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Mr V Bansi

Appointed Acting Chief Executive Officer

1 March 2016

Message from the Chief Executive Officer

 

No matter what we are able to achieve at Alexander Bay, we always need to be cognisant of the fact that what we have is a finite resource and, as such, all our decisions need to be driven around creating a lasting legacy for the people of this part of South Africa. It is this dual commitment that will guide my role as Acting CEO in the decisions I undertake on behalf of Alexkor.

 

A new board was appointed on 14 August 2015 and I am confident that with their wealth of experience and clear commitment, we are in a far stronger position to deliver on Alexkor’s mission of “operating a growing, profitable and sustainable mining organisation that contributes to the development needs of the communities.”

 

Key to this will be reaching optimal diamond production at our Alexander Bay operations by streamlining our current operations, as well as pursuing a mid- to long-term strategy that will see Alexkor optimise its expertise to pursue new opportunities, enabling the diversification of our value offering.

 

Making safety a priority

 

It is with deep regret and sadness that I report the death of one of our contractor employees in a light vehicle incident at our mine in October last year. I extend our deepest sympathies to his family, friends and colleagues.

 

Following the incident a thorough review of all our safety procedures took place. We have since implemented a vehicle key control system at the mine and all vehicles have been fitted with rollover protection bars to improve on vehicle safety systems. In addition, the Department of Mineral Resources regularly undertakes safety audits at the mine. During this process every aspect of personnel safety is addressed; adhering to this receives the highest priority.

 

Operating environment

 

In 2015 the diamond industry suffered from a mild decline in consumer demand. That said, the long-term outlook is good with the diamond mining industry expected to grow steadily over the next ten years due to increasing jewellery demand from Asian countries, and a diminishing supply of rough diamonds, estimated at 1% to 2% a year until 2030.

 

Operational performance

 

Carat production was impacted by a lack of quality exploration data in the Muisvlak target area where the bulk of mining efforts were focused for the year under review. To optimise the mine plan the JV has implemented a comprehensive exploration programme driven by industry specialists and the mine’s team of geologists. To complement the programme, and to improve production at our land-based operations, we have invested a further R10 million in an exploration/prospect plant. The value of accurate data cannot be underestimated in order to drive our future efforts. While we can expect an initial lag time on this investment, I am certain that we will begin to reap rewards of the exploration programme sooner than can be expected.

 

However, while carat production was down, I am pleased to report that the performance of the shallow water marine operations has been extremely encouraging; both the boat and shore units are yielding some unusually rare diamonds of high value.

 

Deed of settlement update

 

As per the 2007 Deed of Settlement, Alexkor and the Richtersveld Mining Company hold a 51 and 49 per cent interest respectively in the PSJV. The agreement allows for a

R45 million payment following transfer of Alexkor–owned property to the Commercial Property Association (CPA). It is of paramount importance to Alexkor that the communities of the Richtersveld receive their rightful award of the R45 million. We will continue to work through the correct legal and governance structures to ensure that the handover of these ring-fenced funds are effectively concluded. The board and executive management team remain committed to working with the Department of Rural Development and Land Reform and the constituted community structures in order to resolve the local governance issues so that this process is concluded as a matter of priority.

 

Developing positive stakeholder relationships

 

Fostering sound and positive engagement with all our stakeholders is important to Alexkor. We believe collaboration is vital to building the future success of our mining operations with optimal benefits for community development. To deliver on our social responsibility mandate we are committed to playing our part in developing a secure, sustainable livelihood for the community in the area in which we operate and to enhancing the capacity and abilities of our employees.

 

Alexkor’s turnaround strategy

 

In order to turn around the business we will focus our efforts on optimising the utilisation of existing diamond assets and on unlocking the value within the PSJV.

 

As already mentioned, we recognise that this is a finite resource and as such we need to diversify our offering in order to build a sustainable, diversified, profitable mining company. In order to diversify our business we will focus on exploring the coal beneficiation and supply opportunity.

 

Furthermore we are exploring mutually beneficial cross-border mining opportunities in the SADC region and further afield.

 

Further consideration is mining of the high potential mid-water concessions independently or via joint ventures with new or existing marine contractors.

 

Another focus area was a cost containment initiative at head office. In this regard, we have significantly downsized our head office human resource structure.

 

The year ahead

 

Looking to the immediate future we will forge ahead with our coal strategy and anticipate completing the feasibility study by Q3 2017. We will continue to expand our land exploration programme in which future mining is supported by sound geoscientific data. I have confidence that marine diamond mining presents a big opportunity for Alexkor, and we will therefore continue with our efforts to access the valuable mid–water assets.

 

As a new leadership team we are committed to ensuring that our engagement with the community is purposeful and impactful. Most importantly, we will focus our collective efforts on improving stakeholder relationships in the Northern Cape area so that we are able to unlock the PSJV value.

 

While I can conclude that this has been a challenging year, there were moments of delight when diamonds of exceptional size and quality were discovered in our concessions. Discovering diamonds of truly high quality should remind all of the immense potential that lies in the arid beauty of the Richtersveld.

 

Appreciation

 

In closing, I wish to extend my thanks to the Minister of Public Enterprises, the Honourable Ms Lynne Brown, for her support and guidance on the way forward for Alexkor. Further, my heartfelt thanks goes to the Alexkor board and staff who have supported my task as Acting Chief Executive, providing me with valuable advice in helping me to steer the business in these challenging times.

 

My profound thanks also goes to the mine executive and operational team who have kept diamond production at sustainable levels.

 

Given the value, skills and expertise of the Alexkor team, I am confident that while we have another challenging year ahead, we can deliver on the plans we have set ourselves in our goal to deliver value for all our stakeholders.

 

Mr Vimal Bansi

Acting Chief Executive Officer

25 July 2016

 

 

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