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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

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Presentation Transcript
  • 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
Financial & Production Review

Consolidated Results (R’000)

financial production review1
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
Revenue Split (Total R152,4 million)

Financial & Production Review

financial production review2
Financial & Production Review

Carat Production 2005 (49 577 carats)

better diamond prices achieved
Better diamond prices achieved

Financial & Production Review


Financial & Production Review

Persistent strengthening of the Rand

major difficulties
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
Areas that Attributed to Production Shortfall:

Against Approved Production Budget for 2005

short term production improvement plans
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
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 and investment skills development
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 investment community support
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
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
  • 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 review3
Financial & Production Review

Consolidated Results (R’000)