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De Beers is the largest diamond mining company in the world today, producing over 40% of global gem
diamonds from our mines in Africa, as well as sorting and selling the majority of the world’s rough diamonds.
We have 15 mines across Africa and new mines coming on stream in Canada. Many of these mines are joint
ventures with partner governments, building on over a century of expertise in every form of mining.
The Diamond Trading Company (DTC) sorts and values diamonds into more than 14 000 different categories
and prepares them for sale to its 93 sightholders (clients) who are “world leading diamantaires” and carefully
chosen for their diamond and marketing expertise. The DTC also spends US$180 million driving demand for
diamond jewellery in the world’s biggest markets.
Our recent joint venture with LVMH has taken the De Beers name to the High Street with De Beers jewellery
stores in the US, Japan, UK, France and Dubai.
• Also in Canada, C$1 billion has been earmarked for the Victor project, scheduled for production in 2008.
• In South Africa, US$177 million has been approved by the board for the Voorspoed project.
• US$115 million has been approved for the South African Sea Areas marine mining project.
De Beers group annual review 2005 1
Purpose, vision and values
We are on a journey of significant change at De Beers. We are a great company, we mine a very special
product, our people are passionate about delivery and our growth prospects are good. However, the
world around us continues to present challenges. Our success in overcoming these challenges over the
next five years will define our future. We will need to adapt. Our old ways of working will not be sufficient
for us to win in the new environment. We need new goals, new strategies and new organisational
models. And, we need a vision and a purpose to guide this change.
Our Purpose
In the De Beers family of companies, we have one purpose.
It means we will…
Be Passionate
We will be exhilarated by the product we sell, the
challenges we face and the opportunities we create.
Pull Together
Being united in purpose and action, we will turn the
diversity of our people, skills and experience into an
unparalleled source of strength.
Build Trust
We will always listen first, and then act with openness,
honesty and integrity so that our relationships flourish.
Show We Care
The people whose lives we touch, their communities and
nations and the environment we share, all matter deeply
to us. We will always think through the consequences of
what we do so that our contribution to the world is real,
lasting and makes us proud.
De Beers group annual review 2005 3
We will make this a reality by maximising the potential of our global partnerships, the skills and commitment of
our people and the magic and emotional value of our product.
These partnerships extend across our entire value chain. Our productive partnerships begin with cutting edge
exploration in the remotest regions of our planet and extend to our operations through our drive to reduce the
time it takes to bring new mines into production. This focus on partnership is further enhanced via the
adjacencies and communities in which we operate and in the client focus we bring to our sightholders in
securing the perfect niche for diamond products.
In our endeavours we are driven by our values – living up to diamonds! Our purpose is to turn “diamond
dreams” into lasting reality. The De Beers family will strive to reflect the unique qualities of our product in
everything we do. This intent is embodied in our new mission, vision and values; in the Diamond Best Practice
Principles applied to every facet of our business and through our involvement in several initiatives around the
globe, many of which are undertaken in partnerships involving civil society, organisations and governments.
Nicky Oppenheimer and Minister of Minerals and Energy Lindiwe Hendricks at the signing,
on 8 November 2005, of a Memorandum of Understanding for the sale of 26% of De Beers Consolidated
Mines Holdings Limited (DBCM) to a new empowerment vehicle, Ponahalo.
De Beers group annual review 2005 5
DBsa board and
group structure
Government of Botswana 15% Central Holdings Group 40% Anglo American Group 45%
De Beers sa (Lux)
De Beers
Diamond Trading
Debswana Namdeb Williamson Consolidated
Company
(Botswana) (Namibia) (Tanzania) Mines*
(United Kingdom)
50% 50% 75% (South Africa)
100%
74%
Tony Trahar
Serwalo Tumelo
1
Gary Ralfe retired as managing director on
28 February 2006.
2
Appointed by the shareholders with effect
5 April 2006.
De Beers group annual review 2005 7
Corporate governance
Underpinning the way in which we run our
mines and do business
The board of De Beers supports the principles of openness, integrity, responsibility and accountability. It also
continuously endeavours to ensure that the group’s policies on corporate governance meet current best practice.
The group follows, to the extent that they are applicable, the principles and recommendations set out in the Code
of Corporate Practices and Conduct contained in the King Report on Corporate Governance for South Africa 2002.
The board meets every quarter – and more frequently, if required. Where a director is based in another country
and not able to attend personally, video- or teleconferencing facilities are used to include that director in the
relevant proceedings.
In addition, De Beers and its holding company, DB Investments (DBI), are party to a shareholders’ agreement
which governs the shareholders’ relationship and also sets out, inter alia, matters relating to the directors
and management of De Beers, committees of the De Beers board, and matters reserved specifically for either
the shareholders or the De Beers board.
De Beers and DBI are also party to a management contract with Central Holdings Limited and Central
Management Services Limited (CMSL), in terms of which both DBI and De Beers appointed CMSL to assist in
the strategic development of the De Beers group and, in particular, to assist in the appointment of the senior
executives and management of the group.
Executive committee
Chaired by Gareth Penny, the executive committee meets regularly and is responsible to the board for
implementing the policies and strategies of the group. It deals with all executive business of the company not
specifically reserved for the board or shareholders, and prioritises the allocation of capital and technical and
human resources. It also reviews biannually the major risk areas of each business unit.
Audit committee
De Beers group annual review 2005 8
This committee monitors the adequacy of the financial information reported to shareholders, internal controls,
accounting policies and financial reporting, and provides a forum for communication between the board and
the external and internal auditors.
The group strives to conduct its business with due regard for economic, social, cultural and environmental
concerns. A comprehensive policy focuses on the health and safety of the group’s employees and the well-
being of the communities surrounding its mines.
The group’s mining and related activities face complex environmental challenges. Through its environmental
policy the group is committed to addressing environmental risks and impacts.
Remuneration committee
This committee approves remuneration for the executive directors to ensure that rewards and incentives are
linked to both individual and group performance.
Investment committee
During the year the board established an investment committee to manage the process of investment capital
approval and/or allocation within the group. This committee aims to ensure that investments, divestments and
financing proposals increase shareholder value and meet the company’s financial and strategic criteria.
Members of the committee comprise representatives of the shareholders and nominees of the management
company, CMSL.
effectiveness. The principal aim of the system of internal controls is to manage business risks that are
significant to the fulfilment of De Beers’ business objectives with a view to enhancing over time the value of the
shareholders’ investment and safeguarding the group’s assets.
Although no system of internal controls can provide absolute assurance that business risks will be fully
mitigated, the internal control systems have been designed to meet the group’s particular needs and the risks
to which it is exposed.
Corporate governance
continued
Risk management
Both the shareholders and the board recognise that engaging risk is at the core of De Beers’ business and that
risk taking is a choice in the pursuit of objectives. A risk framework – where risks are proactively identified and
managed – governs the De Beers group and its operations. This includes identifying and taking advantage of
opportunities as well as protecting intellectual capital, income and assets by mitigating adverse impacts of risk.
The focus of risk management is on identifying, assessing, managing and monitoring all known forms of risk
across the group. Management is involved in a continuous process of enhancing its risk control procedures to
improve the mechanisms for identifying and monitoring risks. These risks encompass such areas as consumer
markets, skills and people risks, technology, stakeholder, commercial, social, environmental, corporate
reputation, compliance with regulation and legislation, professional liability and the general operating, financial
and treasury risks.
Monitoring process
The effectiveness of the internal control systems, including the potential impact of changes in the operating and
business environments, is monitored through regular management reviews, reviews and testing by internal
auditors, and testing of certain aspects of the internal financial control systems by the independent auditors
during the course of their statutory examinations. Control self-assessment also takes place, with a
representation letter on compliance being signed annually by the managers of each major business unit.
Employment equity
De Beers is committed to creating a workplace in which hardworking people can develop rewarding careers at all
levels, regardless of their background, race, or gender. The group’s employment practices and policies emphasise
equal opportunity for all, and seek to identify, develop and reward employees who demonstrate good performance.
The employment equity policies of De Beers Consolidated Mines (DBCM) provide for bursary schemes and
De Beers group annual review 2005 10
academic support programmes, input-based targets, training, development and mentoring programmes, as well
as innovative technical and management career development processes. These policies also aim to create an
inclusive organisational culture in which all employees feel comfortable and accepted.
Where appropriate, employment equity is implemented in consultation with employee representative bodies. An
employment equity/affirmative action agreement exists between DBCM and the National Union of Mineworkers.
In Botswana and Namibia, localisation strategies, determined and monitored through legislation, are well
established and provide similar citizen development and workplace activities and initiatives.
Employee participation
The group supports a system of employee participation in addressing issues which affect them and encourages
employees and their representatives to participate in communication, and consultative and negotiating structures.
Regular briefing sessions inform all employees about the company’s operations and on other matters of interest.
Grievance procedures and other structures are in place with a view to speedily identifying conflict and its
effective resolution.
6 March
De Beers displays a selection of rough diamonds from two of its Canadian projects at the Prospectors and
Developers Association of Canada Convention (PDAC) in Toronto.
• 780 carats from the Snap Lake project, including a diamond of 50 carats
• 240 carats from the Victor project in Northern Ontario – remarkable for their colour and clarity
23 March
Announcement of the De Beers group syndicated multi-currency revolving credit facility of US$3 billion.
8 April
DBCM confirms that it is operating under difficult circumstances with five of its seven operations operating at a
loss. Initiatives include a Business Model Review, which considered a variety of structural changes to DBCM
that will improve efficiencies, and is aimed at ensuring the viability of operations at R5 to the Dollar.
10 May
De Beers board gives approval for the construction and financing of a mine at Snap Lake in Canada.
18 May
Strategic Leadership Forum in Vereeniging, South Africa – announcement of Gary Ralfe’s retirement, in 2006,
as managing director and Gareth Penny’s appointment as his successor.
