---

UNITED STATES**SECURITIES AND EXCHANGE COMMISSION**Washington, 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 **May 31, 2007**(with other information to November 28, 2007 except where noted)

OR

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

For the transition period from _______________ to
_______________

OR

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

Date of event requiring this shell company report
______________

Commission file number **000-30588**

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

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

BRITISH COLUMBIA, CANADA(Jurisdiction of
incorporation or organization)

Level 0, Wilds View, Isle of Houghton,Cnr. Carse
OGowrie & Boundary Rd, Houghton Estate, Johannesburg 2198 P O Box
3011Houghton, South Africa, 2041(Address of principal
executive offices)

COMMON SHARES WITHOUT PAR VALUE(Title of
Class)

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                           

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- ii -

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**

Number of outstanding shares of Rockwell's only class of capital
stock as at May 31, 2007. **186,976,219 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 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              
[X]   Accelerated
Filer                       
 [   ]   Non Accelerated Filer

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.

NOT APPLICABLE

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- ii -

Currency and Exchange Rates

All monetary amounts contained in this Annual Report are,
unless otherwise indicated, expressed in Canadian dollars. On May 31, 2007 the
Bank of Canada noon rate for Canadian Dollars was US$1.00: Cdn$1.0696 (see Item
3A for further historical Exchange Rate Information).

NOTE REGARDING FORWARD LOOKING STATEMENTS

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

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

|               |                                                                                    | PAGE
|-------------- | ---------------------------------------------------------------------------------- | ----
|               |                                                                                    |     
|PART
      1   |                                                                                    | 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                                                   | 11  
|               |                                                                                    |     
|ITEM
      5.  | OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS                                 | 49  
|               |                                                                                    |     
|ITEM
      6.  | DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES                                   | 61  
|               |                                                                                    |     
|ITEM
      7.  | MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 71  
|               |                                                                                    |     
|ITEM
      8.  | FINANCIAL
      INFORMATION                                                        | 75  
|               |                                                                                    |     
|ITEM
      9.  | THE
      OFFER AND LISTING                                                        | 76  
|               |                                                                                    |     
|ITEM
      10. | ADDITIONAL
      INFORMATION                                                       | 78  
|               |                                                                                    |     
|ITEM
      11. | QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 92  
|               |                                                                                    |     
|ITEM
      12. | DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 93  
|               |                                                                                    |     
|PART
      II  |                                                                                    | 94  
|               |                                                                                    |     
|ITEM
      13. | DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES                              | 94  
|               |                                                                                    |     
|ITEM
      14. | MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 94  
|               |                                                                                    |     
|ITEM
      15. | CONTROLS
      AND PROCEDURES                                                      | 94  
|               |                                                                                    |     
|ITEM
      16. | AUDIT
      COMMITTEE, CODE OF ETHICS, ACCOUNTANT FEES AND EXEMPTIONS              | 96  
|               |                                                                                    |     
|PART
      III |                                                                                    | 98  
|               |                                                                                    |     
|ITEM
      17. | FINANCIAL
      STATEMENTS                                                         | 98  
|               |                                                                                    |     
|ITEM
      18. | FINANCIAL
      STATEMENTS                                                         | 98  
|               |                                                                                    |     
|ITEM
      19. | EXHIBITS                                                                           | 99  

---

PART I

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 last five fiscal years ended May 31, 2007, in Canadian
dollars, presented in accordance with Canadian generally accepted accounting
principles ("Cdn GAAP"). Additional information is presented to show the
differences which would result from the application of United States generally
accepted accounting principles ("US GAAP") to the Company's financial
information. Refer to note 17 to the consolidated financial statements included
herein for a discussion of the material differences between Cdn GAAP and US GAAP
and their effect on the Company's financial position and results of operations.
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 and with the
information appearing under the heading, "Item 5. Operating and Financial Review
and Prospects."

(In Canadian Dollars, except per share amounts)
      
      As at May 31,Balance Sheet
        Data
      
      2007
      
      
      2006
      
      
      2005
      
      
      2004
      
      
      2003Total assets (Cdn GAAP)
      $
      129,606,383
      
      $
      288,647
      
      $
      659,577
      
      $
      1,974,188
      
      $
      197,548Total assets (US GAAP)
      
      130,135,690
      
      
      288,646
      
      
      612,720
      
      
      1,931,981
      
      
      150,691Total liabilities (Cdn GAAP)
      
      52,034,772
      
      
      1,146,070
      
      
      29,976
      
      
      33,406
      
      
      256,003Total liabilities (US GAAP)
      
      52,564,080
      
      
      1,146,070
      
      
      29,976
      
      
      33,406
      
      
      256,003Share capital (Cdn GAAP)
      
      88,903,530
      
      
      11,857,649
      
      
      11,815,792
      
      
      11,647,887
      
      
      8,697,652Share capital (US GAAP)
      
      88,903,530
      
      
      11,857,649
      
      
      11,815,792
      
      
      11,647,887
      
      
      8,697,652(Deficit) (Cdn GAAP)
      
      (19,603,634
      )
      
      (13,238,492
      )
      
      (11,637,819
      )
      
      (10,152,125
      )
      
      (8,756,107
      )(Deficit) (US GAAP)
      
      (20,062,027
      )
      
      (13,696,885
      )
      
      (12,740,977
      )
      
      (11,255,283
      )
      
      (9,863,915
      )Net assets (deficiency) (Cdn GAAP)
      
      (71,592,842
      )
      
      (857,423
      )
      
      629,601
      
      
      1,940,782
      
      
      (58,455
      )Net assets (deficiency) (US GAAP)
      
      (71,592,841
      )
      
      (857,424
      )
      
      582,744
      
      
      1,898,575
      
      
      (105,312
      )


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 page 2 

Year ended May 31,Statement of
        Operations Data
      
      2007
      
      
      2006
      
      
      2005
      
      
      2004
      
      
      2003Revenues (US and Cdn GAAP)
      $
      10,103,328
      
      $
      Nil
      
      $
      Nil
      
      $
      Nil
      
      $
      NilLoss for the year(1)(Cdn GAAP)
      
      6,365,142
      
      
      1,600,673
      
      
      1,485,694
      
      
      1,396,018
      
      
      854,308Loss for the year(1)(US GAAP)
      
      6,365,142
      
      
      1,553,817
      
      
      1,485,694
      
      
      1,391,368
      
      
      861,508Loss per share (Cdn GAAP)
      $
      0.11
      
      $
      0.07
      
      $
      0.06
      
      $
      0.08
      
      $
      0.02Loss per share (US GAAP)
      $
      0.11
      
      $
      0.07
      
      $
      0.06
      
      $
      0.08
      
      $
      0.02


Notes:

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

No cash or other dividends have been declared.

Except as otherwise indicated, all dollar amounts are stated in
Canadian dollars, Rockwell's functional and reporting currency, unless otherwise
stated. 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 May 312007
      2006
      2005
      2004
      2003End of Period
      0.9347
      0.9079
      0.7994
      0.7335
      0.7302Average for Period
      0.8800
      0.8521
      0.7937
      0.7447
      0.6560High for Period
      0.9347
      0.9099
      0.8493
      0.7879
      0.7437Low for Period
      0.8437
      0.7951
      0.7261
      0.7084
      0.6273


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
    LowMay 2007
    0.9347
    0.8981June 2007
    0.9452
    0.9320July 2007
    0.9641
    0.9358August 2007
    0.9525
    0.9298September 2007
    1.0069
    0.9466October 2007
    1.0527
    0.9996November 2007
    1.0905
    0.9992


On November 28, 2007 the noon rate as reported by the Bank of
Canada for the conversion of United States dollars into Canadian dollars was
Cdn$0.9992 per United States dollar.

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 page 3 

B.           Capitalization
and Indebtedness

Not applicable.

C.           Reasons
for the Offer and Use of Proceeds

Not applicable.

D.Risk
Factors

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

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

An investment in Rockwell's common stock involves a number of
very significant risks. You 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. You could lose all or
part of your investment due to any of these risks.

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 page 4 

Risks Associated With Mining

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

Although Rockwell now owns and operates properties with a
history of sporadic to regular diamond production, these properties have never
been subject to a formal reserve estimation through scientific exploration
techniques. Accordingly, there is no assurance that Rockwell can formally
establish the existence of any mineral reserve on any of its properties. A
mineral reserve is defined by the Securities and Exchange Commission in its
Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as
that part of a mineral deposit which could be economically and legally extracted
or produced at the time of the reserve determination. The probability of an
individual prospect ever having a "reserve" that meets the requirements of the
Securities and Exchange Commission's Industry Guide 7 is remote. If none of our
current or future mineral resource properties contains any "reserve," any funds
that Rockwell spends on exploration will be lost.

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

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

The commercial viability of an established mineral deposit will
depend on a number of factors including, by way of example, the size, grade and
other attributes of the mineral deposit, the proximity of the resource to
infrastructure such as a smelter, roads and 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 discovers a mineral resource in a
commercially exploitable quantity, these laws and regulations could restrict or
prohibit the exploitation of that mineral resource. If Rockwell cannot exploit
any mineral resource that it might discover on our properties, its business may
fail.

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

Rockwell believes that it is in compliance with all material
laws and regulations that currently apply to its activities but there can be no
assurance that it can continue to do so. Current laws and regulations could be
amended and the Company might not be able to comply with them, as amended.
Further, there can be no assurance that Rockwell will be able to obtain or
maintain all permits necessary for our future

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 page 5 

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
extraordinary operating risks. Rockwell does not currently insure against these
risks. In the event of a cave-in or similar occurrence, Rockwell's liability may
exceed its resources, which would have an adverse impact on Rockwell.

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 does not currently maintain any insurance coverage against
these operating hazards. The payment of any liabilities that arise from any such
occurrence would have a material, adverse impact on Rockwell.

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

In the case of alluvial diamond deposits, the prediction of
grade can be challenging due to the inherent geological nature of such deposits.
The alluvial diamonds are laid down by rivers flowing over uneven terrain and
the diamonds vary in terms of size and quality. Individual diamonds are not
evenly or uniformly distributed through out an alluvial deposit; neither are
they randomly distributed. Rather, their distribution has been described as a
random distribution of clusters of points. The clusters are both randomly
distributed in space, and the point density of the cluster is also random. In
order to determine grade under such circumstances it is necessary to process
large volumes of material (bulk testing) 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. Notwithstanding the above caution, bulk
testing is a straightforward technique that is currently being applied across
all of Rockwell's South African operations. Furthermore, size frequency
distribution curves can be used to accurately predict the relative abundance of
diamonds in terms of stone size, thus mitigating risk.

Mineral prices are subject to dramatic and unpredictable
fluctuations.

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

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 page 6 

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

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

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

Risks Related to Rockwell

In January 2007, the Company completed all the conditions under
the Definitive Agreement to acquire Durnpike. Commencing January 31, 2007 (Date
of Acquisition), the results of operations from the acquisition of the
Companys rights and/or interest in the following properties have been included
in the consolidated statement of operations: Holpan/Klipdam Property in South
Africa, Wouterspan Property in South Africa, Galputs in South Africa and Kwango
River Project in the DRC.

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

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

Rockwell requires additional financing to fund its operations.
At May 31 2007, the Company had a working capital of $26,742,798 compared to a
working capital deficit of $889,614 at May 31, 2006.

The Company has estimated that it will have adequate funds from
existing working capital to meet our corporate, operational, development,
administrative and property obligations for the coming year. The Company will
periodically need to obtain additional financing, and while it has been
successful in the past, there can be no assurance that it will be able to do so
in the future. Any additional equity financing that Rockwell undertakes could be
dilutive to existing shareholders, and any debt financing that Rockwell
undertakes could involve restrictive covenants with respect to future capital
raising activities and other financial and operational matters.

Management recognizes that the group will need to generate
additional financial resources in order to discharge its liabilities and achieve
its planned business objectives. Since the operations of Rockwell have been
primarily funded through funds raised from equity financing, the groups ability
to continue operations and exploration activities as a going concern is
dependent upon its ability to obtain additional funding. While the Company is in
production from its operating properties and has been successful in

---

 page 7 

obtaining its required financing in the past, there is no
assurance that raising funds from these sources will be successful or, if
successful, will be sufficient to support the groups operations and exploration
activities in the future.

There is no guarantee of title to Rockwell's properties.

Although Rockwell has obtained the usual industry standard
title reports with respect to its properties, this should not be construed as a
guarantee of title. Properties may be subject to prior unregistered agreements
or transfers, or native land claims, and title may be affected by undetected
defects. Certain of the claims may be under dispute and resolutions of a dispute
may result in the loss of all of such property or a reduction in Rockwell's
interest therein.

Surveys have not been performed on all the properties.

Not all of Rockwell's properties have been surveyed and,
accordingly, the precise location of the boundaries of the properties and
ownership of mineral rights on specific tracts of land comprising the properties
may be in doubt. It is therefore possible that if Rockwell discovers a mineral
deposit near the boundary of one of its properties, such mineral deposit may end
up being outside the boundary of its property and therefore not owned by
Rockwell.

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

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

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

The nature of Rockwell's business and Rockwell's ability to
continue its exploration activities and to exploit any mineral reserves that it
may find in the future depends, in large part, on Rockwell's ability to attract
and maintain qualified key management personnel. Competition for such personnel
is intense, and there can be no assurance that Rockwell will be able to attract
and retain such personnel. Rockwell's development now and in the future will
depend on the efforts of key management figures, such as John W. Bristow,
Rockwell's Chief Executive Officer, and Dominique de la Roche, Chief Financial
Officer. The loss of any of these key people could have a material adverse
effect on Rockwell's business. Rockwell does not currently maintain key-man life
insurance on any of its key employees.

Rockwell's properties are located in South Africa, the
Democratic Republic of the Congo, and Chile and its operations there may be
affected by varying degrees of political and economic uncertainties.

Rockwell's properties are located in South Africa and the
Democratic Republic of the Congo (the DRC) and Chile, and mineral exploration
and mining activities in these countries may be affected in varying degrees by
political stability and economic uncertainties. Operations also 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.

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 page 8 

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, terrorism,
crime, extreme fluctuations in currency exchange rates and inflation.

The DRC has been the subject to significant political and civil
unrest. In 1992, the DRC completed a transition to multi-party democracy after a
long history of one-party Marxist rule. However, the 1990s were subject to
periods of violent civil unrest, including a low-level guerrilla war waged
against the government by a group known as the "Ninjas" in the Pool region of
the country. The DRC has remained stable and calm since the signing of a peace
accord with the Ninjas in March 2003.

In March 2006, the World Bank and International Monetary Fund
("IMF") approved Heavily Indebted Poor Countries decision point treatment for
the DRC. However, the IMF and World Bank noted that the DRC needed to address
serious concerns about governance and financial transparency in order to qualify
for completion point and irrevocable debt relief. Any resources that are freed
by interim debt relief granted to Congo must be used for poverty reduction under
a reform program closely monitored by the international financial
institutions.

There is no assurance that Rockwell's operations in the DRC
will not be affected in the future by political and economic instability,
terrorism, crime, extreme fluctuations in currency exchange rates and
inflation.

There can be no assurance that the current economic and
political stability in Chile will continue throughout the period in which
Rockwell is looking to explore and operate its properties or that government
regulations will not be changed in a way that will adversely affect Rockwell's
operations in the country. Any shifts in political or economic conditions, and
any changes to government regulations relating to the mining industry and
foreign investors in Chile are beyond the control of Rockwell and may adversely
affect its business.

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

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

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

---

 page 9 

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

Absence of dividends

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

Rockwell is subject to potentially volatile exchange rate
fluctuations

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

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

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

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

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

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

---

 page 10 

In addition to the "penny stock" rules promulgated by the
Securities and Exchange Commission (see above for discussions of penny stock
rules), the National Association of Securities Dealers (NASD) 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 NASD believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The NASD requirements make it more difficult for broker-dealers to
recommend that their customers buy Rockwell common stock, which may limit your
ability to buy and sell Rockwell stock and have an adverse effect on the market
for Rockwell shares.

Rockwell has a significant number of outstanding options
and warrants, the exercise of which could result in significant equity dilution.

At November 28, 2007, Rockwell had a significant number of
share purchase options (7,645,000) and warrants (161,379,154), which will likely
act as an upside damper on the trading price range of Rockwell's shares. The
underlying shares issuable upon exercise of these securities represent
approximately 82% of Rockwell's currently issued shares.

---

 page 11 

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)  | In June 2006, Rockwell entered into an agreement
        to acquire (the "Acquisition") all of the shares and loans in Durnpike
        Investments (Pty) Limited ("Durnpike"), a private South African company,
        from eight arm's length individuals (the "Vendors"), for consideration
        payable in the common shares of Rockwell ("Common Shares") on specified
        dates described in Item B. Business Overview  Alluvial Diamond
        Propertiesbelow. Durnpike held an interest and/or rights in four
        alluvial diamond properties in South Africa and the Democratic Republic
        of the Congo. These were:
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      | On January 31, 2007, all the conditions precedent
        to implementation of the Acquisition were fulfilled. The Company also
        received the necessary regulatory approvals in Canada and South Africa.                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (ii) | In conjunction with the acquisition of Durnpike,
        HCVW had an option agreement to acquire the Makoenskloof alluvial diamond
        project. As a result of the acquisition of                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

 page 12 

| |       | HCVW by Durnpike, and concurrent
        acquisition of Durnpike by Rockwell, the Company assumed the option to
        purchase the Makoenskloof property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (iii) | On March 6, 2007, the Company
        and Trans Hex Group Limited (Trans Hex) entered into a conditional
        agreement whereby the Companys wholly owned South African subsidiary,
        Rockwell Resources RSA (Pty) Ltd. (Rockwell RSA), would acquire
        two open pit alluvial diamond mines and three alluvial diamond exploration
        projects from Trans Hex (the Transaction). Trans Hex, through
        its wholly-owned subsidiary, Trans Hex Operations (Pty) Ltd. (THO),
        is the owner of 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 between Douglas
        and Prieska 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 acquisition is
        subject to fulfillment of certain conditions precedent and have yet to
        be completed at the end of November 2007.

|8. | Rockwell's principal capital expenditures and material
      divestitures in the past three fiscal years ended May 31, 2007 are as
      follows:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------

Exploration
    
    
      ExplorationExpenditures
    Mineral
    
      Expenditures ExpensedDeferred
    Property
    Property, Plant
      (excluding related
    Mineral Property(capitalized or
    Acquisitions
    and Equipment
      stock-based
    AcquisitionsYear
    invested)
    Capitalized
    acquired
      compensation)
    Expensed2007
    nil
    $24,121,854
    $46,340,914
      $ 1,371,351
    nil2006
    nil
    nil
    nil
      $ 307,390
    nil2005
    nil
    nil
    nil
      $ 920,902
    nil


|9. | The principal expenditures by property currently
      anticipated for the ensuing year, subject to the ability to finance from
      existing cash reserves and other sources of equity financing, are as
      follows:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Exploration
      ExpendituresRicardo Property
    $ 300,000Holpan/Klipdam/ Wouterspan Property
    $3,125,000Wouterspan Property
    $5,000,000Galputs Property
    $1,700,000Kwango River Project
    $7,900,000


---

 page 13 

B.          
Business Overview

1)Alluvial Diamond Properties

Agreements

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

Subsequently, pursuant to the terms of
the definitive acquisition agreement, the Company acquired all of the shares and
loans in Durnpike, a private South African company, from eight vendors (the
Vendors) for consideration set forth below, payable in Common Shares of the
Company (Common Shares) related to the closing price of the Common Shares on
the TSX Venture Exchange on the specified dates described below. Durnpike holds
an interest in respect of and/or rights in the four alluvial diamond properties.

The Holpan/Klipdam Property and the
Wouterspan Property were indirectly owned by the H.C. Van Wyk Diamante Trust
(Van Wyk Trust), a business trust registered in South Africa. The Van Wyk
Trust held 99% of HC Van Wyk Diamonds Ltd (HCVW), a private South African
company, and 99% of Klipdam Mining Company Limited (Klipdam), a private South
African company. The remaining 1% of HCVW and Klipdam was owned by nominees of
the Van Wyk Trust. HCVW and Klipdam, and were collectively referred to as The
Van Wyk Diamond Group of companies (VWDG).

On July 7, 2006, Durnpike completed the
acquisition of an initial 49% of the issued and outstanding shares of HCVW and
51% of the issued and outstanding shares of Klipdam (the Acquisition Interest)
for South African Rand (ZAR) 50 million and agreed to pay an additional ZAR30
million to the Van Wyk Trust on July 7, 2007. The payment of ZAR30 million was
made to the Van Wyk Trust in June 2007. Durnpike also had the option to increase
its shareholding in HCVW to a 51% controlling interest by (a) subscribing for
additional shares in HCVW for the amount of ZAR1 million and (b) introducing a
ZAR24 million working capital loan into VWDG. These conditions were met in
January 2007.

The Company also entered into an
Exchange Agreement with the Van Wyk Trust pursuant to which it holds a call
option, and has granted a corresponding put option to the Van Wyk Trust, to
acquire an additional 23% of VWDG for ZAR60 million, payable in Common Shares.
The Exchange Agreement shall become effective upon Rockwell having completed a
listing of the Companys Common Shares on the Johannesburg Stock Exchange
(JSE). The Company is currently in discussions with a black economic
empowerment (BEE) group to increase the BEE current shareholding from 15% to
26% by subscribing for an additional 11% shares in the VWDG. This additional 11%
will be at a subscription price of ZAR17.5 million and the BEE group will also
need to inject ZAR10.5 million working capital into the VWDG. During the year
ended May 31, 2007, a BEE group purchased 15% of the VWDG from the Van Wyk Trust
for an amount of ZAR 22.5 million. To facilitate Durnpikes payment of ZAR50
million to the Van Wyk Trust on July 7, 2006, the Company advanced a
non-interest bearing loan to Durnpike of ZAR50 million. This loan is secured by
a pledge of Durnpikes Acquisition Interest.

