Business

Letšeng’s new strategy pays off

Bereng Mpaki

LETŠENG Diamond Mine’s improved operational performance recorded in 2018 has been attributed to its Business Transformation strategy implemented in 2017.

The Business Transformation strategy is aimed at enhancing mining efficiencies and improvements, mine planning optimisation, increased plant uptime, asset and contract management, capital discipline and continued stringent cost controls.

Gem Diamonds chief executive officer Clifford Elphick said the business strategy has significantly improved the mine’s operations.

“At Letšeng, planned major maintenance work conducted on the plants during May, together with enhanced efficiencies from various Business Transformation initiatives, improved plant runtime resulting in a significant increase in the tonnages treated during the second half of 2018,” Mr Elphick said on the company’s full year 2018 results, which were published on 13 March 2019.

“Carats recovered during 2018 increased by 13 percent to 126 875 from 111 811 in carats 2017.

“A total of 125 111 carats were sold, generating revenue of US$267, 3 million, an underlying EBITDA of US$82, 3 million and earnings per share of 18, 80 US cents. The group ended the year in a net cash position of US$17, 5 million compared to US$1, 4 million in the previous year.”

Michael Michael, who is Gem’s chief financial officer (CFO), said after its commencement in the second half of 2017, the Business Transformation continued its momentum in 2018.

“The cumulative four-year target to 2021 of US$100 million in revenue, productivity improvements and cost savings remains on track. This target is stated net of implementation costs, consultant fees and an employee incentive plan related to the successful delivery of initiatives contributing to the overall target.

“The focus in 2018 remained on mine planning optimisation, mining efficiencies and improvements, increased plant uptime, asset and contract management, capital discipline and continued stringent cost controls.

“There were 325 initiatives identified and pursued during 2018 and by year end, initiatives which are expected to contribute US$63, 7 million to the cumulative US$100 million target had been implemented.

“Of these implemented initiatives, US$4, 9 million relates to once-off savings and the balance of US$58, 8 million relates to cumulative recurring annualised benefits over the four-year period. The majority of the implemented initiatives were within the mining and processing work streams, totalling US$53, 3 million. US$20, 7 million of the implemented initiatives have been cash flowed to date, of which US$19, 4 million flowed in 2018.

“Business Transformation also aims to improve resource-use efficiencies, thereby reducing the financial cost of mining while at the same time containing the impact on our communities and the environment. The reduction of our carbon footprint benefits the natural environment and reduces the levels of air pollution exposure for our communities and employees. This aligns with our Group strategy of maximising benefit for our communities and minimising our (negative) impact on the environment,” Mr Michael said.

Commenting on the mine’s full-year performance for 2018, Mr Elphick said they recovered larger stones than ever before.

“Gem Diamonds achieved a good set of results, characterised by the recovery of 15 diamonds greater than 100 carats, a record for a single calendar year.

“Production in 2018 also included the highest recovery of diamonds greater than 20 carats, with 80 percent of revenue primarily generated by diamonds greater than 10 carats.

“The mine plan for Letšeng was revised during 2018, with the aim of further reducing the waste stripping through the steepening of inter-ramp slope angles. Mining in accordance with this plan has commenced and is expected to significantly increase the net present value of the mine.

“The Business Transformation process has progressed well and remains on-track to achieve the target of US$100 million in cost savings and efficiencies by 2021. By December 2019, the initiatives already implemented are expected to deliver US$64 million to the end of 2021,” Mr Elphick said.

The mine posted a stronger financial performance revenue increased to US$267, 3 million up from 2017 US$214,3 million, with profit for the year rising to US$46, 6 million as compared to the US$20, 8 million of 2017.

The mine recovered a total of 126 875 carats during the year, which is an improvement from the 111 811 carats that were recovered in 2017.

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