25 May
Williamson Diamonds in Tanzania is granted a Special Mining Licence by the Minister of Energy and Minerals.
This secures the company’s tenure over an area of about 30 square kilometres for a 25-year period.
De Beers group annual review 2005 12
27 May
Endiama and De Beers conclude an exploration and mining agreement in Angola.
9 June
The DTC completes client selection and announces a significant increase in the number of empowered clients
for the new contract supply period (2005 – 2008). The total number of South African customers will increase
from 14 to 19.
10 June
The announcement of a C$1.5 million expansion to the Kimberlite Career and Technical Centre, starting in July.
The project was spearheaded by De Beers Canada, the government of the Northwest Territories, a number of
business partners and Yellowknife Catholic Schools.
17 June
The exploration contract with Endiama, Angola, is formally signed.
21 June
No more under-a-tree classrooms at several Limpopo schools. Limpopo Education MEC Dr Aron Motsoaledi and
DBCM MD Jonathan Oppenheimer officially launch the Rural Schools programme, an R8 million groundbreaking
partnership between DBCM and the Limpopo Education Department.
28 June
President Pohamba officially opens the offices of Diamdel in Namibia. The President is hosted by Chairman
Nicky Oppenheimer, MD Gary Ralfe and Diamdel Namibia’s area manager Paulus Shituna, who is a Namibian
national.
5 July
Companies from a cross-section of the diamond and gold jewellery business form the Council for Responsible
Jewellery Practices – a not-for-profit organisation. De Beers is one of 14 founding members from different parts of
the supply chain, from mine to retail. Council members are committed to promoting responsible business
practices in a transparent and accountable manner throughout the industry.
15 July
Wati Ventures and De Beers Botswana sign a joint venture agreement and the joint venture company, Debwat,
has its first board meeting on 8 September.
10 August
The Elizabeth Bay Liberation project is officially inaugurated by the President of Namibia, Hifikepunye
Pohamba.
15 August
DBCM ceases underground production in Kimberley. Underground mining began in 1889. Surface operations
(tailings dump retreatment) continue.
De Beers group annual review 2005 13
7 September
De Beers Group Exploration launches the Diamonds for Development airship in Cape Town. The project will
assist exploration activities in southern Africa and the airship is currently being deployed in Botswana.
De Beers in 2005
continued
8 September
DBCM announces that it is considering the disposal of its mining operations at Koffiefontein Mine through a
formal sale process and calls for expressions of interest. The announcement to close the mine is made on
20 January 2006, following unsuccessful sale attempts. The mine was discovered in 1870.
27 September
DTC announces roll-out of the Forevermark to new markets for 2006. Following the success of the Forevermark
pilot in Hong Kong, the DTC announces that it is developing plans to launch in Japan, China, India and the Gulf
by the end of 2006.
28 September
De Beers wins an international HIV/Aids award. The company is honoured for its workplace response to
HIV/Aids counselling and testing by the Global Business Coalition on HIV/Aids at its Annual Awards for
Business Excellence Gala in Washington.
Photo by Chris Greenberg, Getty Images for the Global Business Coalition
29 September
The DBCM transformation process takes a step forward with the announcement that David Noko will succeed
Jonathan Oppenheimer as MD of DBCM.
6 October
De Beers Angola Prospecting (Debap) and De Beers Angola Investments announce the appointment of General
Antonio Dos Santos Franca “Ndalu” as non-executive chairman of Debap.
De Beers group annual review 2005 14
12 October
De Beers urges the South African Parliamentary Portfolio Committee on Minerals and Energy to consider
amendments to the Diamond Amendment Bill at the public hearings held in Cape Town.
26 October
Construction starts on the new Diamond Trading Company Botswana building in Gaborone. It is expected to be
operational in early 2008.
27 October
De Beers Canada announces that final provincial environmental approval has been received for the
development of the Victor project in Northern Ontario. Federal environmental approval was given to the project
in August 2005.
3 November
A revolutionary ore transport system, costing about R128 million, is launched at Finsch Mine. De Beers has
been a trailblazer in the implementation of automated ore transportation in South Africa and the system is a
world first in underground mining ore transportation.
4 November
The Attawapiskat First Nation and De Beers Canada sign an Impact Benefit Agreement for Ontario’s first
diamond mine at Victor. In addition, De Beers Canada and Yellowknives Dene First Nation conclude an Impact
Benefit Agreement for the Snap Lake project on 14 November.
8 November
De Beers and Ponahalo announce that they have signed a Memorandum of Understanding relating to the
proposed sale of a 26% equity interest in DBCM to Ponahalo, a broad-based black economic empowerment
company. Ponahalo will be jointly owned by Ponahalo Investment Holdings and De Beers employees and
pensioners.
9 November
Miba and De Beers sign a joint venture agreement. The Miba joint venture Memorandum of Understanding was
approved by the Economics and Finance commission of the Democratic Republic of Congo on 4 October and
by the Cabinet of the DRC government on 28 October.
23 November
It is announced that Chris Sivertsen will be Namdeb’s first Namibian GM, effective February 2006.
29 November
De Beers Canada files an application for the permits required to construct and operate a mine at Gahcho Kué.
The Gahcho Kué project is a joint venture between De Beers Canada (51%), Mountain Province Diamonds Inc.
(44%) and Camphor Ventures (5%).
30 November
De Beers group annual review 2005 15
Agreement is reached, and a preliminary approval order issued, to settle the majority of civil class action suits
filed against De Beers in the United States. This settlement does not involve any admission of liability on the
part of De Beers and brings an end to a number of outstanding disputes.
Chairman’s statement
The year was largely dedicated to reshaping
major elements within the group into a fitting
and efficient launch pad for future growth and
increased profitability
This past year has seen the great family of companies that make up the De Beers group transform as it
prepares for the next exciting chapter in its development as a stand-alone, privately owned enterprise dedicated
to the growth and expansion which will ensure its continued leadership of the diamond world.
Key developments in this transition towards “Chapter 2” included the turnaround in the fortunes of De Beers
Consolidated Mines (DBCM), the redesign of our South African operations, and the fulfilment of a bold black
economic empowerment (BEE) plan for DBCM. The latter step is widely welcomed for its innovative breadth
and reach, which, we believe, makes it a model for others to follow.
The year was largely dedicated to reshaping major elements within the group into a fitting and efficient launch
pad for future growth and increased profitability. 2005 was also marked by a number of important milestones.
It says much for the energy and dedication of all who work for De Beers that, during a period of radical
restructuring, the Diamond Trading Company could nevertheless achieve record sales, that DBCM could
achieve exceptional production figures, the lowest injury frequency rate in its history, and that the group as a
whole could reach a record production of 49 million carats.
Kimberley’s tourist economy. With the introduction of a gain-sharing incentive scheme throughout the
operations, cooperation with the mining unions and minimal disruption, excellent production and safety
statistics were achieved. Regrettably, Kimberley Mines recorded a fatality during 2005. Our goal is zero
accidents and the group accident frequency decreased by 43%, the severity rate decreased by 71% and the
fatality rate reduced by 75% compared to 2004.
As part of our corporate restructuring, De Beers Group Services – our services arm – was split from the South
African mining operations as DBCM prepared for our groundbreaking BEE transaction with Ponahalo. This deal
not only exceeds the government’s BEE requirements as set out in the Mining Charter, but also achieves the
Left: Nicky Oppenheimer. Right: Workers at the cone crusher at Namaqualand Mines’ Buffels Marine
Complex process plant.
goal we set ourselves – to create a company that will truly reflect the non-racial ideals of the government and
all the citizens of the new South Africa. Our aim was to spread the benefits of empowerment as widely as
possible and that, I think, we have achieved. At the same time, DBCM itself, now led by David Noko, the first
black managing director in its history, is set to anticipate by three years the government target of 40%
historically disadvantaged South African (HDSA) representation in management by 2009.
The BEE transaction also represents, in the most tangible way possible, De Beers’ commitment to the concept
of partnership – not only with its clients, and its mining partners but, above all, with all the countries and the
communities in which it operates. It is a concept that lies at the very heart of our corporate philosophy, born of
the conviction that the diamond, the product we mine and sell, imposes on us all an absolute requirement to
live up to the values it exemplifies. It is a belief that unites all who work for the large De Beers family around the
world and will be one of the main drivers of success as we embark on the next exciting chapter in our history.
On the production side there can have been few periods in our long history when the group has been
committed to so many projects in so many different parts of the world. In South Africa, for example, we believe
that after 20 years of research we have discovered a way of profitably mining the sea areas off the South
African coast and have committed US$115 million to equipping a ship for this purpose. Subject to the granting
of a mining licence, the first marine diamond project in South Africa will come into production in 2007. A further
US$177 million will – again subject to the necessary mining licence – be committed to reopening the
Voorspoed mine, last worked in 1909. These new projects will be an important counterbalance to the
necessary closure of Koffiefontein and the Kimberley underground operations.
Chairman’s statement
continued
In Canada, where we believe De Beers now has better assets than any other mining company, we will be
investing C$1.9 billion to bring Snap Lake and Victor into production and we have also filed an application to
construct and operate a mine at Gahcho Kué.
Evidence of our determination to find and develop new sources of supply was the US$113 million spent by
De Beers Group Exploration around the world in 2005. More than 60% of this investment was allocated to Africa
and new exploration agreements were signed in Angola and the Democratic Republic of the Congo (DRC). At
the same time, the scientific innovation that has always been the hallmark of De Beers could be seen in a
number of new exploration techniques.
We have also in the past year entered into 30 new joint ventures, bringing the total to 60 around the world,
including agreements with Endiama in Angola, Miba in the DRC, with the government of the Central African
Republic and with companies – both public and private – in Botswana, India, South Africa, Brazil and Canada.
One of the most promising of these is the joint venture with African Diamonds plc covering an area near Orapa.
