December 22, 2016, Vancouver, BC - Rockwell Diamonds Inc. ('Rockwell' or the 'Company') (TSX:RDI; JSE:RDI) announces that it has entered into a purchase and sale agreement with Nelesco 318 Proprietary Limited ('Nelesco') for certain assets and the assumption of certain liabilities for cash consideration of R45M (CAD $4.3M), and the assumption of R70M (CAD $6.7M) in rehabilitation liabilities, and the transfer of almost 100 employees. In addition, the deferred taxes of R29M (CAD $2.8M) arising on the 2015 purchase of Pioneer Minerals, being an accounting entry under International Financial Reporting Standards, will be reversed, thus reducing consolidated liabilities by a total of R99M (CAD $9.5M). An impairment of CAD $1.25M book value is expected to be recorded on the transaction.

Payment will be in three tranches, the first being R20M (CAD $1.9M) upon the completion of certain suspensive conditions, expected by January 31, 2017, the second being R15M (CAD $1.4M) due on completion of the registration of the Saxendrift farm in the name of Nelesco, and the balance of R10M (CAD $0.95M) upon the completion of and consents to assign certain contracts, the Section 11 transfer approval of the mineral properties to the name of Nelesco as well as the consent of the Takeover Regulation Panel of South Africa.

During the period up to completion of all conditions, Nelesco will operate on a contract mining basis with a royalty payable to the Company of 2.5% of revenue from diamonds recovered from properties covered by the transaction and be responsible for any related rehabilitation liabilities.

In addition, the transaction provides for the lease of the Saxendrift office and accommodation complex back to the Company for a period of twenty years as well as access to water. The Company will provide electricity to Nelesco at cost.

'This transaction represents a significant milestone in our repositioning plans for the 'new Rockwell' explains the CEO Tjaart Willemse. It not only brings in cash in addition to the recently announced funding by two of the key shareholders and a third party, but also disposes of non-core assets and associated liabilities, leaving the new Rockwell to focus on completing the next phase and ramp up of the Wouterspan mine and processing plant and advance its portfolio of development and exploration properties. The transfer of 98 employees also assists with our employee right sizing initiative and reduces the number of retrenchees.

I am very appreciative of the support we are getting from our investors and commercial suppliers and particularly our employees during this challenging time, and with this transaction now well advanced to completion stage, and our plant expansion and commissioning in progress, we are excited by what the new Rockwell will deliver.'

For further information on Rockwell and its operations in South Africa, please contact

About RockwellDiamonds:

Rockwell is engaged in the business of operating and developing alluvial Diamond deposits. The Company also evaluates consolidation opportunities that have the potential to expand its mineral resources and production profile and provide accretive value to the Company.

Rockwell is known for producing large, high quality gemstones comprising a major portion of its Diamond recoveries. This is enhanced through a beneficiation joint venture that enables Rockwell to participate in the profits on the sale of the polished and certain re-traded diamonds, which are not beneficiated.

Rockwell has set a strategic goal to become a mid-tier Diamond production company. In pursuit of this goal the Company has embarked on a strategy to grow its Middle Orange River ('MOR') operational base and minimise production and recovery volatility by setting a medium term target to process 500,000m of gravels per month from its MOR operations.

Rockwell's common shares trade on the Toronto Stock Exchange and the JSE Limited under the symbol 'RDI'.

No regulatory authority has approved or disapproved the information contained in this news release. Forward LookingStatements

Except for statements of historical fact, this news release contains certain 'forward-looking information' within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as 'plan', 'expect', 'project', 'intend', 'believe', 'anticipate', 'estimate' and other similar words, or statements that certain events or conditions 'may' or 'will' occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

Factors that could cause actual results to differ materially from those in forward-looking statements include uncertainties and costs related to the transaction and the ability of each party to satisfy the conditions precedent in a timely manner or at all, exploration and development activities, such as those related to determining whether mineral resources exist on a property; uncertainties related to expected production rates, timing of production and cash and total costs of production and milling; uncertainties related to the ability to obtain necessary licenses, permits, electricity, surface rights and title for development projects; operating and technical difficulties in connection with mining development activities; uncertainties related to the accuracy of our mineral resource estimates and our estimates of future production and future cash and total costs of production and diminishing quantities or grades if mineral resources; uncertainties related to unexpected judicial or regulatory procedures or changes in, and the effects of, the laws, regulations and government policies affecting our mining operations; changes in general economic conditions, the financial markets and the demand and market price for mineral commodities such as diesel fuel, steel, concrete, electricity, and other forms of energy, mining equipment, and fluctuations in exchange rates, particularly with respect to the value of the US dollar, Canadian dollar and South African Rand; changes in accounting policies and methods that we use to report our financial condition, including uncertainties associated with critical accounting assumptions and estimates; environmental issues and liabilities associated with mining and processing; geopolitical uncertainty and political and economic instability in countries in which we operate; and labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in markets in which we operate our mines, or environmental hazards, industrial accidents or other events or occurrences, including third party interference that interrupt operation of our mines or development projects.

For further information on Rockwell, Investors should review Rockwell's home jurisdiction filings that are available at www.sedar.com.

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