Presentation to Parliamentary Portfolio Committee on Alexkor Restructuring

1. Presentation to Parliamentary Portfolio Committeeon Alexkor Restructuring 17th June 2008

2. Introduction • The purpose of this presentation is to provide the Parliamentary Portfolio Committee with a progress report on the Alexkor restructuring • The presentation will include: • Background and details of the mine restructuring • Structure of the financial separation packages offered to employees affected by the restructuring • Progress with social and labour plan obligations • Progress with stakeholder engagement obligations

3. Background to the restructuring

4. Deed of settlement • The Deed of Settlement entails, inter alia: • Alexkor's land mining rights will be transferred to theRichtersveld Mining Company (RMC). • Alexkor will retain its marine mining rights and remaining mining assets • Alexkor and RMC will form a Pooling and Sharing Joint Venture (PSJV) and put their respective marine mining rights and land mining rights under the control of a Joint Board for purposes of mining both the marine and land diamond resources • Alexkor will furthermore pledge its land and marine mining rights to the PSJV • Alexkor's movable assets relating to its agricultural and maricultural businesses to be transferred to the RVC As a consequence of Deed of Settlement, Alexkor is obliged to:- transfer the mining operations to the PSJV- transfer the agricultural and maricultural assets to the community

5. Context of restructuring • The successful land claim by the Richtersveld Community culminated in a complex Deed of Settlement for the restitution to the community. • As a consequence of the Deed of Settlement, Alexkor is obliged to • Transfer it’s agricultural & maricultural assets to the Community, and • Transfer the Mining operations to the PSJV. • The transfer of agricultural & maricultural assets to the Community took place at the end of Jan 08 • The current restructuring focus is on the people affected by the restructuring initiatives • Ensuring that employees are treated with fairness and dignity • Providing an financial package to ease the impact on employees • Providing support initiatives such as training to improve employability and transition support (assistance with seeking alternative jobs) • Engagement with key stakeholders (internally and externally) • Ensuring legal compliance at every stage of the restructuring

6. New Organisational Structure ALEXKOR Marine mining Land mining Support services Rehabilitation Township Alexkor mining rights RMC mining rights Assets and operations to be pledged to the Alexkor/RMC PSJV Assets and operations to be transferred to the Richtersveld Municipality

7. Financial consequences of restructuring • Alexkor mining operations are not profitable and funds are limited • Alexkor Management wants to act as an exemplary employee in the Mining sector and ensure that: • Restructuring approach is integrated and holistic and that stakeholder engagement is seen as a critical success factor

8. Employee numbers Farm and Mine Workers Farm Workers TOTAL: 276 ABM (mine): 198 (72%) & ABT (farm): 78 (28%) TOTAL: 78 ABT sectoral: 49 (61%) ABT non-sectoral: 29 (39%) Approximately 100 ABM positions have been ring-fenced for Care and Maintenance operations until PSJV takes over

9. Integrated approach L A N D C L A I M SUSTAINABLE ECONOMIC DEVELOPMENT T R A N S F O R M A T I O N R E D R E S S C O N S U L T A T I O N C O M M U N I C A T I O N Alexkor VSP Ex-emp Farming Mining S & L Plan New Job New Co PSJV T&D needs T&D needs T&D needs Change and leadership network COMMUNITY AND SOCIAL DEVELOPMENT

10. Alexkor restructuring Original approach • Transfer of agricultural employees to RAHC ito s 197 of the LRA • Retrenchment process activated with s 189 Notice (notice of intention to dismiss • for operational reasons, as set in the LRA) for Mine Workers • Due to downscaling of mine operations till PSJV was operative Engagement time-lines: 03/07-01/08 Farms Mine Transfer ito section 197 of LRA Retrenchment ito section 189 of LRA • Employees to transfer to the new business , with same or similar conditions of service • Employees and unions were notified of the Mine’s intention to restructure and downscale operations to a Care and Maintenance model, until PSJV operative • Section 189 consultation commenced in 03/07

11. Financial packages offered

12. What was on offer? • Original offer • Farms to transfer in terms of s 197 and • Mine to undergo retrenchment in terms of s 189 • Offer changed…Voluntary Separation Package (VSP) offer to Farms only • Mandate changed to include Mine in the VSP • Retrenchment process placed on hold, with principle that retrenchment process would be resuscitated if there was insufficient interest in the VSP • VSP offer: 2 weeks for every completed year of service • Organised labour requested an improved offer of 3 weeks + R10 000 relocation allowance • DPE mandated an integrated and holistic approach to the restructuring and for the financial package re-evaluated • Research was conducted on similar restructuring initiatives in the Mining industry in the region • Mining Charter and the Social and Labour Plan guidelines used • Aim is to develop a seamless transition plan, post the conversion of the Mining Rights and the cession of the rights to the PSJV