We have also set ourselves a new and challenging target: to halve the time it typically takes from the discovery
of a new and viable prospect to bringing a mine into production. This is central to our drive not only to expand
supply, but also to achieve cost and asset efficiencies, improve productivity and increase the return on capital.
Innovation has also been the hallmark of the Diamond Trading Company (DTC) in its threefold quest: to
generate value-added services for our clients, to drive worldwide demand for diamonds and to maintain
consumer confidence in diamonds. The success of our investment in marketing can already be seen in the
sustained growth of the world’s largest diamond jewellery market, the United States. India saw double-digit
growth for the third year in a row, and the vibrant, developing markets of China and the Gulf States hold the key
to a major expansion in the worldwide demand for diamonds.
De Beers group annual review 2005 18
While the DTC in London will continue to concentrate on maintaining our unrivalled diamond expertise on
marketing, on consumer confidence issues and on servicing our clients, the decision to move its aggregation
facility to Botswana will more than meet our objective of shortening the diamond pipeline from mine to finger. It
will also provide additional diamond employment and is important proof of our ability to identify with the aims
and aspirations of the producer countries.
Left: Work in progress at the Namdeb Mining Area No 1 jet rig, which operates along the shoreline and
in shallow water. Right: Nicky Oppenheimer and Dr Manuel Calado, chairman of Endiama, at the
signing ceremony in Angola on 27 May 2005.
Historically De Beers has played a key role in supporting local beneficiation and in the sustainable development
of southern Africa’s diamond resources. It is not often appreciated that – largely because of De Beers’ efforts
over a long period of time – more diamonds have been beneficiated in South Africa than any other mineral
resource. Indeed, in value terms, De Beers sells more of the type of diamonds desired by local cutters for
cutting in South Africa than are produced by our South African mines. Sadly, some of the diamonds sold by
De Beers to clients in South Africa as suitable for cutting locally are exported through official channels for
manufacturing abroad; in this fact rests one of the challenges to South Africa as a manufacturing centre.
We are working closely with the industry to ensure that our supplies are better used and we are considering
several marketing initiatives to try to offset the competitive disadvantage of the higher cost base of the southern
African industry. In Botswana, the newly formed DTC Botswana will focus particularly on beneficiation and the
creation of marketing opportunities. Similar plans will be implemented in Namibia once the sales negotiations
there have been concluded.
If diamonds are to continue to reflect those values, it is essential that every aspect of the industry guard that
reputation by maintaining the highest ethical and professional standards.
Chairman’s statement
continued
The reputation of the group as a good global citizen is of great importance and this is why it has sought legal
compliance with all the jurisdictions in which it may operate or have business interests. Thus, 2005 saw
significant progress towards achieving this both in the United States and in the EU, where a ruling on our sales
contract with the Russian diamond producer, Alrosa, was finally achieved.
Our adherence to the principles of good citizenship also found expression in our commitment to the United
Nations’ Global Compact which requires signatories to respect UN principles on human rights, labour practices,
environmental protection and anti-corruption. The group is already a signatory to the Extractive Industries’
Transparency Initiative and to the World Economic Forum Partnering against Corruption.
These commitments reflect a belief which has been at the core of our corporate philosophy: no De Beers
operation anywhere in the world can be an island, sufficient unto itself; it is the product of a mutually beneficial
partnership with its host community and nation. Our continuing success owes much to the enduring
relationships we have built with those communities and in 2005 we sought to reinforce that commitment by
publishing the De Beers Community Policy.
This is a distillation of the many guidelines and operating practices developed and refined over the years to
ensure that our relationships with our neighbours are characterised by mutual respect and understanding. It
also underwrites our absolute respect for the rights and interests of the people among whom we live and work,
and our willingness to work with them to achieve shared goals.
A highlight of the year came in September 2005 when De Beers’ role in the fight against HIV/Aids was accorded
international recognition when it received the Global Business Coalition (GBC) Business Excellence Award for
its highly successful Voluntary Counselling and Testing programme. This programme is available throughout its
southern African operations to all employees and their partners, contractors and, where possible, to members
De Beers group annual review 2005 20
of the wider community. De Beers has been an active member of the GBC since 2002. This worldwide
organisation aims to coordinate and encourage a private sector response to the Aids pandemic.
De Beers has also become a member of the Global Health Council, a voice for action in addressing the world’s
most critical health issues. In 2005 we announced the launch of the De Beers African Health Scholars
Programme – aimed at strengthening African public health infrastructure – at the Johns Hopkins Bloomberg
School of Public Health in the USA.
Left: Nicky Oppenheimer and Gary Ralfe – a partnership which has extended over many years. They
are seen (left) with Anthony Oppenheimer and former Prime Minister of Namibia Hage Geingob on a
DTC Tour in 1992. Right: Nicky Oppenheimer, Chairman of De Beers, and Gary Ralfe, managing
director of De Beers, at the launch of the new DTC identity and Forevermark, July 2000.
A further noteworthy development was the launch of a joint venture between the De Beers Fund and the
US-based charity Jewelers for Children to extend the Isibindi model of care for children made vulnerable or
orphaned by Aids. Isibindi has been implemented by the National Association of Child Care Workers and the
local Department of Social Development in Galeshewe, Northern Cape. It is just one of the 22 projects
supported by the De Beers Fund in South Africa in the year under review.
In Botswana two major De Beers programmes dealing with education, community-based natural resources
management, income generation and heritage will be rolled out in 2006. This will be done in partnership with
the Kuru Family of Organisations, the largest non-governmental organisation in Botswana, which deals primarily
with the rights of the San.
A C$1.5 million expansion to the Kimberlite Career and Technical Centre has been spearheaded by De Beers
Canada, the government of the Northwest Territories, a number of business partners and Yellowknife Catholic
Schools.
These are but a few examples of corporate responsibility initiatives as widespread and diverse as our mining
activities.
initiative is focusing on De Beers’ purpose, vision and values. It will seek to provide an integrated overview of
organisational efficiency and the way in which we plan to organise the company to deliver our Chapter 2 goals.
As the baton of leadership now passes to a new generation and the De Beers group embarks on another
challenging and exciting chapter in its long history, it will continue to be guided by the best of the past and by
its central philosophy that if diamonds are to be forever, they must also be a force for good wherever they are
found, mined and sold.
Chairman’s statement
continued
A special tribute is due to Gary Ralfe with whom I have worked in close partnership for almost my entire
professional life. Gary’s energy, drive, dedication and, above all, his loyalty to the company and the values for
which it stands, have been essential ingredients in its continuing success. His unflagging search for innovation
and continuous improvement in the way we organise our business, his role in guiding the restructuring of
De Beers, its conversion from a supply- to a demand-driven business, and in the privatisation of the company,
were all invaluable. This sentiment applies to me personally, as much as to the company and to the diamond
industry as a whole. He has been largely responsible for a historic chapter in the development of De Beers and
his imprint will be evident for many years to come.
I am delighted that Gary will be remaining on the DBsa board so his extensive knowledge will not be lost to the
group. Other board changes have seen Paddy Kell retire as chief financial officer and be succeeded by Stuart
Brown, while Ed Dowling and Jonathan Oppenheimer have also joined the board. I am particularly pleased that
Baron David de Rothschild has agreed to join the DBsa board as a non-executive director; this re-establishes a
close link between De Beers and the Rothschilds, which has existed for well over 100 years.
Our thanks are also due to Glenn Turner who, as legal director, played a key role in our settlement with the US
Department of Justice and in achieving legal compliance in the US and the EU.
Nicky Oppenheimer
De Beers group annual review 2005 22
30 April 2006
The search for new De Beers diamond mine prospects in southern Africa got a major lift with the arrival
in August of the Diamonds for Development airship in Cape Town. De Beers, Bell Geophysics and
Zeppelin Luftschifftechnik (ZLT) have signed a two-year agreement to operate and pilot the ZLT airship
for De Beers in the southern African region.
De Beers group annual review 2005 23
Financial summary
Headline earnings before class action payment were
US$824 million, 26% higher than in 2004.
DTC sales were a record US$6 539 million, 15% higher than in 2004.
Diamonds recovered
(carats)
De Beers group annual review 2005 24
Results
Own earnings at US$782 million were 26% higher than in 2004, as were headline earnings at US$824 million
before the payment of US$250 million in terms of a class action settlement agreement. The increase was mostly
derived from a specific deferred tax gain of US$148 million. Without this benefit own earnings would have been
2% higher than in 2004 and headline earnings 4% higher. DTC sales at a record US$6 539 million were 15%
Right: Diamond classification on one of the diamond sorting floors in Orapa House, Botswana.
higher than in 2004, but without the favourable impact of the stockpile releases that took place in 2004,
diamond account margins were lower. In addition, the current year was adversely affected by mark-to-market
differences on hedges and the mine closure costs referred to below.
Operating cash flow fell to US$723 million, before the payment of US$250 million in terms of a class action
settlement agreement, from US$985 million in 2004, mainly as a result of an increase in working capital
requirements during 2005.
Distributions of US$600 million were made to shareholders during the year, including US$200 million paid in
April 2005 in respect of the final dividend for 2004. The final distribution in respect of 2005 of US$250 million was
brought forward to December 2005 to facilitate the black economic empowerment transaction referred to below.
Production
Group production for the year, inclusive of our joint ventures in Namibia and Botswana, was 49.0 million carats,
an increase of 4% over 2004. Debswana produced a record 31.9 million carats, an increase of 2% over 2004.
Namdeb’s production of 1.8 million carats was 5% lower than in 2004. De Beers’ South African mines produced
a total of 15.2 million carats, an increase of 1.4 million carats (10%) on 2004. DBCM initiated and completed the
closure of its lossmaking underground operations in Kimberley and Koffiefontein resulting in impairments and
provisions for retrenchments amounting to US$48 million. De Beers has implemented reskilling programmes for
those employees who have been retrenched.
growth in all areas with the exception of Europe. The US had a satisfactory Christmas with overall annual
growth in line with the world trend. The high-end independents and internet retailers outperformed the market.
