Portfolio Committee Briefing
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Portfolio Committee Briefing 26 October 2005 PowerPoint PPT Presentation


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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

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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


Core Business: Diamond Mining through ABM


Non-Core Business: Agricultural and Tourism through ABT


Other Assets Under Management


Location of Operations


Financial & Production Review


Financial & Production Review

Consolidated Results (R’000)


Financial & Production Review


Financial & Production Review


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


Production and Other Challenges


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


Declining Carat Production


Company currently under-capitalised


Inconsistent Exploration programme


Continuous Downward Trend on Sea Days


Unpredictability of the number of sea days: 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


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


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 & Investment


Social Responsibility and Investment:


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


CAT 769 Dump Truck – Operated by a Lady


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


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


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


Thank you


Financial & Production Review

Consolidated Results (R’000)


Financial & Production Review


Financial & Production Review


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