---

 page 14 

Pursuant to the Definitive Agreement,
the Company:

| | • | acquired from the Vendors all
        of their shares and loans in Durnpike for consideration of ZAR 43 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 and the DRC. The ZAR consideration does not include payment
        in respect of the Kwango River Project, which payment stands 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | • | will spend US$7 million on a
        feasibility study on the Kwango River Project by August 31, 2007. This
        deadline may be extended to February 29, 2008 at no cost and be further
        extended to December 31, 2008 by payment of US$1 million in Common Shares.
        As it seems highly unlikely that the deadline of February 29, 2008 will
        be met, the Company is currently negotiating an extension to such deadline.
        If the Company wishes to retain the Kwango River Project following completion
        of the feasibility study, the Company must (i) pay to the Vendors an amount
        equal to 60% of the net present value of the Kwango River Project Valuation
        (as determined in terms of the feasibility study and subject to a minimum
        acquisition cost of US$13 million and a maximum acquisition cost of US$26
        million), which payment shall be effected by the issuance of Common Shares
        and (ii) commit to incur an additional amount of up to US$6 million in
        expenditures for development of the Kwango River Project within 16 months
        from the date of completion of the feasibility study. If the Company does
        not wish to retain the Kwango River Project following completion of the
        feasibility study, the Definitive Agreement provides for Durnpike being
        divested of such project on certain terms, with the Company nevertheless
        retaining 100% of the shares in Durnpike (and therefore the indirect interests
        in the Holpan/Klipdam, Wouterspan and Galputs properties). In such event,
        the full and final purchase consideration for Durnpike will be limited
        to the ZAR Consideration.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   | Durnpikes interest in the
        Kwango River Project is constituted by an agreement (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 will
        be 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.
        These royalties take the form of a series or recurring annual minimum
        royalty payments of US$1.2 million per annum (commencing on December 31,
        2007). (As to the enforceability of this commitment in light of developments
        pertaining to the Midamines Agreement, see note 16 (b) of the audited
        financial statements as at May 31, 2007 and 2006);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

All of the Common Shares issued to the
Vendors pursuant to the acquisition, other than the Common Shares issued to
extend the feasibility study deadline, will be held in escrow for at least nine
months from the date of issuance, provided that a limited portion of those
escrowed Common Shares may be released to enable the Vendors to meet certain
specified obligations.

On January 31, 2007, all the conditions
precedent to implementation of the Acquisition as per the Definitive Agreement
were fulfilled The Company also received the necessary regulatory approvals in
Canada and South Africa. As provided for in the Definitive Agreement, the

---

 page 15 

Company executed an agreement in
relation to the acquisition of control of the mineral rights relating to the
Galputs Minerale Project and appointed three of the Vendors to the Companys
Board of Directors.

In conjunction with the acquisition of
Durnpike, HCVW had an option agreement to acquire the Makoenskloof alluvial
diamond project. The Makoenskloof property is located on the north bank of the
Middle Orange River ("MOR"), approximately 20 km from the town of Douglas, South
Africa, and 40 km upstream from the Wouterspan diamond operation. 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. HCVW paid ZAR5.4 million in January 2007 for the
property and mining permits. Pursuant to this option exercise, HCVW also entered
into a sub-contracting agreement with Folmink Delwery CC to perform bulk
sampling commencing in March 2007. In April 2007 HCVW entered into an agreement
to purchase ZAR21.3 million in plant and equipment from the sub-contractor and
to terminate the subcontracting arrangement. The Company has paid a total
consideration ZAR1.5 million in during the year and is committed to pay the
remaining consideration in the following manner:

| | • | ZAR3 million shall be payable
        by way of Common Shares of the Company. The shares cannot be exchanged,
        or traded, or sold in any manner, by the seller for a period of one year
        after date a listing on the JSE. In the event a listing is not concluded
        or is not finalized on or before February 28, 2008, the outstanding balance
        (including the ZAR3 million) shall be payable by way of monthly cash payments
        of ZAR1 million and shall incur interest calculated at the prime rate
        of the Standard Bank of South Africa.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | • | During August 2007, subsequent
        to the year end, an amount of ZAR10.6 million was paid to settle the outstanding
        balances owing on certain equipment that was purchased. The remaining
        balance payable of ZAR$6.2 million shall be paid in monthly payments of
        ZAR500,000. The monthly payments shall incur interest calculated at the
        prime rate of the Standard Bank of South Africa.                                                                                                                                                       

---

 page 16 

The operational status, and ownership of each of the properties
was as follows:

Property
    Operational status
      at May 31, 2007
    Ownership immediately
      before the transactionHolpan and Klipdam
    In production.
    The Holpan/Klipdam property and
      the Wouterspan property were indirectly owned by the H.C. Van Wyk Diamante
      Trust ("Van Wyk Trust"), a business trust registered in RSA. Van Wyk Trust
      holds 99% of HC Van Wyk Diamonds (Pty) Ltd ("HCVW"), a private RSA company
      (the remaining 1% owned by the Van Wyk Trust nominees), and 99% of Klipdam
      Mining Company Limited ("Klipdam"), an unlisted RSA public company (the
      remaining 1% owned by the Van Wyk Trust nominees). HCVW and Klipdam, are
      collectively referred to as The Van Wyk Diamond Group of companies
      ("VWDG"). VWDG is an independent diamond producer that conducts diamond
      exploration and mining on the Holpan/Klipdam property, which VWDG owns.Wouterspan
    In production.
    VWDG is an independent diamond
      producer that conducts contract mining on the Wouterspan Property, over
      which HCVW holds options to acquire title.Makoenskloof
    In development. Bulk sampling
      with some recovery of diamonds has taken place.Galputs Minerale Project
    On standby.
    The Galputs Minerale project was
      owned 100% by Virgilia Investments BVI Limited, a private British Virgin
      Islands corporation, which in turn was owned by certain of the Vendors.Kwango River Project
    On standby.
    The Kwango River Project was
      owned by Midamines SPRL, a private company incorporated under the laws of
      the DRC. Durnpike had entered into an agreement in January 2006 to conduct
      exploration and mining operations (as an independent contractor) on behalf
      of Midamines at the Kwango River Project.


For illustrative purposes, and to aid in understanding the
effects of the transaction, we provide below a table showing projected estimated
ownership of Rockwell after each major step of the transactions. The figures
stated in the table below are based on certain assumptions. There is a
significant risk that the actual results will very, perhaps materially, from the
results projected below.

---

 page 17 

|Assuming Kwongo River costs the maximum      |                 |  | Running total of number of common shares, | 
|-------------------------------------------- | --------------- |  | ----------------------------------------- | 
|agreed, namelyUS$ 26 million                 |                 |  | and
      %of total                       | 
|                                             |                 |  |                                           | 
|                                             |                 |  |                                           | 
|                                             |                 |  |                                           | 
|                                             |                 |  | Held bynon-                               | 
|                                             | Value of common |  | vendor owners                             | 
|                                             | shares issued   |  | of Rockwell                               | 
|                                             |                 |  |                                           | 
|Common shares outstanding at March 15, 2007  |                 |  | 68,300,000                                | 
|Acquire 100% of Durnpike (which owns 51% HP) | 34,000,000 ZAR  |  | -                                         | 
|                                             |                 |  | 68,300,000                                | 
|Finders' fees                                | 8,500,000 ZAR   |  | 2,249,000                                 | 
|                                             |                 |  | 70,549,000                                | 
|Warrants exercised                           |                 |  | 41,000,000                                | 
|                                             |                 |  | 111,549,000                               | 
|Acquire Galputs                              | 9,000,000 ZAR   |  | -                                         | 
|                                             |                 |  | 111,549,000                               | 
|Purchase Kwongo (assume maximum amount)      | 26,000,000 USD  |  | -                                         | 
|                                             |                 |  | 111,549,000                               | 
|Durnpike purchases a further 23% of HP       | 60,000,000 ZAR  |  | -                                         | 
|                                             |                 |  | 111,549,000                               | 

|Assuming Kwongo River costs the minimum      |                 |  | Running total of number of common shares, | 
|-------------------------------------------- | --------------- |  | ----------------------------------------- | 
|agreed, namelyUS$ 13 million                 |                 |  | and
      %of total                       | 
|                                             |                 |  |                                           | 
|                                             |                 |  |                                           | 
|                                             |                 |  |                                           | 
|                                             |                 |  | Held bynon-                               | 
|                                             | Value of common |  | vendor owners                             | 
|                                             | shares issued   |  | of Rockwell                               | 
|                                             |                 |  |                                           | 
|Common shares outstanding at March 15, 2007  |                 |  | 68,300,000                                | 
|Acquire 100% of Durnpike (which owns 51% HP) | 34,000,000 ZAR  |  | -                                         | 
|                                             |                 |  | 68,300,000                                | 
|Finders' fees                                | 8,500,000 ZAR   |  | 2,249,000                                 | 
|                                             |                 |  | 70,549,000                                | 
|Warrants exercised                           |                 |  | 41,000,000                                | 
|                                             |                 |  | 111,549,000                               | 
|Acquire Galputs                              | 9,000,000 ZAR   |  | -                                         | 
|                                             |                 |  | 111,549,000                               | 
|Purchase Kwongo (assume minimum amount)      | 13,000,000 USD  |  | -                                         | 
|                                             |                 |  | 111,549,000                               | 
|Durnpike purchases a further 23% of HP       | 60,000,000 ZAR  |  | -                                         | 
|                                             |                 |  | 111,549,000                               | 

The above analysis assumes that 41 million in-the-money
warrants will be exercised. In the event that they are not, the Company will
likely have to undertake an equity offering and would consider not

---

 page 18 

immediately purchasing a further 23% of Holpan/Klipdam from the
Vendors. Consequently the Company does not expect any change-of-control issues
with respect to this transaction.

Upon acquisition of Durnpike, the Company will commence
consolidating the results of Durnpike into its consolidated financial
statements.

The Company did appoint two of the Vendors to its Board of
Directors. The individuals appointed were Messrs John Bristow and Jeffrey
Brenner. Mr. John Bristow was appointed President and Chief Operating Officer of
Rockwell. Hennie Van Wyk was also appointed Operations Director for the
Company.

In December 2006 Mr. Mark D. Bristow was appointed as a
Director of the Company.

In September 2007, Mr. John Bristow was also appointed Chief
Executive Officer. Mr Jeffrey Brenner retired from the Board of Directors in
September 2007 and assumed the role of Manager  Diamond Marketing and Sales and
Messrs Patrick Bartlett and Dominique de la Roche were appointed as Directors of
the Company.

The Company does not anticipate that any more of the Vendors
will become involved with the Company at the Board of Directors, or senior
management, levels.

There were several other Board changes during the 2007 fiscal
year. In September 2007, Jeffrey Mason retired as Chief Financial Officer and
from the Board of Directors. Dominique de la Roche, who had been the CFO of
Rockwell Resources RSA was appointed CFO and to the Board of Directors. Ronald
Thiessen retired from the role of Chairman and as a Director. David Copeland was
appointed Chairman of the Board. Mark Bristow and Patrick Bartlett were
appointed to the Board during the year.

2)Ricardo
Property

Rockwell's Ricardo Property is located along the West Fissure
fault in Chile. Although exploration on the Ricardo Property to date has not
identified a deposit containing economic mineralization, Rockwell's management
remains optimistic that given its location, the Ricardo Property represents a
property that warrants further exploration or the possibility of a farm-out to
another party prepared to fund its exploration.

Hunter Dickinson Inc.

Hunter Dickinson Inc. ("HDI") provides management services to
Rockwell, pursuant to a geological and administrative services agreement dated
January 1, 2001. HDI 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.

HDI has supervised mineral exploration projects throughout
Canada and internationally in Brazil, Chile, China, the United States (Nevada
and Alaska), Mexico and South Africa. HDI 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 HDI staff costs and
overhead) for amounts that are considered by Rockwell's management to be
competitive with arm's-length suppliers. The shares of HDI are owned equally by
each of the participating corporations (including Rockwell) as long as HDI
services are being provided. However, should the

---

 page 19 

Company terminate the service agreement, the Company will be
required to surrender its single share at the time of termination pursuant to
the terms of the service agreement. HDI is managed by certain directors of
Rockwell and who are generally also directors of the other corporate
participants in similar arrangements with of HDI.

**C.****Organizational Structure**

Rockwell is based in British Columbia, Canada. As at May 31,
2007, Rockwell had the following subsidiaries:

| | a) | Minera Ricardo Resources Inc. S.A. (Ricardo), an
      exploration-stage company organized pursuant to the laws of Chile, of
      which the Company owns a direct 99.9% partnership interest; Rockwell holds
      its interest in the Ricardo Property in Chile through Minera Ricardo
      Resources Inc. S.A.                                   
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | b) | 549949 BC Ltd., a wholly owned subsidiary incorporated
      under the laws of British Columbia which holds a 0.1% partnership interest
      in Minera Ricardo Resources Inc. S.A.                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | c) | N9C, a wholly owned subsidiary incorporated under the
      laws of the Cayman Islands of which Rockwell owns a direct 100%
      interest                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | d) | N10C, a wholly owned subsidiary incorporated under the
      laws of the Cayman Islands of which N9C owns a direct 100%
  interest                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | e) | Rockwell Resources RSA (Pty) Ltd, a wholly owned
      subsidiary incorporated under the laws of the South Africa of which N10C
      owns a direct 100% interest                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | f) | Durnpike Investments (Pty) Ltd (Durnpike) a wholly
      owned subsidiary incorporated under the laws of the South Africa of which
      Rockwell Resources RSA owns a direct 100% interest. Durnpike holds a 51%
      interest in both HC Van Wyk Diamonds Ltd and Klipdam Mining Company
      Ltd.                                               
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | g) | HC Van Wyk Diamonds Ltd is a subsidiary incorporated
      under the laws of the South Africa of which Durnpike owns a direct 51%
      interest. HC Van Wyk Diamonds Ltd is a diamond producer that conducts
      diamond exploration and mining on the Holpan/Klipdam property, as well as
      mining on the Wouterspan and Makoenskloof property.
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | h) | Klipdam Mining Company Ltd. is a subsidiary incorporated
      under the laws of the South Africa of which Durnpike owns a direct 51%
      interest. Klipdam Mining Company Ltd is a diamond producer that conducts
      diamond exploration and mining on the Klipdam property.                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | i) | Virgilia Investments Inc. a wholly owned subsidiary
      incorporated under the laws of the British Virgin Islands of which
      Rockwell owns a direct 100% interest.                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | j) | Galputs Minerale (Pty) Ltd. a wholly owned subsidiary
      incorporated under the laws of the South Africa of which Virgilia
      Investments Inc. owns a direct 100% interest. Galputs Minerale holds
      mining rights to the Galputs Project.                                                                                                   

---

 page 20 

Immediately after the completion of the Acquisition described
in Item B. Business Overview  Alluvial Diamond Properties, the
organization structure of Rockwell changed to:



D.          
Property, Plants and Equipment

Rockwell has plant and equipment located on its Holpan,
Klipdam, Wouterspan and Makoenskloof properties as at May 31, 2007.

| |                                                          |   | As
      at May 31, 2007 | 
| | -------------------------------------------------------- | - | ------------------------ | 
| |                                                          |   |                          | 
| |                                                          |   | Cost                     | 
| | Real property  land and building                        | $ | 3,823,455                | 
| | Processing plant and equipment                           |   | 16,307,635               | 
| | Processing plant and equipment under capital
      lease |   | 24,686,561               | 
| | Office equipment                                         |   | 299,072                  | 
| | Vehicles and light equipment                             |   | 1,065,396                | 
| | Vehicles and light
      equipment under capital lease   |   | 158,795                  | 
| |                                                          | $ | 46,340,914               | 

---

 page 21 

The Company did not have any property, plant and equipment
prior to the acquisition of Durnpike Investments (Pty) Limited, which occurred
on January 31, 2007.

Glossary:In this Annual Report on Form 20-F, the
following terms have the meanings set forth herein:

*A.*         
*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
    A concentration or occurrence of diamonds, natural solid
      inorganic material, or natural solid fossilized organic material including
      base and precious metals, coal, and industrial minerals in or on the
      Earths crust in such form and quantity and of such a grade or quality
      that it has reasonable prospects for economic extraction. The location,
      quantity, grade, geological characteristics and continuity of a Mineral
      Resource are known, estimated or interpreted from specific geological
      evidence and knowledge. The mineral deposit classifications in
      this annual report on Form 20F adheres to the resource/reserve definitions
      and classification criteria developed in 2005 by the Canadian Institute of
      Mining as required under NI 43-101. Estimated mineral resources fall into
      two broad categories dependent on whether the economic viability of them
      has been established and these are namely resources (economic viability
      not established) and ore 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.


---

 page 22 

Measured Mineral Resource
    The part of a Mineral Resource for which quantity, grade
      or quality, densities, shape, and physical characteristics are so well
      established that they can be estimated with confidence sufficient to allow
      the appropriate application of technical and economic parameters, to
      support production planning and evaluation of the economic viability of
      the deposit. The estimate is based on detailed and reliable exploration,
      sampling and testing information gathered through appropriate techniques
      from locations such as outcrops, trenches, pits, workings and drill holes
      that are spaced closely enough to confirm both geological and grade
      continuity.Porphyry
    A type of mineral deposit in which ore minerals are
      widely disseminated, generally of low grade but large tonnage.SAMREC
    South African Mineral Resource Code


*B.*         
*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, terrorism,
crime, extreme 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

---

 page 23 

exploration, development and mining activities. Failure to
comply strictly with applicable laws, regulations and local practices relating
to mineral right applications and tenure could result in loss, reduction or
expropriation of entitlements or in the imposition of additional local or
foreign parties as joint venture partners with existing or other interests.

Government Regulation

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

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 proposes, among other things, that companies extracting diamonds pay a
  royalty of 5% from the sales of those metals, payable on gross revenue. The
  Export Levy Bill contemplates an additional 5% levy on any rough diamonds that
  are cleared for export under the South African Diamonds Act, based on
  the value of such diamonds established or assessed under that Act. If enacted,
  the Royalty Bill and the Export Levy Bill may reduce the viability of diamond
  projects undertaken by the Company in South Africa. The Bills are presently
  under discussion and comment.

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. A number of
significant matters have not been finalized, including the Royalty Bill
as well as legislation dealing with beneficiation. Rockwell cannot predict the
outcome or timing of any amendments or modifications to applicable regulations
or the interpretation thereof, the release of new regulations or their impact on
its business.

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).

Mining in the Democratic Republic of the Congo

The renewed interest by the international mining industry in
the DRC has been as a result of the 2003 implementation of the new DRC Mining
Code, which was drafted in consultation with the World Bank.

The Mining Code provides the prospecting permit holder with
broad access to explore its properties under a transparent and efficient permit
process. In the case of diamond exploration, the new Mining Code gives

---

 page 24 

the prospecting permit holder exclusive rights for a period of
four years, renewable for two additional two-year periods. Upon development of
an economically viable deposit, the holder can apply for a mining permit.

The Congo Mining Code states that an Exploitation License is a
real property, exclusive, conveyable and transferable right which can be leased,
in accordance with the provisions of the present Code, the surface rights
therefore form an integral part of the mining rights. The Code identifies that
any applicant for an Exploitation License must submit an environmental impact
study (EIS) together with an environmental management plan for the project
(EMPP), and obtain the approval for the EIS and EMPP, as well as implement the
EMPP.

The Exploitation License entitles its holder to the exclusive
right to carry out, within the perimeter over which it has been granted, and
during its term of validity, exploration, development, construction and
exploitation works in connection with the mineral(s) for which the license has
been granted. In addition, it entitles the license holder, without restriction,
to:

| | o | enter the Exploitation License area to conduct mining
      operations;                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                         
| | o | build the installations and infrastructures required for
      mining exploitation;                                                                                                                                     
| |   |                                                                                                                                                                                                                         
| | o | use the water and wood within the Exploitation License
      perimeter for the requirements of the mining, complying with the
      requirements set forth in the EIS and the EMPP;                                     
| |   |                                                                                                                                                                                                                         
| | o | use, transport and freely sell his products originating
      from within the exploitation perimeter;                                                                                                                   
| |   |                                                                                                                                                                                                                         
| | o | proceed with concentration, metallurgical or technical
      treatment operations, as well as the transformation of the mineral
      substances extracted from the deposit within the exploitation perimeter;
      and
| |   |                                                                                                                                                                                                                         
| | o | proceed to carry out works to extend the mine.                                                                                                                                                                          

As long as a perimeter is covered by an Exploitation License,
no other application for a mining or quarry right for all or part of the same
perimeter can be processed. However, an applicant to whom the holder of the
exploitation license has refused to provide his consent to open a quarry within
the perimeter may submit an application for quarry exploitation license over
part of the perimeter which is the subject of the exploitation license but which
is not being used for the mining operations. Failing that, the application is
processed and is the subject of an administrative litigation process in which
the holder and the applicant participate if the latter submits, together with
his application, evidence that the holder has refused to give his consent and is
acting in bad faith. The mining regulations set forth the basic and substantive
rules for this administrative litigation process.

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 the Holpan/Klipdam, Wouterspan,
Galputs and Saxendrift/Niewejaarskraal (part of the Middle Orange River
Operations) properties located in the Republic of South Africa ("RSA" or "South
Africa").

