portfolio committee briefing 26 october 2005

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


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


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 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)


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)


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


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


Net operating expenses under control

0

50

100

150

200

250

300

350

1997 1998 1999 2000 2001 2002 2003 2004 2005

Rm


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


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)


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%


portfolio committee briefing 26 october 2005

Documents

diamond production income

total revenue

total operating loss

total assets

total r152

total expenses218

total income242

total income9