Communicators

ROCKWELL RECOMMENDS SHAREHOLDERS REJECT HOSTILE PALA BID

September 22, 2008, Vancouver, B.C. – Rockwell Diamonds Inc. (“Rockwell” or the “Company”) (TSX: RDI; JSE: RDI; OTCBB: RDIAF) today announced that its Board of Directors, based on the recommendation of its Special Committee of independent directors, unanimously recommends that Rockwell shareholders reject the unsolicited offer (the “Offer”) by Pala Investments Holdings Limited (“Pala”) to acquire all of the outstanding shares of Rockwell for $0.36 per share. After careful consideration, including consultation with its independent financial and legal advisors, Rockwell’s Board concluded that the Offer significantly undervalues Rockwell and is not in the best interests of its shareholders.

In its Directors’ Circular, filed today with securities regulators and mailed to security holders, Rockwell’s Board strongly recommends that all Rockwell shareholders reject the Offer and not tender their shares. “The Offer falls significantly short of providing fair value to Rockwell’s shareholders and would deprive them of significant upside potential which will be delivered as the Company’s production grows strongly over the next months and years,” said John Bristow, President, Chief Executive Officer and director of Rockwell. “Our Special Committee and the full Board of Directors unanimously determined that the Offer is inadequate and unfair. There is no rationale for accepting the Pala bid and many reasons to reject it.”

Mr. Bristow further commented that “the highly conditional nature of Pala’s Offer, the misleading claims made in their conference call on September 16, 2008 and in their Offering Circular, and Pala’s apparent lack of understanding of Rockwell’s business, leads to questions regarding the seriousness of Pala’s Offer and their intent to follow through.”

Reasons for Recommendation

The Board believes that the Offer should be rejected for the following reasons, as are described in more detail in the Directors’ Circular available on SEDAR:

• The Offer significantly undervalues Rockwell’s assets and growth potential.
o Rockwell is a producer of diamonds of high value in excess of US$1700 per carat, with a strong upward trend.
o Rockwell enjoys low production costs with tight cost control despite an inflationary environment.
o Rockwell has a number of fully financed brownfields projects coming on stream which will lead to an increase in production from the current run rate of approximately 23,000 carats per annum to 70,000 carats per year in 2011.
o The Company has strong management expertise and a supportive BEE partner in African Vanguard Resources.
o Rockwell benefits from transparent and multi-faceted marketing and beneficiation arrangements.
• The Special Committee’s independent financial advisor, RBC Capital Markets, has determined that the price of $0.36 per share offered by Pala is inadequate, from a financial point of view, to shareholders.
• The Offer is highly conditional and gives Pala broad discretion to abandon the bid.
• There is substantial uncertainty with respect to Pala’s intentions. Pala is a financial investor with no experience running a diamond company operating in South Africa. The Board believes that the Offer is designed to create value for Pala rather than the Company’s other shareholders.
• The Offer does not treat holders of Rockwell securities fairly and does not comply with the applicable securities laws in South Africa. In particular, the Offer violates the South African requirements that the Offer be made to holders of convertible securities, and for the bid to not be subject to conditions that are dependent on subjective assessment.
• Rockwell continues to pursue alternatives to maximize shareholder value, and the Board believes that tendering shares to the Offer before these alternatives are fully explored may diminish the likelihood of a better transaction emerging.
• The timing of the Offer is opportunistic given the recent decline in Rockwell’s share price as a result of the overall decline in share prices of diamond companies and the impact of the recent Wouterspan labour dispute. The Rockwell share price traded at the Offer price of $0.36 as recently as July 14, 2008 and as high as $0.59 (or 64% more than the Offer) as recently as March 13, 2008.
• The timing of the Offer is opportunistic because it is designed to deny shareholders the near term benefits of increased production and decreased operating costs expected to result from the Company’s investment in its brownfields operations.
• The Offer has been rejected by all of Rockwell’s directors and senior officers who together own 8.51% of the Company’s shares.

“With a proven track record of resource growth and a strong and experienced management team, we believe Rockwell is poised to deliver superior shareholder returns. For the reasons outlined in the Directors’ Circular, Rockwell’s Board strongly recommends that all Rockwell shareholders reject the Offer and not tender their shares,” Mr. Bristow said.

Rockwell’s Board advises shareholders not to be misled by the claims that Pala made on a conference call on September 16, 2008. On this call and in its news releases, Pala has made a variety of claims against Rockwell and its management that are without foundation. In the Board’s view, these claims suggest that Pala’s understanding of the Company’s business is flawed and that their methods of valuing Rockwell’s business are not credible. Schedule A attached to this news release contains responses to some of the more spurious claims made by Pala.

Rockwell is mailing its Directors’ Circular to shareholders today, which sets forth the formal recommendation of the Board to reject the Offer.

The directors of Rockwell, accept responsibility for the information contained in this announcement and confirm that to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and, where appropriate, does not omit anything likely to affect the import of such information.

The Company will host a telephone conference call on Tuesday, September 23 at 10:00 a.m. Eastern Time (7:00 a.m. Pacific; 3:00 p.m. London; 4:00 p.m. Johannesburg) to discuss Board’s recommendation. The conference call may be accessed by dialing 719-457-2655 or toll free 888-339-3503 in North America, toll free 0-800-404-7656 in United Kingdom or toll free 080-09-97290 in South Africa.

For further details on Rockwell Diamonds Inc., please visit the Company’s website at www.rockwelldiamonds.com or contact Investor Services at (604) 684-6365 or within North America at
1-800-667-2114.
John Bristow
President and CEO

David Copeland, P.Eng., a qualified person under National Instrument 43-101, who is also the Chairman and a Director of Rockwell, has reviewed and approved this news release.

Forward Looking Statements

This release includes certain statements that may be deemed “forward-looking statements”. Other than statements of historical fact may be forward-looking statements, including, but not limited to, statements in this release about the expected upside potential of holding Rockwell shares, anticipated increases in the Company’s level of production, decreases in operating costs and increases in the price of diamonds, the upward trend in the value of diamonds produced by Rockwell, and the likelihood of a better transaction emerging. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, including, but not limited to assumptions regarding the success of the Company’s brownfields expansion efforts, the Company’s cost structure, and matters that would affect a third party’s decision to enter into an alternative transaction with the Company, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, changes in and the effect of government policies regarding mining and natural resource exploration and exploitation, availability of capital and financing, geopolitical uncertainty and political and economic instability, and general economic, and market or business conditions. The Company undertakes no obligation to update forward-looking statements except to the extent required by law. For more information on Rockwell, investors should review Rockwell’s annual Form 20-F filing with the United States Securities and Exchange Commission www.sec.com and its home jurisdiction filings that are available at www.sedar.com.

Schedule A

Specific responses of Rockwell to claims made by Pala during its conference call held on September 16, 2008, and in Pala’s news releases are set out below.

Please find the conference call held on September 16 under the following link: http://www.irw-press.com/dokumente/Rockwell_220908Table.pdf

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