---

 page 25 

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

The Holpan/Klipdam Property

Location and Access

The Holpan/Klipdam property is located 45 km from Kimberley in
the Northern Cape Province of central South Africa.

The property has ready access to all required infrastructure.
Given that the operations are located next to an irrigation canal, the
operations have year-round water supply and the necessary pumping stations and
water supply pipelines are 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.

Property Description and Ownership

The Holpan/Klipdam property consists of the adjacent Holpan 161
and Klipdam 157 farms, covering an area of 3,836 hectares. Details are provided
in Table 1.

---

 page 26 

Table 1: Summary of Holpan-Klipdam landholdings

Company
      Property Name
      Area
        (ha)
      Permit No.
      RenewalDateHCVW
      Remaining extent of farm Holpan
        161, Barkley West
      2 370.0518
      ML 1/2002
      09-11-2014Klipdam
      Remaining extent of the farm Klipdam 157, West
      1 466.0095
      MP 86/2002
      06-06-2004*


> * An application (No. B/2004/06/07/001) for renewal has
>       been submitted on June 10, 2004 to the Department of Minerals and Energy.
>       The application for conversion was granted on 11 October 2006. The execution
>       of the right is dependent on Klipdam resubmitting BEE document as per an
>       undertaking made by Klipdam to the DME. This undertaking was complied with
>       by Klipdam which will allow the notarial execution to proceed. Klipdam is
>       currently waiting for the notarial execution to proceed.

Exploration 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. There are regular references to this in historic records such as the
work of George Beet (1931), who discusses the Broderick diamond  a perfect
Cape white, weighing 412.5 carats. VWDG produced in excess of 90,000 carats of
diamonds from Holpan and Klipdam since 1994. Klipdam produced 18,333 carats
between July 1996 and February 1999 from the Klipdam Farm.

The work conducted from 1994 to date at Holpan-Klipdam
comprises extensive mining of Rooikoppie and primary gravels, drilling and bulk
testing. Since August 2005, the majority of processing has been undertaken using
a state of the art, high efficiency 200 tonnes per hour (tph) Dense Media
Separation (DMS) plant with X-ray Flowsort recovery and grease table final
recovery apparatus. A large new earth moving fleet, comprising 41 units of Volvo
and Komatsu equipment, currently moves 159,000 cubic metres (m3) of
gravel and overburden on a monthly basis.

Geology

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

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

The Rooikoppie unit varies in thickness from a few cm up to
about 2 m and has an estimated average thickness in the order of 1 m. Solution
cavities up to 3 m deep in the calcretised bedrock form sharp,

---

 page 27 

discontinuous depressions and are filled with the overlying
Rooikoppie gravel. Since such cavities, when considered in a hydrodynamic
context, have very high diamond trapping potential and are of key economic
importance. Given the high incidence of pronounced solution features in the
palaeo-land surface underlying the Rooikoppie (as observed in current mine
workings at Holpan-Klipdam), this area is considered to be of high interest with
regard to its exploration potential.

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

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

Exploration and Operation

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

As of January 2006 the drilling program, supported by trial
mining test work and field observation, has outlined gravel volumes of
approximately 7,500,000 m3 for the Rooikoppie unit and 4,300,000
m3 for the primary unit on the Holpan-Klipdam properties.

The production and survey data obtained from VWDG have been
accepted following on-site observation of mining and treatment processes,
extended discussions with company personnel and detailed presentations by the
Managing Director as well as other individuals responsible for the compilation
of the state diamond logs.

At least 3,267,400 m3 of gravel has been bulk
sampled or mined within the Holpan-Klipdam properties by HCVWD between June 2003
and December 31 2005. Systematic and professional surveying information are
available for this period.

Geological continuity for both the Primary gravels and the
Rooikoppie gravels has been established and demonstrate the continuity of
diamond mineralization along these alluvial diamond "runs" and within the
defined resource area. A simple aggregated global average diamond grade of 1.16
carats per 100 m3 is implied. When evaluated on a the basis of a
6-month rolling weighted average for the same period, grade ranges from 0.89
carats per 100 m3 to 1.93 carats per 100 m3. Therefore,
the estimated grade of 1.16 carats per 100 m3 is considered to be
conservative.

Diamond values presented in this report represent information
collated from actual diamond sales concluded by HCVWD. They are determined by an
official tender process whereby goods are cleaned, sorted and parceled into
different sizes and categories (either individually, which is typical for larger
stones, or collectively for smaller stones) before being shown to registered
buyers who make sealed offers

---

 page 28 

on the different diamond parcels. Typically, diamonds are sold
to registered local and international buyers who offer the best price on a
parcel. This process is underpinned by professional valuation of the stones to
arrive at a reserve or market price prior to tender and the entire process is
conducted through officially registered diamond marketing facilities or
bourses'. Strict adherence to the Kimberley Process is maintained throughout
the mining, recovery, marketing and sales process.

For the period June 2003 to December 2005 (for which survey
information is available and the data on which the grade has been estimated) the
average weighted diamond value is US$848 per carat.

Using stone-by-stone weight records compiled by HCVWD
production staff for the period January  April 2006, a diamond size-frequency
distribution analysis was carried out in order to gain a better understanding of
the diamond population present at Holpan-Klipdam. This approach was used to
predict the frequency with which large stones would be expected to be present at
Holpan-Klipdam. This is of key importance as a small number of large, high value
stones can significantly increase the value of production. When compared to
nearby properties such as Zoutpan, Riverview and Pniel, there appears to be a
significant population of large stones, possibly representing a distinct
kimberlitic source or a higher degree of fluvial sorting.

In March 2006, RH De Decker, Pr.Sci.Nat., an independent Qualified
  Person, estimated the resources for Holpan and Klipdam based on operational
  statistics, drilling and other sampling completed to that time as 12,339,700
  m3 grading 1.16 carats per 100 m3, with an average value
  of US$848/carat. It was his opinion that the continuity of the geology and mineralization,
  together with the degree of confidence in grade and stone value are considered
  sufficient to classify the diamondiferous gravels, as an inferred resource.

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


Estimates of Mineralization

Dr Tania R. Marshall, Pr.Sci.Nat., an independent qualified
person, updated the mineral resource estimates at Holpan/Klipdam in March 2007.
According to her May 2007 report, production between January 2006 and March 2007
mining at the Holpan and Klipdam properties focused on the Rooikoppie gravels,
and a volume of 1,889,308 m3 was mined and processed during the
period. In addition, based on the sale of 15,953 carats during the period, a
mean value of US$876 per carat had been identified on the property.

The mineral resource at March 31, 2007 is:

---

 page 29 

Table 2. Holpan and Klipdam Inferred Mineral Resources

Gravel Resource
      Volume (m3)
      Sampled Grade (carats per 100m3)Holpan Primary Gravel
    1,660,000
    1.16Klipdam Primary Gravel
    3,036,000
    1.16Holpan and Klipdam Rooikoppie Gravel
    5,754,000
    0.81Total
    10,450,000
    0.95


The continuity of the geology and mineralization, together with
the degree of confidence in grade and stone value are considered sufficient to
classify the diamondiferous gravels, as an inferred resource. The production
information used to support this contention covers a mined volume of 3,267,400
m3 and a total of 37,809 carats. The drilling information is deemed
sufficiently dense, accurate and clearly defined to support this classification.
Although reconciliation of carats produced to volumes mined is only possible in
a global sense, RH De Decker, Pr.Sci.Nat., the independent Qualified Person
responsible for the resource estimate, is of the opinion that it constitutes an
inferred resource.

De Decker also estimated that 4,800,000 m2 of
gravel, that is similar, visually, to the Rooikoppie gravels, surrounds the area
of the inferred resource. While this gravel feature is readily identifiable from
the prevalent red chert clasts (Pebbles) in the regolith and abandoned artisanal
workings, as well as vegetation features discernable from aerial photography,
its diamond content should be independently evaluated to determine whether a
classifiable resource exists.

Production

Production and sales from Holpan and Klipdam for fiscal 2007 is
discussed under Results of Operations (Item 5.A).

---

 page 30 

Planned Program

A program of 400 boreholes has been proposed to delineate the
edges of the Klipdam Channel and to identify palaeo-channel remnants on Holpan.
In addition, further future work will be done to better quantify the grades of
the individual gravel units as more of the Rooikoppie and paleochannel gravels
are processed. The proposed budget for the 2007/2008 program is as follows:

Table 3. Holpan and Klipdam Planned Program

Amount
      AmountDescription
      ZAR
      C$Drilling (6,000 m)
      1,140,000
      181,500Geology and supervision
      240,000
      33,200Total
      1,380,000
      214,700


(ZAR:C$ exchange rate of 6.28)

The Wouterspan Property

Location and Access

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 200 km from the town of Kimberley, where
comprehensive back up services for mining, spares and other supplies are
available. The property is connected to the national electricity grid. Staff
quarters have been built on site and transport provisions have been made for
personnel to work on a two week on, four day off basis.

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

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

Property Description and Ownership

The property comprises portions of the Lanyon Vale 376 farm
that total 969.4 hectares.

The surface rights of Wouterspan are held by Mr. J.F. Gouws. No
servitudes exist with regard to these landholdings. HCVW has concluded
prospecting and option agreements to purchase the two companies

---

 page 31 

Farhom Mining and Construction Limited and Okapi Diamonds (Pty)
Limited together with their surface and mineral rights holdings at Wouterspan.
These are described below: Table 4. Permits for Wouterspan Property

Company
      Property Name
      Area (ha)
      Permit No.
      Renewal DateHCVW
    Portion 16 (a portion of Portion
    188.7926
    MP144/2004
    29-04-2006*9) of Lanyon Vale 376HCVW
    Remainder of Portion 9
    780.61
    PP86/2004
    21-11-2008(Wouter) of Lanyon Vale 376


The Farhom renewal has been lodged and accepted and
  should be granted by the end of the year.

History

The first diamond discovered in South Africa was about 75 km
upstream of Wouterspan on the Middle Orange River ("MOR"). This discovery 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.
Subsequently, the MOR has not seen much prospecting and mining activity until
relatively recently. The reasons for this are twofold:

| | (i)  | Large areas are covered by a very hard layer of calcrete,
      0.5m  3m thick, which limits access to the underlying gravel horizons;
      and                                                                 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) | the gravels contain a high percentage of banded ironstone
      clasts, which makes the treatment and concentration of the gravels
      technically difficult when using the traditional pan plant
    processes.

More recently, the mining problem of the MOR was solved by the
use of blasting and heavy earthmoving equipment to rip and remove the hard
calcrete-silcrete layer. This new technology has resulted in the area being
effectively explored and mined for the first time. A number of companies have
been active in the area. The MOR alluvial deposits have regularly yielded
exceptional large diamonds such as a 211 carat stone recovered from a terrace on
a high level terrace upstream from Wouterspan and was reportedly sold for ZAR 28
million; a 181 carat stone recovered from Terrace B on Saxendrift; a 205 carat
stone recovered by Trans Hex from Saxendrift and a 175 carat stone from Trans
Hexs MOR mine.

In 2005, drilling work indicated that the size of the gravel
deposits at Wouterspan could be at least 30 million tonnes. Based on the bulk
sampling project that had commenced in April 2005, a targeted recoverable
diamond grade is in the order of 0.4 - 0.5 carats per 100 m3.

Geology

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

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

---

 page 32 

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

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

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

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

---

 page 33 

Exploration and Bulk Sampling

Given that the terrace extends beyond the boundary of the
Wouterspan properties, the entire property is considered prospective. The
thickness and distribution of the alluvial gravel deposits have been
investigated through systematic percussion drilling. Geological logging and
surveying of all boreholes has been undertaken and has been used in the
construction of a geological model, which has itself been used as a guide to
trial mining operations.

Quantitative reconciliation and modeling of grade is not
possible through the analysis of drill data. The only way to establish diamond
presence and grade is through bulk sampling operations.

The purpose of the bulk sampling was to:

| | (i)  | expose the gravels in section over a wide lateral area in
      order to gain a better understanding of the sedimentology; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------
| | (ii) | to process sufficient gravel to be able to determine the
      diamond grade of the gravels and lateral consistency
  thereof.

Between March 2005 and January 2006, a total of 513,892
m3 of Primary gravel and 24,013 m3 of Rooikoppie from 11
localities at Wouterspan property were tested by VWDG during trial mining
operations. Bulk sampling locations were selected by VWDG according to the most
well-developed gravel assemblages both laterally and vertically as identified by
the drilling program and a series of box-cuts were excavated. Currently
operations are taking place on two portions of the property called Farhom and
Okapi farms.

Drilling and bulk sampling indicate that the property hosts an
extensive alluvial deposit with a large average stone size within the Rooikoppie
and Primary gravel units. Approximately 4,481,000 m3 of Rooikoppie
Gravel and 43,259,000 m3 of Primary Gravel were defined as a result
of this work. In trial mining operations, 2,868 carats of diamonds have been
recovered from 514,000 m3 of Primary and 24,000 m3 of
Rooikoppie gravel. The drilling and bulk sampling work, while confirming the
presence of diamondiferous gravels, did not define a mineral resource.

Additional drilling was done in 2006, leading to the resource
estimated described below.

Diamonds of exceptional value have been recovered from this
property, including the recent discovery of a 157 carat stone that sold for
approximately US$5.7 million at official tender.

Estimates of Mineralization

Independent qualified persons AN Clay, FAusIMM, Pr.Sci.Nat.,
and N McKenna, Pr.Sci.Nat., of Venmyn Rand (Pty) Ltd, estimated the mineral
resources at Wouterspan as of March 31, 2007.

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


---

 page 34 

Indicated resources for Farhom were defined by drilling at 50 m
x 100 m spacing on Farhom,and 100 m x 200 m spacing on Okapi, with grades being
extrapolated to a maximum of 250 m from mined out areas.

Table 5a. Wouterspan Indicated Mineral Resources

Area
      Volume (m3)
      Grade (carats per 100
      m3)Farhom
    6,143,000
    0.63Okapi
    9,670,000
    0.63TOTAL
    15,814,000
    0.63


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


Inferred resources were established at the same drill spacing,
but global grades were extrapolated beyond 250 m from mined to the limit of the
drilled areas.

Table 5b. Wouterspan Inferred Mineral Resources

Area
      Volume (m3)
      Grade (carats per 100
      m3)Farhom
    2,895,000
    0.63Okapi
    17,853,000
    0.63TOTAL
    20,748,000
    0.63


Production

Production and sales from Wouterspan for fiscal 2007 is
discussed under Results of Operations (Item 5.A).

Planned Program

Some 20,000 m of additional drilling are planned.

Table 6. Wouterspan Planned Program

Description
      Amount ZAR
      Amount C$Drilling (20,000 m) and Geological
    4,500,000
    699,800


---

 page 35 

Makoenskloof Project

Property Agreement

In conjunction with the acquisition of Durnpike, HCVW had an
option agreement to acquire the Makoenskloof alluvial diamond project. The
Makoenskloof property is located on the north bank of the Middle Orange River
("MOR"), approximately 20 km from the town of Douglas, South Africa, and 40 km
upstream from the Wouterspan diamond operation. 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. HCVW paid ZAR5.4 million in January 2007 for the property and mining
permits. Pursuant to this option exercise, HCVW also entered into a
sub-contracting agreement with Folmink Delwery CC to perform bulk sampling
commencing in March 2007. In April 2007, HCVW entered into an agreement to
purchase ZAR21.3 million in plant and equipment from the sub-contractor and to
terminate the sub-contracting arrangement. The Company has paid a total
consideration of ZAR1.5 million in during the year and is committed to pay the
remaining consideration in the following manner:

- ZAR3 million shall be payable by way of Common Shares of the Company. The
  shares cannot be exchanged, or traded, or sold in any manner, by the seller
  for a period of one year after the date a listing on the JSE. In the event a
  listing is not concluded or is not finalized on or before February 28, 2008,
  the outstanding balance (including the ZAR3 million) shall be payable by way
  of monthly cash payments of ZAR1 million and shall incur interest calculated
  at the prime rate of the Standard Bank of South Africa.
- During August 2007, subsequent to the year end, an amount of ZAR10.6
  million was paid to settle the outstanding balances owing on certain equipment
  that was purchased. The remaining balance payable of ZAR$6.2 million shall be
  paid in monthly payments of ZAR500,000. The monthly payments shall incur
  interest calculated at the prime rate of the Standard Bank of South Africa.

Location and Access

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

Property Description

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

Geology

---

 page 36 

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

Only small isolated outcrops of Rooikoppie gravels are known
from the property. These deposits have not yet been investigated and will be
described at a later date.

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

The gravels are, generally, not well sorted, massive to
horizontally - bedded and more matrix - supported. The larger clasts are,
generally, in the 300 - 500 mm range. They are typical of braid bars that
migrate through sections of river channels in response to variable water speed.

Numerous sand-silt lenses (0.5 1.5 m thick) are also present,
indicative of relatively low energy environments such as are found on bar tails.
However, incised into the sequence are scour channels filled with clast
supported, large cobble to boulder units. These are locally referred to as high
speed channels that reflect deposition in a much higher energy environment. It
is, typically, from these higher energy environments, especially where incised
into the bedrock that the larger diamonds are recovered.

It is important to note that, in contrast with the deposits
further down the Orange River the gravel on Makoenskloof has minimal BIF, which
means that the processing and metallurgy is less complicated and overall mining
costs are lower, thereby compensating for potentially low grades.

Recent Exploration

Bulk sampling was conducted, recovering stones that were
included in the May 2007 tender sale. The Makoenskloof parcel included a range
of good quality stones including those between 5 and 10 carats, and a 58 carat
white stone that received an excellent price of US$27,676 per carat.

Since that time, the plant and infrastructure have been
upgraded and commissioning of the recovery plant began in July. The in-situ
gravel has now been removed and forms the majority of the screened stockpile,
and the tailings disposal facility has also been completed.

---

 page 37 

The Galputs Minerale Project

Location and Access

The Galputs property is located on the Koa River in
Namaqualand, in the Northern Cape Province, South Africa.

Galputs Pan, located on an extensive plain with little
topographic relief, is one of a series of deflation pans located along the
palaeo-Koa River that actively flowed for about 5 million years. The first
diamonds from the Koa Valley were discovered at Galputs in 1936.

The Galputs Pan comprises three interleading pan-shaped
features: the Northern Pan and Neck Area, the Main or Central Pan and the
Southern Pan. Access to the project site is possible via a number of
well-maintained gravel roads. The roads are adequate for large vehicle use and
link to both Springbok and Upington which have regular daily air-links to major
centres in South Africa. The nearest large town is Springbok, about 110 km west
of Galputs. Aggenys, 45 km north of Galputs, is connected to the town of
Springbok in the west by an excellent tarred road and with Upington to the
north-east by an equally good paved road. A wellmaintained paved landing strip
suitable for small to mid-sized aircraft is located at Aggenys.

The Namaqualand region is extremely arid with annual rainfall
averaging only 125 mm, occurring mainly in the summer months from November to
February.

Property Description

The property is comprised of the mining rights to the Galputs
104 farm on which diamondiferous gravels have been identified.

A mining license (ML 1/2003) was issued to Galputs Minerale
(Pty) Limited on January 8 2003 and is valid until January 7 2018. This mining
license was granted in respect of a property comprising 791,183 hectares. The
mining license constitutes an Old Order Mining Right and must be converted to a
New Order Right by 2009. A valid Environmental Management Program (EMPR) is in
place for the prospecting and mining operations. A surface use agreement is also
in place with the landowner of the property.

The Galputs Project is indirectly owned by Virgilia Investments
Inc ("Virgilia"), a British Virgin Islands corporation. Virgilia's wholly-owned
subsidiary, Galputs Minerale (Pty) Limited, a private SA company, holds mining
rights to the Galputs Project. Durnpike conducts contract mining operations at
The Galputs Project. Rockwell will acquire, for nominal consideration, all of
the outstanding shares of Virgilia from Marla Trust and make a payment as set
out in (c) above under Item 4 Durnpike acquisition.

History

The Koa River and the region around Galputs was probably
occupied by the Orange River during Miocene times (5 Ma). It is now generally
accepted that the diamonds found in both the coastal marine deposits and fluvial
gravels of Namaqualand have been derived from the kimberlite pipes occurring in
the hinterland of southern Africa. The hinterland is underlain by rocks of the
ancient Kaapvaal Craton and from which as much as 500  1,500 m of erosion has
taken place since the intrusion of kimberlites in the late Cretaceous (120  85
Ma). The considerable quantity of diamonds released would have been

---

 page 38 

transported through the Koa Valley with possible deposition of
some stones in favourable hydrological traps eroded into the bedrock.

Exploration and prospecting work has been conducted
intermittently at Galputs since 1936, with systematic prospecting only
commencing in 1960. Between 1936 and 1986, a total of 4,110 carats were
recovered. No previous data are available to reliably determine the in situ
grade of the gravels at the Galputs Project. Mining at Bosluis Pan, a nearby
site in the Koa Valley, on gravel deposits similar to that of Galputs, has
indicated an average grade of about 3 carats per hundred tons, with reports of
exceptionally rich areas reaching grades of 70 carats per hundred tons.

Production by Galputs Minerale commenced in March 2002 and
processing increased in August 2002, resulting in an estimated mining rate of
about 14,000 tonnes of gravel and 42,000 tonnes of waste overburden per month.
Mining was hampered by a hard layer of silcrete overlying the gravel and
excessive groundwater found in certain areas. The largest stone recovered during
prospecting in 2002 was 17.5 carats, the average stone size for the period June
to August 2002 was 0.98 carats and the average selling price since March 2002
has been US$388. An estimation of the potential gravel resource contained within
the Galputs license area was completed in 2002. Note that the above observations
are based on historic data alone and do not constitute a mineral resource under
the terms of Canadian National Instrument 43-101. Hence, any work on the
property should be considered exploratory.