Japan and the rest of Asia-Pacific grew in low single digits, with China doing better after the poor first half of the
year. On the other hand, in Asia-Arabia there has been growth in double digits.
During the year, the DTC raised its rough diamond prices on two occasions, the cumulative effect of which was
that sales by the DTC in 2005 were at prices, on average, 9.5% higher than in 2004. For most of the year,
demand for rough diamonds from the cutting centres was strong. In addition, the DTC successfully launched a
suite of Value Added Services to clients.
Financial summary
continued
Projects
During the course of 2005, De Beers announced the approval for the Snap Lake project in Canada with full
production to be achieved by the third quarter of 2008. The board also approved C$982 million for the Victor
project. The required environmental approval was received in October 2005 and full production will be achieved
by the third quarter of 2009.
In South Africa, the De Beers board approved US$177 million for the Voorspoed mining project on
30 November 2005 subject to the granting of the required mining licence. On 8 February 2006 US$115 million
was approved for the South African Sea Areas marine mining project.
US settlement
Agreement has been reached, and a preliminary approval order issued, to settle the majority of civil class
action suits filed against De Beers in the United States. This settlement does not involve any admission of
liability on the part of De Beers and will, when concluded, bring to an end a number of outstanding class
actions. US$250 million has been paid into escrow pending conclusion of the settlement process.
Outlook
Demand for rough diamonds continues to be steady. However, stocks of both rough and polished in the cutting
centres were relatively high at the beginning of the new year as were aggregate debt levels. As a result, DTC
clients were happy to see a relatively modest January Sight, preferring to spread their ITO (Intention to Offer)
allocation much more evenly over the first half. However, the 2006 outlook remains positive, with market growth
expected to be similar to 2005 in line with expectations for global economic growth.
Management changes
Gary Ralfe and Paddy Kell, after eight years of service as managing director and finance director respectively of
De Beers, retired at the end of February 2006. Gary has assumed a role as a non-executive director on the
DBsa board. We are grateful for their enormous contribution to the De Beers group. Gary has been succeeded
by Gareth Penny and Paddy by Stuart Brown.
De Beers group annual review 2005 26
Consolidated income statement
For the year ended 31 December 2005
Abridged
US Dollar millions
2005 2004
Diamond sales
– DTC 6 539 5 695
– Other 513 512
Joint venture and other income 906 836
7 958 7 043
Deduct:
Cost of sales 5 906 5 026
Sorting and marketing 484 543
Exploration, research and development (Note 1) 242 239
Group services and corporate overheads (Note 2) 140 80
Net diamond account 1 186 1 155
Deduct:
Net finance charges (Note 3) 101 83
Costs related to reorganisation and restructuring 19 39
Income before taxation 1 066 1 033
Taxation (Note 4) 283 386
Income after taxation 783 647
Attributable to outside shareholders in subsidiaries 1 26
Own earnings 782 621
Share of retained income of joint ventures 22 21
Total earnings 804 642
Amortisation of goodwill (Note 5) 144
Net earnings before class action payment 804 498
Payment in terms of class action settlement agreement (Note 6) 250
Net earnings 554 498
Headline earnings reconciliation
Net earnings before class action payment 804 498
Adjusted for:
Amortisation of goodwill (Note 5) 144
Amortisation of intangible fixed assets 31
Surplus on realisation of fixed assets less provisions (14) (21)
Mine impairment and retrenchment costs 48
Taxation and minority interests (14)
Headline earnings before class action payment 824 652
De Beers group annual review 2005 27
Abridged
US Dollar millions
2005 2004
Ordinary shareholders’ interests 3 597 3 801
Outside shareholders’ interests 104 132
Total shareholders’ interests 3 701 3 933
Net interest-bearing debt (Notes 3 and 7) 2 362 1 588
Other liabilities 1 729 1 776
7 792 7 297
Fixed and intangible assets 5 790 5 360
Investments and loans 66 81
Diamond stocks and other assets 1 936 1 856
7 792 7 297
Exchange rates Rand = US$
– average 6.39 6.43
– year end 6.36 5.74
US Dollar millions
2005 2004
Cash available from operating activities 473 985
Investing activities
Fixed assets – stay-in-business 248 356
Fixed assets – expansion 370 60
Investments 21
639 416
Financing activities
Preference share capital redeemed 214 214
De Beers group annual review 2005 28
1. The costs of feasibility studies to prove the viability of mineral resources, previously included in cost of sales,
have now been included with exploration, research and development. The prior year has been restated
accordingly.
2. The incorporation of De Beers Group Services earlier this year has led to improved cost accountability, resulting
in certain costs being identified as group service costs which were previously included in cost of sales and
sorting and marketing.
3. Preference share capital is included in net interest-bearing debt. Preference dividends, amounting to US$54 million
(2004: US$75 million), are included in finance charges.
On 30 June 2005, the company took advantage, for the second time, of an early redemption clause attaching to
its 10% preference shares in issue and redeemed the maximum permissible amount of US$214 million, or 25% of
the total originally in issue.
4. Following on from the approval of the Victor project, the value of the group’s accumulated tax losses has been
brought to account as a deferred tax asset, which has had the effect of reducing the current year’s tax charge
by US$148 million.
5. In accordance with International Financial Reporting Standard 3 (Business Combinations), with effect from
1 January 2005 it is no longer permissible to amortise goodwill arising on consolidation. The standard does not
permit the restatement of the prior year, which includes amortisation of goodwill amounting to US$144 million.
6. In terms of a class action settlement agreement dated 8 November 2005, US$250 million was paid into escrow
on 9 December 2005 pending conclusion of the settlement process attaching thereto.
7. The US$2.5 billion revolving credit facility was replaced on 31 March 2005 with a US$3 billion multicurrency
revolving facility, on more favourable terms, split into two equal tranches with tenors of five and seven years.
Chapter 2 relates to the period 2005 – 2009 which we see as one of growth and expansion, with important new
financial goals set for management in terms of EBITDA, ROCE and enterprise value.
Although 2005 is a transition year between Chapter 1 and Chapter 2, it has nevertheless been dynamic in many
different ways. De Beers Consolidated Mines (DBCM) has been “re-engineered”, its underground operations in
Kimberley and Koffiefontein have been closed and four of its six mines are now operating profitably. The
restructuring of our South African operations was successfully concluded in April 2005 and this paved the way for
the announcement later in the year of a black economic empowerment (BEE) deal for 26% of the equity of DBCM.
Important new exploration partnerships have been negotiated in Angola and the Democratic Republic of
Congo. There has been growing understanding, dialogue and alignment with the governments of southern
Africa regarding downstream beneficiation and job creation.
The long quest for legal compliance has culminated in a settlement with the European Commission on the
trading agreement with Alrosa of Russia; and with a provisional settlement of all of the outstanding civil litigation
in the United States of America.
New mining developments in both Canada and South Africa have been approved by the board. Another
refinancing took place, giving De Beers access to greater, longer and cheaper bank credit. The new business
model of driving demand with its central platform of Supplier of Choice was again validated by record sales by
the Diamond Trading Company (DTC), increased retail consumption of diamond jewellery and significant rough
diamond price increases.
De Beers group annual review 2005 30
At the same time a new De Beers leadership team has been put into position, the culmination of which is
Gareth Penny taking over from me in 2006 as managing director of De Beers. Important work has been
undertaken in redefining the purpose, vision and values of the De Beers family of companies and in examining
organisational effectiveness with a view to instilling best practices across the group.
Gary Ralfe, managing director.
Financial results
As the financial section of this report explains, there are a great number of exceptional items that make it
difficult to directly compare our 2005 results with those of 2004. Certainly, management cannot claim that the
results are as good as the headline growth of 26% seems to indicate. After stripping away the major
exceptionals, headline growth is a much more modest 4% and EBITDA 6%. In mitigation, however, these
results would have been better had it not been for the closure costs of DBCM’s underground operations and a
big mark-to-market provision on foreign exchange. Management is proud that the EBITDA result outperformed
the target of US$1 350 million set by the shareholders.
We have now concluded the first of the five years that should be leading us to the stated financial targets for
Chapter 2 by the year 2009, which are:
• EBITDA US$2 000 million;
• ROCE 20%; and
• EV of US$12 000 million.
New leadership
A significantly different leadership team will be working alongside Gareth Penny. David Noko is the first black
managing director in DBCM’s 118-year history. Varda Shine, who is Israeli-born, has become the first female
managing director of the DTC. They join Blackie Marole of Debswana and Inge Zaamwani of Namdeb as the
managing directors of De Beers’ operating companies.
Managing director’s review
continued
Other changes include Stuart Brown taking over the reins from Paddy Kell as finance director, Bruce Cleaver
succeeding Glenn Turner as legal and commercial director, and Leon Smith replacing Craig Mudge as human
resources director. Finally, Stephen Lussier, who for 10 years was responsible for the DTC’s highly successful
marketing campaigns, has joined the executive committee in the new role of corporate and external affairs
director – a clear indication of the growing importance of reputation management and consumer confidence.
After his successful leadership of the transformation of DBCM, Jonathan Oppenheimer joins his father in the
Chairman’s Office.
During 2005, the human resources department led the inaugural De Beers Organisational and Capability review.
This will now be an annual process that allows the De Beers executive to participate in reviewing the
organisation’s capability and that of its people to deliver on organisational goals. This has resulted in a more
formalised talent management process.
Ponahalo is owned 50% by De Beers South African-based employees and pensioners and 50% by a
consortium of business and broad-based groupings. Ponahalo will utilise R10 million (escalating at 5% per
annum) of its dividend income each year, or more than R100 million in aggregate over the first 10 years,
pre-debt service, to make other investments in South Africa. Ponahalo will set aside R5 million each year, or
R50 million in aggregate over the first 10 years, pre-debt service, which will flow directly through to trusts for the
benefit of disadvantaged women, people with disabilities and communities around DBCM mines.
