De Beers Operations and Exploration Overview GA Beevers Director Operations 5 November 2003
DTC SALES INTERIM RESULTS 3,000 US $ Millions 2,500 2,000 1,500 1,000 2,842 2,422 2,920 500-2002 June Actual 2003 June Budget 2003 June Actual
OPERATING CASHFLOW INTERIM RESULTS 1,200 1,000 US $ Millions 800 600 400 1,144 1,115 200-2002 June Actual 2003 June Actual
NET GEARING INTERIM RESULTS 60% 50% 40% 30% 20% 10% 0% 53.7% 2002 June Actual 20.3% 2003 June Actual
DEBT MANAGEMENT 2001: Leveraged Buyout Delisting/Private Company US$ 3.55 billion principal debt US$ 1 billion revolving credit facility Fixed interest arrangements i.e. 50 % hedged which as things turned out was expensive 2002: Principal debt: US$ 2.6 billion / Revolving credit untouched US$ 710 million ahead of repayment schedule Cashflow: US$ 1.6 billion
DEBT MANAGEMENT 2003: Strong cashflow generated June: US$ 1 115 million Defying gravity... Debt Refinancing US$ 2.5 Billion Revolving Credit loan 5 year / Standard commercial terms
De Beers Exploration Strategy Exploration vision Finding De Beers Future Exploration mission Securing economic diamond resources through discovery, partnership and acquisition Future Strategic Alignment Secure new high margin mines Extend geographic diversity of De Beers operations Focus mainly on kimberlite discovery Drive early stage projects aggressively towards resource delivery Increase partnerships and alliances Align with corporate strategy
World Diamond Production - 1870 to 2002 US$ Billion RSA Other Namibia DRC/Zaire Angola Russia Botswana Australia Canada 9 8 South Africa Africa Alluvials Big Pipes 7 6 5 4 3 2 1 0 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
How do we explore? Identify most prospective areas Early into new areas with maximum holdings Identify, assess, action potential quality JVs or acquisition opportunities Top-class support Labs, MRM, financial, legal, HR, corporate, Different strategies for different environments Mix of traditional and new technologies, applications, concepts Flexible outlook on priorities
Airborne discovery technologies
Current Areas of Activity CANADA Toronto Sudbury Grande Prairie INDIA Bangalore SOUTH AMERICA Brasilia AFRICA Lobatse Bulawayo Kimberley Johannesburg AUSTRALIA Melbourne Perth
Laboratory support services Mineralogical Laboratories Toronto / Brasilia / Lobatse / Bulawayo / Kimberley / Centurion / Melbourne / Bangalore Support to global exploration activities Examination of sample concentrates for the recovery of kimberlitic indicator minerals Microdiamond Laboratory Kimberley Support to global exploration activities and to on-mine evaluation programmes Recovery and sorting of microdiamonds Evaluation Services Department Kimberley Support, co-ordination and execution of evaluation projects worldwide Macrodiamond Laboratory Johannesburg Support to global exploration activities and to on-mine evaluation programmes Final recovery and sorting of macrodiamonds GeoScience Centre - Johannesburg Specialist services to support global exploration, e.g. geochemistry, geochronology, petrology, GIS, remote sensing Research and innovation
Laboratory Focus Areas Dedicated facilities for high priority areas Increase laboratory capacity More efficient sample turnaround New technologies introduced Providing full, reliable and timely results to our partners
De Beers Exploration Expenditure 2002 Exploration Spend South America (8%) RSA Support & Services Services (20%) North America & Europe (39%) Africa (22%) Advanced Exploration (18%) Early stage Exploration (62%) Australia & Asia (20%) (11%) In 2002 De Beers Exploration discovered 63 new kimberlites in 7 countries
De Beers Exploration Expenditure 2003 Forecast Exploration Spend RSA Support & Services 21% By region Africa 18% By Stage Services 19% outh America 8% North America & Europe 32% Australia & Asia 13% Advanced 9% Early stage 72%
Country Risk After WMRC Country League Table, January 2003
OPERATIONS
GROWTH Tons - Million PRODUCTION PERFORMANCE Carats - Million 60 210 55 185 160 50 135 45 110 40 85 35 60 2000 2001 2002 2003 F 2004 B 30 Tons treated Tons mined Carats recovered
GROWTH 12.2 EFFICIENCY IMPROVEMENT De Beers Group US$ per Ton Treated 11.2 10.2 US$ 9.2 8.2 7.2 6.2 1998 1999 2000 2001 2002 2003 Forecast 2004 Provincial Budget
GROWTH RECENTLY COMPLETED PROJECTS Kimberley Combined Treatment Plant Treatment of underground production material and old dump material Extension of operations at Kimberley to 2020 Production ramp-up challenges/problems Equipment failure Lack of redundancy Ore mix De Beers Marine mv Ya Toivo Gariep conversion
GROWTH EXPANSION PROJECTS Finsch Block 4 Introduction of Block Cave mining New mining level 63 Level Project Implementation Premier C Cut Extension of life of mine Evaluation for board submission in 2004
GROWTH Namdeb Elizabeth Bay EXPANSION PROJECTS Wet primary crushing circuit Wet and cemented ore Extension of life from 2004 to 2013 Venetia Quick Wins Process plant de-bottlenecking Maximize tonnage treated Throughput increase: 1.3 million tons / 1.6 million carats per year
GROWTH NEW MINES Canadian Operations Development of operations in Canada Snap Lake Trial Mining in 2004 Victor Feasibility study & permitting Gahcho Kué Pre-feasibility study Capital Investment of around US$ 1.5 billion
GROWTH South Africa Voorspoed Discovered in 1906 Mined for 5.5 years by Voorspoed Diamond mining company Bought by DBCM in 1912 NEW MINES Sampled in 1965/67, 1979/80, 1997 and 1998 Feasibility study to re-open Geotechnical & Ore dressing activities
GROWTH RESOURCES EXTENSION Enhanced resources information Short-term forecasting Supplier of Choice / ITO LOM extension for brownfield ore bodies Programme cost: > R500 million Focused MRM team
CURRENT CHALLENGES Exchange rate 2003 Budget at rate higher than R7-00 Financial pressure Marginal/small mines more pressured! Voluntary Separation Avoid forced retrenchments Survival Incentive Fair and transparent process
CURRENT CHALLENGES SA Royalty/Money bill 8 % ad valorem royalty on diamonds Diamonds attract highest royalty Other major commodities: Gold 3 % royalty Platinum 4 % royalty De Beers position: Bill is discriminatory & punitive against diamond industry
CURRENT CHALLENGES Minerals and Petroleum Resources Development Act/Charter/Scorecard Element Internal Rating HR Development Employment Equity Procurement Housing & Nutrition Mine Community Development
CURRENT CHALLENGES Minerals and Petroleum Resources Development Act/Charter/Scorecard Element Internal Rating Beneficiation Migrant Labour Ownership & Joint Venture Reporting
EMPOWERMENT Exploration: Ndowana JV Mvelaphanda & De Beers Preparation for BEE partner Partner of choice Selection process in progress More than 30 interested parties Stand-alone asset / De Beers Group of Companies Broad-based socio-economic empowewrment Proudly South African
EMPOWERMENT 70% EMPLOYMENT EQUITY 500 60% 50% 450 400 350 40% 30% 20% 24.7% 27.3% 30.7% 34.2% 300 250 200 150 # of Employees 100 10% 50 0% 2000 2001 2002 1st Half 2003 0 Designated % Designated
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