Geology

The geology of the region comprises granite gneiss rocks of the
Gladkop Metamorphic Suite. These are Proterozoic basement sequences of the
Bushmanland Metamorphic Complex which yield ages of about 1,300 million years.
Locally, as in the Koa River Valley, ancient drainages are found with sequences
of diamondiferous gravel deposits. Diamonds found in the Koa Valley were
deposited during the transport of vast amounts of material eroded from
kimberlite pipes and fissures situated in the hinterland, to the Atlantic coast
during the Tertiary (65 to 2 Ma). Regionally the cover deposits are extensive
wind blown sequences of Quarternary age.

Diamonds are found in the alluvial gravel successions that have
been exposed in a series of large pans, which are represented by large flat
depressions typically about 1 to 2 km in length, and 200 to 500 m in width
located along the palaeo-Koa River drainage. The gravel deposits are located on
the granite gneiss basement and comprise a thin horizon varying in thickness
from a few centimetres to about 1 metre in places. The gravel layer is overlain
by coarse silty sandstones, which in places is lithified to a hard silcrete and
sand.

The rock assemblages comprising the gravels are mainly quartz
and quartzite pebbles with minor amounts of banded ironstone, epidote and
jasper. Abundant garnet and ilmenite are present in heavy mineral concentrate.
Cobbles and boulders are dominantly granitic in composition and are frequently
highly weathered.

The Galputs Pan comprises three interleading pan-shaped
features: the Northern Pan and Neck Area, the Main or Central Pan and the
Southern Pan.

Diamond mineralization in the Galputs deposit is primarily
confined to the extensive basal gravel sequence that occurs immediately above
the granite-gneiss basement that underlies the Galputs Pan. Silcretes which
overlie the well developed gravel horizon at Galputs also contain clasts and
gravel fragments in places and it is possible that they could be diamond
bearing.

---

 page 39 

Exploration and Bulk Sampling

Exploration by Galputs Minerale comprised a drilling program
along lines 500 m apart over selected areas and construction of simple 3D models
for these areas. Galputs Minerale also undertook prospecting by means of
excavation and processing of gravels to recover diamonds so that estimates could
be made of in-situ grades. Prospecting work was undertaken in the Central or
Main Pan, the Northern Pan and the Neck area, Gravels remaining in areas
previously mined were also delineated, excavated and mined, and tailings
material which still contained a high proportion of clasts was also retreated.
Final diamond recovery was by concentration in a Plietz jig at different size
fractions (typically 1.5 mm, 4-8 mm, 8-16 mm, and +16 mm), after which the
different concentrates were hand sorted.

Results of the bulk sampling work indicate a consistent
distribution of diamonds across the pan and show that the gravel sequences
produce consistently high value gem diamonds. Results produced by Galputs
Minerale are compatible with previous prospecting results obtained at Galputs by
other operators.

A total of 139 percussion boreholes have been drilled along
lines 500 m apart and with hole spacing 20 m apart over a localized portion of
the deposit; 67 holes of these holes intersected gravel in the Northern Pan and
Neck Area, and the Main Pan, and Southern Pan. The work was done by Mine Track
Solutions and indicated that the gravel deposit was relatively intact and
prospective in the Northern Pan and the neck Area between the Northern and Main
Pans. Computer modeling of the drill results was carried out to make an initial
estimate of resources volumes and tonnages.

Based on a drilling program and computer modeling by Van Breda
(2004), a number of observations with respect to the diamondiferous gravels at
the Galputs Project may been made. The reader is advised that the following
observations are based on historic data alone and do not constitute a mineral
resource under the terms of Canadian National Instrument 43-101.

| | (i)   | Northern Pan and Neck Area - a gravel resource of 510,000
      tonnes was arrived at for this portion of the deposit.                                                                                                                                                                                                                                 
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | Main and South Pans - Van Breda (2004) gives an estimate
      of 82,800 tonnes for the Main Pan, with further gravels covered by
      silcretes which could yield diamonds as well. No drilling was done on the
      South Pan, though excavations from previous prospecting operations
      indicate the presence of gravel horizons in this area.
| | (iii) | Tailings Heaps - There are large tailings heaps located
      on Galputs which are known to contain diamonds.                                                                                                                                                                                                                                          

Based on estimates of Cooke (2002a) and selective drilling and
resource delineation undertaken by Mine Track Solutions on behalf of Durnpike,
it is reasonable to assume there is a gravel volume of between 700,000 and 2.1
million tonnes. Note that this does not constitute a mineral resource under the
terms of Canadian National Instrument 43-101.

Planned Program

A budget has been prepared which will allow the Galputs deposit
to be tested systematically by trial mining at an initial scale of about 25,000
tonnes per month with the ability to rapidly expand this to about 50,000 tonnes
per month.

In terms of diamond mining operations the South African
government receives a 5% state royalty from diamond revenues, while South
African company tax is 29%. A 5% royalty is paid to the farmer after deduction
of the State royalty.

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 page 40 

A budget of C$1.7 million had been proposed in 2006 for further
exploration and bulk sampling operations. No work was done in 2007 or is
immediately planned for 2008 as attention is focused on completion of definitive
agreements, production at Holpan/Klipdam and Wouterspan and acquisition of the
Makoenskloof and Saxendrift properties.

Table 7. Galputs Planned Program

Description
      Amount (C$)Reverse Circulation
      drilling program, 3D modeling, Resource delineation
    60,000Purchase of
      excavator
    430,000Purchase of front
      end loader
    200,000Purchase of 2 articulated dump trucks
    430,000Description
      Amount (C$)Construction and
      purchase of rotary pan metallurgical treatment plant
    100,000Construction and purchase of mobile X-ray Flow-sort final
      diamond recovery
    480,000Total
    C$1,700,000


The Middle Orange River Operations  South Africa

Agreement

On March 6, 2007,Rockwell and Trans Hex announced that
the companies had entered into an agreement whereby Rockwells wholly owned
South African subsidiary, Rockwell Resources RSA, may acquire two open pit
alluvial diamond mines and three alluvial diamond exploration projects from
Trans Hex (the Transaction).

Trans Hex, through its wholly-owned subsidiary, Trans Hex
Operations (Pty) Ltd. (THO), is the owner of two open pit alluvial diamond
mines and three alluvial diamond exploration projects located along the southern
bank of the Middle Orange River between Douglas and Prieska in the Northern Cape
Province of South Africa, collectively called the Middle Orange River Operations
and Projects or MORO. Rockwells Wouterspan alluvial diamond operation is
located on the north bank of the Middle Orange River immediately adjacent to the
Saxendrift and Niewejaarskraal diamond mines.

The MORO includes (but are not limited to):

- 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 of the Northern Cape Province of South Africa (see Table 8 in
  the Property Description section below);
- a series of large remnant alluvial diamond terraces comprising
  approximately 8.7 million cubic meters of indicated resource and 30.4 million
  cubic meters of inferred resources;
- the material plant, machinery, equipment and other movable assets owned
  and/or used by THO - These operating assets were independently valued by
  Manhattan Mining Equipment (Pty) Limited in April 2005 at ZAR53 million;
- the employees of THO in terms of Section 197 of South Africas Labour
  Relations Act of 1995; and

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 page 41 

- 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 Rooikoppies gravels will be reprocessed by Rockwell to
  recover contained diamonds.

It is proposed that Rockwell will pay a cash purchase
consideration to Trans Hex of approximately ZAR100.4 million and will assume
potential liabilities for staff layoffs (capped at ZAR5 million) and
rehabilitation bonds (capped at ZAR4.25 million) (All such purchase payments and
liabilities are expected to total approximately Cdn$17.7 million, subject to
adjustment depending on the final combination of assets acquired.) Trans Hex
will transfer all its relevant mineral rights and associated assets into a new
special purpose vehicle (Saxendrift SPV), which Rockwell will acquire via
Rockwell RSA for the consideration indicated above.

The implementation of the Transaction is subject to fulfillment
of certain conditions precedent including:

- The unconditional approval of South Africas Competition Commission (or if
  such approval is subject to conditions, such conditions being acceptable to
  Trans Hex and Rockwell);
- All requisite consents by South Africas Minister of Minerals and Energy to
  the cession and transfer of the underlying mining and prospecting rights
  pertaining to the MORO to the Saxendrift special purpose vehicle (Saxendrift
  SPV) and the acquisition by Rockwell of the shares in Saxendrift SPV;
- Satisfactory provision by Rockwell of certain financial undertakings to
  THO;
- The approval by the TSX Venture Exchange;
- Completion by Rockwell to its satisfaction of a mineral title due diligence
  investigation; and
- The audited balance sheet of Saxendrift SPV as at the effective date
  meeting specified criteria.

Fulfillment of some of the conditions precedent may be waived,
or the date specified for their fulfillment extended, in certain limited
circumstances. The MORO will be placed on care and maintenance with effect from
date of signature of the relevant transaction agreements pending fulfillment of
the conditions precedent.

Rockwell entered into an agreement with Trans Hex on February
  26 2007 to purchase the MORO.

Property Location and Access

The properties are located adjacent to the Wouterspan Property
on the Middle Orange River.

Property Description

The mineral rights holding of the properties to be acquired by
Rockwell on successful completion of the MOR transaction are indicated in Table
8. The majority of the mineral rights listed below have already been converted
by THO to new order rights under the Minerals and Petroleum Resources
Development Act. The Saxendrift mining rights are currently the subject of a
conversion process that is being progressed.

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 page 42 

Table 8. Middle Orange River Operations Mineral Rights

|                                                 | FARM NAME          | PORTION            | SIZE
      (HA) | HOLDER
      AT     
|------------------------------------------------ | ------------------ | ------------------ | --------------- | --------------------
|                                                 |                    |                    |                 | SIGNATURE
      DATE
|Part
      1  Saxendrift Mining Operations      |                    |                   
|Trans Hex Rights                                 | Saxendrift 20      | Ptn Of Rem         | 1368.294        | Trans Hex Ops       
|Saxendrift 21                                    | Remainder          |                    |                 |                     
|Saxendrift 21                                    | Ptn Of Ptn 1       |                    |                 |                     
|Mvela Rights                                     | Saxendrift 20      | Ptn Of
      Rem   | 359.000         | Mvela               
|Part
      2  Niewejaarskraal Mining Operations |                    |                   
|Trans Hex Rights                                 | Niewejaarskraal 40 | Ptn Of Ptn 6       | 1766.390        | Trans Hex Ops       
|                                                 | Niewejaarskraal 40 | Ptn Of Ptn 4       |                 |                     
|                                                 | Niewejaarskraal 40 | Ptn Of Ptn 2       |                 |                     
|                                                 | Viegulands Put 39  | Ptn Of Rem         |                 |                     
|Mvela Rights                                     | Viegulands Put 39  | Ptn Of Rem         | 324.105         | Mvela               
|                                                 | Niewejaarskraal 40 | Ptn Of
      Ptn 6 | 995.200         | Mvela               
|Part 3 - Prospecting Projects                    |                    |                   
|Kwartelspan Project                              | Kransfontein 19    | Ptn 1              | 903.650         | Mvela               
|Kwartelspan 25                                   | Remainder          |                    |                 |                     
|Remhoogte-Holsloot                               |                    |                    |                 |                     
|Project                                          | Remhoogte 152      | Ptn Of Ptn 1       | 2798.511        | Pioneer             
|Holsloot 47                                      | Ptn Of Rem         | Ptn Of Ptn 3       | 1049.590        | Trans Hex Ops       
|Zwemkuil-Mooidraai                               | Zwemkuil 37        | Ptn Of Rem         | 2488.124        | Mvela               
|Project                                          |                    |                    |                 |                     
|                                                 | Mooidraai 36       | Ptn Of
      Rem   | 2901.000        |                     

Project History

The MORO comprise two open pit alluvial diamond mines currently
on care and maintenance, namely Saxendrift Mine and Niewejaarskraal Mine, and
three alluvial diamond exploration projects, namely Kwartelspan,
Zwemkuil-Mooidraai and Remhoogte-Holsloot.

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

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

---

 page 43 

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

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

In 2006, in anticipation of the disposal of the projects, Trans
Hex mandated Venmyn to undertake a technoeconomic valuation of the MORO and
present their findings in the form of a SAMREC compliant Competent Persons
Report, highlighting the status of the mining, prospecting and surface rights
held over the projects and indicating that several of the old order rights would
lapse if no application was made for conversion to new order rights before May
2006. These applications were duly submitted by THD to the relevant government
departments.

Since the date of issue of the report in April 2006, only
limited mining production has taken place at Niewejaarskraal and Saxendrift
Mines. In January 2007, Saxendrift Mine was placed on care and maintenance and
shortly thereafter Niewejaarskraal Mine followed suit.

Estimates of Mineralization

An updated technical report was completed for Rockwell based on
additional field work by G. D. Stacey, B.Sc.Eng and C. A. Telfer, Pr.Sci.Nat.,
the latter of which is an independent qualified person as defined by National
Instrument 43-101. The updated resource statement, as of March 2007, for all the
mines and exploration projects subject to the purchase agreement with Rockwell,
is summarized below:

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


Table 9a. Middle Orange River Operations Indicated Mineral
Resources

MINE/PROJECT
      MINING AREA
      VOLUME (m3)
      GRADE (carats/100 m3)
      CARATSSaxendrift Mine
      Saxendrift Terrace A
      1,824,000
      0.83
      15,051Saxendrift Terrace B
      422,000
      1.15
      4,850Stockpiles
      385,539
      0.46
      1,755Total/Average Saxendrift Mine
        Indicated
      2,631,539
      0.82
      21,656Niewejaarskraal Mine
      Niewejaarskraal
      4,164,745
      0.80
      33,289Viegulandsput
      1,802,822
      1.16
      20,939Total/Average Niewejaarskraal
        Mine Indicated
      5,967,567
      0.91
      54,228GRAND TOTAL  INDICATED
        RESOURCES
      8,599,106
      0.88
      75,884


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 page 44 

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


Table 9b. Middle Orange River Operations Inferred Mineral Resources

MINE/PROJECT
      MINING AREA
      VOLUME (m3)
      GRADE (carats/100
        m3)
      CARATSSaxendrift Mine
      Saxendrift Terrace A
      5,723,000
      0.48
      27,344Saxendrift Terrace B
      1,821,000
      0.68
      12,334Stockpiles
      263,000
      0.29
      763Total/Average Saxendrift Inferred
      7,807,000
      0.52
      40,441Niewejaarskraal Mine
      Niewejaarskraal
      1,696,000
      0.48
      8,132Viegulandsput
      1,465,000
      0.47
      6,911Nieweskraal TB2
      4,919,000
      0.90
      44,066Total /Average Niewejaarskraal
        Mine Inferred
      8,080,000
      0.73
      59,109Zwemkuil-Mooidraai
      N/A
      1,640,000
      0.95
      15,643Remhoogte-Holsloot
      N/A
      11,503,000
      1.15
      131,781Kwartelspan
      N/A
      1,385,000
      1.50
      20,838Total/Average of Exploration
        Projects Inferred
      14,528,000
      1.16
      168,262GRAND TOTAL  INFERRED
        RESOURCES
      30,415,000
      0.88
      267,812


Studies by THO indicated densities or specific gravities at the
Saxendrift operations: 2.2 for Basal gravels, and 1.90 for Middlings gravels.
The deposits are similar at all the mines and projects described above and an
average density or specific gravity of 2.1 is be used to convert cubic meters to
tonnes. The total indicated mineral resources would be 18.3 million tonnes and
the total inferred mineral resources would be 63.9 million tonnes.

Acquiring the MOR operations properties will allow Rockwell to
combine its Wouterspan operation with that of the Saxendrift and Niewejaarskraal
mines and thereby optimise the utilisation of its management and operating teams
and infrastructure at Wouterspan, which is located directly across the MOR from
Saxendrift and Niewejaarskraal.

Significantly, the acquisition of the MOR operations mines and
projects will position Rockwell as a dominant development, mining and
exploration company in the Middle Orange River area and thus able to add
substantially to its ability to mine and market high value gemstone diamonds.
Rockwell intends to increase its current diamond production which averages
approximately 2,000 carats/month.

---

 page 45 

Properties in the Democratic Republic of the Congo

The Kwango River Project

Location and Access

The property is located on the Kwango River in the Bandundu
Province of southeastern Democratic Republic of the Congo ("DRC") (Figure 2).

Figure 2 Location of
Kwango River Property

Roads in the DRC are passable for the purposes of moving heavy
equipment associated with project startup. The country's aging railway
infrastructure provides important connections domestically as well as with the
Angolan port of Luanda and with southern Africa. Daily flights are available
between Kinshasa and Tembo.

Cell phone signals can be picked up from Mawangu, the village 5
km from the Midamines campsite on top of the plateau. At present, satellite
technology represents the only viable option for the communication of voice and
data outside the project area.

The project area is also accessible via Angola, through the
town of Malange, about 250 km south-southwest from Tembo. Luanda lies a further
400 km to the west and could be used as port of disembarkation for the
equipment.

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 page 46 

The country's regional climate is tropical to sub-tropical.
While annual average rainfall is in the order of 1,300 mm in the south, it is
nevertheless possible to work in the river for most of the year, which Midamines
have reportedly done in the nineties. The Kwango River is navigable by light
vessel for the full length of the Kwango Project area. During the dry season the
river level drops considerably and water flow ceases altogether, leading to the
exposure of sandbars.

Property Description

The Kwango River Project encompasses over 75 km of river
frontage and also extends across elevated, palaeo-river terraces. Alluvial
diamond deposits occur as gravel assemblages within the modern Kwango River,
underlying its banks and in the adjacent terraces.

The Kwango River Project in the DRC comprises approximately 109
square km within Exploitation Permit Number 331 ("PPE331") held by Midamines
SPRL ("Midamines"), a company incorporated, and operating, in the DRC. Durnpike
has an agreement with Midamines to manage and carry out exploration and mining
on a portion of PPE331, as contractor for and on behalf of Midamines, and is
entitled to an 80% share of the net revenue from the sale of any diamonds
produced from the contract area. PPE 331, issued in December 2003, is valid
until January 2017 (and is renewable for a second term) and allows the holder to
conduct exploration, develop and exploit the deposit as well as market the
diamonds produced from the deposit according to local government requirements
and the Kimberley Process.

History

Subsequent to the discovery of the rich West Kasai diamond
fields in the DRC in 1907, other diamond bearing deposits were noted in
south-west DRC along the Kwango (also spelled Cuango) River and extensive
exploration work was undertaken in the region during the 1950's. Reports state
that "the results of washing gravels about 25km south of the Tembo Falls brought
immediate results of 81 diamonds weighing 9.42 carats". Following good results
in Angola, prospecting by the company Forminiere took place in the recent
fluvial deposits between the Franz-Jozef and Tembo Falls. The conclusion from
that work was that the primary origin of the Kwango diamonds lies upstream of
the Cuango-Quissema confluence. In 1961, another investigation of the region
between Tembo and Franz-Jozef Falls confirmed the earlier work of 1959: the
presence of potholes and gullies with locally important concentrations of
diamonds. The difference between the Angolan and DRC diamonds are in their size:
in DRC the average is between 10 and 20 stones per carat and in Angola between 1
and 10 stones per carat.

Due to the vast number of diamonds and easy mining conditions
encountered in the West Kasai deposits, emphasis on exploitation of diamonds in
the DRC has remained focussed on this area, with areas such as those noted along
the Kwango River having been subjected only to artisanal mining.

Since the implementation of political changes in the DRC, the
new Minerals Act of 2003, and the implementation of the Kimberley Process to
which the DRC is a signatory, diamond production has grown steadily.

Midamines has been active in the Kwango River since the mid
nineties. This appears to have been the first mining operations to have been
undertaken in the Kwango Valley from the DRC. The results of their earlier work
are not known. No activity is recorded from the Angolan side of the river in
this part of the Kwango River, despite the good results achieved further
upstream at Luzamba and Luremo.

The river deposits are currently being mined using small
dredges, and the river bank and terraces are being mined by small scale
excavations. The Government Valuator in Kinshasa has valued parcels of

---

 page 47 

diamonds from recent small scale mining on the property in the
range of US$85 to US$110 per carat. The recoveries from both sources are 0.15 to
0.2 carats per 30 kg samples.

Midamines has not maintained precise production records and no
other reports are available to give an indication of the size of the diamond
resource along the Kwango River. However since the commencement of the project
the author is aware that Midamines produced a parcel of diamonds in the order of
2,700 carats in September 2005 which attracted average sales prices of US$115 to
$125 when marketed in Antwerp.

Approximately 84% of the diamonds produced by Midamines are gem
diamonds and only about 6% classify as industrials and rejects. Of the gem
population, a significant 34% classify as sawables, and 60% classify as
makables. Typically, diamonds recovered from the Kwango River comprise a well
sorted population of stones, with an average size of approximately 0.25 carats
per stone.

Geology

The project area lies in the broad valley cut by the Kwango
River into the Cretaceous Kwango Formation conglomerates, sandstones and
siltstones. These rocks are the equivalent of the diamondiferous Calonda
Formation in Angola. The Calonda Formation is considered to be a prime source of
the secondary diamond deposits that are mined in recent drainage systems, for
example, diamonds being mined at Luzamba and elsewhere along the Cuango and Lui
Rivers in Angola, which both lead into the Kwango River to the north.

