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 | Tue, 30 Jan 2007 |
Posted: Thu, 09 Nov 2006 [miningmx.com] -- DE BEERS is chopping its South African head office staff yet again to the shock of its workforce and the delight of its competitors looking to employ the experienced executives that will be retrenched. De Beers spokesman Tom Tweedy confirmed about 200 positions in the current Johannesburg head office staff of about 800 are affected. This is the third round of staff cuts at the diamond group over the past two years and follows a report by Bloomberg News that four out of six South African mines will post a loss this year. There was an initial call for staff to take voluntary retrenchment or voluntary early retirement packages and a subsequent retrenchment programme specifically aimed at De Beers Consolidated Mines (DBCM) which houses the group’s South African mines. This time the cuts affect both DBCM and the separate De Beers Group operation which provides services to De Beers international operations outside South Africa. Many of De Beers' most experienced technical and exploration staff are affected. Industry sources say at least 15 of the affected senior employees intend taking legal action against De Beers on the grounds of unfair dismissal. Tweedy said De Beers was not aware of any legal action being taken against it by former employees. Most of the affected executives are now circulating their CV’s around the various mining companies intent on breaking into the diamond business. Groups ranging from resource heavyweight BHP Billiton to juniors like Tawana Resources and Petra Diamonds are expanding their diamond operations because of the excellent long-term prospects for the sector. Demand is expected to outstrip supply over the next ten years as not enough major new diamond deposits are being discovered and developed. According to one diamond industry executive: "The CV’s coming across my desk from people that De Beers is letting go represent an incredible resource in terms of skills and experience. "What’s more, because they are being forced to look for new positions, the wage negotiation process is very different to what takes place when you try to poach such executives from De Beers." Industry sources said the retrenchment process was being driven aggressively by MD Gareth Penny who took over in February. Before his appointment to the top job, Penny ran De Beers marketing arm - the Diamond Trading Company (DTC). Said one source: "It seems Penny is going for a different business model. Previously, the De Beers approach was to keep a great depth of technical diamond mining, processing and exploration expertise in-house. "It seems Penny now feels that’s too costly and De Beers can simply buy these skills from outside consulting firms as and when needed. "Penny is a marketer. He seems intent on surrounding himself with 35 to 40 year old ’perfume salesmen’ who believe the diamond business can be run like it’s Calvin Klein. That may be a short-sighted approach." One of the reasons for this assessment concerns the possible long-term implications for Debswana - the joint venture between De Beers and the Botswana government which controls the group’s most important diamond mines at Jwaneng and Orapa. The two mines accounted for 65% of the group’s production in 2005. Said a diamond industry executive: "The Botswana government views one of De Beers’ greatest strengths as being its reservoir of technical excellence. "If De Beers is no longer going to retain that technical resource and, instead, will merely contract in firms like SRK as and when required, then that’s another reason to ask why the Botswana government should want to stay linked so closely to De Beers." There has been widespread speculation - denied by both De Beers and the Botswana government - that the Botswana government might sell its 15% stake in De Beers. What is indisputable is that the Botswana government has been strengthening its relative position in the partnership. It has gained more control over the marketing of the country’s production through the establishment of DTC Botswana. De Beers also intends shifting the "aggregation" of its global diamond production to the Botswana capital, Gaborone. That key function was previously carried out in London. In addition to the head office cuts, De Beers is also reducing employee numbers at its Kimberley Mines and Namaqualand Mines divisions. Tweedy said an evaluation of Namaqualand Mines showed the current operating model "did not present a viable business case." So far S189 notices have been issued to 370 people and the number of positions that may be affected is estimated at about 535 out of a total work force of 2319.Free news alerts: click here to subscribe
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