Producer partners
Open, mutually beneficial relationships with the governments of all the countries in which De Beers operates
underpin the way in which we conduct business.
De Beers group annual review 2005 32
Throughout the development of South Africa’s new diamond legislation, government has demonstrated its
openness to frank and honest dialogue with De Beers and the wider diamond industry. We will continue to work
with the South African government to ensure that the new Diamond Act achieves its objectives.
In Botswana, the stage has been set for a new era of partnership. De Beers and the Botswana government are
finalising the Jwaneng lease agreement, a road map for beneficiation, and planning to transfer the aggregation
activities which presently take place in London to a new sorting facility under construction in Gaborone.
The No. 1 treatment plant at Orapa Mine – taken at dusk.
The review of our agreements with the government of Namibia continues in a constructive and open manner
with both sides sharing their visions of the future role of diamonds in the nation’s economy.
In mid-2005 Williamson Diamonds Limited, our joint venture with the government of the Republic of Tanzania,
was issued a Special Mining Licence, so securing the company’s land tenure for a 25-year period.
Looking to new areas of operation, 2005 saw the establishment of Endeb, a joint venture between De Beers
and the state diamond company, Endiama. In addition, several joint venture agreements were concluded which
will contribute to foreign direct investment in the Democratic Republic of Congo.
laws. The settlement represents one more step in De Beers’ policy of addressing the legal issues it encounters
even where it does not actually operate in the jurisdiction in question. The agreement, which expressly provides
for no admission of wrongdoing on the part of De Beers, received preliminary approval from the relevant US
court in November. There now follows the standard, lengthy period of consideration by the court of the terms of
the settlement reached, culminating in a final decision, hopefully, by the close of 2006 or early 2007. Third
parties may make submissions during part of this period. De Beers took the view that settlement of these four
actions (which represent the bulk of all the class actions) was commercially acceptable to avoid the time, cost,
Managing director’s review
continued
distraction and uncertainties of litigating in the US. Other cases remain outstanding. De Beers continues to
consider how best to address any issues that may arise. Subsequent to year end, De Beers reached agreement
to settle all remaining class actions on the same basis.
We aim to eliminate all fatalities and to reduce the amount of lost-time injuries by 10% per year through to 2010.
This initiative got off to a good start in 2005, with the lost-time injury frequency rate (LTIFR) reduced by 12%; the
severity rate reduced by 63%; and the fatality rate reduced by 80% compared to 2004. Behaviour-based safety
systems have been implemented at some mines and these have begun to bear fruit.
Production
The group’s mines produced a total of 49 million carats in 2005, an increase of 4% over 2004.
Botswana: Debswana
Debswana once again produced a record 31.9 million carats, a 2% increase over 2004. This increase was
mainly due to operational efficiency improvements at Jwaneng.
Namibia: Namdeb
Namdeb produced 1.8 million carats, including a record 976 890 carats from the sea. However, this was an
overall 5% decrease over 2004 due to operational problems at land operations.
Although 2005 saw the second-highest level of treatment since the return of the mine to De Beers’ management
in 1994, diamond recovery dropped 33% to 190 384 carats as a direct result of a fall in grade. Plant
enhancements have been identified to increase the treatment volume of the higher grade in-pit material.
Venetia Mine diamond recovery plant.
Improving the performance of existing operations represents the best opportunity to increase revenue and
decrease costs. This strategy has begun to deliver impressive results. The streamlined execution of projects
and a renewed focus on talent management will enable the group to both increase the yield of existing mines
and bring new resources into production more effectively.
Projects update
De Beers announced the approval for the Snap Lake project in Canada with production scheduled to
commence in the last quarter of 2007. The board further earmarked C$982 million for the Victor project subject
to environmental approval. The required environmental approval was received in October 2005 and production
is scheduled to commence in the third quarter of 2008. De Beers has also filed an application to construct and
operate a mine at Gahcho Kué, subject to board approval. The De Beers board approved US$177 million for
the Voorspoed mining project in South Africa, subject to the granting of required mining licences, and
US$115 million for the implementation of the South African Sea Areas (SASA) marine mining project.
The continued development of marine mining technology has led to increased efficiency of the mining fleet
operated by De Beers Marine Namibia. A record 976 890 carats were produced from the sea, surpassing
Namibian land production for the first time. A NPV-driven mine plan has been developed to optimise use of the
mining fleet.
The feasibility study for the SASA marine mining project was completed in 2005. Pending the issuing of the
mining licence, this project should proceed to implementation in 2006, culminating in full production in 2007.
This will be the first marine diamond project in South Africa.
Managing director’s review
continued
Exploration
Resources directed to highly prospective areas
De Beers Group Exploration invested US$113 million in diamond exploration globally during 2005, discovering
34 new kimberlites in Africa, Canada, India and Australia. Over 60% of exploration resources were committed to
Africa. A comprehensive model of potential diamond supply opportunities for De Beers was compiled which,
combined with recent successes in gaining access to highly prospective areas, has identified exciting new
exploration possibilities.
Botswana’s Orapa area has been a focus. The evaluation of the AK06 resource by Boteti Exploration, a joint
venture with African Diamonds plc, shows promise and the assessment of other kimberlites continues in terms
of joint venture agreements with African Diamonds plc, Firestone Diamonds and Wati Ventures.
approximately 50% of the total worldwide diamond jewellery market), also exhibited solid growth, despite
soaring oil prices and the impact of Hurricane Katrina.
For most of the year, demand for rough diamonds from the cutting centres was strong. Sales by the DTC, the
marketing arm of De Beers, were a record US$6 539 million, 15% higher than in 2004. In addition, the DTC
launched a range of Value Added Services to clients.
During 2005, the DTC raised its rough diamond prices on two occasions, the cumulative effect of which was
that sales by the DTC in 2005 were at prices, on average, 9.5% higher than in 2004.
Diamond polishing is a unique skill taught at the Diamond Hub, Cullinan Diamond Mine.
“Full Disclosure” is an industry requirement with regard to synthetics, simulants and treatments. Our policies in
this regard have been endorsed by the World Jewellery Federation, The World Federation of Diamond Bourses,
the International Diamond Manufacturers Association, and the evolving Council for Responsible Jewellery
Practices.
Both sightholders and retailers involved in the Hong Kong pilot programme have provided positive feedback. In
late 2005 new Hong Kong partners were added and in 2006 the DTC will be selecting partners in four new
major markets – Japan, China, India and the Gulf. On the operational front, the first overseas marking facility will
open in Antwerp in early 2007. This will more than double the current marking capability.
Managing director’s review
continued
The Council for Responsible Jewellery Practices (CRJP) has incorporated an industry baseline regarding ethical
policies. By the end of 2005, the CRJP had admitted 28 members from across the diamond industry. This is an
essential initiative – from mine to retail – for companies in the diamond and gold jewellery supply chain to
demonstrate compliance with a common ethical, social and environmental code. Such a code will avoid the
duplication of effort that will arise from a multitude of similar, corporate-led initiatives.
Living up to diamonds
In 2005, we published a booklet called “Living Up to Diamonds”, which highlights some of our corporate social
investment (CSI) activities in southern Africa. Nelson Mandela, who wrote the foreword, stated: “I congratulate
De Beers for the way it continues to demonstrate its credentials as a good corporate citizen in so many areas of
concern. De Beers – with its partner companies in Botswana, Namibia and Tanzania, and its operations in
Canada and elsewhere – is a fine example of responsible business, making a real and lasting contribution to
the people in the countries and communities where it operates”.
Our partnership approach with communities, through bodies at operation level and at the De Beers Fund level,
is not just philanthropy; it is sustainable CSI. Each project is developed in partnership with, and often led by,
the people it is intended to benefit.
The Los Angeles store opened on World Aids Day on 1 December 2005 and announced that it would donate
10% of its December sales to three Aids charities. It received a message of support from Nelson Mandela,
whose Children’s Fund was one of the recipients of the donation.
De Beers group annual review 2005 38
Plans for 2006 include more stores in existing and new geographies, funded by both the JV and franchise
partners. New collections will also be launched to maintain the growth in existing stores.
While De Beers LV has not recorded the instant results that we had anticipated, we appreciate it does take time
to establish new retail brands in the market place. Good progress is now being made, with the first stores to be
opened (Old Bond Street and Japanese Boutiques) exceeding their break even with the expectation that all
stores opened more than a year ago will do so in 2006. Both partners remain committed and confident in the
joint venture in which De Beers has so far invested US$120 million.
Trucks on the way to collect a load at Jwaneng Mine.
Element Six
In 2005, the Element Six group increased its sales revenue by 21% as a result of growth across all of its
businesses. A sizeable contribution came from Syndrill whose business was driven by increased market share
in oil and gas drilling as a result of substantial improvements, together with the strong performance of the oil
drilling market. The group sought to further expand its production capability and cost-competitiveness by
starting construction of a Chinese plant and acquiring a majority share in a Ukrainian plant. Investment in
research and development remained high to ensure that new competitive industrial diamond products were
brought to market rapidly.
However, despite the increase of 21% in sales revenue, Element Six did not contribute significantly to De Beers’
overall results in 2005. This was due to pressure on margins caused by continuing price erosion and
expenditure arising from a restructuring that took place in the distribution channels of Element Six.
The continuing success of De Beers is underpinned by the perennial love affair of American consumers with
diamonds and their responsiveness to the DTC’s marketing initiatives, together called “the American diamond
dream”. This is matched by a modest resurgence in Japanese consumption and strong growth in the new
De Beers group annual review 2005 39
economies of China, India and the Gulf States. The challenge, which De Beers must manage carefully, is
synthetic stones. Global legal compliance, reputation management and our consumer confidence campaigns
all have a role in meeting this challenge.
