17 Mar 2016

Debswana managing director, Mr Balisi Bonyongo, has described 2015 as a difficult year for the mining industry.

When sharing Debswana’s business performance during the stakeholder engagement on Wednesday, Mr Bonyongo explained that their response to the 2015 challenges paid off for Debswana and as a result, positioned the company well for 2016.

In response to prevailing market conditions, he said in 2015 the company reduced carat production by three million carats.

Additionally, he said to keep the business going, Debswana focused on business efficiencies and also reduced total operating expenditure and did that well.

“Our response was measured and guided by a number of principles, such as safety measures, continuous consultation of our employees and operational efficiencies to unlock and take waste out of the business. We achieved exceptional safety performance in 2015, with serious injuries down 15 per cent from 2015,” he said.

He said the mining industry as a place of many hazards such as high energy, huge trucks, ground fall, working at major heights and confined spaces as well as electricity, demanded that a safe environment be a prerequisite for a good business.

Thus Mr Bonyongo said, “our safety performance continues to improve. Our mines are safe and our safety performance is comparable to the best in the world. And we really are in the top of the league of mining houses.”

In terms of comparison, Debswana managing director said the company measured itself against other companies using the Total Recordable Injury Frequency Rate imdex. From 2014 to 15, he said the index came down 17 per cent. Since 2011, he said the trend had been a remarkable one.

Since 2011, he said there had also been a reduction of 78 per cent for the lost time injuries, which are serious injuries whereby an employee loses 24 hours without going to work for that period. 

This, Mr Bonyongo said demonstrated the level performance and the level of commitment and pulling together to make things work.

“At the end of 2014, weaker than expected consumer demand left retailers holding higher stocks, leading to build up of inventory throughout the pipeline and therefore sight holders purchasing lower volumes of rough diamonds from De Beers,” he said.

As a result of this building up of inventory in the pipeline, he said the company’s first response was to look at the supply and as a result, the current production went down 16 per cent, from 24 million carats to 20 million carats in 2015.”

“What is very dramatic is the profitability line, it went down heavily by 37 per cent. This is just how the environment was last year,” he said. 

To help support the productivity of the business, he explained that the company took a number of steps, such as aligning production to demand and utilising its operational flexibility and this reduced current production by three million carats against budget. 

He said they focused on the cost line and had to do a lot of operational efficiency work to improve and this helped bring down operating expenditure quite significantly. For 2016, Mr Bonyongo said current production had been maintained at 20 million carats, taking into account the inventory levels at the end of 2015 and the need to conserve cash.

“The inventory buildup in the pipeline, last year, made us reduce our volumes and therefore it meant that at the end of the year we needed to take into account the inventory levels then, to make decisions for what we are going to produce this year and also to ensure that cash is managed appropriately,” he explained.

Furthermore, to optimise revenue and distributions for 2016, the managing director said the company would maximise production at core assets and scale down production at lower value and lower margin assets. The focus, Mr Bonyongo said was on two areas, which is maximising production at Jwaneng mine and at Orapa No. 2 Plant, placing Damtshaa mine on full care and maintenance and scaling down Orapa No. 1 Plant in terms of operations. Ends