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Portfolio Committee on Public Enterprises Briefing: 2006 Annual Report 25 October 2006. Opening Remarks by Chairperson. Opening Remarks. Introduction Report back on issues raised in previous briefing: Clear company strategy required to deal with the loss making situation
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Portfolio Committee on Public Enterprises Briefing: 2006 Annual Report 25 October 2006
Opening Remarks • Introduction • Report back on issues raised in previous briefing: • Clear company strategy required to deal with the loss making situation • Possible scenarios post land claim case • Phased approach for handing over the non-core assets to relevant authorities • Plan to deal with the disposal of perishable products • Progress on women empowerment • AGM date and tabling of annual report to parliament • Overview of 2006 report
Content • Company Background • Pre-Amble to Results • Health and Safety Statistics • Overview of 2005/06 • Social Responsibility and Investment • Update on 2006/07 Progress • Update on Litigation Matters • Strategic Outlook – 2008 and Beyond
Introduction Vision To transform Alexkor into a competitive and sustainable mining company that will contribute positively towards the needs of all stakeholders. Mission To maximise profits from the sustainable exploitation of the resource, thereby ensuring satisfactory returns to our shareholder and make a contribution towards the socioeconomic upliftment of the region. This will be achieved in accordance with all statutory and regulatory requirements.
Operational Challenges • Mining an inferred resource ; • Inadequate exploration; • Ageing mining equipment; • Continuous decline in sea-days • Continued subsidisation of non-core business activities; • Fixed cost structure with regards to salary, town maintenance and hospital related expenditure; • Recruitment and retention of qualified and skilled human resource
Implementation of Key Strategic Objectives: 1. Establishing a mineral reserve base followed by a LOM plan and reliable business plan 2. Increasing production through full utilisation of existing plants, equipment and labour 3. Reducing units costs and cut-off grade to R26/ton and 1.5ct/100 cubics respectively 4. Assisting in capacity building & amalgamation of marine contractors • Developing a proper succession planning and fill in key management positions (i.e. Mine Manager, Metallurgical Mgr, Environmental Mgr) 6. Improving the level of diamond marketing to realise more value from the product • Establishing accurate and reliable IT and Financial Control Systems • Ring-fencing and transfer of Non-Core Assets – eliminating cross subsidisation 9. Introducing Remote Mining Techniques to reduce over-reliance on diving operations Good progress on objectives 2,3,4,6,9
Uncertainty Relating to Land Claim Case • Impact of land claims case on Alexkor: • Impaired medium to long-term planning on land mining; • Inability to re-invest in appropriate infrastructure; • Inability to mine potentially economical mining areas; • Inability to discontinue loss-making divisions/business units; • Inability to restructure balance sheet.
Safety and Health Statistics • The Northern Cape open-cast mine RI rate average is 2.05 • Fatal accidents - Diver lost his life during diving operations; • - Oyster Farm manager lost her life in a vehicle accident; • DME FFPS currently at 559 - 6 months to go for 1000FFPS; • Focus on continuous initiatives to improve safety awareness, equipment and working conditions – evidenced by downward trend in rates
Summary – 2005/06 Results • Diamond production decreased from 49 577 carats (9 month’s production) to 43 207 carats (12 months production) • Total revenue up 4% to R159.4m from R152.4m in 2005 (9 month period). • Diamond production income decreased from R143.9 million during 2004/05 to R129.1 million during 2005/06. • Net Operating loss increased to R38.1m (2005: R1.5m profit). • Adoption of International Financial Reporting Standards as from 31 March 2005. • Revaluation of assets resulted in R409.3m increase in asset base in FY 2005. • Two major-non cash adjustments made: • Restating of Rehabilitation liability by R160.0m (2005: R0.6m) • Increase in Post-retirement medical liability by R11.4m (2005: R10m) • ABT operating loss decreased to R4.1m loss (2005: R5.5m loss) • Non-core activities increased loss to R6.9m (2005: R6.4m loss)
Sea-Day Forecast (Example) The four-corners of a sea-day:
Alexander Bay Trading Other Agricultural is comprised of maize and lucern farms and related produce
Employment Equity As at 30 September 2006
Job Creation - 2006 Additional 15 Bedrock Sweepers to be appointed at end of October 2006
FY2005 (R million) FY2006 (R million) Social Contribution
Health Care Services Provision of Health Care Services to Alexander Bay, the employees of Alexkor and it’s independent contractors, the communities of Beauvallon, Sanddrift, Kuboes and the Richtersveld National Park Patient Statistics 2005/06
Health Care Services • Health care services reporting consistent annual losses; • Provincial Department in process of providing medical doctor; • Request made that medical supplies be provided by Provincial Department; • Currently negotiating transfer of health care services and facilities to Provincial Government; • Target date for transfer – 1 April 2007
Social Contribution (Continued) Education • ABET training provided for employees and community members up to level 4 in English, Mathematics and Numeracy • School buildings for Primary and Secondary School sponsored by Alexkor Municipal Services • Provision of Municipal Services to Alexander Bay • Provision of Portable water to Alexander Bay and Port Nolloth • Provision of subsidized accommodation to residents of Alexander Bay • Process for the establishment of Alexander Bay as municipality commenced during 2005 Social Services Employed a Social Worker to service Alexander Bay and Richtersveld Communities HIV/AIDS Prevalence Survey conducted in April 2003 – Infection rate of 2.8% attributable to the introduction of a Health Care Plan which includes: • Voluntary testing and awareness programmes; • Continuous training of Peer Educators with more emphasis on psychological development of Peer Educators • Facilitating the introduction of Anti-Retroviral Drugs
Training & Development • Retraining and Redeployment of non-production staff to production teams • Split in terms of production vs non-production changed from 40% production to 60% production • Artisan-Assistant Development Programme was initiated in line with JIPSA, 11 employees sent to Namaqualand Technical Training Institute • Continuous Multi-Skilling of Earth Moving Operators and retraining of processing staff at Plants • Accredited diving course to commence during October 2006 in Alexander Bay
Female Empowerment Initiatives • Allocated 8 bursaries in mining related disciplines – 5 female • Appointed 12 apprentices of which 2 are female • Trained 5 females as heavy earthmoving- and Infield Screening operators • Appointed females on bedrock sweeping operations on a temporary basis • 29% Female representation in Senior Management positions • 2 Females employed as trainee diamonds evaluators • Women's empowerment group commenced with Witvoorkop mining in collaboration with a contractor company • Female shareholding in shallow water contractors of 17.5%
Preferential Procurement Annual preferential procurement for the 2005/06 financial year amounted to 55% of total spending
Summary – 2006/07 Corporate Plan • Implemented three shift operations to fully utilise the current plant capacity, aimed at reducing unit costs and increased production; • Optimal use of current human resource capacity – shift from non-production to production units • Recapitalisation request submitted to DPE earmarked for: • Working capital – R41.6m; • Maintain operations – R40.4m; • Exploration program – R109.6m; • Improve marine mining – R38.5m; • Introduction of remote mining techniques with one unit already in production; • Sale of diamonds on open-market basis through Diamond Bourse commenced in April 2006, with good results
Strategic Outlook – 2008 and Beyond • Short-term focus is on improving financial performance through productivity improvements and continuous reduction of both operating costs and break-even grade cut-off • Implementation of additional remote mining techniques; • Exit from non-core activities (ABT, Hospital and Town) • Restructuring of Alexkor’s balance sheet; • Acquisition of mineral rights in other parts of the country in order to move Alexkor beyond a single mine company • Recapitalisation of land and marine operations (post land claims case)