De Beers looks set for the foreseeable future to continue to produce about 40% by value of the world’s rough
diamonds. The major pits of Jwaneng, Orapa and Venetia are the backbone of our productive capacity. One of
the stated aims of Chapter 2 is to find more profitable carats; be it through enhanced asset utilisation on
existing mines, new mining projects, in the new deposits that we hope to find in Central Africa, or through a
new strategic partnership with Alrosa. Between growing demand for diamond jewellery and expanding our
Managing director’s review
continued
production of profitable carats, De Beers will sustain and enhance its core business, which is the mining and
marketing of rough gem diamonds. I believe that the new management team has the vision and vigour to look
for growth in the so-called adjacencies like DBLV and Element Six. I believe also that with the reinvigoration that
comes with youth and fresh blood, both vital for continuing performance in any company, De Beers will address
deficiencies in organisation and leadership.
When the BEE deal in DBCM has been completed the “new DBCM” will be a role model for South Africa. This
should put De Beers in a better position to face up to the political dynamics of South Africa where the company
must continue to address fundamental problems of poverty and unemployment as an ally of government. Likewise,
our partnerships with the governments of Botswana and of Namibia must be responsive to national aspirations.
As I leave my executive responsibility at De Beers I express great confidence in its future and in its leadership
by Nicky Oppenheimer as its wise and experienced Chairman, and Gareth Penny as a new and dynamic
managing director, and in the versatile and cosmopolitan team that he has gathered around him.
Personal note
It was my good fortune to be awarded an academic scholarship from Anglo American Corporation that took me
to Cambridge University. This good fortune translated into a job with Anglo American in October 1966. Two
years later I was joined in my office in the Gold Division of Anglo American by Nicky Oppenheimer. This was the
beginning of a lifelong friendship and partnership. I express my gratitude to Nicky for the confidence and trust
that he has shown me over many years, not least in nominating me as managing director of the DTC in 1994
and as managing director of the De Beers group in 1998. His confidence has been matched by that of the
board and other De Beers shareholders.
It has been a rare privilege and an exacting responsibility to be the MD of the world’s leading diamond company
and, in partnership with Nicky, to guide its transformation over the past eight years. In that, we have been
assisted by many remarkable people, both within De Beers and among its stakeholders: its partner governments,
its sightholders and other partners. I record particular gratitude to Julian Ogilvie Thompson, the ex-chairman of
De Beers, who has been mentor to both Nicky and myself, and to Gareth Penny and my other lieutenants within
De Beers. Notable among them are Paddy Kell, the outgoing finance director, and Ollie Oliveira who, together
with Gareth, have been with me from the start. We have been inspired by passion, united in trust, and concerned
for our communities and environment as we worked as a team to shape the future of De Beers.
De Beers group annual review 2005 40
Gary Ralfe
28 February 2006
Our prospecting technologies span the entire prospecting pipeline. The Bell/Zeppelin Airborne Gravity System
places De Beers at the leading edge of airborne gravity technologies. This, together with our in-house
Spectrem EM system and other airborne and ground geophysical systems, significantly enhances our ability to
make new discoveries quickly and cost-effectively. Ground sampling in remote areas (be it within the high Arctic
or equatorial forests) can be readily facilitated.
A further enhancement to automation is the introduction of a powerful management system that allows high-
level control of the planning and execution of block cave mining. This ore management system totally integrates
a number of systems to track all movement and interaction, including that of the autonomous trucks. The only
human intervention is by operators, remotely located in control rooms. Automating the transport of the ore will
not only improve safety, but also increase productivity and reduce capital and maintenance costs.
De Beers group annual review 2005 42
Today, DBMN leads the world in mining the oceans at depths greater than 100 metres – using the self-
developed equipment guided by experience gained, innovative thinking and a passion to be the best.
The search for new De Beers diamond mine prospects in southern Africa got a major lift on
31 August 2005 with the arrival of the Diamonds for Development airship in Cape Town. De Beers
and Zeppelin Luftschifftechnik (ZLT) have signed a two-year agreement to operate and pilot the airship
for De Beers in the southern African region.
Technology, developed over time, has enabled a differentiating capability in the exploitation of sub-sea
diamondiferous gravels in Atlantic 1 off the west coast of Namibia and, more recently, the SASA ML3 mining
licence off the west coast of South Africa.
This technology includes both vertical and horizontal mining systems in the treatment of marine gravels mined
off the seabed. Completely self-contained “floating mines” – with complex and challenging logistical support for
both people and equipment – sustain mining activities at sea for up to three years.
In 2005, there was a continued push to optimise the final recovery process through completing research and
development on laser-based, single-particle sorters capable of handling all the material in the sorthouse with
close to 100% efficiencies. This equipment started to be introduced across the De Beers operations during the
year.
The development of modular wet X-ray-based sorting machines will drive down operating and capital costs as
well as significantly reduce the infrastructure costs normally associated with housing large machinery.
De Beers group annual review 2005 43
It is costly to measure process plant efficiency. Thanks to access to diamond damage information from the
Diamond Trading Company, combined with technical experience, we are able to adopt a structured approach to
continuous optimisation of diamond recovery through the treatment process. This includes:
• diamond damage management (measuring, tracking and managing revenue loss due to damage);
• diamond recovery efficiency (measuring and improving free diamond recoveries); and
• determining and monitoring optimum top, recrush, and bottom cut-off at each operation using granulometry,
stage crushing and size frequency analysis.
A sizeable body of work is focused on ensuring that diamonds are not damaged through the mining and
metallurgical processes. This work has generated a set of best practice rules in plant design.
The Diamond Wizard is an extraordinary simulation tool pioneered by our research and development team.
It is the first simulator in the world to analyse comprehensively metallurgical efficiency, diamond deportment
and revenue recovery. It also facilitates investigations into process design and operating philosophy to
determine each mine’s efficiency in recovering diamonds. Metallurgists are able to compare the actual returns
of a plant with estimations based on mineral resource information.
De Beers group annual review 2005 44
Jumbo drill rigs are used for underground long hole development drilling at Finsch Mine. The operator is
safely away from the development area and operates the drill remotely.
De Beers group annual review 2005 45
Prospecting activities
worldwide
In 2005, we reviewed our strategy and global
footprint and took further steps to ensure that
our exploration focus is directed to those areas
that offer the best opportunities for
economically significant diamond deposits
De Beers group annual review 2005 46
A E
B
F
During 2005, we concluded a number of important new joint venture agreements with various partners. These
include Endiama in Angola; Miba and a number of local and international companies in the Democratic Republic
of Congo; the government of the Central African Republic and other public and private companies in Botswana,
India and elsewhere. Numerous other partnership and value-adding joint venture opportunities were initiated in
Africa, Brazil, Australia and Canada.
De Beers continued to invest in new geophysical technologies and systems to enable rapid and effective
investigation of exploration target areas. We also made significant progress with new and expanded laboratory
capacities and processes, and successfully developed mineral chemistry interpretative techniques to help
prioritise early-stage exploration targets.
De Beers group annual review 2005 47
In 2005, De Beers invested US$113 million in diamond exploration in 12 countries on five continents. In the
process we discovered 34 kimberlites in seven countries. Included in this amount is the total cost of restructuring
our organisation to ensure that we are well equipped to manage the challenges that lie ahead in 2006 and
beyond.
Prospecting activities worldwide
Areas of operation
A North America
During 2005, we conducted exploration activities in Canada within the Northwest Territories, Nunavut,
Saskatchewan, Manitoba, Ontario and Quebec.
Further exploration and evaluation work continues on the Fort à la Corne kimberlites in partnership with
Shore Gold Inc. (following their merger with Kensington Resources in 2005) and Cameco Corporation.
Assessment of satellite kimberlites around Victor in the Attawapiskat cluster is also in progress.
B South America
We maintain a presence in Brazil with an indicator mineral laboratory in Brasilia and a small team to
manage existing joint venture agreements and assess other opportunities. In 2005 deals were concluded
with Brazilian Diamonds and Majescor Resources. Negotiations with other mining and exploration
entities are under way.
C Southern Africa
Exploration continues in South Africa, Botswana and Zimbabwe. Botswana continues to yield interesting
results and the AK06 project (in joint venture with African Diamonds plc) in the Orapa area is making
encouraging progress and will undergo a conceptual economic study during 2006. We will continue to
assess the economic potential of other kimberlites within the Orapa area in partnership with African
Diamonds, Firestone Diamonds and Wati Ventures.
D Central Africa
We are exploring in highly prospective parts of Angola, the Democratic Republic of Congo and Central
De Beers group annual review 2005 48
African Republic. Our Partner of Choice strategy has been successful in the region, resulting in a number of
joint venture agreements with parastatal agencies and other privately and publicly owned exploration and
mining entities. Unearthing opportunities for further joint venture agreements remains high on the agenda.
E Eastern Europe
We are steadily increasing our exploration activities within Russia and Ukraine and are actively looking
for partnership opportunities within the region.
Archangel Diamond Corporation and De Beers are still pursuing a settlement over the disputed
Verkhotina licence with Archangelskgeoldobycha.
F Australasia
In India, we are exploring in Karnataka, Andhra Pradesh, Orissa, Madhya Pradesh, Uttar Pradesh and
Chattisgarh, with encouraging results.
In China, our representative office in Beijing continues to seek opportunities for partnership and some
cooperative activities were supported in Liaoning.
In Australia, we concluded active prospecting activities at the end of 2005 and sold our Melbourne
laboratory. However, we are maintaining a small presence in Perth, to manage existing joint ventures and
to investigate further opportunities.
Challenges
In our efforts to maintain a global competitive edge, we face a number of challenges:
• Being first to access the best new opportunities and taking advantage of those;
• Being able to adapt quickly to changes in operative environments, and responding rapidly to new
opportunities;
• Speeding up operating activities; and
• Creating a workforce that is representative of the areas in which we work.