The Kwango Formation is generally covered by younger Quaternary
age sediments of the barren Kalahari Formation. The sequence forms low rolling
hills that terminate in a plateau that lies about 150 m above the river.

The bedrock is granitic gneiss, displaying potholes and gullies
exhibiting extremely high diamond trapping potential. Extensive indurated,
closely-packed diamondiferous gravel was observed in these potholes and gullies.
The gravel lies below 5 to 10 m of overburden that consists of well-sorted buff
to reddish-brown sand, interfingered with silty to clayey sand.

Extensive raised terrace deposits are found adjacent to the
modern river system, formed in an earlier geological period when the base level
of the river valley was at a higher elevation. The significance of the terrace
deposits are that they may be indurated Kwango Formation and therefore present a
different metallurgical challenge for their exploitation.

It is apparent that the basal gravel units should be targeted
as a potential source of alluvial diamonds. Funnelling of the stream flow
prevents the deposition of fine sediments. Under suitable conditions and
resistant lithologies, the higher flow rates generated would create potholes,
gullies and other irregularities in the bedrock that would act as trapsites for
diamonds. Because of their high specific gravity and small size, the diamonds
would quickly settle to the bottom and be covered (and consequently protected)
by cobbles, pebbles and boulders. This process would continually add diamonds to
the same trapsites, thereby enriching the grade of the basal deposits.

Planned Program

A preliminary budget scenario has been compiled for the Kwango
River project based on the observations of manufacturing companies including
Marine and Mineral Projects' (Pty) Limited and ADP Projects (Pty) Limited, of
Cape Town, South Africa, both with extensive experience of operating conditions
in Angola and the DRC. The scenario is very preliminary in nature and is
intended as a guide for initial

---

 page 48 

financial planning. No members of personnel from either of the
above companies have visited the project area or examined the project data and
no exclusive planning or feasibility study has been undertaken.

A C$ 7.9 million provisional budget for the initial exploration
work and bulk sampling program is:

Table 10. Planned Program

Description
      AmountC$Desk top geological
      studies, resource delineation, 3D modeling, field vehicles, site
    200,000surveysEstablishment of
      operational infrastructure
    100,000Purchase of rotary
      pan plant and X-ray flowsort final recovery unit
    1,300,000Purchase of Earth
      moving equipment
    2,700,000Logistics, road
      construction and site infrastructure
    2,200,000Fuel
    1,400,000Total
    7,900,000


In late 2006 and early 2007, Rockwell has been advancing the
logistical activities for its planned exploration and bulk sampling initiative
with Midamines. Rockwell has established a working base in Kinshasa and
conducted geophysical and other investigations on site.

One of the 50% shareholders of Midamines has, subsequent to the
conclusion of the Midamines Agreement in accordance with a mandate granted by
such shareholder, denied the validity of the Midamines Agreement. The remaining
50% shareholder disputes this view and remains committed to the Midamines
Agreement. Due to this dispute, Midamines has not afforded Durnpike access to
the site, and assistance as regards its proposed operations on the site, in the
manner contemplated in the Midamines Agreement. This failure has significantly
delayed the Companys proposed operations on the site, and it is consequently
the Companys position that the required royalty payments have become suspended
for the duration of Midamines internal dispute.

Rockwell remains committed to the Kwango River Project and is
confident that the ongoing dispute between the shareholders of Midamines will be
resolved. Rockwell will obtain formal legal advice from both Belgian and DRC
legal counsel as soon as possible as the Midamines Agreement is governed by
Belgian law and the obligations under the Midamines Agreement are to be
implemented, where required, in accordance with the laws of the DRC.
Concurrently, Rockwell will also monitor the resolution of the internal dispute
between the Midamines shareholders. If the issue of minimum royalty payments is
not settled on or before December 31, 2007, Rockwell will seek formal legal
advice and may consider formally terminating the Midamines Agreement.

Ricardo Property, Chile

Rockwell also holds the Ricardo Property, a copper prospect in
the Chuquicamata district of Chile. Rockwell is looking for new partners to
advance exploration at the Ricardo Property.

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 page 49 

ITEM
5.           OPERATING AND
FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of Rockwell's financial
condition and results of operations for the three years ended May 31, 2007
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
consolidated financial statements 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 of the Annual Report on Form
20-F

Going Concern

As at May 31, 2007, Rockwell had working capital of $26,742,798
(2006  working capital deficiency of $889,000) and has incurred operating
losses since its inception. Management recognises that Rockwell will need to
generate additional financial resources in order to achieve its planned business
objectives. Since operations of Rockwell have been primarily funded through
funds raised from equity financing, Rockwells ability to continue operations
and exploration activities as a going concern is dependent upon its ability to
obtain additional funding. While Rockwell is currently in production of its
operating properties and has been successful in obtaining its required financing
in the past, there is no assurance that sufficient funds from these sources will
be enough to support Rockwells operations and exploration activities in the
future. Furthermore, failure to continue as a going concern would require that
Rockwells assets and liabilities be restated on a liquidation basis, which may
differ significantly from the going concern basis.

Critical Accounting Policies

The Company's significant accounting policies are presented in
note 2 of the accompanying audited consolidated financial statements for the
year ended May 31, 2007. 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.

---

 page 50 

A.          
Results of Operations

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 or
investments by the Company's U.S. shareholders. Inflationary factors have not
had a material impact on the Company's operating results for fiscal 2007, 2006
or 2005. The Company's results of operations are summarized below:

|                                                                   |   | As
      at May 31 |  
|------------------------------------------------------------------ | - | ------------------ | -
|Balance Sheets                                                     |   | 2007               |  
|Current assets                                                     | $ | 56,142,572         |  
|Mineral properties                                                 |   | 24,121,855         |  
|Other assets                                                       |   | 49,341,956         |  
|Total assets                                                       |   | 129,606,383        |  
|                                                                   |   |                    |  
|Current liabilities                                                |   | 29,399,774         |  
|Other liabilities                                                  |   | 28,613,767         |  
|Shareholders
      equity (deficiency)                            |   | 71,592,842         |  
|Total liabilities and shareholders equity                         | $ | 129,606,383        |  
|                                                                   |   | Years ended May 31 |  
|Statement of Operations                                            |   | 2007               |  
|Revenue                                                            | $ | 10,103,328         |  
|Mine site operating costs                                          |   | (8,974,742         | )
|Amortization and depletion                                         |   | (2,074,415         | )
|Operating profit (loss)                                            |   | (945,829           | )
|Expenses                                                           |   |                    |  
|Accretion of reclamation obligation                                |   | 55,471             |  
|Exploration                                                        |   | 1,371,351          |  
|Foreign exchange loss (gain)                                       |   | (3,580,364         | )
|Legal, accounting and audit                                        |   | 691,759            |  
|Office and administration                                          |   | 2,993,453          |  
|Property Investigations                                            |   |                   |  
|Shareholder communications                                         |   | 200,574            |  
|Stock-based compensation                                           |   | 79,623             |  
|Travel and conference                                              |   | 666,194            |  
|Transfer agent filings                                             |   | 176,530            |  
|Subtotal                                                           |   | 2,654,591          |  
|Gain on sale of marketable securities                              |   |                   |  
|Loss on disposal of equipment                                      |   | 94,621             |  
|Interest income                                                    |   | (372,149           | )
|Interest on capital leases                                         |   | 433,125            |  
|Convertible note accretion and interest expense                    |   | 2,466,839          |  
|Loss on early extinguishment of convertible
      promissory notes |   | 137,957            |  
|Write-off of amounts receivable                                    |   | 224,942            |  
|Write-down of marketable securities                                |   | 1                  |  
|Write-down of mineral
      property interests                     |   |                   |  
|                                                                   |   | 2,985,336          |  
|Loss before income taxes                                           |   | 6,585,756          |  
|Future income tax recovery                                         |   | (635,773           | )

---

 page 51 

|Loss before non-controlling interest                       |   | 5,949,983  |   |   | 1,600,673  |   |   | 1,485,694  |  
|---------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|Non-controlling
      interest                             |   | 415,159    |   |   |           |   |   |           |  
|Loss for the year ended                                    | $ | 6,365,142  |   | $ | 1,600,673  |   | $ | 1,485,694  |  
|Basic and diluted loss per common share                    | $ | (0.11      | ) | $ | (0.07      | ) | $ | (0.06      | )
|Weighted average number of common shares
      outstanding |   | 55,418,242 |   |   | 23,640,123 |   |   | 23,376,122 |  

Year ended May 31, 2007 (fiscal 2007) versus year ended
May 31, 2006 (fiscal 2006)

Production and Sales

A summary of Rockwells share of diamond production and sales
for fiscal 2007 (during the four month period of February 1 to May 31) is
provided in the tables below:

Rockwells Share of Production
      for the four month period in the year ended May 31, 2007Operation
    Production Volume (cubic
      meters)
    Production (carats)
    Average grade (carats per 100
      cubic meters)Holpan
    487,535
    2,850.57
    0.58Klipdam
    257,900
    1,883.85
    0.73Wouterspan
    370,888
    2,272.86
    0.61Total
    1,116,323
    7,007.28
    0.63


Rockwells Share of Sales and Inventory
        four month period in the year ended May 31, 2007Operation
      Sales (carats)
      Value of Sales (US$)
      Value of Sales (C$)
      Average dollar value (US$) per
        carat
      Inventory (carats)Holpan
      2,947.27
      2,936,597
      3,329,223
      996.38
      405.78Klipdam
      1,762.04
      1,388,938
      1,588,261
      788.26
      402.55Wouterspan
      2,435.99
      2,859,328
      3,200,163
      1,173,78
      149.53Total
      7,145.30
      7,184,863
      8,117,647
      1,005.53
      957.86


Holpan/Klipdam

The Holpan/Klipdam Property consists of the contiguous Holpan
161 farm and Klipdam 157 farm. Production has been accounted for separately
because Holpan and Klipdam are separate operating entities. Production from
February 1 to May 31 at Holpan at was 2,850.57 carats from 487,535 cubic meters
(975,270 tonnes) of gravels and at Klipdam was 1,883.85 carats from 257,900
cubic meters (515,800 tonnes) 4,734.42 from 745,435 cubic meters of gravels
(1,490,870 tonnes) at an average cost of $3.00 per tonne.

Wouterspan

At Wouterspan, operations are taking place on two portions of
the property called the Farhom and Okapi farms. From February 1 to May 31, 2007,
the property produced 2,272.86 carats from 370,888 cubic meters (741,776 tonnes)
of gravels at an average cost of $3.00 per tonne.

Bulk Sampling at Makoenskloof

A mining contractor was engaged to conduct bulk sampling on the
Makoenskloof property in March and early April. Gravel processed during bulk
sampling resulted in the recovery of a parcel of diamonds for evaluation,
including a 58 carat white stone that was sold in the Companys May tender sale
for US$27,676 per carat. The revenue for the sale was offset by the contractor
cost.

---

 page 52 

Financial Summary

The Company had a net loss of $6,365,142 for the year ended May
31, 2007 compared to a net loss of $1,600,673 for the prior year ended May 31,
2006. The increase in net loss during the year is primarily due to expenses
related to exploration and acquisition related activities, and interest expense
on the Companys convertible promissory notes, capital leases related to the
acquisition of Durnpike and credit facility.

In January 2007, the Company completed all the conditions under
the Definitive Agreement to acquire Durnpike. Commencing January 31, 2007 (Date
of Acquisition), the results of operations from the acquisition of the
Companys rights and/or interest in the following properties have been included
in the consolidated statement of operations: Holpan/Klipdam Property in South
Africa, Wouterspan Property in South Africa, Galputs in South Africa and Kwango
River Project in the DRC.

During the year ended May 31, 2007, the Company realized rough
diamond sales of $10.1 million, representing four months of revenue from the
Date of Acquisition. This amount is inclusive of contractor income to the value
of $1.96 million mine site operating costs were $9.0 million, inclusive of
contractor expenses of $1.76 million, and amortization charges were $2,074,415.
As this represents the first four months of commercial production, attributable
to Rockwells account since the Date of Acquisition there were no similar
revenues and expenditures in previous periods. February and April had been below
average production months. In April, specifically, this was because of all of
the public holidays in South Africa, including Easter, and so almost one weeks
production was lost. February was also impacted due to the abnormally high
rainfall experienced in the area. The average selling price achieved over this
period was only $1,005 per carat which is 33% less than the current year to date
average selling price of just over $1,500 to the end of August 2007. There were
also expenses of around $0.2 million relating to Makoenskloof for which there is
no related revenue or stockholding.

Exploration expenses for fiscal 2007 amounted to $1,371,351
compared to $307,390 for fiscal 2006. The increase is mainly due to increased
engineering activities (2007  $217,197, 2006  $nil), geological activities
(2007  $468,408, 2006  $6,675), site activities (2007  $315,182, 2006 
$161,692) and property assessment fees (2007  $154,587, 2006  $138,520). A
significant portion of the Companys exploration activities during the year were
performed on the Holpan/Klipdam property in South Africa, Kwango River Project
in the DRC and the Ricardo property in Chile.

Foreign exchange gain increased to $3,580,365 for the year
ended May 31, 2007 compared to a foreign exchange gain of $46,881 for the year
ending May 31, 2006 due to a higher amount of South African denominated
liabilities and the strengthening of the Canadian dollar.

Administrative costs for the fiscal 2007 increased to
$2,993,453 compared to $489,014 incurred in fiscal 2006, primarily due to
increased consulting and salary expenses required to support the increase in
corporate financing, acquisition, operational management and property
investigation activities. Travel and conference expenses increased to $666,194
for the year ended May 31, 2007 compared to $132,647 for the prior year ended
May 31, 2006 due to increased travel by the Companys expanded personnel base
and to more properties in South Africa and the DRC. Legal, accounting and audit
expenses for fiscal 2007 was $691,759 compared to $175,782 in the prior year.
The increase was due to additional legal services and accounting services
rendered for the Companys acquisition activities.

Stock-based compensation amounted to $79,623 for the year
ending May 31, 2007 in comparison to $83,516 for the prior year ended May 31,
2006, no additional share options were granted during fiscal 2007.

---

 page 53 

Convertible note interest accretion and interest expenses
increased to $2,466,839 for fiscal 2007 as a result of the Companys issuance of
the $9.5 million convertible promissory notes, the utilization of a $11m
bridging loan and credit facility, the shareholders loans of $1.5 million and
US$5 million used to facilitate the acquisition of Saxendrift Mines (Pty)
Limited and a $5.5 million 90 day loan agreement with Amarc Resources Ltd.

Related Party Transactions  Fiscal 2007

As
      at
    
    
    As
      atBalances payableMay 31, 2007
    
    
    May 31, 2006Hunter Dickinson Inc. (a)
    $
    37,571
    
    $
    853,733Plateau Resources (Proprietary) Limited
      (j)
    
    
    
    
    124,737CEC Engineering Ltd(c)
    
    5,558
    
    
    Euro-American Capital Corporation (b)
    
    2,879Durnpike shareholder
      loans (i)
    
    1,503,566
    
    
    Banzi Trade 26 (Pty) Ltd (k)
    
    2,191
    
    
    Jakes Tyres (l)
    
    10,993
    
    
    Cashmere Trading (g)
    
    46,543
    
    
    $
    1,609,301
    
    $
    978,470Balances receivableFlawless Diamonds Trading
      House (h)
    
    781,928
    
    
    AA
      Van Wyk (m)
    
    57,325
    
    
    $
    839,253
    
    $
    


Year ended May 31Transactions
      
      2007
      
      
      2006Services rendered and expenses reimbursed:Hunter Dickinson Inc. (a)
      $
      1,988,027
      
      $
      578,134Euro-American Capital
        Corporation (b)
      
      18,765
      
      
      18,630CEC Engineering Ltd (c)
      
      187,225
      
      
      John Bristow (d)
      
      115,320
      
      
      Jeffrey B Traders CC (e)
      
      141,318
      
      
      Seven Bridges Trading
        (f)
      
      55,534
      
      
      Plateau Resources (Proprietary) Limited
        (j)
      
      
      
      
      124,737Cashmere Trading (g)
      
      43,357
      
      
      Banzi Trade 26 (Pty) Ltd (k)
      
      251,942
      
      
      Jakes Tyres (l)
      
      267,361
      
      
      AA Van Wyk (m)
      
      173,977
      
      
      Sales rendered to:Flawless Diamonds Trading House (h)
      $
      10,085,536
      
      $
      


| | (a) | Hunter Dickinson Inc. (HDI) is a private company owned
      equally by nine public companies, one of which is Rockwell, and has
      certain directors in common with the Company. HDI provides geological,
      technical, corporate development, administrative and management services
      to, and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

 page 54 

| |     | incurs third party costs on behalf of, the Company on a
      full cost recovery basis pursuant to an agreement dated January 1, 2001.
      Exploration advances to and from HDI have arisen in the normal course, due
      to in-progress and near-term planned exploration work, primarily on the
      Companys exploration properties and for other operating expenses. There
      are no specific terms of repayment.                                                                                                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (b) | Euro-American Capital Corporation is a private company
      controlled by Rene Carrier, a director of the Company, which provides
      management services to the Company at market rates for those
    services.                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (c) | CEC Engineering Ltd. is a private company owned by David
      Copeland, Chairman and a director of the Company, which provides
      engineering and project management services at market rates.                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (d) | The Company paid $115,320 to John Bristow, President,
      Chief Executive Officer and a director of the Company, for engineering
      consulting services at market rates.                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (e) | Jeffrey B Traders CC is a private company controlled by
      Jeffrey Brenner, a director of the Company, which provides management and
      marketing services to the Company at market rates.                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (f) | Seven Bridges Trading is a wholly owned subsidiary of
      Randgold Resources, a public company where Mark Bristow, a director of the
      Company, serves in an executive capacity. Seven Bridges Trading provides
      administrative and management services at market rates to the Companys
      South African subsidiaries.                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (g) | Cashmere Trading is a private company owned by Hennie Van
      Wyk, an officer of the Company, which provides helicopter services at
      market rates.                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (h) | Flawless Diamonds Trading House (Flawless) is a private
      company of which certain directors and officers of the Company, namely,
      Messrs. Brenner, Bristow and Van Wyk, are shareholders. Flawless is a
      registered diamond broker and purchases diamonds from the Company at
      market prices.                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (i) | In conjunction with the Companys Definitive Agreement to
      acquire all of the shares and loans in Durnpike Investments (Pty) Limited
      from eight individuals (the Vendors), of which three individuals from
      the Vendors were appointed to the Companys Board of Directors (Messr.
      Brenner, M.Bristow, J.Bristow).                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (j) | Plateau Resources (Proprietary) Limited (Plateau) is a
      wholly-owned subsidiary of Anooraq Resources Corporation, a Canadian
      company which has certain directors in common with the Company. Plateau
      shares certain premises and other facilities with the Company pursuant to
      a cost-sharing arrangement with no profit element involved.                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (k) | Banzi Trade 26 (Pty) Ltd (Banzi) is 50% owned by Hennie
      Van Wyk Family Trust, 30% by Ronnie Visagie a member of the Van Wyk family
      and 20% by Bokomoso Trust. Banzi is a private company focused on providing
      self sustaining programs to local communities. During the year, Banzi
      provided the Company with building materials amounting to $27,000 at
      market rates. Rockwell also wrote off an amount receivable from Banzi
      amounting to $224,942 due to the local development projects not being able
      to repay these amounts.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (l) | Jakes Tyres is a private company with certain directors
      and officers in common with the Company, that provides consumable
      materials at market rates.                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (m) | AA Van Wyk is a private company owned by a party related
      to the directors and officers of the Company, which provides contract
      mining services at market rates.                                                                                                                                                                                                                                                                                                                                                                                                  

---

 page 55 

Year ended May 31, 2006 (fiscal 2006) versus year ended
  May 31, 2005 (fiscal 2005)

The Company had a net loss of $1,600,673 for the 2006 fiscal
year compared to a net loss of $1,485,694 for the previous year. The increase in
net loss is primarily due to increased expenses in property investigation,
travel and conference expenses and stock based compensation. This increase was
offset by decreases in exploration expenses (2006  $307,390; 2005 
$920,902).

Exploration expenses (excluding stock-based compensation)
decreased to $307,390 in fiscal 2006 compared to $920,902 in fiscal 2005. This
decrease is due to the termination of exploration activities at the Royce
Diamond property and various British Columbia properties due to insufficient
results to warrant further exploration.

Foreign exchange gains increased to $46,881 in fiscal 2006
compared to a foreign exchange loss of $3,105 in fiscal 2005. Administrative
costs for fiscal 2006 increased to $489,014 in comparison to $285,618 incurred
in fiscal 2005, primarily due to increased consulting and salary expenses
related to the evaluation of properties for acquisition and exploration.

Property investigation expenses (2006  $399,006; 2005  $nil)
and travel and conference expenses (2006  $132,647; 2005  $30,293) increased
for the fiscal year 2006 compared to fiscal 2005 as the Company continued to
evaluate properties for acquisition and exploration.

Legal, accounting and audit expenses for fiscal 2006 increased
to $175,782 in comparison to the $80,078 incurred in fiscal 2005, the increase
is primarily related to the evaluation of properties for acquisition. Write-down
of marketable securities decreased to $19,128 in fiscal 2006 from $135,486 in
fiscal 2005 due to the decline in the value of Taseko Mines Limited common
shares in early fiscal 2006 and the Comwest warrants held by the Company as
marketable securities. The Taseko Mines Limited shares were sold during the year
for a gain of $55,340.

The Company recorded a write-down of mineral property interests
of $46,856 in fiscal 2006 due to the Company's application for easements on the
Company's Minera Ricardo property being denied by the Chilean law courts.

