANCIAL
STATEMENTS

Not applicable. See Item 17.

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 Page 111 

**ITEM
19.****EXHIBITS**

|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                              
|1.1     | Notice of Articles (3)                                                                                                                                                                                                                                                                                                                                                                           
|1.2     | Articles (3)                                                                                                                                                                                                                                                                                                                                                                                     
|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    | Sale of shares agreement between
        Rockwell Resources RSA (Proprietary) Limited and Etruscan Diamonds Bermuda
        Limited and Etruscan Diamonds Limited and Etruscan Resources Inc. *                                                                                                                                                                                                  
|4.13    | Sale of shares agreement amongst
        Rockwell Resources RSA (Proprietary) Limited and DBM Diamante CC and Zwemrem
        Mine (Proprietary) Limited. *                                                                                                                                                                                                                                      
|4.14    | Contractor, surface use and option
        agreement between Batla Resources (Proprietary)                                                                                                                                                                                                                                                                                                       

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 Page 112 

|Exhibit |                                                                                                                                                                                                                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Exhibit Description                                                                                                                                                                                                                                                                                                  
|        | Ltd and HC van Wyk Diamonds Limited
        and MJA Boedery CC. *                                                                                                                                                                                                                                                    
|4.15    | Consent of Tania R. Marshall,
        PhD., Pr. Sci. Nat*                                                                                                                                                                                                                                                            
|4.16    | Consent of Glenn Norton, Pr.
        Sci. Nat*                                                                                                                                                                                                                                                                       
|8.1     | List of Subsidiaries (See Item 4.C of this Form 20-F)                                                                                                                                                                                                                                                                
|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, 2011 and February 28, 2010 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    | 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    | Letter of Davidson and Company, Chartered Accountants.
      (4)                                                                                                                                                                                                                                                     
|99.5    | Audit Report of Davidson and Company, Chartered
      Accountants. (4)                                                                                                                                                                                                                                               

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.                
| | (3) | Filed as an exhibit to the Companys Annual Report on
      Form 20-F for the year ended February 29, 2010, and incorporated herein by
      reference.                
| | (4) | Filed as an exhibit to the Companys Annual Report on
      Form 20-FA Amendment No, 2 for the year ended February 29, 2010, and
      incorporated herein by reference

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 Page 113 

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:

/s/James AH Campbell

|                        | 
|----------------------- | 
|                        | 
|James AH Campbell       | 
|Chief Executive Officer | 

DATED:        
September 6, 2011

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