The Global and Domestic Diamond Industry in 2010/11
The global diamond market ended 2010 in a far better position than it started the year. Even as economic and diamond industry measures are placed in perspective of a weak comparative year in 2009, diamond prices and trading volumes returned to early 2008, pre-recession levels. Global demand for rough diamonds by far outpaced growth seen in the rest of the diamond pipeline, as did the recovery in rough diamond prices.
Diamond production in South Africa rose in 2010 to about seven million carats from 4.8 million carats in 2009. Rough diamond sales were boosted by a strong recovery in prices. It is estimated that rough diamond prices rose about 21 per cent during 2010 and ended the year about 90 per cent above levels of the first quarter of 2009, the weakest period for rough diamond trading during the recession. Prices achieved by mining companies returned to pre-recession levels already in late 2009 and continued to uptrend in 2010.
Alexkor 2010/11 Performance
It is therefore encouraging that Alexkor has indeed taken advantage of the improving environment in the diamond industry and has reported better results for the year ended 31 March 2011 than the previous year’s performance.
The improved performance, mainly as a result of higher carat production coupled with better cost management is commendable. Alexkor achieved its first gross operating profit since 2005/06 and went on to record a significant increase in the net profit for the year. The net profit of R 84.2 million represents a significant positive step for Alexkor and should be used as a new baseline for the coming years.
Richtersveld Deed of Settlement
As you are aware, settlement agreement reached between Alexkor, Government and the Richtersveld Community in the matter of the Richtersveld Community’s land claim against Alexkor and the State entails, inter alia, that Alexkor has to transfer its land mining rights to Richtersveld Mining Company (RMC). In the interim, the parties agreed to form a Pooling and Sharing Joint Venture (PSJV) between Alexkor and the Richtersveld Mining Company (RMC) as follows:
- Alexkor will remain the holder of its marine mining rights and RMC will remain the holder of its land mining rights;
- Alexkor and RMC will respectively put their marine mining rights and their land mining rights under the full control of a Joint Board of the Joint Venture for purposes of mining both the marine mining resources and the land diamond resources. Alexkor and the Richtersveld Mining Company are each entitled to appoint, remove and replace three members of the Joint Board, who shall be duly authorised to represent that party in respect of all matters relating to the pooled operations;
- Alexkor will have a beneficial interest of 51% in the PSJV and the Richtersveld Community, through RMC will hold a 49 % interest
I am pleased to announce that the Notarial Deed of Cession of the Alexkor land mining right (transferring Alexkor’s land mining right from Alexkor to the Richtersveld Mining Company) was registered by the Mineral and Petroleum Titles Registration Office on 6 April 2011.
Alexkor’s land mining rights have been transferred to the Richtersveld Community. Effectively what this means is that given that Alexkor has transferred its land mining rights to the Richtersveld Mining Company and that the Pooling and Sharing Joint Venture has now come into effect, Alexkor’s operations in Alexander Bay now fall under the control of the Joint Board of the PSJV.
Significant progress has been made in the implementation of the Deed of Settlement signed with the Richtersveld community in 2007. All Alexkor, State and Northern Cape Provincial land has been transferred, except for the properties in Alexander Bay Township. These properties will be transferred to the community soon after the upgrade of the township civil and electrical engineering services to municipal standards.
Alexkor’s agricultural and maricultural assets have been transferred to the community. I have instructed Alexkor to work diligently to complete all outstanding settlement obligations to the Richtersveld Community.
The Richtersveld community has been fraught with infighting and tensions in the recent past. Given our partnership with the Richtersveld Community, the situation was concerning as continued conflicts threaten to derail the overall land claim settlement process and the success of the Pooling and Sharing Joint Venture.
We therefore welcomed the appointment by the Northern Cape High Court of an interim Receiver (Taswell Papier) to control the Richtersveld Communal Property Association to help address these conflicts within the community. The receiver was mandated to update the community’s membership register, convene annual general meetings and hold elections for the community leadership.
Elections were held in June 2011 and a new community leadership has been ushered into office. We continue to engage with the Richtersveld Community and all other stakeholders to ensure the operational and financial sustainability of the joint venture and the socioeconomic wellbeing of the region to the benefit of the adjacent local communities and Alexkor.
Alexkor Strategic Outlook and New Growth Path
The Deed of Settlement with the Richtersveld Community has considerably changed the landscape of Alexkor and its strategic outlook. Alexkor must actively seek opportunities to procure new mining ventures to secure new revenue streams beyond the Alexander Bay and independent of the PSJV operations.
This will ensure Alexkor’s future growth and sustainability and enable the company to effectively address its historical obligations and liabilities. In pursuance of this new strategy, Alexkor will be guided by government’s policy objectives.
The South African mining sector has the potential to be an important driver of employment, societal transformation, skill building, broad-based wealth creation, and building a developmental state. Alexkor has a key role to play in this regard. For government, the main interest in managing natural resources is to expand the country’s economic potential and to achieve growth and developmental objectives.
As you are aware, the New Growth Path promotes beneficiation, as well as greater utilisation of the mineral resource base of the country for developmental purposes. Alexkor will explore opportunities for downstream beneficiation to contribute to the creation of new jobs, development of requisite skills, investment in research and development, economic growth, sustainable development and cost-effective support for the broader policies of government.
As these opportunities will invariably require funding, it will be important to explore different funding mechanisms and sources available for the new mining ventures so as not to depend entirely on the fiscus to fund Alexkor’s growth opportunities. I believe the new business ventures will bolster the sustainability of the company and contribute to the broader developmental objectives of government.
Conclusion
I wish to thank the Board, Executive Management Team, employees and all other stakeholders who were involved in ensuring that 2010/11 was a successful one for Alexkor. I will continue to support Alexkor to overcome the various bottlenecks and uncertainties to ensure that the company achieves its objectives and becomes aligned with its key stakeholders.
Enquiries:
Masibonge Mzwakali
Media Liaison Officer in the Deputy Minister’s Office
Tel: 012 431 1228
Cell: 071 609 2380