Stock-based compensation increased to $83,516 in fiscal 2006
from $11,513 in fiscal 2005 due to an increase in the number of options granted
during fiscal 2006 (486,250) compared to fiscal 2005 (30,000). Interest income
decreased to $2,172 for the fiscal 2006, compared to $17,854 for the fiscal 2005
due to lower cash balances on hand.

B.          
Liquidity and Capital Resources

Overview

Historically, the Company's sole source of funding has been 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 exploration
financing, when the financing is not transaction specific, is always uncertain.
There can be no assurance of continued access to significant equity funding.

---

 page 56 

Working Capital

At May 31 2007, the Company had a working capital of
$26,742,798 compared to a working capital deficit of $889,614 at May 31,
2006.

As described in Item 1.2.2 Financings on the attached
Management Discussion and Analysis for the Year Ended May 31, 2007, the Company
arranged various financings including: a $9.5 million private placement of
convertible promissory notes, a $21 million private placement equity financing,
various loan agreements, a $11 million credit facility, and a $60 million equity
financing. Please refer to Item 1.2.2 for the detailed description of each
financing activity.

At May 31, 2007, the Company had the following payment
commitments relating to the acquisition of Durnpike remaining: (a) Payment of
ZAR43 million ($6.5 million) in common shares of the Company to the Vendors and
(b) payment of ZAR30 million ($4.5 million) in cash to the Van Wyk Trust.

The Company has the following payment commitments: (a) payment
of ZAR19.2 million ($2.88 million) in cash to Folmink Delwery CC (Makoenskloof)
for plant and equipment (b) minimum lease payments of ZAR128 million ($19.2
million) in installments up to the year 2010 to various financial institutions
for plant and equipment.

Other than described above 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.

Financing Activity

$9.5 million private placement of convertible promissory
notes

In July 2006, the Company entered into agreements to complete a
$9.5 million private placement of subordinated secured convertible promissory
notes (the Notes). The Notes were to be repaid on or before March 31, 2007 and
had similar terms and conditions to the Credit Facility described in note 6 of
the attached financial statements for the year ended May 31, 2007, including
conversion rights. The Notes were subordinated to the Facility, and were secured
by a charge over all of the assets of the Company. As consideration for the
Notes, the note holders received 678,572 Common Shares, fair valued at $522,500,
of the Company on July 7, 2006 and 1,055,555 common shares, fair valued at
$522,500, of the Company on September 30, 2006. The payment on September 30,
2006 was equal to five percent of the outstanding balance owed on the Notes
divided by the average closing price of the Company's Common Shares on the TSX
Venture Exchange for the five trading days immediately preceding such issue,
less a 10% discount.

In November 2006, the Notes, with a face value of $9.5 million,
were repaid in full.

$21 million private placement financing

In November 2006, Rockwell completed a private placement of $21
million, consisting of units at $0.50 per unit (the Offering).

---

 page 57 

Each unit consisted of one Common Share (Share) in the
capital of the Company and one Share purchase warrant. Each warrant entitles the
holder to buy one common share in the capital of the Company at the exercise
price of $0.60 during the first year from completion of the financing, or at an
exercise price of $0.80 during the second year or at an exercise price of $1.00
during the third year. The third year term of the warrants is conditional upon
Rockwell achieving Tier 1 status on the TSX Venture Exchange within the first
two years.

Rockwell is using, or has used, the net proceeds from the
Offering (a) to acquire the interests and/or rights in the four alluvial diamond
properties in South Africa and the DRC, (b) to discharge the convertible
promissory notes of $9.5 million, (c) to carry out exploration and development,
and (d) for general working capital and corporate development purposes.

Loan Agreements

In January 2007, the Company entered into a $5.5 million 90 day
loan agreement (Loan) with Amarc Resources Ltd. (Amarc), a related company
by virtue of common directors and certain shareholders. The Loan bore interest
of 5% for the 90 day period. The interest could be payable in the common shares
of the Company, at Amarcs election, based upon the 10 day average closing price
of the Company immediately preceding the repayment date, less a 10% discount. In
April 2007 the Company issued 497,993 common shares, fair valued at $273,896, of
the Company to Amarc as interest payment and repaid the loan of $5.5 million in
full.

In conjunction with the Loan, the Company also entered into
separate loan agreements with two shareholders (Holders). These loan
agreements were in the amount of $1.5 million and US$5 million, and were used to
enable the Company to establish a letter of credit to facilitate the acquisition
of Saxendrift Mines (Pty) Limited (Saxendrift). If the Company was unable to
complete the acquisition of Saxendrift within 180 days, the funds would be fully
refunded. In the event that the Company conducts a private placement of equity
securities before October 31, 2007, the two shareholders would have the option
to participate in the private placement on the same terms as the other
participants.

The loan agreements of $1.5 million and US$5 million were
repaid in full by the Company in May 2007.

Financing to raise up to $60 million

In April 2007, the Company announced a private placement
whereby the Company will issue up to 115.4 million units at a price of $0.52 per
unit for aggregate proceeds of up to $60 million, comprised of approximately $50
million to be issued to investors under the brokered offering and $10 million to
be issued in the non-brokered offering.

Each unit is comprised of one common share and one share
purchase warrant exercisable at $0.70 for a 24 month period from completion.
Units issued under the brokered offering are being offered by a syndicate of
agents. Closing of the offering occurred on May 9, 2007.

The net proceeds from the offerings will be used to fund
Rockwells acquisition of the MORO from Trans Hex, expand production capacity at
its Wouterspan operation across the river from the MORO, implement improvements
at its other operations, and for general corporate purposes.

$11 million credit facility

On August 21, 2006, the Company reached an agreement with Quest
Capital Corp. (Quest) for a $6 million credit facility (the Facility). The
Facility was to be paid out of the proceeds of any future debt

---

 page 58 

or equity financing or disposition of any of the assets of the
Company, other than in the ordinary course of business, and bore interest from
March 1, 2007 at the rate of 18% per annum, calculated daily and compounded
monthly, payable on the last business day of each month. The Facility, if not
earlier converted, was to be repaid on or before May 31, 2007. The Facility was
secured by a first charge over all of the assets of the Company. In
consideration for the Facility, the Company issued to Quest 385,714 Common
Shares of the Company on August 31, 2006, and 490,909 common shares of the
Company on November 28, 2006, each fair valued at $297,000. The Facility could
be repaid at any time, without penalty. Quest had the right to convert the
facility to common shares if the Company completed an equity financing for $5
million or greater, at the greater of the price at which the financing is
conducted (less a 3% discount), subject to a minimum conversion price of $0.65
per share.

On September 1, 2006, the Company borrowed $6 million under the
Facility to facilitate the funding of Durnpikes obligations in connection with
the acquisition of 51% of the outstanding shares of Klipdam Diamond Mining
Company Limited and HC Van Wyk Diamonds (Proprietary) Limited.

In January 2007, the Company renewed and extended the Facility
(Revised Facility) to $11 million. Under the Revised Facility, Quest had the
right to convert the facility to Common Shares if the Company completed an
equity financing for $5 million or greater, at the greater of the price at which
the financing is conducted (less a 3% discount), subject to a minimum conversion
price of $0.60 per share.

The Revised Facility, if not earlier converted, was to be
repaid on or before December 21, 2007, and bore interest from March 21, 2007 at
a rate of 19% per annum payable as follows: (a) on March 21, 2007, by the
issuance 1,062,939 Common Shares of the Company at an issue price of $0.4986 per
share to pay the first three months of interest of $529,981; (b) on June 21,
2007, by the issuance of such number of Common Shares of the Company at a price
equal to the five day average closing price of the Company prior to June 21,
2007, less a 10% discount for the second three months of interest; and (c) to
December 21, 2007, the Company shall pay interest, in arrears, on the last
business day of each month. The Company issued to Quest 1,062,939 Common Shares,
fair valued at $588,688, of the Company on March 21, 2007 and the Revised
Facility of $11 million was repaid in full in May 2007 without incurring any
penalties.

Financial Instruments

Rockwell financed its activities from fiscal 2000 through
fiscal 2007 primarily through the issuance of equity shares by way of private
placement. Rockwell keeps its financial instruments denominated in Canadian
dollars and does not engage in any hedging operations with respect to currency
or in-situ minerals.

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

Not applicable.

D.Trend Information

The rough diamond market showed steady growth in demand in
2005. Prices for polished stones increased, including large stones (>2 carats
with better colour and quality) and smaller diamond segments.

---

 page 59 

In 2006, diamond prices increased 4-5% in the first three
quarters, but softened in the latter part of the year as a consequence of
increased debt levels in manufacturing centers and high energy prices,
depressing discretionary spending in key markets such as the United States of
America. Prices of larger solid diamonds continued to show solid gains on a
year-over-year basis.

During 2007 the international diamond market showed continued
strong demand and concomitant increases in diamond prices. Worldwide diamond
supply showed a flat or downward trend in terms of carats. As a consequence of
demand effectively starting to outstrip supply, prices of rough goods greater
than 2carats in size showed strong increases in the first part of the year which
was also reflected in polished prices for large goods. For example round
polished diamonds, 4 carats and 5 carats in size, and representing about 1% of
the market by value, continue to post solid price gains, year-over-year.

The continued price appreciation of large stones is significant
in respect to the production mix from the projects being acquired by Rockwell in
the Kimberley area of South Africa, which comprises a significant component of
large (greater than 2 carats, including 10 carat) stones. Demand for large high
quality diamonds such as those produced by Rockwell remains particularly strong
and for the first 6 months of 2007 the Company has achieved an average price of
US$1500 per carat.

Interestingly there has also been appreciation in the price of
small diamonds typically referred to as Indian goods. This reflects growing
shortages in these qualities and sizes due to declining world production as long
standing mines in Russia, South Africa and West Australia reach the end of their
lives and either have to go underground with reduced production, or close down
as has been in the case for the Kimberley (South Africa) underground mines.

Rockwell is confident that given the growing world wide
shortage in diamonds, particularly in large diamonds (+2 carats), that it will
continue to benefit from price appreciation in the large and high value goods
that it produces from its alluvial mining operations in South Africa.

Overall, copper prices have been increasing since late 2003,
averaging US$3.03/lb in 2006. Prices dropped slightly in early 2007, but have
increased again since mid February. The average price in 2007 to the end of
October was approximately US$3.24/lb.

The Company will continue to make expenditures in fiscal 2007
to keep its Ricardo property in good standing, and has plans to invest in
exploration and development of its recent alluvial diamond acquisitions, as
discussed in Items 4.B and 4.D of this Annual Report. These expenditures will
result in a decrease in the Company's cash and working capital position unless
further equity financings are completed during 2007, and there is no assurance
that the Company will be successful in acquiring such financing.

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.

---

 page 60 

F.          
Tabular Disclosure of Contractual Obligations

As at May 31, 2007, Rockwell had the following types of
contractual obligations: capital lease obligations, purchase obligations, or any
other long term liabilities required to be reflected on its balance sheet under
Cdn GAAP.

Payment due by periodType of Contractual Obligation
      Total
      Less than 1 Year
      1 - 3 Years
      3 - 5 Years
      More than 5
        YearsCapital (Finance) Lease Obligations
      $ 17.1m
      $ 7.8m
      $ 9.3m
      
      Purchase Obligations
      9.4m
      9.4m
      
      
      Other Long-Term Liabilities Reflected on the Company's Balance
        Sheet under the GAAP of the primary financial statements
      
      
      
      
      Total
      $ 26.5m
      $ 17.2m
      $ 9.3m
      
      


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 61 

ITEM
6.           DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES

A.          
Directors and Senior Management

Name, Position and Place of Residence
    Position
    Period a Director of theIssuerDavid CopelandVancouver, Canada
    Chairman and Director
    since September 2006President, Chief
      Executive Officer and Director
    since August 2006John BristowPretoria, South AfricaChief Financial Officer
      and Director
    since September 2007Dominique de la RochePretoria, South AfricaPatrick BartlettMoreleta Park,
      South Africa
    Director
    since September 2007Mark BristowBryanston, South
      Africa
    Director
    since December 2006Rene G. CarrierNorth Vancouver,
      Canada
    Director
    since April 1993Scott D. CousensVancouver, Canada
    Director
    since November 2000Douglas B. SilverEnglewood,
      United States of America
    Director
    since March 1998


Principal Occupation of Current Management of
Rockwell

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. His principal occupation is President
and Director of CEC Engineering Ltd., a consulting engineering firm that directs
and co-ordinates advanced technical programs for exploration on behalf of
companies for which Hunter Dickinson Inc. provides services. He is also a
director of Hunter Dickinson Inc.

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

Company
    Positions Held
    From
    ToAmarc Resources Ltd.
    Director
    September 1995
    PresentAnooraq Resources Corporation
    Director
    September 1996
    September 2004Continental Minerals Corporation
    Director
    November 1995
    Present


---

 page 62 

Company
    Positions Held
    From
    ToFarallon Resources Ltd.
    Director
    December 1995
    PresentGreat Basin Gold Ltd.
      Director
      February 1994
      PresentNorthern Dynasty Minerals Ltd.
    Director
    June 1996
    PresentRockwell Diamonds Inc.
      Director
      September 2006
      PresentChief Executive Officer
      September 2006
      September 2007Chairman
      September 2007
      PresentTaseko Mines Limited
    Director
    March 1994
    Present


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

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

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

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

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

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

Trans Hex Groupin 2000.

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

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

---

 page 63 

Most recently he was CEO of Kalahari Diamonds plc in Botswana,
which successfully merged with Petra Diamonds in 2005. Dr. Bristow is, or was
within the past five years, an officer and/or director of the following public
companies:

Company
    Positions Held
    From
    ToOropa Limited
      Director
      December 2000
      April 2004Rockwell Diamonds Inc.
    Director
    August 2006
    PresentPresident
    August 2006
    PresentChief Operating Officer
    August 2006
    September 2007Chief Executive Officer
    September 2007
    Present


DOMINIQUE DE LA ROCHE  Chief Financial
Officer and Director

Dominique de la Roche is a Chartered Accountant with an Honours
Degree in Accounting Sciences from the University of South Africa (UNISA), and a
Higher Diploma in Tax from UNISA. He completed his articles at Price Waterhouse,
and subsequently worked for Vaal Reefs Exploration & Mining Company (Anglo
American), Standard Corporate and Merchant Bank in Johannesburg, and BCL (Ltd)
in Botswana and was Financial Director at Kairos Industrial Holdings/Witbank
Brickworks.

Mr. de la Roche has extensive operational experience in the
senior and junior mining sectors, finance and corporate environments, as well as
expertise in the South African mining taxation regime. He has gained past
working experience in mining activities and legislative environments within
different southern African countries.

Mr. de la Roche replaced Jeffrey Mason as CFO and joined the
Board of Directors effective September 26, 2007. Mr. de la Roche is not a
director of any other public company.

Company
    Positions Held
    From
    ToRockwell Diamonds Inc.
    Chief Financial Officer
    May 2007
    PresentDirector
    September 2007
    PresentKairos Industrial Holdings Ltd.
    Director
    December 2005
    November 2006


DR. PATRICK BARTLETT  Director

Dr. Bartlett, a geologist and mining engineer with extensive
experience in exploration evaluation and mining of alluvial diamond and
kimberlite deposits, joined the Board of Directors as an Independent Director on
September 26, 2007.

Patrick Bartlett holds a BSc Honours degree from Rhodes
University, and MSc in Minerals Exploration from London University, a BA in
Economics and Communications from the University of South Africa, and a PhD in
Mining Engineering from the University of Pretoria. He worked for De Beers for
some 38 years and during that time gained experience in the evaluation and
development of West Coast alluvial diamond deposits, undertook feasibility work
of the Jwaneng mine in Botswana and other diamond mines, was the mine geologist
of the Kimberley Central Mines, and later was the Chief geologist of the
Cullinan diamond mine.

---

 page 64 

Mr. Bartlett has extensive experience in grade control, size
frequency analysis and mineral resource management, and processing and recovery
methods as applied to diamond deposits. He is an internationally recognized
expert on block cave mining methods and since his retirement from De Beers in
2003, he has consulted to many of the world leading diamond and base metal
mining companies.

Mr. Bartlett is a director of Rockwell Diamonds Inc. since
September 2007. He has not been an officer or director of any other public
companies in the past five years.

DR. MARK BRISTOW Director

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

From 1992 to 1995, Dr. Bristow had executive responsibility for
the exploration and new business activities of Randgold & Exploration. In
August 1995 he was appointed Managing Director and subsequently, in October
1995, CEO of Randgold Resources, which he helped establish as Randgold &
Explorations international mining and exploration subsidiary and subsequently
built it into an independent, public gold mining and exploration company which
is listed on the London Stock Exchange as well as NASDAQ in New York. He has
held director positions on the boards of: Harmony Gold Mining Company Limited;
Durban Roodepoort Deep, Limited; Blyvooruitzicht Gold Mining Company Limited;
Buffelsfontein Gold Mines Limited; and The Grootvlei Proprietary Mines Limited
and until recently AFPLATS Plc., the AIM listed, junior Platinum company.
Besides his affiliation with Randgold, Dr. Bristow was the Chairman of SOMISY
(Syama) until that company was sold to Resolute in 2004. He is currently the
Chairman of the SOMILO Board of Directors (Loulo Gold Mining Company), a
non-executive Director of Morila Limited and a member of the President of
Senegals Economic Advisory Committee as well as the President of Malis
advisory council. He is also a fellow of the Geological Society of South Africa
and he holds a PhD in geology from Natal University.

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

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


RENE CARRIER  Director

Rene Carrier is a past Vice-President of Pacific International
Securities Inc. where he worked for ten years, until 1991. Since that time he
has been President of Euro-American Capital Corporation, a private company which
specializes in restructuring, administration, and raising venture capital funds
for junior companies.

---

 page 65 

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

Company
    Positions Held
    From
    ToAcrex Ventures Ltd.
      Director
      September 2000
      September 2003Chartwell Technology Inc.
    Director
    June 1991
    April 2007Continental Minerals Corporation
      Director
      February 2001
      PresentInternational Royalty Corporation
    Lead Director
    June 2003
    PresentQuartz Mountain Resources Ltd.
      Director
      January 2000
      PresentPresident
      June 2005
      PresentRockwell Diamonds Inc.
    Director
    April 1993
    Present


SCOTT COUSENS  Director

Scott Cousens provides management, technical and financial
services to a number of publicly traded companies. Mr. Cousens focus since 1991
has been the development of relationships within the international investment
community. Substantial financings and subsequent corporate success has
established strong ties with North American, European and Asian investors.

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

Company
    Positions Held
    From
    ToAmarc Resources Ltd.
      Director
      September 1995
      PresentAnooraq Resources Corporation
    Director
    September 1996
    PresentContinental Minerals Corporation
      Director
      June 1994
      PresentFarallon Resources Ltd.
    Director
    December 1995
    April 2007Great Basin Gold Ltd.
      Director
      March 1993
      November 2006Northern Dynasty Minerals Ltd.
    Director
    June 1996
    PresentRockwell Diamonds Inc.
      Director
      November 2000
      PresentTaseko Mines Limited
    Director
    October 1992
    Present


DOUGLAS SILVER  Director

Douglas Silver, the president and owner of Balfour Holdings
Inc., holds a Bachelor of Geology and Zoology degree from the University of
Vermont and a Masters degree in Economic Geology from the University of Arizona.
Mr. Silver, who is based in Englewood, Colorado, has had twenty years of
professional experience in the base and precious metals industry ranging from
exploration geologist to activities in the areas of corporate business
development, capital raising and investor relations.

Mr. Silver has been a director of Rockwell since March 1998 and
is, or was within the past five years, an officer and/or director of the
following public companies:

Company
    Positions Held
    From
    ToRockwell Diamonds Inc.
    Director
    March 1998
    Present


---

 page 66 

Company
    Positions Held
    From
    ToInternational Royalty Corporation
    Chairman and CEO
    February 2005
    PresentMirasol Resources Ltd
    Director
    February 2005
    Present


B.          
Compensation

During Rockwells financial year ended May 31, 2007 the
aggregate direct remuneration paid or payable to Rockwells directors and senior
officers by Rockwell and its subsidiaries, all of whose financial statements are
consolidated with those of Rockwell, was C$705,004. This figure includes any
portion of remuneration received by the named person as an officer or employee
of HDI that is attributable to Rockwells affairs.

David Copeland, Chairman and former Chief Executive Officer,
John Bristow, President, Chief Executive Officer and Chief Operating Officer,
Ronald W. Thiessen, former Chairman, President and Chief Executive Officer,
Jeffrey Brenner, Marketing and Sales Manager, Jeffrey R. Mason, former Chief
Financial Officer, and Dominique de la Roche, Chief Financial Officer, are each
a Named Executive Officer of Rockwell for the purposes of the following
disclosure.