We believe that we are well positioned to make new discoveries in many of the areas where we are active. Our
geophysical discovery tools will play an increasingly significant role in these exploration programmes.
De Beers group annual review 2005 49
We will remain committed to our Partner of Choice programme as we seek opportunities to become involved
with other parties on a mutually beneficial basis.
Noteworthy activities for the year ahead include the conceptual economic study for the AK06 resource and
commencement of kimberlite evaluation in Angola.
Debswana
Exceptional production figures
Blackie Marole
Debswana statistics
Location
Botswana
Established
De Beers group annual review 2005 50
1969
Type
Opencast
Union membership
Botswana Mineworkers Union
Safety statistics (LTIFR)
0.15
Fatalities 2005 2006
0 1
De Beers group annual review 2005 51
Debswana
continued
31 124 649
31 889 771
30 412 155
28 396 926
26 416 531
01 02 03 04 05
In 2005, Debswana laid foundations for improved relations with all its stakeholders. Following the industrial
action of 2004, successful interactions with the Union of Mineworkers resulted in an agreement being signed to
implement a performance-based pay system for all union members.
In addition, an independent climate survey among employees helped the company measure its organisational
health. The study enabled management to identify the general problems and the underlying causes.
Recommendations are currently being implemented.
It is against this background that we have been able to report exceptional production figures and a fatality-free 2005.
Regrettably we have had one fatality in 2006.
• Orapa No 3 treatment plant will replace the No 1 plant, which is over 30 years old and showing signs of
ageing. The new plant is scheduled for 2010 when full production will reach 8 to 9 million tons per annum.
Left: The heavy vehicle maintenance workshops at Orapa are responsible for maintaining all the heavy-
duty fleet working in the pit. Right: A longhole drill rig for preparing holes for emulsion blasting in the
Jwaneng mining area.
• Letlhakane Mine tailings treatment plant is intended to treat current tailings to augment the forecast shortfall
in carat production as a result of the reduced mining rate, as the pit gets deeper. A feasibility study is being
undertaken and the plant should come into full production in 2012 at around six million tons per annum.
• Jwaneng Mine main treatment plant replacement – this will replace the existing plant, part of which will be
within the opencast mining cut limit. The plant is scheduled for full production by 2011 at 10 million tons per
annum of run-of-mine ore.
• Damtshaa Mine’s production double-up involves the construction of an additional dense media separation
treatment module to increase head feed tonnage from 200 to 400 tons per hour. The project will be
commissioned at the end of 2006.
It is with regret that we record the death of Baagi Medupe, an electrician at Letlhakane Mine in February 2006.
There were no fatal injuries during 2005 and the company’s combined lost-time injury frequency rate (LTIFR) was
0.15 – slightly better than the target of 0.16.
De Beers group annual review 2005 53
Despite initiatives to improve safety at Orapa, Letlhakane and Damtshaa Mines, a negative trend was shown
with 12 lost-time injuries during the year compared to nine in 2004. Five of these involved mine employees
while the rest were contractors.
Investigations established that the key causal factors were failure to follow established procedures and the
lack of risk assessments. The mines consequently engaged the DuPont Resource Centre to run a Behavioural
Based Safety programme to develop safety competencies for senior managers, line management and
supervisors. The project continues in 2006 when the programme is cascaded to the entire workforce.
Debswana
continued
Jwaneng Mine, on the other hand, showed a significant improvement in the overall safety performance during
the review period. Lost-time injuries were restricted to five, one less than 2004, with a LTIFR of 0.12. However,
property damage costs, although significantly lower than those of benchmarking operations, exceeded the
target for the year.
Morupule Colliery’s safety record for the year improved, with no lost-time injuries. While the number of minor
accidents increased significantly from nine in 2004 to 18 in 2005, this is attributed to a successful campaign to
improve the reporting of accidents and injuries.
The Colliery won various inter-mine safety competitions and, with no lost-time injuries, was placed second in the
De Beers Chairman’s Safety Shield competition. New safety initiatives were implemented during the year and
these are expected to further improve the mine’s safety record.
While the company has traditionally focused on safety in terms of accidents, attention is now increasingly being
paid to worker-related diseases.
A safety and occupational hygiene manager was appointed during the year and an occupational hygiene
programme has started being implemented. An HIV/Aids evaluation survey is being undertaken to help the
company assess the effectiveness of its HIV/Aids-related initiatives, policies and programmes.
The major challenge for the review period, and which continues into 2006, is the new Environmental lmpact
Assessment (EIA) Act. This requires a strategic environmental assessment of all policies and programmes. The
Act is retrospective and an existing activity has one year from the Act’s promulgation to “legalise” itself.
Fortunately, Debswana has undertaken numerous impact assessments in the past, and can draw on this
information in its compliance applications for past projects. New projects will have to comply with the Act’s
rigorous requirements from the outset. All projects are being evaluated to ensure that possible impacts are
identified and management plans put in place.
On the environmental front, Orapa and Letlhakane Mines spent P5.8 million on environmental capital costs –
mainly rehabilitation – and P7.7 million on environmental working costs during the review period. This included
P1.78 million on wildlife conservation and restocking. At Jwaneng Mine, a total of P3.7 million was spent on
environmental capital and working costs.
The South African Bureau of Standards did two surveillance audits on the company’s diamond mines, based on
the new ISO 14001: 2004 standard, and they were recommended for recertification. Significant progress was
also made with the ISO 14001 implementation at Morupule Colliery.
The Jwaneng and Orapa game parks continued to be used as public recreation areas and a source of
environmental education. Jwaneng Mine is finalising a long-term Memorandum of Understanding with the
Cheetah Conservation Botswana group to fully support their efforts both scientifically and educationally.
De Beers group annual review 2005 54
Business development
Debswana re-evaluated its involvement in some projects. The Tourism project is not deemed profitable and has
concluded, while production from the Masedi Farms has increased. Pandamatenga, where Masedi Farms is
located in the north of Botswana, has transformed from an area that supplied 10 – 15% of the national sorghum
grain harvest to one supplying over 90% in the five years that Debswana has been there. Masedi also produces
seed for southern Africa, which is processed for export in Gaborone. A young farmer development scheme and
the introduction of modern, yet affordable, techniques to local subsistence farmers have also been successful.
Corporate responsibility
In 2005, the Debswana Donations Fund continued to support over 30 deserving local non-governmental and
sporting organisations selected from a cross-section of Botswana society. Total funds amounted to P2.8 million
compared to P2.1 million in 2004.
In addition to the funds, some management support was provided to assist in identifying and addressing
community needs. The broad spectrum of organisations that the Fund assists is indicative of Debswana’s
commitment to a meaningful corporate citizenship agenda.
Blackie Marole
Managing director
De Beers group annual review 2005 55
Namdeb
Namdeb production from marine resources
overtook land production for the first time
Inge Zaamwani
Namdeb statistics
Location
Namibia
Established
De Beers group annual review 2005 56
1994
Type
Alluvial and marine
Union membership
Mineworkers Union of Namibia
Safety statistics (LTIFR)
0.18
Fatalities
0
De Beers group annual review 2005 57
Namdeb
continued
1 858 383
1 774 409
1 454 756
1 275 899
1 384 704
01 02 03 04 05
The year under review was filled with many exciting events for both Namdeb and Namibia. Among these was
the inauguration of a second Head of State, President Hifikepunye Pohamba, in March.
We are mindful that if the noble objectives of Namibia’s Vision 2030 are to be achieved, the GDP needs to grow
by 10% per annum, which is an audacious goal indeed. Namdeb must continue to increase production
profitably so that the contribution to the GDP will assist Namibia in achieving sustainable and equitable
economic growth.
Namdeb’s goal for Chapter 1 (2001 – 2005) was to “sustainably double the value of Namdeb by 2005 using
2000 as the base year”. This goal measured the actual and planned cash flow for the 20-year period to 2020.
By the end of our 2005 financial year we had achieved this goal despite the difficulties relating to technical
challenges in Mining Area 1 (MA1), the breakdown of the Seawalker, and ramp-up challenges for the Elizabeth
Bay Liberation Plant. This is indeed a great accomplishment and we all share in this joy.
During 2005, Namdeb and the Mineworkers Union of Namibia (MUN) signed a two-year agreement to increase
employee wages and to improve other substantive conditions of employment. This relationship is considered
an industrial role model in the region and has resulted in a stable and productive employment climate.
Government and De Beers commenced the five-yearly review of the Namdeb Sales Agreement and De Beers
Marine/Namdeb Services Agreement in the last quarter of 2005. The review is in accordance with the current
contract between the government of Namibia and De Beers.
Production levels
De Beers group annual review 2005 58
History was made in the Namibian diamond industry in 2005, when Namdeb production from marine resources
overtook land production for the first time. As a result, De Beers Marine Namibia became the biggest diamond
miner in Namibia, producing a total of 976 890 carats. Supported by sound business management principles, a
performance-driven culture and commitment from management and employees, the company has improved its
production output by 72% from 2001 to 2005.
Left: A view of the floating treatment plant at Namdeb’s Mining Area No 1.
Right: The MV Debmar Atlantic.
Namdeb produced a total of 1.7 million carats for the year under review, which was 7% below budget. The
unfavourable variance in Diamond Area 1 (DA1) was mainly due to poor recoveries and the loss of the floating
treatment plant. This was offset by good recoveries from Atlantic 1 (A1) where additional areas were mined as
well as higher grades recovered. For the first time, production from A1 surpassed that of DA1 and exceeded
budget by 12%.
Orange River Mines contributed 14.5% of total revenue produced by Namdeb and 7.3% of all carats produced.
Orange River Mines are renowned for their good stone size and the quality of the stones they produce.
NamGem had an opportunity to test its new business model in its drive towards profitability and global
competitiveness, and the results were positive. Production increased steadily, reaching an annual output of
24 000 rough carats during 2005. This represents an output increase of 42% from the previous year.
