JOHANNESBURG (Business Day) -- Jonathan Oppenheimer, the head of diamond giant De Beers' South African operations, warned yesterday that the company may be forced to begin closing unprofitable mines, which are in trouble because of the strong rand.
Five out of seven of De Beers' local mines are losing money, and the unions have been warned that between 1,200 and 1,400 workers could be affected, out of a workforce of 11,000 and 3,000 contractors - although some jobs could be saved by moving workers to other operations and through outsourcing production.
When asked whether the current restructuring exercise could lead to the closure of mines, Oppenheimer replied: "The desire is not to; the reality is we may have to."
He said a consultation process was under way at the Koffiefontein mine in Free State, which he said "continues to struggle", and that the underground operations at Kimberley were losing R150m a year.
Oppenheimer said that efforts were still being made to keep all the company's mines in operation.
He said he was not scared of tough decisions if it were to become impossible to restore some mines to profit, as such a situation would not be sustainable.
"Running mines at a loss and subsidising them through profitable mines is not being honest," he said.
Despite a lack of profitability in some of the company's mines, De Beers expects South African production to rise this year to 14-million carats, from last year's level of 13,7-million carats.
De Beers is busy negotiating an empowerment deal for its South African operations, and Oppenheimer said that this would be concluded by the end of the calendar year. The company was still open to approaches, and the focus would be on a "value-adding and sustainable transaction to all parties - including communities and government".
"Most probably, it won't mirror existing empowerment transactions," he said.
De Beers came under fierce attack recently from deputy minerals and energy minister Lulu Xingwana, who voiced concern about the appointment of a white man, Gareth Penny, to head the De Beers global group - but Oppenheimer said he was not prepared to enter a public row with government.
"Our relationship with government is fundamentally engaged and honest. We agree to disagree from time to time."
Oppenheimer said there were times when too many people made comments on behalf of De Beers "and government has the same problem".
And he said that if government had serious problems with the company "they must come and take them up with me. I am happy to engage."
Only one member of the 13-strong De Beers South African board is black, but Oppenheimer said that this would change following the planned empowerment deal.
"We will have a very different board," he said.
Oppenheimer, who was launching the annual report of De Beers SA, said the company was making good progress in improving its safety record.