The compensation paid to the Named Executive Officers during
the Company's three most recently completed financial years is as set out
below:

Summary Compensation Table

NAMED EXECUTIVE
        OFFICERS Name and Principal Position
      Year
      Annual Compensation
      Long Term Compensation
      **All Other** (C$)Awards
      PayoutsSalary
        (C$)
      Bonus (C$)
      Other Annual
        Compensation (C$)
      Securities Under
        Options Granted (#)
      Shares or Units Subject
        to Resale Restrictions (C$)
      LTIP Payouts(C$)John Bristow(1) 
        Director, President and 
        Chief Executive Officer, 
        Chief Operating Officer
      2007 
        2006 
        2005
      169,244 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilDavid Copeland(1) 
        Director, Chairman and 
        former Chairman and Chief 
        Executive Officer
      2007 
        2006 
        2005
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      187,225 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilRonald W. Thiessen(1) 
        former Director, Chairman, 
        President and Chief 
        Executive Officer
      2007 
        2006 
        2005
      47,633 
        29,016 
        10,834
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilJeffrey Brenner(1) 
        Marketing and Sales 
        Manager, and former 
        Director
      2007 
        2006 
        2005
      140,310 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilDominique de la Roche (1)(2) 
        Director and Chief 
        Financial Officer
      2007 
        2006 
        2005
      70,105 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilJeffrey R. Mason(1)(2) 
        former Director and Chief 
        Financial Officer
      2007 
        2006 
        2005
      28,940 
        18,769 
        8,418
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil


---

 page 67 

Notes:

| | 1. | Effective September 26, 2007 Mr. Thiessen resigned as
      Director and Chairman, Mr. Mason resigned as Director, Mr. Brenner
      resigned as Director, Mr. de la Roche was appointed as a Director, Mr.
      Copeland resigned as Chief Executive Officer and was appointed as
      Chairman, and Mr. Bristow was appointed as Chief Executive
  Officer.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                
| | 2. | Effective May 2007 Mr. Mason retired as Chief Financial
      Officer and Mr. de la Roche was appointed as Chief Financial
    Officer.                                                                                                                                                                                                                        

No share options were granted to the Named Executive Officers
during the year ended May 31, 2007. No share options were exercised by the Named
Executive Officers during the year ended May 31, 2007. The value of outstanding
options held by the Named Executive Officers at May 31, 2007, was nil.

The share options granted to the Named Executive Officers
subsequent to May 31, 2007 were as follows:

NAMED EXECUTIVE OFFICERS Name
    Securities Under Options
      Granted (#)
    Exercise or Base Price
      ($/Security)
    Market Value of Securities Underlying
      Options on the Date of Grant ($/Security)
    Expiration DateJohn Bristow
    600,000
    $0.62
    $0.62
    September 24, 2012David Copeland
    500,000
    $0.62
    $0.62
    September 24, 2012Dominique de la Roche
    300,000
    $0.68
    $0.68
    July 10, 2010Ronald W. Thiessen
    450,000
    $0.62
    $0.62
    September 24, 2012Jeffrey Brenner
    350,000
    $0.62
    $0.62
    September 24, 2012Jeffrey R. Mason
    400,000
    $0.62
    $0.62
    September 24, 2012Hennie Van Wyk
    300,000
    $0.62
    $0.62
    September 24, 2012


Termination of Employment, Change in Responsibilities and
Employment Contracts

There is no written employment contract between the Company and
any Named Executive Officer, except for an agreement with Mr. Dominique de la
Roche dated November 22, 2006. Mr. de la Roches employment commenced effective
January 1st , 2007 an under his agreement he is required to work full time for
the Company and is eligible to receive stock options and a performance based
bonus at the discretion of the Compensation Committee and the Board of Directors
and other standard benefits made available by the Company. Please see
Compensation of Executive Officers.

There are no compensatory plan(s) or arrangement(s), with
respect to the Named Executive Officers resulting from the resignation,
retirement or any other termination of employment of the officers employment or
from a change of a Named Executive Officers Responsibilities following a change
in control.

---

 page 68 

Compensation of Directors

Directors who are executive officers, employees or consultants
of the Company are compensated in those capacities and do not receive any
additional fees.

Independent directors of the Company were paid an annual
directors fee of $7,200 based on market rates.

No options to purchase common shares under the Option Plan of
the Company were granted to directors during the year. Subsequent to May 31,
2007, the following options were granted to directors:

Name of Director
    Securities Under Options Granted
      (#)
    Exercise or Base Price
      ($/Security)
      Market Value of Securities 
        Underlying
      Options on the Date of Grant ($/Security)
    Expiration DateD. Mark Bristow
    450,000
    $0.62
      $0.62
    September 24, 2012John Bristow
    600,000
    $0.62
      $0.62
    September 24, 2012Rene Carrier
    300,000
    $0.62
      $0.62
    September 24, 2012David Copeland
    500,000
    $0.62
      $0.62
    September 24, 2012Scott Cousens
    450,000
    $0.62
      $0.62
    September 24, 2012Dominique de la Roche
    300,000
    $0.68
      $0.68
    July 10, 2010Douglas Silver
    300,000
    $0.62
      $0.62
    September 24, 2012


Securities Held By Insiders

As at November 28, 2007 the directors and officers of Rockwell
and their affiliates held as a group, directly and indirectly, own or control an
aggregate of 6,349,668 common shares of the Company (3.3%), or 12,345,668 common
shares on a fully diluted basis (6.5%) To the knowledge of the directors and
officers of the Company, as at such date, there were no persons holding more
than 10% of the issued common shares. The value of outstanding options held by
the Named Executive Officers at May 31, 2007, was nil.

**C.****Board Practices**

All directors were elected at the annual general meeting held
in November 2007, and have a term of office expiring at the next annual general
meeting of Rockwell expected to be held in November 2008. The period during
which each director has served as a director is disclosed in Item 6(A) herein.
All officers have a term of office lasting until their removal or replacement by
the Board of Directors.

There are no contracts or arrangements under which directors
are compensated or provided benefits upon termination of employment.

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 69 

Committee
    MembershipAudit Committee
    Rene Carrier Douglas Silver
      Patrick BartlettNominating and Governance Committee
    Rene Carrier Pat Bartlett
      Scott CousensCompensation Committee
    Mark Bristow David Copeland
      Pat Bartlett Scott CousensTechnical Committee
    Mark Bristow Pat Bartlett
      David Copeland


Messrs. Rene G. Carrier, Douglas Silver and Patrick Bartlett
are members of Rockwell's audit committee. 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.

D.          
Employees

At November 30, 2007, Rockwell has 697 direct employees. The
Company's administrative and operational functions are primarily administered in
South Africa (see Item 7B).

E.          
Share Ownership

Security holdings of the Company's directors and senior
management (as at November 28, 2007), as disclosed on www.sedi.ca.

Name of Insider(1)
    Shares Beneficially Owned or
      Controlled(2)
    As a percentage of outstanding
      sharesD. Mark Bristow
    2,804,000 shares
    1.5%John W. Bristow
    600,000 shares
    0.3%Rene G. Carrier
    608,359 shares (3)
    0.3 %David Copeland
    1,916,373 shares
    1.0%Scott D. Cousens
    4,669,436 shares
    2.5%Dominique de la Roche
    300,000 shares
    0.2%Gordon Fretwell
    1,147,500 shares
    0.6%Douglas B. Silver
    300,000 shares
    0.2%Patrick Bartlett
    Nil
    Nil


Notes:

|(1) | The information as to principal occupation, business or
      employment and Shares beneficially owned or controlled 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

 page 70 

|(2) | The number of Shares beneficially owned by the above
      nominees for directors, directly or indirectly, is based on information
      furnished by the Company and by the nominees themselves.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                  
|(3) | Certain of these shares are held by Euro American Capital
      Corporation, a private company that is wholly owned by Mr.
  Carrier.                                                            

At the Company's Annual and Extraordinary General Meeting held
in November 2007, shareholders of the Company approved a Share Incentive Plan
("2007 Plan") in accordance with the policies of the TSX Venture Exchange. Under
the 2007 Plan, a maximum of 10% of the issued and outstanding shares of the
Company at the time an option is granted, less the number of shares reserved for
issuance in the 2007 Plan, are reserved for issuance as options to be granted at
the discretion of the Company's board of directors to eligible optionees under
the 2007 Plan. The exercise price of each option normally equals or exceeds the
market price of the Company's shares as calculated on the date of grant. Options
granted are for a term of no greater than five years.

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.

At November 28, 2007, an aggregate of 7,645,000 common shares
have been reserved for issuance pursuant to the 2007 Plan:

ExerciseExpiry
      date
    price
    Number
    NumberShare purchase options
    February 29, 2008
    $ 0.42
    175,000March 28, 2008
    $ 0.50
    150,000July 10, 2010
    $ 0.68
    300,000September 24, 2012
    $ 0.62
    5,905,500November 14, 2012
    $ 0.63
    1,114,500
    7,645,000


---

 page 71 

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 the Company does not have
knowledge or access to information about of the beneficial owners thereof. To
the best of its knowledge, the Company is not directly or indirectly owned or
controlled by a corporation or foreign government. As of November 28, 2007,
Rockwell had authorized an unlimited number of common shares without par value
of which 189,997,099 were issued and outstanding.

"Beneficial ownership" means the sole or shared power to vote
or direct the voting or to dispose or direct the disposition of any security. A
person is deemed to have beneficial ownership of any securities that such person
has a right to acquire within 60 days of November 28, 2007 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.

As of November 28, 2007, other than the security holdings of
directors and senior management disclosed in Item 6.E., the only registered
holders of 5% or more of the common shares of the Company are as follows:

Shareholder Nameand
      Address(1)
    Number ofShares Held
    Percentage ofIssuedCommonSharesThe Canadian Depository for Securities
      Limited ("CDS") 25 The Esplanade PO Box 1038 Stn A Toronto, ON
      M5W 1G5
    160,151,285
    84.3%Fortis Global Custody Services Amsterdam,
      Netherlands
    9,400,000
    5.0%


|(1) | The above information was supplied to the Company by the
      shareholders and from the insider reports available at
  www.sedi.ca.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

As of November 28, 2007, directors and officers of Rockwell in
total (8 persons) own or control an aggregate of 6,349,668 common shares of the
Company (3.3%), or 12,345,668 common shares on a fully diluted basis (6.5%) .
These directors or officers do not have any different voting rights with respect
to the common shares held by them. Under the British Columbia Securities
Act, insiders (generally officers, directors, holders of 10% or more of the
Company's shares) are required to file insider reports of changes in their
ownership in the first 10 days following a trade in Rockwell's securities. Under
British Columbia securities laws, insider trading information is available at
www.sedi.ca

---

 page 72 

As at November 28, 2007, 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.

|                |                      |                  | Percentage
|--------------- | -------------------- | ---------------- | ----------
|                | Number of registered | Number of common | of total  
|Location        | shareholders         | shares held      | shares    
|Canada          | 34                   | 167,213,710      | 88.0%     
|United States   | 20                   | 9,071,269        | 4.8%      
|Other countries | 138                  | 13,712,120       | 7.2%      
|Total           | 192                  | 189,997,099      | 100%      

To management's knowledge, there are no arrangements the
operation of which may at a subsequent date result in a change of control of
Rockwell. The purchase of Durnpike and its related southern African operating
properties is expected to cause significant dilution, but a change of control
resulting from this purchase is not anticipated.

B.          
Related Party Transactions

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 during the fiscal year ended May
31, 2007 except as follows:

|(a) | Arrangements with Hunter
      Dickinson Inc.                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                           
|    | The Company is party to the geological and administrative
      services agreement with HDI dated for reference January 1, 2001, as
      described under Item 4.B of this Annual Report.                                                                                 
|    |                                                                                                                                                                                                                                                                           
|    | During the fiscal year ended May 31, 2007, the Company
      paid $1,988,027 (May 31, 2006  $578,134) for such services and cost
      reimbursements.                                                                                                                   
|    |                                                                                                                                                                                                                                                                           
|(b) | Gordon J. Fretwell Law Corporation                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                           
|    | Gordon J. Fretwell Law Corporation is a private company
      controlled by an officer of the Company, Gordon Fretwell, which provides
      legal services to the Company.                                                                                               
|    |                                                                                                                                                                                                                                                                           
|(c) | Euro-American Capital Corporation                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                           
|    | Euro-American Capital Corporation is a private company
      controlled by a director, Rene Carrier, that provides management services
      to the Company During the year ended May 31, 2006, the Company paid
      $18,765 (May 31, 2005  $18,630) for such services.
|    |                                                                                                                                                                                                                                                                           
|(d) | CEC Engineering Ltd.                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                           
|    | CEC Engineering Ltd. is a private company owned by David
      Copeland, Chairman and a director of the Company, which provides
      engineering and project management services at market rates.                                                                        

---

 page 73 

|(e) | J Bristow Engineering and Consulting
    Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company paid $115,320 to John Bristow, President,
      Chief Executive Officer and a director of the Company, for engineering
      consulting services at market rates.                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(f) | Jeffrey B Traders CC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Jeffrey B Traders CC is a private company controlled by
      Jeffrey Brenner, a director of the Company, which provides management and
      marketing services to the Company at market rates.                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(g) | Seven Bridges Trading                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Seven Bridges Trading is a wholly owned subsidiary of
      Randgold Resources, a public company where Mark Bristow, a director of the
      Company, serves in an executive capacity. Seven Bridges Trading provides
      administrative and management services at market rates to the Companys
      South African subsidiaries.                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(h) | Cashmere Trading                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Cashmere Trading is a private company owned by Hennie Van
      Wyk, an officer of the Company, which provides helicopter services at
      market rates.                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(i) | Flawless Diamonds Trading House                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Flawless Diamonds Trading House is a private company of
      which certain directors and officers of the Company, namely, Messrs.
      Brenner, Bristow and Van Wyk, are shareholders. Flawless is a registered
      diamond broker and purchases diamonds from the Company at market
      prices.                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(j) | Arrangement with Durnpike Investments (Pty)
      Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | In conjunction with the Companys Definitive Agreement to
      acquire all of the shares and loans in Durnpike Investments (Pty) Limited
      from eight individuals (the Vendors), of which three individuals from
      the Vendors were appointed to the Companys Board of Directors (Messr.
      Brenner, M.Bristow, J.Bristow).                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(k) | Plateau Resources (Proprietary) Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Plateau Resources (Proprietary) Limited is a wholly-owned
      subsidiary of Anooraq Resources Corporation, a Canadian company which has
      certain directors in common with the Company. Plateau shares certain
      premises and other facilities with the Company pursuant to a cost-sharing
      arrangement with no profit element involved.                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(l) | Banzi Trade 26 (Pty) Ltd                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Banzi Trade 26 (Pty) Ltd is 50% owned by Hennie Van Wyk
      Family Trust, 30% by Ronnie Visagie a member of the Van Wyk family and 20%
      by Bokomoso Trust. Banzi is a private company focused on providing self
      sustaining programs to local communities. During the year, Banzi provided
      the Company with building materials amounting to $27,000 at market rates.
      Rockwell also wrote off an amount receivable from Banzi amounting to
      $224,942 due to the local development projects not being able to repay
      these amounts.

---

 page 74 

|(m) | Jakes Tyres                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                            
|    | Jakes Tyres is a private company with certain directors
      and officers in common with the Company, that provides consumable
      materials at market rates.           
|    |                                                                                                                                                                            
|(n) | AA Van Wyk                                                                                                                                                                 
|    |                                                                                                                                                                            
|    | AA Van Wyk is a private company owned by a party related
      to the directors and officers of the Company, which provides contract
      mining services at market rates.

C.          
Interest of Experts and Council

Not Applicable.

---

 page 75 

ITEM
8.           FINANCIAL
INFORMATION

|A. | Consolidated Statements and Other Financial
      Information                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                             
|   | See Item 17 Financial Statements.                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                             
|   | Dividend Policy                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                             
|   | Rockwell has not paid any dividends on its outstanding
      common shares since its incorporation and does not anticipate that it will
      do so in the foreseeable future. All funds of the Company are being
      retained for exploration of its projects.                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                             
|B. | Significant Changes                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                             
|   | There have been no significant changes to the
      accompanying consolidated financial statements since May 31, 2007. On
      January 31, 2007, the Company acquired 100% of Durnpike which had acquired
      51% of Klipdam/Holpan (see Item 4), and consequently commenced
      consolidating the balance sheets and income statements of Durnpike at that
      date.

---

 page 76 

ITEM
9.           THE OFFER AND
LISTING

A.          
Offer and Listing Details

Trading Markets

TSX
        Venture Exchange
      
      OTC
        Bulletin BoardSymbol=RCW
      
      Symbol=RCKVFCanadian
        Dollars
      
      U.S.
        DollarsHigh
      Low
      
      High
      LowFive most recent financial yearsFiscal 2003
      $0.88
      $0.08
      
      $0.56
      $0.04Fiscal 2004
      $1.28
      $0.16
      
      $1.00
      $0.24Fiscal 2005
      $0.68
      $0.28
      
      $0.52
      $0.20Fiscal 2006
      $0.70
      $0.28
      
      $0.13
      $0.05Fiscal 2007
      $0.85
      $0.38
      
      $0.80
      $0.25Two most recent financial years by quarterFiscal 2006Quarter ended August 31, 2005
      $0.44
      $0.28
      
      $0.37
      $0.24Quarter ended November 30, 2005
      $0.52
      $0.28
      
      $0.42
      $0.22Quarter ended February 28, 2006
      $0.55
      $0.28
      
      $0.56
      $0.23Quarter ended May 31, 2006
      $0.70
      $0.55
      
      $0.64
      $0.40Fiscal 2007Quarter ended August 31, 2006
      $0.85
      $0.50
      
      $1.98
      $050Quarter ended November 30, 2006
      $0.71
      $038
      
      $0.70
      $0.25Quarter ended February 28, 2007
      $0.70
      $0.49
      
      $0.58
      $0.40Quarter ended May 31, 2007
      $0.78
      $0.50
      
      $0.70
      $0.42Latest six monthsJune 2007
      $0.70
      $0.60
      
      $0.66
      $0.57July 2007
      $0.80
      $0.68
      
      $0.75
      $0.59August 2007
      $0.75
      $0.62
      
      $0.72
      $0.60September 2007
      $0.71
      $0.58
      
      $0.65
      $0.55October 2007
      $0.70
      $0.61
      
      $0.74
      $0.60November 2007
      $0.70
      $0.55
      
      $0.73
      $0.55


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

---

 page 77 

B.          
Plan of Distribution

Not applicable.

C.          
Markets

The shares of Rockwell trade in Canada on the TSX Venture
Exchange ("TSX Venture"), in South Africa on the Johannesburg Stock Exchange
(JSE) from November 28, 2007 and are quoted on the National Association of
Securities Dealers OTC Bulletin Board ("OTCBB").

D.          
Selling Shareholders

Not applicable.

E.          
Dilution

Not applicable.

F.          
Expenses of the Issue

Not applicable.

---

 page 78 

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, no fraud related convictions in the previous five years and a majority
of

---

 page 79 

directors must be ordinarily resident in Canada. There is no
mandatory retirement age either under Rockwell's articles or under the BCA.

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

Rights and Restrictions attached to Shares

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

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

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

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

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

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

Notwithstanding any other provisions of the articles should any
dividend result in any shareholders being entitled to a fractional part of a
share of Rockwell, the directors shall have the right to pay such shareholders
in place of that fractional share, the cash equivalent thereof calculated on the
par value thereof, or in the case of shares without nominal or par value,
calculated on the price or consideration for

---

 page 80 

which such shares were or were deemed to be issued, and shall
have the further right and complete discretion to carry out such distribution
and to adjust the rights of the shareholders with respect thereto on as
practical and equitable a basis as possible including the right to arrange
through a fiscal agent or otherwise for the sale, consolidation or other
disposition of those fractional shares on behalf of those shareholders of
Rockwell.

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

Changes to Rights of Common Shareholders

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

Shareholders Meetings

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

Redemption

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

Rockwell has no redeemable securities authorized or issued.

---

 page 81 

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.)

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 material contracts are included in the exhibits list
in item 19.

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.

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 page 82 

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) 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.

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 page 83 

E.          
Taxation

Certain Canadian Federal Income Tax Consequences

The discussion under this heading summarizes the principal
Canadian federal income tax consequences of acquiring, holding and disposing of
shares of common stock of Rockwell for a shareholder of Rockwell who is not a
resident of Canada but is a resident of the United States and who will acquire
and hold shares of common stock of Rockwell as capital property for the purposes
of the Income Tax Act (Canada) (the "Canadian Tax Act"). This summary
does not apply to a shareholder who carries on business in Canada through a
"permanent establishment" situated in Canada or performs independent personal
services in Canada through a fixed base in Canada if the shareholder's holding
in Rockwell is effectively connected with such permanent establishment or fixed
base. This summary is based on the provisions of the Canadian Tax Act and the
regulations thereunder and on an understanding of the administrative practices
of Canada Revenue Agency, and takes into account all specific proposals to amend
the Canadian Tax Act or regulations made by the Minister of Finance of Canada as
of the date hereof. It has been assumed that there will be no other relevant
amendment of any governing law although no assurance can be given in this
respect. This discussion is general only and is not, nor is it intended to
provide a detailed analysis of the income tax implications of any particular
shareholder's interest. Investors are advised to obtain independent advice from
a shareholder's own Canadian and U.S. tax advisors with respect to income tax
implications pertinent to their particular circumstances.

The provisions of the Canadian Tax Act are subject to income
tax treaties to which Canada is a party, including the Canada-United States
Income Tax Convention (1980), as amended (the "Convention").

Dividends on Common Shares and Other Income

Under the Canadian Tax Act, a non-resident of Canada is
generally subject to Canadian withholding tax at the rate of 25 percent on
dividends paid or deemed to have been paid to him or her by a corporation
resident in Canada. Rockwell is responsible for withholding of tax at the
source. The Convention limits the rate to 15 percent if the shareholder is a
resident of the United States and the dividends are beneficially owned by and
paid to such shareholder and to 5 percent if the shareholder is also a
corporation that beneficially owns at least 10 percent of the voting stock of
the payor corporation.

The amount of a stock dividend (for tax purposes) would
generally be equal to the amount by which the paid up or stated capital of
Rockwell had increased by reason of the payment of such dividend. Rockwell will
furnish additional tax information to shareholders in the event of such a
dividend. Interest paid or deemed to be paid on Rockwell's debt securities held
by non-Canadian residents may also be subject to Canadian withholding tax,
depending upon the terms and provisions of such securities and any applicable
tax treaty.

