Q&A with the COO - Johnny Velloza

2017 was a challenging year on a number of fronts, having said that we did achieve a number of our goals and the year ended well.

A: Challenging.

2017 was a challenging year on a number of fronts, having said that we did achieve a number of our goals and the year ended well.

The world economy remained depressed, which put pressure on the global diamond market. Given the reduced number of large diamonds recovered at Letšeng in 2017 and the first half of 2017, cash flows have been under pressure and this is of course a major concern. Thankfully we saw an increased number of large diamonds being recovered in the second half of 2017, which saw our revenues begin to recover.

While there is a degree of resilience of the incredible diamonds produced at our Letšeng mine, this is not the case at Ghaghoo, and as a result we made the decision to place Ghaghoo on care and maintenance. During the year operations were halted, this was an incredibly difficult decision which had a significant impact on our employees and on the government and people of Botswana. Clearly under these conditions, where financial losses were mounting we had other difficult decisions to make, which included halting those initiatives that weren’t business-critical.

A: I think the broader Gem team really rose to the challenge this year. There was real commitment from each person to do their part to ensure the sustainability of the business. We launched a business transformation initiative that had the soul purposes of reorganising our business to ensure sustainability. Through this process, we evaluated and prioritised a large number of initiatives, leading to some difficult decisions, but it also gave rise to some necessary improvements in business practices.

For example, our continued focus on waste management at Letšeng lowered our overall cost base as well as reducing our carbon footprint. It is increasingly obvious that the link between operational and sustainability performance is inextricable, and it is not possible to prioritise one at the expense of the other.

A: Safety remains our top priority. I’m pleased that we once again achieved a fatality-free year – our fifth consecutive year. This is a testament to the hard work of our team. While we only recorded one lost time injury in 2017, an improvement on last year, it’s still not good enough. We are committed to zero harm and that means even one is too many.

Our proactive approach to HSSE is pleasing and I’ve been very happy with the number of initiatives that are suggested, not by the sustainability team, but by employees who are encountering issues in their jobs that they’ve found a way to address.

This speaks to a bottom-up culture of accountability and ownership which bodes well for our future. At Gem it's obvious that everyone across the value chain is invested in the safety of their co-workers. And that doesn’t just mean at the mines: our teams in Johannesburg and Antwerp have internalised this safety culture too.

We made good progress in our treatment of nitrate waste in 2017. We now know that in bioremediation we have an effective solution to deal with high nitrate levels, and I look forward to the next phase of the project.

Waste management was an area we targeted this year. We’ve made big strides in terms of waste management, but we still have a way to go. While we understand and dispose of the waste we generate responsibly, we’d like to reduce the amount of waste we generate in the first place. We need to look even more carefully at the inputs we accept into our business to ensure there aren’t alternatives that are more sustainable.

Our community projects continue to deliver pleasing results. I think that this is due to our focus on two strategic objectives: community consultation, and self-sustainability as the desired end-state. I think that approach has served us very well.

All of our flagship projects are also designed with their eventual self-sustainability in mind. We're cognisant of the fact that the lives of our mines are necessarily limited, and we don't want to enter into partnerships with our communities that aren't sustainable once we leave the region.

A: Macroeconomic issues such as global and currency instability will continue to affect our operations. There are concerns around international fuel and commodity prices, which may well lead to increased costs. We’ll also need to monitor the demand for diamonds closely, although at the moment the market for the Letšeng goods appears to remain robust.

The business transformation project within Gem Diamonds has brought huge benefits and will continue to offer much in the way of opportunities. The change process itself is likely to bring challenges and short-term instability, but I have no doubt that we’ll handle it responsibly and end up with a more engaged, motivated workforce.

We want to ensure that we continue to improve our systems and processes to deliver sustainable and repeatable results at significantly lower costs. We’re making good progress on that, especially on the maintenance front at Letšeng and in the improvement of our blasting and general mining practices.

I'd like to build on the work with our project-affected communities. Next year we will complete the handover of the dairy project as a sustainable business, and then we will begin to engage with the community to identify the next meaningful community project

In terms of the environment we want to make progress on the waste-management issue and deliver a study on the feasibility of a scaled-up bioremediation plant to deal with nitrates.

From a safety perspective we are striving for zero fatalities and zero lost time injuries, and a substantial reduction in our restricted work injury frequency rate.

These are not unachievable goals. Last year may have been difficult, but the response from our people was to put a lot of very good work in, and I think we've been left with some very solid foundations for future success.

A: I’d like to thank Gavin for his contribution to Gem over the last ten years. In that time, and more specifically over the two years that I’ve been around, Gavin has been an absolute pillar of support. He will be sorely missed by all of us, but his legacy is well-established and will endure.

By the same token I’d like to welcome Mike Brown to the company. He starts with the support of the whole team, and we are all looking forward to working with him and continuing to make progress on our sustainability objectives.

I'd also like to make special mention of Mike Salomon. The untimely passing of Mike has affected us all, he was an active and engaged member of our Board, I shall miss his wisdom and wise counsel. Mike contributed an enormous amount of time and energy to Gem Diamonds and his input into the sustainability of our business cannot be underestimated, particularly in our safety journey over the last number of years.

Finally, I'd like to offer my appreciation to the entire team for the enormous effort they put in last year. The fact that we were able to end such a challenging period with some undeniable positives is testament to their good work and commitment.

Johnny Velloza
Chief Operating Officer