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
Budget 05 Actuals 05 Variance Actual 04(9 months) Mar-05 Jun-04
Total Income 242,683 171,582 (71,101) 263,201 Diamond Income 211,633 143,958 (67,675) 227,046 Other Income 31,050 27,624 (3,426) 36,155
Total Expenses (218,992) (176,358) 42,634 (227,467) Personnel Expenses (40,880) (41,742) (862) (45,439) Consumables and Maintenance (29,759) (24,693) 5,066 (29,691) General Expenditure (25,825) (28,752) (2,927) (24,517) Depreciation (8,011) (7,291) 720 (8,318) Professional Services (25,797) (9,520) 16,277 (22,194) Revenue Split - Contractors (88,720) (64,360) 24,360 (97,308)
Operating Profit/(Loss) 23,691 (4,776) (28,467) 35,734
Consolidated Results (R’000)
Abridged Mining Income (R'000) 2005 2004 VARIANCE
Carats 49,577 79,725 -38%
Marine Mining 38,362 59,284 -35%
Land Mining 11,215 20,441 -45%
Average Price Received 481 403 19%
Exchange rate 6.04 6.81 -11%
Ave. R/carat 2,905.24 2,744.43 6%
Revenue ($) 23,837 32,104 -26%
Revenue (R) 143,958 227,047 -37%
Operating Profit/(Loss) (874) 26,118
Net Profit/(Loss) (4,777) 35,734
Needed 28,600 more Carats to be in line with the Previous Year
Financial & Production Review
Abridged Non-Mining Income ( R'000 ) 2005 2004 VARIANCE
Dairy 2,071 3,673 -44%Ostriches 2,041 3,341 -39%Oysters 720 1,363 -47%Citrus 93 83 12%Guest Houses 663 866 -23%Other Income 3,543 5,906 -40%
Total Income 9,131 15,232 -40%
Net Profit/Loss (5,582) (84)
The deficit can be attributed to the following:
a) The Parsely project that was written off with the value of R850 000.
b) Revaluation of maize with the negative value of R2.5 million.
c) The flu virus on ostriches also played a role in the
decreased sale of live ostriches.
Financial & Production Review
Financial & Production ReviewIn Summary:
• Total revenue was R152.4m compared to R264.7m in 2004.
• Diamond production income decreased from R182.5 million to R143.9 million.
• Diamond production down 38%
• Operating costs decreased by 32%
• Total operating loss was R 0.9 million
• ABT operating loss increased from R0.084m to R5.5m
• Price per carat up 15% (US$), 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
79%
6%
9%6%
Marine mining (R120.7 million)
Land mining (R9,0 million)
Beach mining (R14.1 million)
Agriculture and other (R8.6 million)
Financial & Production Review
10%
13%
77%
Land (4,752 cts)
Beach (6,464 cts)
Marine (38,361 cts)
Carat Production 2005 (49 577 carats)
Net profit/(loss)
13.69.7 10.7
6.5
-24.2
-67.1
-45.8 -45.4
1.776.27
-4.78
-3.9
35.73
-11.95
-80
-60
-40
-20
0
20
40
60
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Years
R m
illio
ns
Financial & Production Review
Better diamond prices achieved
0
100
200
300
400
500
600
700
Jul-0
2
Oct
-02
Jan-
03
Apr-0
3
Jul-0
3
Oct
-03
Jan-
04
Apr-0
4
Jul-0
4
Oct
-04
Jan-
05
$/C
t
Budget Actual
Financial & Production Review
Net operating expenses under control
0
50
100
150
200
250
300
350
1997 1998 1999 2000 2001 2002 2003 2004 2005
Rm
Financial & Production Review
Available Cash as at 31 March 2005 (R42,7m)
0
20
40
60
80
100
120
R m
illio
nsFinancial & Production Review
0
2
4
6
8
10
12
07/0209/02
11/0201/03
03/0305/03
07/0309/03
11/0301/04
03/0405/04
07/0409/04
11/0401/05
03/05
R/$
ra
teFinancial & 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
