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Debswana saves P1bn through cost-cutting

BRIAN BENZA
Bonyongo
Debswana managed to save up to P1 billion in 2016 through a range of measures to improve efficiencies and cut costs. The company looked to navigate a difficult period of slow consumer demand and indigestion in the diamond pipeline hence the need to act.

Under its high performance promise strategy the company, which saw its earnings drop 37% in 2015, last year effected a range of measures to improve operational efficiencies  while it also concentrated  production on its high value and low cost assets.

Briefing stakeholders in Gaborone this week, managing director, Balisi Bonyongo said in a bid to cut costs they are managing to improve tyre lifespan, fuel consumption and improve productivity.

“After a difficult 2015 we  decided to scale down activity on our low value assets and focused production on Jwaneng and Orapa Number 2, which are our high value assets.

 Through improvement of operational efficiencies and adoption of a better operating business model, we saved up to a billion pula in 2016,” he said.

According to Bonyongo, Debswana improved production costs through improving tyre life by 22% while its shovels’ tonnes per hour  improved by 22% at Jwaneng. Due to improved scheduling and resourcing of planned activities, the company  bettered its pula per tonne costs by 12% while its production costs dropped nine percent at Jwaneng in 2016.

“When you have 200 trucks operating in the Jwaneng pit everyday with tyres costing P500,000

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each while annual fuel consumption stands at over P800 million, you can imagine how improving  efficiencies can impact your bottomline,” he said.

 On the back of improved sentiment in the global diamond market, Debswana earnings last year bounced  to record a 40% jump leading to improved mineral revenues to government.

Government receives about 80% of every pula of diamonds mined by Debswana. Apart from higher demand from key markets such as United States, a favourable exchange rate also helped the pula earnings as the dollar gained in 2016. In the year, Debswana produced 20.5 million carats and Bonyongo said the company plans to produce around the same output this year or slightly more.

“We have seen a normalisation of the situation in terms of demand as well as sentiment in the midstream, but we are not out of the woods yet.  We remain cautious and we will continue to produce to demand in 2017,” he said.

At its peak, Debswana produced 34 million carats in 2007 before adapting to a ‘new normal’ strategy of producing to the market, a development which analysts said has contributed significantly to price growth.



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