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Portfolio Committee Briefing 26 October 2005. Content. Company Background Overview of Operations Financial and Production Review Mine Production Challenges Short-term Production Improvement Plans Health and Safety Statistics Possible Opportunities for Growth
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Portfolio Committee Briefing 26 October 2005
Content • Company Background • Overview of Operations • Financial and Production Review • Mine Production Challenges • Short-term Production Improvement Plans • Health and Safety Statistics • Possible Opportunities for Growth • Social Responsibility and Investment • Uncertainties & Litigation Issues • Conclusion
Financial & Production Review Consolidated Results (R’000)
Financial & Production Review In Summary: • Total revenue was R152.4m compared to R264.7m in 2004. • Diamond production income decreased from R182.5 million to R143.9 million. • Diamond production down 38% • Operating costs decreased by 32% • Total operating loss was R 0.9 million • ABT operating loss increased from R0.084m to R5.5m • Price per carat up 15% (US$), whereas the ave. R/$ rate was 6.04 vs. 6.80 in 2004 • Capex up 43% to R17.71 million with main expenditure of R13.53m on replacement of equipment • Exploration reduced by 69% to R4.18m
Revenue Split (Total R152,4 million) Financial & Production Review
Financial & Production Review Carat Production 2005 (49 577 carats)
Financial & Production Review Net profit/(loss)
Better diamond prices achieved Financial & Production Review
Financial & Production Review Net operating expenses under control
Financial & Production Review Available Cash as at 31 March 2005 (R42,7m)
Financial & Production Review Persistent strengthening of the Rand
Major Difficulties: • Mining a mineral resource that is not well defined • Huge replacement Capex programme required • Extensive exploration on land is necessary • Current marine mining methods often hampered by poor sea weather • Financial provisions for both long-term & other liabilities • Rehabilitation liability • Provision for post retirement medical aid • Other unforeseen expenses related to legal matters • Main constraint is the lack of funding ability for Capex and exploration
Areas that Attributed to Production Shortfall: Against Approved Production Budget for 2005
Short-term production improvement plans: • Implementation of double shift work on land mining • Involvement of labour in production planning sessions • Implementation of remote mining techniques • Place emphasis on cost reduction and control • Market development for ABT products
Safety and Health Statistics: • The N.C opencast mines LTI average is 0.99 • Higher rates for Alexkor as a result of extensive diving operation in comparison to peers • No fatality for the period under review • Awarded the DME 1000 FFPS in April 2005
Possible Growth Opportunities • Acquisition of mineral rights in other parts of the country • Restart mining operations at Muisvlak • Embark on an extensive exploration programme • Recapitilise current land mining • Replacement of current mining equipment Constraint: Lack of funding capacity
Social Responsibility and InvestmentSkills Development: • Five out of ten current bursary holders are females • Seven out of 11 HDSA employees in mentorship programme are females • Three out of 10 HDSA apprentices are females • Trained 3 females as heavy earthmoving machine operators • ABET classes to improve literacy, numeracy and life skills of employees and community • Alexkor expended 3.14% of total wage bill in 2005 on training
Social Responsibility and InvestmentCommunity Support: • Providing Health Care and emergency services to Alexander Bay and Richtersveld Communities • Maintenance of Alexander Bay town. • Providing portable water to A/Bay and Port Nolloth • Ad-hoc donations & rental subsidies of R11 million for period 2000-2005 • Involvement in HIV/Aids awareness projects
Employment Equity, as at 30 September 2005 Total workforce = 6% African, 73% Coloured, 21% Whites
Uncertainties and Litigation Issues • Outcome and Impact of Land Claims case on Alexkor • Awaiting court proceedings and ruling on other legal matters • Possible restructuring post land claims case • Financial implications include legal fees and possible compensation • Limited provision has been made for payment of possible settlement amounts • Alexkor counterclaimed against some of the cases • We expect the cases to be concluded by 2nd quarter of 2006
Conclusion • Short-term focus is on improving financial performance: • Optimise the use of available resources • Implement initiatives for productivity improvement • Continuous reduction of both operating costs and pay-limit • Develop a long-term strategy to transform the company: • Move Alexkor beyond a single mine company • Collaborate with established companies and leverage on their ability to fund expansion plans • Implementation of remote mining techniques
Financial & Production Review Consolidated Results (R’000)