13. Organised labour’s expectations • The uniform VSP offer to all employees instead of the original intention of retrenchment, had the unintended consequence of denying affected employees access to the legitimate benefits of: • UIF • Tax reprieve • A distinction was drawn between • Farm workers, who had the safety of a job, if they did not take up the offer • Mine workers, who did not have job security • Organised Labour requested that the retrenchment process ito of section 189 be resuscitated and completed, to enable Mine employees to claim their legitimate benefits to UIF and the tax reprieve • An amended notice ito of s 189 was served on organised and consultation has commenced • Aim is to run the s 189 consultation with Voluntary Severance Packages (alternative to retrenchment) for ABM alongside the Voluntary Separation Packages for ABT employees • Timelines- End of June 08

14. Employee financial package • Principles governing the package: • The package had to be socially conscious - ensure that the poorest, affected by this change, are not compromised and provided with an appropriate financial parachute • The value of the payment should have meaning - discrimination had to be meaningful, logical and consistent • Consideration of the profile of the affected individuals (Age, length of service and skill levels) • Re-employment prospects of the affected employee • Consideration of the VSP’s against other redress mechanisms • Consideration of whether the package was legally defensible FINANCIAL PACKAGE FORMULA • Benefits (accrued leave and accumulated bonus contribution) + • VSP (2 weeks for every completed year of service) + • 80% of VSP value as an Ex Gratia payment = • Total payout (minimum threshold of R 20 000) • TOTAL COST: VSP & benefits + Ex Gratia R16 918 221.33 + R10 928 271.87= R28 073 796.92

15. Adopted restructuring approach Current approach • Same Financial Package offered to all employees (Farms and Mine) • Farms: Voluntary Separation Package • Mine: Voluntary Severance Package, as an alternative to retrenchment Engagement time-lines: 08/03-08/06 Exiting E/yees Farms Mine New opportunities Maintenance ops New Co- RAHC • E/yees will have a choice to accept the VSP or • Transfer to the new business • E/yees have the opportunity to take up early retirement option and receive the VSP or • Apply for new positions • All e/yees have been offered the severance package • Ring-fenced E/yees-continue till PSJV is operative • Ring fenced E/yees will be offered same package before PSJV operative

16. Phased restructuring approach The restructuring process is being conducted in two-stages Phase 1 • Immediate transfer and/or exit of farm employees • Employees affected by the downscaling of the mining operations • Mine moving to a Care and Maintenance Model pending the PSJV becoming operative Phase 2: • Exit of employees prior to the PSJV taking over operations • Financial package values have been communicated and offered to all employees • Farm workers: • 73 have accepted the offer and 3 will transfer to new co • Anticipate that many of the ex-employees will be re-employed by the new co • Mine Workers: • Currently 40 employees have accepted the voluntary separation alternative • The generous package and the differed option have discouraged volunteers • 83 employees volunteers required to avoid a forced retrenchment process

17. Proposals for an Integrated Social Transition Plan

18. Legal Compliance requirement In terms of the Mining Charter requirements, Alexkor is obligated to develop a Social and Labour plan that encompasses the following components: • Development programmes, in consultation with the local government structures • Processes to manage downscaling or closure of the Mining operations • Details of how to promote and ensure socio-economic development in the region • Minimise closure or downscaling impact on • Individuals, • Region and/or • Local economy

19. POLITICAL OBLIGATIONS Government, as the employer, must engage with Provincial political structures District and regional political structures Region is economically weak and opportunities are limited High possibility of eventual poverty & dependency on the state Context of Restructuring SOCIAL CHALLENGES • Need to ensure that employees are treated fairly with • Financial packages that will ease the burden • Initiatives that will assist and support employees during the transition • Assistance in seeking alternate employment and/or • Community outreach and development programmes that will drive economic sustainability EMPLOYEE IMPACT • Employees have had the threat of restructuring for almost ten years • Employees and community are fatigued and feeling dejected • Skill level of existing staff is low and earning potential weak

20. Research findings • Regional activities • Mining industry has been downscaling for a number of years in the region • Social and Labour Plan precedents have been set in the region • Gathered data on what works and what doesn’t in the region • Engaged with community representatives to assess opportunities that can be leveraged • Environmental scan • Region has limited economic opportunities • Need for sustained development programmes