Plan Actual Var RemarksLand Mining Witvoorkop 6,265 500 -92% Contractor withdrew Muisvlak 1,765 8 -100% No contract awarded Alexander Bay (own) 20,006 4,243 -79% Shortfall at Voltas Contract Mining 10,518 6,464 -39% Revenue target achieved
Marine Mining Boat Units 24,585 23,777 -3% Shore Units 27,725 14,585 -47% High % of non producers
Total shortfall FY' 05 90,864 49,577 -45%Income (Rm) 211.6 143.8 -47%
Carats
Declining Carat Production
0
50000
100000
150000
200000
250000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Car
ats
Land Sea Total
Company currently under-capitalised
0
10
20
30
40
50
60
70
80
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
R m
illio
ns
ADDITIONS DISPOSALS
Inconsistent Exploration programme
6.29 6.29
12.92
3.83
2.26
13.5
4.18
0
2
4
6
8
10
12
14
16
1999 2000 2001 2002 2003 2004 2005
Rm
0
20
40
60
80
100
120
140
160
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 6mytd
Div
ing D
ays
Continuous Downward Trend on Sea Days
Unpredictability of the number of sea days: 2005
0
2
4
6
8
10
12
Jul Aug Sep Oct Nov Dec Jan Feb Mar
Sea
Day
s
actual budget
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
Injury Classification
RI LTI Dressing
Number (of injuries) 4 11 24
Rate (Injuries/mmhrs) 0.52 1.43 3.12
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
BEE Purchase Order Spending
0
2
4
6
8
10
12
Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05
R m
illio
ns
BEE purchases Total purchase orders
Social Responsibility and Investment:
Social Responsibility and Investment
Skills 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
• 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
Social Responsibility and InvestmentCommunity Support:
Employment Equity, as at 30 September 2005
POSITIONNumber of
Incumbents A C W A C W
% OF DESIGNATE
D GROUP
Senior Management 8 1 3 3 - 1 - 63%
Professionaly qualified 18 3 4 7 2 1 1 61%
Skilled 77 - 23 41 - 4 9 47%
Semi Skilled 216 7 145 20 - 31 13 91%
Unskilled 109 12 63 1 - 33 - 99%
Total 428 23 238 72 2 70 23 83%
MALE FEMALE
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
Budget 06 Actuals 06 Variance(6 Months) Sep-06
Total Income 126,423 65,459 (60,964) Diamond Income 106,208 48,345 (57,863) Other Income 20,215 17,114 (3,101)
- - -
Total Expenses (130,494) (89,925) 40,569 Personnel Expenses (27,590) (25,633) 1,957 Consumables and Maintenance (19,128) (14,568) 4,560 General Expenditure (14,198) (11,962) 2,236 Depriciation (4,101) (5,195) (1,094) Professional Services (12,017) (10,588) 1,429 Revenue Split - Contractors (53,460) (21,979) 31,481
- Operating Profit/(Loss) (4,071) (24,466) (20,395)
Consolidated Results (R’000)
Abridged Mining Income (R'000)Budget'06 (6 Months)
Actuals'06 (6 Months) 2005 VARIANCE
Carats 40,380 17,417 49,577 -65%Marine Mining 24,155 10,609 38,362 -72%Land Mining 16,225 6,808 11,215 -39%
Average Price Received 390 439 481 -9%
Exchange rate 6.5 6.33 6.04 5%
Revenue ($) 15,740 7,637 23,837 -68%
Revenue (R) 102,308 48,345 143,958 -66%
Net Profit/(Loss) (4,071) (24,466) (4,777)
Financial & Production Review
Abridged Non-Mining Income ( R'000 )Budget'06 (6 Months)
Actuals'06 (6 Months) 2005 VARIANCE
Dairy 1,812 1,280 2,071 -29%
Ostriches 1,417 1,330 2,041 -6%
Oysters 1,160 101 720 -91%
Citrus 333 30 93 -91%
Guest Houses 443 389 663 -12%
Other Income 5,381 3,333 3,543 -38%
Total Income 10,546 6,463 9,131 -39%
Net Profit/(Loss) 3,004 (2,484) (5,582) -183%
Financial & Production Review
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