Navachab throws town a lifeline

A mostly employee driven turnaround strategy improved the chance of survival for a gold mine.

09 June 2019 | Business

George Botshiwe; Navachab MD; “capital investments by the shareholder amounting to N$700 million did not totally offset the increasing costs of production.”

Karibib



Navachab Gold Mine has through various interventionist financial strategies managed to improve its financial position from a negative cash flow of N$20 million towards the end of 2018 to a positive financial result of nearly N$130 million (pretax and unaudited) as at the end of May 2019.

This was revealed at the Karibib Travel and Tourism Fair recently by the managing director (MD), George Botshiwe, in an update on the status of the mine.

The mine is regarded as an important player in the socio-economic environment of Karibib and the region with more 400 mine employees staying in the town with their families.

Discussions with the town council have been initiated to identify and agree on areas of co-operation to support socio-economic growth of Karibib and the greater Erongo region. The Karibib community garden project was launched to this effect recently.

Botshiwe said the mine faced a crisis of such magnitude that it threatened its very survival last year.

He explained that the mine was N$20 million in debt with no prospect of additional funding to sustain its operations between October and November 2018.

“We could have dropped everything, embarked on and instituted retrenchment processes and given up, but refused to do so. I can proudly say that we have enough financial resources which can be invested into the mine to continue operating sustainably into the foreseeable future, with the equipment and resources currently at our disposal.”

According to Botshiwe the previous owners of the mine practised selective mining of high grade ore with very negligible investment into equipment and operations needed to ensure sustainability.

“Navachab Gold Mine is essentially a low grade mine and highly sensitive to operating costs, inflation and fluctuations in macroeconomic conditions such as the gold price and exchange rates. In addition, the costs of production crept up over the years while ore grades decreased at the same time.”

Interventions instituted by the mine’s management in the immediate period after the purchase of the mine by QKR Namibia unfortunately did not produce sufficient cash flow and cost reduction.

“Continued capital investments by the shareholder amounting to N$700 million did not totally offset the increasing costs of production. This could not be allowed to continue as it threatened the sustainability and profitability of the operation as well as the very livelihoods of the more than 400 employees. The mine management therefore embarked on an interventionist turnaround strategy to reduce operating costs, improve productivity and enhance revenue.”

Once completed the envisioned strategy would enable the mine to access funding required to expand operations, ensure a sustainable and profitable operation, minimising the effects on its staff, the communities in which it operates and the economy of the country.

Aptly named Project Khaima (meaning rise up in Damara), the turnaround strategy was launched in August 2018 with full employee participation.

The process was mostly employee driven and yielded significant results in a reasonably short period of time from its establishment in August last year till now.

Staff-generated ideas were fed through a project pipeline, tested and implemented to yield real measurable results.

Project Khaima also targeted an increase in productivity through efficient use of both human resource and equipment.

“We made some tough decisions including amongst other renegotiating and in some cases termination of various third-party service provision contracts, including that of mining contractors. We can now for example make use of our own more cost effective resources (both financial and human resources) to carry out waste stripping operations.”

During the course of eight months the mine achieved significant milestones in its operations including the review of its mining strategy as well as achieving a more streamlined staff structure through the offering of Voluntary Separation packages to employees.

“In order to achieve full operational excellence and sustainability management embarked on a process of financial modelling. We also initiated a process of engaging potential funders for the expansion Investment Plan of the mine which is a bankable proposition.”

The mine also plans to re-introduce waste stripping activities on the Western Pushback in order to reach identified higher grade ore deposits by using the financial resources it has accumulated and saved over the last few months and the equipment at its disposal.

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