Debswana update on 2024 strategy and OLDM assets closures
Following the widespread impact of the COVID- 19 pandemic on global economic activity, Debswana today provides an update on its 2024 strategy and the associated impact of the pandemic.
As with most industrial sectors, COVID- 19 has had a substantial impact on the diamond industry. This has accelerated the existing need for the Debswana business to make changes to its business in order to ensure it is optimally positioned for its long- term future. The Debswana 2024 Strategy, ‘ One Dream, One Team 2024’, has been developed in recognition of this requirement, and will drive a number of projects over the next few years which are aimed at building resilient and cost- effective operations, and an organisation that can withstand market volatilities, maintain profitability and deliver shareholder and stakeholder value in the long term. This strategy is the framework for the company to successfully transition from current operations to a new horizon of complex super- pits and possible underground mining.
Driving this strategy will be a number of key strategic initiatives delivered under the pillars of ‘ Safety, Environment & Communities ( Building Forever)’, ‘ Efficiency and Productivity Improvement’, ‘ People Transformation’, ‘ Innovation and Digital Transformation’, and ‘ Debswana Tomorrow’ which is about the successful execution of large mine life extending projects, essential to Debswana’s future. These strategic initiatives will transform Debswana with a strong emphasis on more effective use of technology and data, digitisation and automation. Some of these initiatives that are in the pipeline may consequently impact on structure, labour, amongst other factors, particularly with the outcomes of innovations around automation and digitisation, as well as potential outsourcing options.
The ongoing market challenges and diminished revenues as a result of the global economic recession induced by COVID- 19 has further prompted Debswana to accelerate the implementation of its transformation programme. At the forefront of the accelerated long- term initiatives is the retirement of two assets at the Orapa, Letlhakane and Damtshaa Mines ( OLDM) operation: the permanent closure of the aged Orapa Mine Plant 1 ( now over 48 years old), and the placement of Damtshaa Mine, a marginal operation, under care and maintenance. It is however important to emphasize that the OLDM assets closure initiative is not a reaction to the COVID- 19 impacts, but rather a pre- existing strategy that commenced before the COVID- 19 crisis to address current mining complexities and to set us on course toward achieving our long term objective to modernize our mining operations.
Orapa Mine Plant 1 started running in 1972. The Plant has served the Company well and plans have been in the pipeline for some time to shut it down completely due to low profitability, structural deterioration that presents increasing challenges regarding safety management as well as high expenditure on structural repairs& operating costs. The business has therefore determined that there is no business case for continuing to run this plant. Orapa Production will be focused on the existing No 2 Plant with increased capacity. Damtshaa mine is currently at waste mining phase, and due to current market conditions raises marginal cash flow that is outweighed by operational costs. The mine will go into care and maintenance for an indefinite period. These actions will support Debswana’s ability to continue to invest in production capacity expansion projects that are essential to its positive long- term future.
Key to these transformation initiatives, especially the current one of asset closures, is meaningful engagements with all stakeholders, especially Unions and Regulators. Consultations are ongoing in this regard. For the asset closures specifically, approximately 500 jobs will be affected however it is important to emphasise that the Company is still in consultations with the Botswana Mine Workers’Union and the broader employee base to explore the various options which include possible redeployment of employees to other areas of the business and voluntary mutual separation. The final course of action will be largely dependent on the outcome of these consultations.
Debswana is fully cognisant of the current limitations provided by regulations under the State of Public Emergency with regard to employee rationalisations. Debswana reassures employees and the public at large that this process is being executed conscientiously under the guidance of the applicable regulations.