21. Easing employee impact Employees affected by the restructuring fall into the following categories: • Immediate: Employees who are seeking out alternate employment post exit from Alexkor • Supported during the transition process through • Training & Development programmes • Skills programmes and training courses (informed by employee preference) • Learnership though a “PROXY” • Placement assistance • Preparation of CV’s and skills to re enter the job market • Establishment of an office that will assist employees to seek alternative employment • Medium Term: Employees, in the mining operations, who will remain during the interim phase • These employees will need to be “upskilled” in order to improve their employability in the new mining venture • Long Term: Employees that need to be “upskilled/reskilled” in order to secure alternate employment and/or become self-sufficient once PSJV in operation

22. Employee Impact and Legal Compliance S&L Plan will have different aims and objectives, which are all interlinked • Training plan considers • Employee profile (unskilled, semi-skilled, skilled) • Cost (regional accessibility to training institutions) • Viability (timing) • Leverages local and regional options and opportunities (agricultural and tourism strategies) • Pre-training screening and assessment - critical for success • The training plan looks at development in terms of: • Employment opportunities • Regional and district development opportunities • Social and economic development opportunities • The interventions leverage existing skills programmes and learnerships that are available and affordable • Costing averaged on a per capita basis and based on benchmarked research estimates

23. ABT Exiting Employees Offered T&D programmes to ensure improved employability and self sufficiency Post care for at least 2 months Transferring employees T&D to upskill and ensure sustainability of the farms Management T&D on core management skills Coaching & Mentorship Preferably within regional agricultural sector Enable access to regional agricultural initiatives for the growth and sustainability of the business ABM Exiting employees Offer T&D programmes to ensure improved employability and self sufficiency Post care for at least 6 months Maintenance & Care Operations T&D to upskill and improve employability in JV operations Facilitate and enable transition of ex-employees into JV Proposed training & development interventions

24. Legal Compliance: Social and Labour Plan Alexkor’s responsibility is to: • Ensure that the proposed initiatives address immediate restructuring needs and longer term restructuring requirements, including: • Minerals and Petroleum Resources Development Act requirements • BEE Socio-Economic Empowerment Charter requirements • “Government will ensure compliance with the provisions of this Charter and will be exemplary in the way in which it deals with state assets’’ (clause 4.10) • Mining operations, until the PSJV takes over mining operations • Conversion to “New Order” Mining Rights • PSJV strategic imperatives will inform: • Mining Plan • Human Resources Plan • Social and Labour Plan • Proposed initiatives will support and enhance the Interim Mining operations and the business needs of the PSJV

25. Social Challenges Alexkor’s responsibility to RAHC: • Ensure that employees who are transferred to the RAHC are sufficiently skilled to meet the needs of the new business • Provide training and development programmes • Directors of the company • Employees that are transferred to the new company • Provide support to management and HR team for seamless transition and to ensure fairness during recruitment and selection process • Initiatives includes “upskill” programmes for ex-employees of the agricultural business who are seeking alternative employment

26. Social and Political Challenges • Region and local economies are weak • Limited employment opportunities in the region area • Provincial opportunities are poor • Community Interventions • Limited social support services/providers in the region Government and Alexkor’s responsibility is to: • Consult the following stakeholders • Government (National, provincial and local government representatives) • Community / Religious leaders • Employee Representatives • DPE and Alexkor • Link and leverage regional and provincial programmes to the benefit of affected employees and the community

27. Stakeholder Engagement The stakeholder engagement process is critical to overall sustainability Critical Success factors: • Community consultation and union involvement • Transferring of skills to members of the community, for improved sustainability • Address short-term and medium term social and economic issues • Long term sustainability driven by: • Integration with needs of emerging JV and alignment with personnel operational needs • Mining license conversion application and integration with S&L Plan • Integration with Richtersveld IDP • Creation of Municipality and local government links and alignment to development plans • Gathering data on where employees are resettling, as part of ongoing effort to secure alternative employment

28. Employee Destination 3 5 6 50 5 5 1 10 Kabus/Sanddrift : 15

29. Political Roles and Responsibilities • Alexkor, with the support of DPE, has engaged with the following stakeholders • Provincial Government • Local government • Relevant National government departments -DME • DPE and Alexkor intend to access opportunities • Regional initiatives (e.g housing project, roads, agricultural initiatives)

30. Financial Overview

31. Marine Productivity Constraints

32. Marine Productivity Improvements • Previously closed southern section of the mine opened up for contractor pump units based on shore • Contracts encouraged to amalgamate and multiple pump units allowed under a single contract in order to create larger more stable contracts • Contracts with vessel based pump units allowed an additional shore based pump unit to use on days when vessels are unable to operate at sea • Revenue split to the contractor improved in underutilised areas to encourage better utilisation of the resource • A remote mining contract that is not as dependant as diver operations on sea conditions was implemented but proved unsuccessful • Other remote mining opportunities have been identified and are awaiting the implementation of the PSJV

33. Questions?