Alluvial and marine diamond mining group Trans Hex has no plans to reduce jobs at its mining operations across South Africa, Namibia and Angola despite pressure on its earnings stemming from the strong exchange rate of the rand against the United States dollar, according to deputy chairperson Bernard van Rooyen.
Reporting its final results earlier on Tuesday, Trans Hex said it has experienced an 18% fall in its headline earnings per share and a 9% decline in profit before tax, due mostly to the impact of the strong rand on its diamond exports. Despite this, production has been maintained at 2003 levels and a rise in diamond prices in US dollar terms globally helped to boost the group’s sales revenue.
Speaking with journalists following the release of Trans Hex’s results, Van Rooyen confirmed that, as with most other South African resources companies, Trans Hex is focusing on reducing its costs in the wake of the strong rand.
However, he said, this is primarily through tough negotiations with suppliers to reduce their prices, and through efficiency gains, as the group’s operations are largely mechanised.
“If we cut the number of people, our productivity will fall,” he explained. “There isn’t a lot we can do to reduce jobs.”
More importantly, Trans Hex is looking to raise its production levels even further to offset the impact of the rand on its revenues, Van Rooyen noted. In the current year three of its main mines — Baken, Bloeddrif and Saxendrift — have achieved record production, and the new Angolan operations are expected to contribute strongly over the medium term.
Trans Hex is also trying to maximise its resources by entering into joint ventures with smaller black empowerment mining groups to mine the company’s more marginal diamond resources, taking advantage of their lower cost base. It is also looking to enter into more joint ventures in its marine mining operations offshore from Namibia, the deputy chairperson noted, given the need to “bulk up” to attain cost efficiencies in conditions that have been difficult in recent years, particularly due to rough weather.
“We only had 67 sea days available to us this year in the areas between shallow and medium water depths due to poor weather,” he revealed. “There’s nothing we can to about the weather, but we will continue to look to join up with other companies offshore.”
Despite the group’s efforts to cut costs and boost production, Van Rooyen said that, should the rand continue at its current exchange rate against the dollar, Trans Hex’s earnings for the upcoming financial year will suffer a “substantial negative impact”. This will be somewhat offset by expected higher global diamond prices and higher production levels.
Finally, Van Rooyen said the company is making progress in its search for a new CEO to replace the departed Calvyn Gardener, and that there are a number of potential candidates being considered. However, the process is likely to be a long one, given the particular skills, experience and “entrepreneurial ability” required.
Trans Hex shares were lower in morning trade on Tuesday, last down 1,8% or 40 cents on the JSE Securities Exchange South Africa to R21,60 from R22 at Monday’s close, with 18 620 shares having changed hands in nine trades so far.
By comparison, the FTSE-JSE Mining Index (J004) was up 0,2% over the same period. — I-Net Bridge