Ms H Matseke
Appointed 14 August 2015
Alexkor continues to ensure that the PSJV is operated within a sound governance framework and on commercial terms, through both oversight by management
of its activities and Alexkor Board representation on its Board.”
In the past year Alexkor, together with the rest of the diamond mining industry, continued to face unremitting headwinds that have impacted and eroded margins.
However, the Company is committed to taking the necessary action to create a sustainable, competitive and profitable business for all its stakeholders.
We, the Board (see page 22 to 25), undertook a comprehensive review of the business, which indicated that the Company’s operational and financial performance needs to be placed on a firmer footing than it currently is. This review was conducted across the entire value chain of the business, to address structural challenges that have impacted performance over time. Building on the varied and effective steps taken to contain operational costs in recent years, the objective of the proposed action was to create a safe, sustainable, competitive and profitable business for the long-term benefit of all our stakeholders.
In order to achieve the above, it was necessary to align baseline production with long-term demand expectations and focus on a high-quality portfolio of assets, to produce diamonds on an economically sustainable basis, both on land and marine operations. Contracts were awarded to four successful bidders for the mid-water concessions, which will boost diamond production in ensuing years. Overheads have been reviewed and reduced while a new organisational design is in the process of being developed to ensure that the operations are appropriately supported.
Alexkor continues to ensure that the PSJV is operated within a sound governance framework and on commercial terms, through both oversight by management of its activities and Alexkor Board representation on its Board. Alexkor has fulfilled most of the Deed of Settlement conditions, the remaining conditions are at the final stages of implementation.
We are delighted to report that the revenue generated by the PSJV has increased to R758 million compared to R387 million the previous year. Operating profit increased from 2.5 million in 2016 to 29.6 million in 2017, whilst carat production was 162 172 compared to 45 493 carats (112 047 carats are from our deepsea operations, whereas 50 125 carats was produced from the other concession areas). Net profit for the financial year was R34 million compared to R5.3 million previously.
The external environment in which the Company operates, not only impacts the way the Company relates to external stakeholders, but it also changes the focus of the work of the Company. At the global level, economic recession and the slow-down in growth have led to reduced demand for industrial commodities, including precious gemstones such as diamonds. However, the weak exchange rate compensated for reduced demand.
Domestically the South African economy experiences high levels of poverty and unemployment. These realities drive policy requirements, and have placed job creation and economic growth as the highest priorities for all public sector organisations.
Alexkor’s CSI initiatives are focussed on the social upliftment and development of local communities in the Richtersveld. Our Company invested a significant amount on various community corporate social investment initiatives, which included partnerships with schools and community organisations.
We are proud to announce that one of our flagship youth enterprise initiatives, aimed at developing commercial diving skills locally was successfully completed. This resulted in our four sponsored candidates completing their Class III diving course at a reputable diving school in Saldanha Bay. These
individuals now have the opportunity to gain expert diver and business skills, in an on-site workplace exposure programme under the supervision of experienced marine contractors. We are in the process of training another ten individuals, interviews have already been completed with the shortlisted candidates and as soon as the logistics are finalised, the successful candidates will be trained.
As a further initiative to enhance the education transformation process in the Richtersveld area, the mine partnered with local schools by sponsoring salaries of teachers with an emphasis on improving the teaching of mathematics and science.
At the PSJV, a further R5.6 million was spent on various social responsibility initiatives such as transportation, donations to charities and partnership with schools and other local community organisations. A total of R1.92 million was spent on Social Labour Plans (SLP) projects.
Our six bursary students from the various provinces are progressing well with their studies, with one student having successfully completed her studies, graduating in April 2016 with a Mechanical Engineering Degree from the Vaal Technical College. She commenced service in the PSJV during September 2016. During the year under review, an amount of R3.19 million was invested by the PSJV on training and skills development initiatives in line with our skills development plans.
Our commercial strategy has been revised to guarantee value and stability of the supply of diamonds to our customers. Mining of our deep-water 1C concession commenced in April 2016, with International Mining and Dredging South Africa (IMDSA) positioning their ship, the Ya Toivo, off the coastline. Production of diamonds from the deep water amounted to 112 047 carats.
Our participation in other mineral exploration and supply, including thermal coal, was closely examined in order to develop a diversified portfolio. A due diligence study on an existing coal wash plant situated in the Witbank-Middelburg coal mining hub has been completed, and Alexkor await response and approval from the shareholders. Coal beneficiation has long been an opportunity for Alexkor in order to leverage SOC to SOC relationships, in this case, between Alexkor and Eskom.
Another beneficiation strategy that lends credibility to the future sustainability of Alexkor is diamond beneficiation. As a primary producer of gem quality diamonds, Alexkor is in a very favourable position to enter and become a serious player in this space. Scarlet Sky Investments, Alexkor’s diamond marketers, has recently commissioned a mini-factory where 5% of Alexkor’s rough stone production are cut and polished for local and offshore markets. As production expands, it is Alexkor’s intention to employ members of the Richtersveld community and Northern Cape artisans in our factories.
Alexkor will continue to optimise its current assets and ensure expenditure is managed prudently as we embark on the execution of the new strategy.
On behalf of the Board, I take this opportunity to extend my gratitude to all parties who have worked closely with Alexkor and assisted us in our quest to fulfil our mandate. Our success as an organisation would not have been possible had it not been for the constant engagement, feedback and support of all our stakeholders.
I am particularly indebted to our shareholder representative, the Minister of Public Enterprises, the Honourable Ms Lynne Brown (MP), for her unconditional support and wise counsel at all times to myself, the Board and the management of Alexkor.
I am especially grateful to my fellow members of the Board for the dedication they have displayed in guiding Alexkor on the right path. Their collective support and wisdom have contributed greatly in steering this ship on the right direction.
Our Chief Financial Officer, Ms Ntombizodwa Mbele, resigned effective 30 September 2016. The Board thanks her for her contribution to the Company. A contract for the position of Acting CFO has been awarded to Ms Tsundzukani Mhlanga during the recruitment process for a permanent position.
We are also hugely grateful to Mr. Mervyn Carstens, his management team, and every employee at the PSJV in Alexander Bay for their excellent support and contribution. The community of Richtersveld also deserves our gratitude and appreciation for embracing and working side by side with us in ensuring that we create a sustainable future for all.
Last but not least, I wish to thank Alexkor’s executive management team and all our committed members of staff for their hard work and dedication during the review period. I look forward to a fulfilling 2017/18 financial year as we strive towards contributing to the sustainable and economic development of all our stakeholders.
Ms Hantsi Matseke
31 August 2017
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