The Convention generally exempts from Canadian income tax
dividends paid to a religious, scientific, literary, educational or charitable
organization or to an organization constituted and operated exclusively to
administer a pension, retirement or employee benefit fund or plan, if the
organization is a resident of the United States and is exempt from income tax
under the laws of the United States.

Dispositions of Common Shares

Under the Canadian Tax Act, a taxpayer's capital gain or
capital loss from a disposition of a share of common stock of Rockwell is the
amount, if any, by which his or her proceeds of disposition exceed (or are
exceeded by, respectively) the aggregate of his or her adjusted cost base of the
share and reasonable expenses of disposition. The capital gain or loss must be
computed in Canadian currency using a weighted average adjusted cost base for
identical properties. The capital gains net of losses included in income are as
follows. For gains net of losses realized before February 28, 2000, as to 75%.
For gains

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 page 84 

net of losses realized after February 27, 2000 and before
October 18, 2000, as to 66 2/3%. For gains net of losses realized after October
17, 2000, as to 50%. There are special transitional rules to apply capital
losses against capital gains that arose in different periods. The amount by
which a shareholder's capital loss exceeds the capital gain in a year may be
deducted from a capital gain realized by the shareholder in the three previous
years or any subsequent year, subject to certain restrictions in the case of a
corporate shareholder.

Under the Canadian Tax Act, a non-resident of Canada is subject
to Canadian tax on taxable capital gains, and may deduct allowable capital
losses, realized on a disposition of "taxable Canadian property." Shares of
common stock of Rockwell will constitute taxable Canadian property of a
shareholder at a particular time if the shareholder used the shares in carrying
on business in Canada, or if at any time in the five years immediately preceding
the disposition 25% or more of the issued shares of any class or series in the
capital stock of Rockwell belonged to one or more persons in a group comprising
the shareholder and persons with whom the shareholder and persons with whom the
shareholder did not deal at arm's length and in certain other circumstances.

The Convention relieves United States residents from liability
for Canadian tax on capital gains derived on a disposition of shares unless

(a) the value of the shares is derived
principally from "real property" in Canada, including the right to explore for
or exploit natural resources and rights to amounts computed by reference to
production,

(b) the shareholder was resident in
Canada for 120 months during any period of 20 consecutive years preceding, and
at any time during the 10 years immediately preceding, the disposition and the
shares were owned by him when he or she ceased to be resident in Canada, or

(c) the shares formed part of the
business property of a "permanent establishment" that the holder has or had in
Canada within the 12 months preceding the disposition.

United States Tax Consequences

United States Federal Income Tax Consequences

The following is, in the opinion of Rockwell after consultation
with its professional advisors, a discussion of material United States federal
income tax consequences, under current law, generally applicable to a U.S.
Holder (as hereinafter defined) of common shares of Rockwell. This discussion
does not address all potentially relevant federal income tax matters and it does
not address consequences peculiar to persons subject to special provisions of
federal income tax law, such as those described below as excluded from the
definition of a U.S. Holder. In addition, this discussion does not cover any
state, local or foreign tax consequences, (see "Taxation  Canadian Federal
Income Tax Consequences" above). Accordingly, holders and prospective holders of
common shares of Rockwell are urged to consult their own tax advisors about the
specific federal, state, local, and foreign tax consequences to them of
purchasing, owning and disposing of common shares of Rockwell, based upon their
individual circumstances.

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

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 page 85 

U.S. Holders

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

Distribution on Common Shares of Rockwell

In general, U.S. Holders receiving dividend distributions
(including constructive dividends) with respect to common shares of Rockwell are
required to include in gross income for United States federal income tax
purposes the gross amount of such distributions, equal to the U.S. dollar value
of such distributions on the date of receipt (based on the exchange rate on such
date), to the extent that Rockwell has current or accumulated earnings and
profits, without reduction for any Canadian income tax withheld from such
distributions. Such Canadian tax withheld may be credited, subject to certain
limitations, against the U.S. Holder's federal income tax liability or,
alternatively, may be deducted in computing the U.S. Holder's federal taxable
income by those who itemize deductions. (See more detailed discussion at
"Foreign Tax Credit" below). To the extent that distributions exceed current or
accumulated earnings and profits of Rockwell, they will be treated first as a
return of capital up to the U.S. Holder's adjusted basis in the common shares
and thereafter as gain from the sale or exchange of property. Preferential tax
rates for long-term capital gains are applicable to a U.S. Holder that is an
individual, estate or trust. There are currently no preferential tax rates for
long-term capital gains for a U.S. Holder which is a corporation.

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

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 page 86 

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

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

Foreign Tax Credit

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

Disposition of Common Shares of Rockwell

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

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 page 87 

five years from the loss year to be offset against capital
gains until such net capital loss is thereby exhausted.

Other Considerations

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

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total
combined voting power or the total value of Rockwell's outstanding shares is
owned, directly or indirectly (pursuant to applicable rules of constructive
ownership), by five or fewer individuals who are citizens or residents of the
United States and 60% or more of Rockwell's gross income for such year is
derived from certain passive sources (e.g., from certain interest and
dividends), Rockwell may be treated as a "foreign personal holding company." In
that event, U.S. Holders that hold common shares would be required to include in
gross income for such year their allocable portions of such passive income to
the extent Rockwell does not actually distribute such income. Rockwell does not
believe that it currently qualifies as a foreign personal holding company.
However, there can be no assurance that Rockwell will not be considered a
foreign personal holding company for the current or any future taxable year.

Foreign Investment Company

If 50% or more of the combined voting power or total value of
Rockwell's outstanding shares is held, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by Code Section 7701(a)(31)), and Rockwell is found to be engaged
primarily in the business of investing, reinvesting, or trading in securities,
commodities, or any interest therein, it is possible that Rockwell may be
treated as a "foreign investment company" as defined in Section 1246 of the
Code, causing all or part of any gain realized by a U.S. Holder selling or
exchanging common shares to be treated as ordinary income rather than capital
gain. Rockwell does not believe that it currently qualifies as a foreign
investment company. However, there can be no assurance that Rockwell will not be
considered a foreign investment company for the current or any future taxable
year.

Passive Foreign Investment Company

United States income tax law contains rules governing "passive
foreign investment companies" ("PFIC") which can have significant tax effects on
U.S. Holders of foreign corporations. These rules do not apply to non-U.S.
Holders. Section 1297 of the Code defines a PFIC as a corporation that is not
formed in the United States if, for any taxable year, either (i) 75% or more of
its gross income is "passive income," which includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if the corporation is not publicly traded and either is a controlled
foreign corporation or makes an election, by adjusted tax basis), of its assets
that produce or are held for the production of "passive income" is 50% or more.
Rockwell appears to have been a PFIC for the fiscal year ended May 31, 2005, and
at least certain prior fiscal years. In addition, Rockwell expects to qualify as
a PFIC for the fiscal year ending May 31, 2006 and may also qualify as a PFIC in
future fiscal years. Each U.S. Holder of Rockwell is urged to consult a tax
advisor with respect to how the PFIC rules affect such U.S. Holder's tax
situation.

Each U.S. Holder who holds stock in a foreign corporation
during any year in which such corporation qualifies as a PFIC is subject to
United States federal income taxation under one of three alternative tax regimes
at the election of such U.S. Holder. The following is a discussion of such
alternative tax regimes applied to such U.S. Holders of Rockwell. In addition,
special rules apply if a foreign corporation

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 page 88 

qualifies as both a PFIC and a "controlled foreign corporation"
(as defined below) and a U.S. Holder owns, actually or constructively, 10% or
more of the total combined voting power of all classes of stock entitled to vote
of such foreign corporation (See more detailed discussion at "Controlled Foreign
Corporation" below).

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

The procedure a U.S. Holder must comply with in making an
effective QEF election, and the consequences of such election, will depend on
whether the year of the election is the first year in the U.S. Holder's holding
period in which Rockwell is a PFIC. If the U.S. Holder makes a QEF election in
such first year, i.e., a "timely" QEF election, then the U.S. Holder may make
the QEF election by simply filing the appropriate documents at the time the U.S.
Holder files his tax return for such first year. If, however, Rockwell qualified
as a PFIC in a prior year during the U.S. Holder's holding period, then, in
order to avoid the Section 1291 rules discussed below, in addition to filing
documents, the U.S. Holder must elect to recognize under the rules of Section
1291 of the Code (discussed herein), (i) any gain that he would otherwise
recognize if the U.S. Holder sold his stock on the qualification date or (ii) if
Rockwell is a controlled foreign corporation, the U.S. Holder's pro rata share
of Rockwell's post-1986 earnings and profits as of the qualification date. The
qualification date is the first day of Rockwell's first tax year in which
Rockwell qualified as a QEF with respect to such U.S. Holder. For purposes of
this discussion, a U.S. Holder who makes (i) a timely QEF election, or (ii) an
untimely QEF election and either of the above-described gain-recognition
elections under Section 1291 is referred to herein as an "Electing U.S. Holder."
A U.S. Holder who holds common shares at any time during a year of Rockwell in
which Rockwell is a PFIC and who is not an Electing U.S. Holder (including a
U.S. Holder who makes an untimely QEF election and makes neither of the
above-described gain-recognition elections) is referred to herein as a
"Non-Electing U.S. Holder". An Electing U.S. Holder (i) generally treats any
gain realized on the disposition of his Company common shares as capital gain;
and (ii) may either avoid interest charges resulting from PFIC status
altogether, or make an annual election, subject to certain limitations, to defer
payment of current taxes on his share of Rockwell's annual realized net capital
gain and ordinary earnings subject, however, to an interest charge. If the U.S.
Holder is not a corporation, any interest charge imposed under the PFIC regime
would be treated as "personal interest" that is not deductible.

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

A QEF election, once made with respect to Rockwell, applies to
the tax year for which it was made and to all subsequent tax years, unless the
election is invalidated or terminated, or the IRS consents to revocation of the
election. If a QEF election is made by a U.S. Holder and Rockwell ceases to
qualify as a PFIC in a subsequent tax year, the QEF election will remain in
effect, although not applicable, during those tax years in which Rockwell does
not qualify as a PFIC. Therefore, if Rockwell again qualifies as a PFIC in

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 page 89 

a subsequent tax year, the QEF election will be effective and
the U.S. Holder will be subject to the rules described above for Electing U.S.
Holders in such tax year and any subsequent tax years in which Rockwell
qualifies as a PFIC. In addition, the QEF election remains in effect, although
not applicable, with respect to an Electing U.S. Holder even after such U.S.
Holder disposes of all of his or its direct and indirect interest in the shares
of Rockwell. Therefore, if such U.S. Holder reacquires an interest in Rockwell,
that U.S. Holder will be subject to the rules described above for Electing U.S.
Holders for each tax year in which Rockwell qualifies as a PFIC.

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

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

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

Effective for tax years of U.S. Holders beginning after
December 31, 1997, U.S. Holders who hold (actually or constructively) marketable
stock of a foreign corporation that qualifies as a PFIC may elect to mark such
stock to the market annually (a "mark-to-market election"). If such an election
is made, such U.S. Holder will generally not be subject to the special taxation
rules of Section 1291 discussed above. However, if the mark-to-market election
is made by a Non-Electing U.S. Holder after the beginning of the holding period
for the PFIC stock, then the Section 1291 rules will apply to certain
dispositions of, distributions on and other amounts taxable with respect to
Rockwell common shares. A U.S. Holder who makes the mark-to-market election will
include in income for each taxable year for which the election is in effect an
amount equal to the excess, if any, of the fair market value of the common
shares of Rockwell as of the close of such tax year over such U.S. Holder's
adjusted basis in such common shares. In addition, the U.S. Holder is allowed a
deduction for the lesser of (i) the excess, if any, of such U.S. Holder's
adjusted tax basis in the common shares over the fair market value of such
shares as of the close of the tax year, or (ii) the excess, if any, of (A) the
mark-to-market gains for the common shares in Rockwell included by such U.S.
Holder for prior tax years, including any amount which would have been treated
as a mark-to-market gain for any prior tax year but for the Section 1291 rules
discussed above with respect to Non-Electing U.S. Holders, over (B) the
mark-to-market losses for shares that were

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 page 90 

allowed as deductions for prior tax years. A U.S. Holder's
adjusted tax basis in the common shares of Rockwell will be adjusted to reflect
the amount included in or deducted from income as a result of a mark-to-market
election. A mark-to-market election applies to the taxable year in which the
election is made and to each subsequent taxable year, unless Rockwell common
shares cease to be marketable, as specifically defined, or the IRS consents to
revocation of the election. Because the IRS has not established procedures for
making a mark-to-market election, U.S. Holders should consult their tax advisors
regarding the manner of making such an election. No view is expressed regarding
whether common shares of Rockwell are marketable for these purposes or whether
the election will be available.

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

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

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

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

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 page 91 

Controlled Foreign Corporation

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

F.          
Dividends and Paying Agents

Not applicable.

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,
attention: Shirley Main. 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 92 

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.

(b)          
Exchange Rate Sensitivity

In the normal course of business for its diamond operations,
the Company enters into transactions for the purchase of supplies and services
denominated in South African rand. As a result, the Company is subject to
foreign exchange risk from fluctuations in foreign exchange rates. The Company
has not entered into any derivative or other financial instruments to mitigate
this foreign exchange risk.

(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.

(d)Commodity Price Risk

While the value of the Company's mineral properties can always
be said to relate to the price of the commodity and the outlook for same, the
Company does not have any hedging or other commodity based risks respecting its
operations.

(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.

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 page 93 

ITEM
12.           DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES

A.          
Debt Securities

Not applicable.

B.          
Warrants and Rights

Not applicable.

C.          
Other Securities

Not applicable.

D.          
American Depositary Shares

Not applicable.

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 page 94 



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

As required by Rule 13a-15 under the Securities Exchange Act of
1934 (the "Exchange Act"), the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of May 31, 2007, the latest completed fiscal year. This
evaluation was carried out under the supervision and with the participation of
the Company's Chief Executive Officer, and the Company's Chief Financial
Officer. Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting management to material information
relating to the Company required to be included in the Company's periodic SEC
filings. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to the date the Company carried out its evaluation.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in the Company's reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in the Company's reports filed
under the Exchange Act is accumulated and communicated to management, including
the Company's Chief Executive Officer and Chief Financial Officer, to allow
timely decisions regarding required disclosure.

During the Company's most recently completed fiscal year ended
May 31, 2007, there were no changes in the Company's internal control over
financial reporting that have materially affected, or are reasonably likely to
affect, its internal control over financial reporting.

The term "internal control over financial reporting" is defined
as a process designed by, or under the supervision of, the registrant's
principal executive and principal financial officers, or persons performing
similar functions, and effected by the registrant's board of directors,
management and other personnel, 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 and includes those policies and procedures that:

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 page 95 

|(1) | Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the registrant;                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that
      receipts and expenditures of the registrant are being made only in
      accordance with authorizations of management and directors of the
      registrant; and
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(3) | Provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      registrant's assets that could have a material effect on the financial
      statements.                                                                                                                                              

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 page 96 

ITEM
16.           AUDIT COMMITTEE,
CODE OF ETHICS, ACCOUNTANT FEES AND EXEMPTIONS

A.          
Audit Committee Financial Expert

The members of the audit committee are Rene G. Carrier, Douglas
Silver and Patrick Bartlett. Mr. Carrier, Mr, Silver and Mr. Bartlett are
independent members of the audit committee. All members are considered to be
financially literate.

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.

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.

B.          
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.

C.          
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:

Nature of Services
    Fees Paid to Auditor in Year EndedMay 31, 2007
    Fees Paid to Auditor in Year EndedMay 31, 2006Audit Fees(1)
    $217,400
    $32,250Audit-Related Fees(2)
    Nil
    NilTax Fees(3)
    $3,500
    $3,500All Other Fees(4)
    Nil
    NilTotal
    $220,900
    $35,750


Notes:

|(1) | Audit Fees include fees necessary to perform the annual
      audit and quarterly reviews of the Companys consolidated financial
      statements. Audit Fees include fees for review of tax provisions and for
      accounting consultations on matters reflected in the financial statements.
      Audit Fees also include audit or other attest services required by
      legislation or regulation, such as comfort letters, consents, reviews of
      securities filings and statutory audits.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 page 97 

|(2) | Audit-Related Fees include services that are
      traditionally performed by the auditor. These audit-related services
      include employee benefit audits, due diligence assistance, accounting
      consultations on proposed transactions, internal control reviews and audit
      or attest services not required by legislation or regulation.                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|(3) | Tax Fees include fees for all tax services other than
      those included in Audit Fees and Audit-Related Fees. This category
      includes fees for tax compliance, tax planning and tax advice. Tax
      planning and tax advice includes assistance with tax audits and appeals,
      tax advice related to mergers and acquisitions, and requests for rulings
      or technical advice from tax authorities.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4) | All Other Fees include all other non-audit
    services.                                                                                                                                                                                                                                                                                                                                                                 

Audit related fees comprise of fees billed for assurance and
advisory services related to the annual audit. From time to time, management of
the Company recommends to and requests approval from the audit committee for
non-audit services to be provided by the Company's auditors. The audit committee
routinely considers such requests at committee meetings, and if acceptable to a
majority of the audit committee members, pre-approves such non-audit services by
a resolution authorizing management to engage the Company's auditors for such
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 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.          
Exemptions from Listing Standards for Audit Committees

Not applicable.

E.          
Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

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 page 98 



PART III

ITEM
17.           FINANCIAL
STATEMENTS

The following attached financial statements are incorporated
herein:

|(1) | Report of Independent Registered Public Accounting Firm
      on the consolidated balance sheets as at May 31, 2007 and 2006;
      consolidated statements of operations and deficit, and cash flows for each
      of the years ended May 31, 2007, 2006 and 2005;
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                     
|(2) | Consolidated balance sheets as at May 31, 2007 and
      2006;                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                     
|(3) | Consolidated statements of operations and deficit for
      each of the years ended May 31, 2007, 2006 and 2005;                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                     
|(4) | Consolidated statements of cash flows for the periods
      referred to in (3) above;                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                     
|(5) | Consolidated schedules of exploration expenses for the
      periods referred to in (3) above;                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                     
|(6) | Notes to the consolidated financial
  statements;                                                                                                                                                                                                                   

ITEM
18.           FINANCIAL
STATEMENTS

Not applicable. See Item 17.

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 page 99 

ITEM
19.           EXHIBITS

The following Exhibits have been filed with Rockwell's Annual
Report on Form 20-F in previous years:

**Exhibit Number**
    DescriptionGeological Management and
      Administration Services Agreement dated for reference December 31, 1996.Amended Share Incentive Plan
      dated for reference June 21, 2000 (See Item 6 "Share Incentive Plan").Mineral Properties Transfer
      Agreement among Hunter Dickinson Group Inc., and Rockwell Diamonds Inc.
      and Amarc Resources Ltd.Option Assignment Agreement
      between Hunter Dickinson Group Inc. and Rockwell Diamonds Inc.Geological, Management and
      Administration Services Agreement between Hunter Dickinson Inc. and
      Rockwell Diamonds Inc., dated January 1, 2001.Rio Tinto Agreement dated January
      30, 2004Farmout Agreement with Amarc
      Resources Ltd. dated November 25, 2004Code of EthicsAcquisition Agreement amongst
      Rockwell Diamonds Inc., Hunter Dickinson Inc. and Jeffrey Brian Brenner,
      Robert Pinkas Blau, Larry Lipschitz, Dennis Mark Bristow, John Bristow,
      Leslie Johnston, Gabriel Rousseau Malan, Ira Sasha Epstein, and Jester
      Investment Trust for the purchase of the common shares of Durnpike
      Investments (Proprietary) LimitedLoan Agreement between Rockwell
      Diamonds Inc., Rockwell Resources RSA (Proprietary) Limited and Durnpike
      Investments (Proprietary) Limited, Jeffrey Brenner, Robert Blau, Larry
      Lipschitz, Mark Bristow, John Bristow, Les Johnston, Gawie Malan, Ira
      Sasha EpsteinContractor Agreement between
      Galputs Minerale (Proprietary) Limited and Durnpike Investments
      (Proprietary) LimitedCredit Agreement between Quest
      Capital Corp. and Rockwell Diamonds dated July 7, 2006.Subordinated Convertible Note
      Subscription Agreement$21 million private placement of
      42 million units at $0.50 per unit Subscription Agreement


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 page 100 

The following Exhibits are filed with the Companys Annual
Report on Form 20-F in the current year:

Exhibit
      Description4.1
      Acquisition
          Agreement between HC Van Wyk Diamonds Limited and Folmink Delwerye CC4.2
      Loan
          Agreement between Rockwell Diamonds Inc. and Amarc Resources Ltd.4.3
      $60
          million private placement of 116 million units at $0.52 per unit Subscription
          Agreement.4.4
      Technical
        Consent Letters.12.1
      Certification
        of Chief Executive Officer12.2
      Certification
        of Chief Financial Officer13.1
      Certification
        of Chief Executive Officer13.2
      Certification
        of Chief Financial Officer99.1
      Audited
          financial statements as at May 31, 2007 and 2006 and for the years ended
          May 31, 2007, 2006, and 2005, and the Report of Independent Registered
          Public Accounting Firm thereon.99.2
      Management
          discussion and analysis as at and for the year ended May 31, 2007.


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 page 101 



SIGNATURES

The Registrant 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/ Dominique de la
Roche

DOMINIQUE DE LA ROCHE Chief Financial Officer and Director

DATED: December 12, 2007

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