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Oppenheimer promises board overhaul for De Beers
Hayley Goodwin
Posted: Tue, 31 May 2005
[miningmx.com] -- EXPECT a very different looking De Beers Consolidated Mines by year-end, says Jonathan Oppenheimer, managing director of the diamond producer's South African arm, which produces about 90% of South Africa's diamonds.
Speaking at the company's annual review in Johannesburg this morning,
Oppenheimer told reporters that the company will cut as many as 1,200 jobs in an effort to return five of its seven unprofitable mines to profitability. It
joins Anglo American stablemates Anglo Platinum, AngloGold and Kumba Resources
-- among others -- in their cost-cutting efforts, as it tries to mitigate the
effects of rand strength.
Approximately 100 of these job cuts will come from middle to senior management and the balance from rank and file.
"We're not scared to take tough decisions, but we will do so responsibly,"
Oppenheimer said. The company currently
employs 8000 people at its South African operations, and around 3000 contractors.
A responsible approach to retrenchment is hardly going to assuage the
National Union of Mineworkers.
"The arrogance that they [DBCM] dish out must be met with the same arrogance,"
says Moferefere Lekorotsoane, a spokesperson for the National Union of
Mineworkers. "De Beers have no reason for retrenchments whatsoever. Profits are
high... their interests are clearly not aligned with those of this government.''
The unions remonstrations against any job cuts will indeed find a sympathetic
ear from a pugilistic mines department. Only last week, Deputy Mines Minister
Lulu Xingwana, lashed out at De Beers for appointing a white managing director
to replace Gary Ralfe. Her reaction -- supported by the mines minister -- was
the latest in a string of attacks leveled by the government at De Beers and its
parent. Oppenheimer will have to walk a fine line.
But
he doesn't believe that the cost-cutting plans will exacerbate what is
perceived to be a patently hostile relationship between the company and
government.
"We have a relationship [with government] that is fundamentally engaged and
honest," said Oppenheimer, one of the directors referred to by the
deputy minister as 'lilly white'. "We may agree to disagree at times but by and large, there is mutual respect," he added.
The company, which sells about 60 percent of all uncut diamonds, reported an
increase of 15% in production from its South African mines in 2004, helped by a
boost in production from its Kimberley operations.
De Beers's seven South African mines will produce more than 14 million
carats this year, compared with 13.7 million last year, Oppenheimer said.
Although the company assumes an exchange rate of R6.40 to the dollar when
planning, Oppenheimer said that short-term fluctuations in the exchange rate
should have very little
influence on the volumes the company mines.
While its mine managers and human resources managers have their hands full
trying to meet production and headcount targets, its dealmakers are scrabbling
to meet a year-end deadline to finalise the sale of a stake in its South African assets to black investors. The completion of the deal, bringing the company in
line with legislation passed in May last year forcing the sale of 26 percent of
mining assets by 2014, could cure a thousand ills for the group.
At a stroke, it would have an ally in increasingly hostile exchanges with
government and crucial mining and exploration permits could be granted. Without
the empowerment deal -- and while it cuts jobs -- it provides an irresistible
target for labour and government.
"We may be seen as tardy in some people's eyes," Oppenheimer said. "This [delay]
is because we are determined to align an empowerment deal with our corporate
values. Finding that has
not been easy.''
As it currently stands, the DBCM board is comprised of eleven white males, one
white female and one black male. "The board structure will change to reflect an
empowerment partner at the time a deal is done," Oppenheimer said. "It will be a very different looking board. If not, we will will have done something very
wrong."
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