• Operational Horizons introduced
• Total tonnes treated up 15%
• 2014 revenue grew 31%
Debswana Diamond Company Managing Director Balisi Bonyongo is optimistic his company will survive the volatility in the world diamond market especially the unpredictable market for rough diamonds.
Bonyongo who was appointed Debswana MD last year, told journalists on Thursday that in order to continue to deliver value to their shareholders they must exploit their resources in a manner that optimizes business value now, in the medium and long term. To achieve that, Debswana will be working around two horizons, the first one dealing with optimising profitability of their existing open pit mines. According to Bonyongo, under Horizon One they will also ensure that they produce to demand.
Bonyongo, who led Jwaneng mine as General Manager said they have already seen the results of Horizon One as they have achieved a step change in performance across all fronts of their business. This is evidenced by registering the lowest Recordable Injury Frequency Rate (TRIFR) of 0.46% which is the first in the history of Debswana, said Bonyongo adding that they have not recorded any fatalities and serious injuries in 2014.
He said they have recorded strong operational and business performance, giving credit to their operational strategy which was initiated by his predecessor, Jim Gowans. Cut 8 Waste mining reached peak mining rate of 82 million tonnes per annum and has now stripped over 50% of the 500 million tonnes of waste required to expose ore, said Bonyongo who has worked for Debswana for more than 20 years holding various senior management positions.
In ensuring that they stick to their strategy of making sure they produce to demand, their Carat production has remained flat at 20 – 24 million carats, in line with market demand.
The year 2014 also saw the revenue of Debswana, a joint venture between Botswana Government and De Beers, shoot up by 31 per cent due to strong demand and a favourable exchange rate. Bonyongo could not reveal the exact amount as De Beers is listed on the Johannesburg Stock Exchange (JSE) and are awaiting announcement of their financial results.
The volatile rough diamonds market
Towards the end of 2014 and early 2015 there were signs of a slowdown in the rough diamonds market primarily caused by Indian economy which was sluggish and grew at 4.4 percent during 2013-14 against 6.2 percent in 2011-12 and 4.7 percent in 2012-13. India is the largest processor of rough diamonds in the world. According to Bonyongo, this led to the Indian diamond manufacturing sector performing below capacity due to liquidity pressure and the rising strength of the US dollar against the Rupee.
The other challenge that the rough diamonds market faced, according to Bonyongo, is the margin squeeze in the mid-stream as rough diamond prices increase ahead of polished prices.This, he said, led to high inventories in the mid-stream as a result of delayed demand from the retail end of the business.
The current market situation
Bonyongo said the current market can be described using the acronym VUCA World, which means Volatility, Uncertainty, Complexity and Ambiguity.
But how will he ensure that as the captain of the Debswana ship it doesn’t sink? The former Chief Operations Officer revealed that they have positioned their business to be agile and flexible. “Our productivity and operating efficiencies have improved across the business in line with our operational strategy HPO 2018 “Always Ahead. Our business plans have in-built flexibility to respond to challenges or opportunities in the market,” he said.
This according to Bonyongo is also evidenced by their performance in the first quarter of 2015; strong trajectory from 2014, as the total tonnes treated has increased by 15%. Debswana has also ensured that they have a robust balance sheet to withstand short term shock, said Bonyongo who holds a Bachelor of Engineering (Hons) degree from Leeds University. He also holds a Master of Business Administration (MBA) from the Graduate School of Business, University of Cape Town.
Horizon II strategy
Bonyongo who once worked as Commissioning Manager of the Aquarium Project at Jwaneng Mine, revealed that Debswana is currently working on Horizon II strategy which aims to prepare for open pit extension and expansion and added that significant capital investment is required to carry out the strategy. Studies for the extension and expansion of Jwaneng Mine beyond Cut 8 and Orapa Mine beyond Cut 2 have commenced, he revealed.
Another critical area that they will ensure that they stay afloat in line with Horizon II strategy is to invest on Tailings Processing Plants and will be used to recover previously unrecovered diamonds in tailings resources. Already Jwaneng Modular Tailings Plant was commissioned in 2014 and will process up to two million tonnes, recovering 900,000 carats per annum.
Closing of Letlhakane mine
Letlhakane Mine will stop its mining operations very soon due to the depleted ore and instead of closing it and cutting jobs; Debswana has decided to construct Modular Tailings Plant at the mining site, he revealed.
Funding for the project was approved in the last quarter of 2014 and construction will commence in the first quarter of 2015, said Bonyongo, who has been tasked to ensure that Debswana Mines are one of the best managed mines in the world. He said that Debswana will recover diamonds from tailings through the use of new and improved recovery technologies and will have capacity of up to 800,000 carats per annum.
Asked what will happen to their employees during the construction of the plant, Bonyongo said that they will be deployed to their other mining operations especially Damtshaa Mine.
Citizen economic empowerment
Last week Member of Parliament for Boteti East Sethomo Lelatisitswe asked Minister of Minerals, Energy and Water Resources Kitso Mokaila in parliament what Debswana is doing to empower the citizen owned companies. Bonyongo said they are doing a lot to support locals with 80% of their total expenditure spent on Botswana based companies.
In 2014, the World’s leading producer in gem diamonds spent P6.63 billion on Botswana based companies but he could not state how many were citizen owned companies. Debswana has revised its Citizen Economic Empowerment (CEE) policy which seeks to support the development of local suppliers to ensure sustainable existence and growth, said Bonyongo. He added that the CEE policy will also facilitate Joint Ventures between local suppliers and larger foreign companies supplying Debswana.
To ensure that CEE benefit Batswana, Bonyongo revealed that they have reserved certain categories of goods and services for citizen owned companies.
For goods and services which they could not procure locally, Debswana MD said they are working with Botswana Chamber of Mines (BCM) to increase supplier base in Botswana by bringing suitable manufacturers to set up in Botswana.
Fighting corruption at Debswana
Bonyongo who confessed that he is a pastor said he abhors corruption in all its forms and said one of his pillars is good governance practices and has shared that with his team. The pastor at New Season Ministries church said there is a hotline at all their mining operations which encourage their employees to report corruption or corrupt practices.
Horizon II poses HIV/AIDS challenges
The implementation of HORIZON II aimed at undertaking major diamond production at Jwaneng and Orapa Mines to unlock the full potential is expected to attract an influx of people seeking employment thus posing a challenge of the spread of HIV/AIDS within the surrounding towns and villages.
Head of Human Resources Ntoti Mosetlhe has acknowledged that the project will bring more challenges regarding the fight against HIV/AIDS within their mining operations. Mosetlhe said it is going to be a big project which is going to attract people from all spheres of life and might lead to the spread of HIV/AIDS, but they are working around the clock to develop programs to address such issues. She said last year they conducted a survey on what could be leading to the high number of HIV/AIDS prevalence and realised that their service providers are the most affected and are working with other stakeholders like National AIDS Coordinating Agency (NACA) to ensure that education on health issues is extended to them.
Mosetlhe said currently their focus is on preventative measures, “but our focus is not limited to HIV/AIDS only but other areas that might affect the wellness of our employees like financial wellness.” The Debswana head of HR added that most of the interventions have to be around education.
One of Debswana’s mining towns; Jwaneng is still battling to contain the spread of HIV/AIDS with AIDS prevalence standing at 12% of the adult population. Out of 100 women 17 are living with HIV/AIDS while 9 out 100 men are living with the virus. In response to that Mosetlhe said Jwaneng has always been an area of concern for them and will always be but they are doing all they can to reduce the virus in the town.
HORIZON II project is aimed at expanding the lifespan of the Jwaneng and Orapa mines to 2050. The project includes construction modular tailings plants which will be able to recover diamonds from tailings through the use of the new and improved recovery technologies.
The Jwaneng modular tailings plant was commissioned in 2014 while the construction for the Letlhakane one will start in the first quarter of 2015. The expansion of the mines will also create opportunities for a fit-for-purpose workshop facilities to cater for increase in the size of earth moving vehicles, thus creating more employment opportunities. Construction of the Orapa Earth Moving Vehicles Workshop (EMV) started in 2013 and is expected to be completed this year and is being carried out by local citizen owned companies.