• The life of mine for 3 Plant and Pocket Beaches Site 2 has been extended as a result of an intensive
geological sampling programme that proved potential mining opportunities in the area.
De Beers group annual review 2005 59
• The next two years are regarded as critical for Inshore projects to obtain the requisite systems development,
knowledge and experience so that a detailed study can be performed to investigate the feasibility of inshore
mining.
• The project enters a vital phase in 2006 when the development of the Jet Rig mining system must be
complemented by continued sampling of the Inter Tidal Corridor area.
• The Seawalker platform has completed secondary mining prototype work at the Dredge Pond and will be
used for essential trials in the Ultra Shallow Water area to gain operational competence in this environment.
Namdeb
continued
During November 2005, all Namdeb operations were audited on the NOSA Integrated Safety, Health and
Environmental System. All three operations achieved a Five Star Platinum Grading and were awarded NOSCAR
status. MA1 retained its third consecutive NOSCAR, Orange River Mines its seventh and Elizabeth Bay Mine its
eighth.
Namdeb proactively committed itself to the management of the HIV/Aids pandemic with its holistic Prevention,
Care and Support Programme for Namdeb employees and the Oranjemund community. Mobile voluntary
counselling and testing units visited mining sites and the town. Almost 70% of Namdeb employees knew their
HIV status by the end of December 2005 and 159 people have been registered. The antiretroviral treatment
programme has been successfully implemented with a reduction of more than 50% in the death rate.
Namdeb’s Environmental Management System continued to comply with the ISO 14001:1996 requirements and
great progress has been made in upgrading to the ISO 14001:2004 version. Namdeb retained its certification to
ISO 14001:1996 and will be recommended for certification to ISO 14001:2004, subject to addressing the findings.
Namdeb appointed Enviroscience for a two-year period to compile a comprehensive rehabilitation plan for all
mining licences. In the meantime, Orange River Mines is addressing the rehabilitation of old worked-out mining
areas and considering ways to limit the environmental impact on new areas.
Total environmental expenditure for 2005 is N$8.97 million. This includes working costs, capital projects and
environmental sponsorships.
Business development
During 2005, the Oshipe Development Fund was established to support small and medium enterprises with a
specific emphasis on sustainable income-generating ventures. Oshipe will also look into business ventures in
Oranjemund to make the town less reliant on mining operations.
A joint sponsorship between Namdeb and De Beers Marine Namibia enabled the Eudafano Women’s Cooperative
to set up a factory to extract oil from the marula fruit kernel to be used to manufacture cosmetic products.
De Beers group annual review 2005 60
Corporate responsibility
Company bursaries enabled 51 students in the designated groups to attend universities and eight of them
graduated to take up employment with the company. A further seven bursaries were awarded to new scholars
to start their studies in 2006. The company also invested N$650 000 on a highly successful, self-study
assistance scheme to allow employees to improve their academic qualifications.
Left: Mining Area 1 – The pioneering jet rig has a similar function to the Seawalker, in that it is able to
“wade” out in the shallows and mine the shoreline. Right: Blasting loosens tons of sedimentary
overburden overlying the ancient Orange River bed where the diamonds are found.
The Namdeb Social Fund, which is the leading corporate responsibility fund in the country, contributed some
N$2.5 million to about 30 projects in 2005.
Education and health and welfare were areas of specific focus. The Fund also supported initiatives focused
specifically on small business development, community development and sports education.
Inge Zaamwani
Managing director
De Beers group annual review 2005 61
De Beers Consolidated
Mines
We have moved the company into a position
where it can stand tall among the best in
South Africa
Jonathan Oppenheimer
David Noko
DBCM statistics
Location
South Africa
Established
De Beers group annual review 2005 62
1888
Type
Open-cast, underground, alluvial
and tailings dump retreatment
Union membership
National Union of Mineworkers
Safety statistics (LTIFR)
0.22
Fatalities
1
De Beers group annual review 2005 63
De Beers Consolidated Mines
continued
15 155 637
13 743 234
11 913 683
10 704 967
10 402 281
01 02 03 04 05
Looking back on 2005, the achievements of De Beers Consolidated Mines (DBCM) and its management team
have been significant. The year started with our Strategic Business Plan forecasting that five of our seven mines
would make a loss during the year and the acknowledgement that significant, deep-seated structural
challenges existed within the company. The 2004 review noted that various programmes had been initiated that
would address some of the principal concerns and promised that 2005 would be a year of delivery.
It is important to recognise the enormous commitment that all employees in DBCM showed in “getting their
hands dirty” during this difficult time. Their efforts speak for themselves with record production, best ever safety
performances, and real and meaningful progress on all of the change programmes.
The result has been the transformation of a business in danger of consigning itself to the annals of history, to
one that has a real opportunity to prosper, economically and socially, for both this and the next generation.
Together we have moved the company into a position where it can stand tall among the best in South Africa.
Regrettably, DBCM’s successes were tempered by some difficult decision-making in 2005. In spite of our best
efforts we were unable to mine Kimberley underground mines and Koffiefontein Mine profitably. Continued,
large-scale losses at these mines led to the painful decision to close two of our oldest South African
underground operations. At Kimberley, however, diamond production continues through the processing of
surface dumps (tailings resources). 673 employees have been retrenched due to the closure of Kimberley
underground operations. Mining activities at Koffiefontein Mine ceased late in the year in preparation for closing
or disposing of the mine.
We have developed a process to mitigate the impact of retrenchments on employees. In 2006, over R20 million
will be spent on reskilling retrenched employees in the form of learnerships and other skills development
initiatives. The company is committed to assisting them to develop portable skills to enable them to be employed
in sectors other than mining. In addition, R65 million will be spent on the development of small and medium
enterprises, promoting education, health and other local economic development initiatives in the next five years.
• Business Model Review – this has resulted in leaner structures and the right people in the right positions
focusing on core business.
• Technical Limits – a process of sustainable, continuous business improvement to enhance our efficiencies
and maximise diamond delivery.
• Gain Sharing Scheme – an even-handed reward scheme to incentivise all DBCM employees to achieve an
improvement in the financial performance of their operation or business unit above the current financial
performance target.
• Resource Protection – this quantifies and minimises the loss of diamonds from our operations by improving
security measures, improving intelligence gathering on mines and developing a loss indicator model.
• Diamond Optical Sorting – seeking to enhance recovery efficiencies through optical technology to recover
diamonds that cannot be recovered using traditional methods.
• Strategic Business Planning – the new SBP office provides the DBCM executive with the best possible
strategic business plan to ensure that the right projects are executed at the right time.
Early indications are that in 2006 the ongoing implementation of the Thrive@Five strategy will result in all but
one of our mines making a positive contribution to DBCM. Cullinan Diamond Mine remains the only unprofitable
operation, and management is keenly focused on resolving this situation.
Against the backdrop of a record year in terms of safety in DBCM mines, the death of Clement Mooki in a mud rush
incident at Dutoitspan Mine in Kimberley was a low point in 2005. Our thoughts and prayers go out to his family.
In spite of the challenging operating environment, DBCM outperformed all its previous safety efforts in 2005.
The lost-time injury frequency rate (LTIFR) of 0.22 is a record for the South African operations as this shows a
43% improvement when compared to the LTIFR of 0.38 achieved in 2004.
Two of our mines need to be singled out for their contribution to our safety statistics. Finsch Mine is still the
SA record holder of the most ever recorded fatality-free shifts for an underground mine. The mine was also
De Beers Consolidated Mines
continued
awarded the DME safety flag for its outstanding safety performance. The Oaks Mine has worked 62 months
without a single lost-time injury, and achieved its third consecutive year without a single lost-time injury. This
earned the mine the Chairman’s Safety shield for the third time.
An initiative was launched to standardise the electronic system for environmental management and reporting on
mines to improve data accuracy and reliability. An integrated water strategy is being developed. ISO 14001
certification was retained at all mines, except for Cullinan, which is committed to regaining certification.
Voluntary HIV/Aids counselling and testing facilities were offered to employees throughout the year, with a
concentrated campaign in November and December. The campaign, dubbed “I Know – the way to live”
encouraged all of De Beers’ employees to know their HIV status, and was part of De Beers’ partnership with the
Department of Health’s mass communication around HIV/Aids, TB and STIs. Over 70% of our employees took
the test and are aware of their status.
Our total expenditure with HDSA enterprises amounts to R1.6 billion, i.e. 42.9% of the company’s total
discretionary spend.
Corporate responsibility
De Beers group annual review 2005 66
The De Beers Fund, in collaboration with government, local area development committees and experienced
rural development facilitators, proactively designs development programmes that seek to harness local
capacities and address their aspirations.
In 2005, the Fund invested in over 160 projects at or near our areas of operation, the cumulative value of which
is close to 2% of pre-tax profit. More than 75% of this funding was directly aligned with De Beers’ business
priorities, bringing real and meaningful change to many of the De Beers labour sending areas.
The South Buffels Marine complex process plant uses sea water for much of the recovery process.
In late 2005, the De Beers board approved R1 190 million for the Voorspoed mining project, near Kroonstad in
the Free State, subject to the granting of the required mining licence.
The SASA marine mining project feasibility study has been completed and, at its meeting in February 2006,
the board approved US$115 million for the full implementation of the project. This is an important project for
DBCM and the culmination of 22 years of exploration and investigation into the mining of the deep sea areas
off the Namaqualand coast. The conversion of the Dock Express 20, which will be capable of recovering
250 000 carats per annum, will commence later in 2006 and we expect that the first carats from the SASA
concession will be produced in 2007.
Both offer the prospect of additional, profitable carats, which will sustain DBCM into the future.
In 2006, a new and dynamic cadre of leaders will take DBCM forward. These new leaders have all been through an
incredible learning experience through the challenges that DBCM has overcome and they are the stronger for it.
Following the reorganisation of De Beers’ South African assets, DBCM has emerged as a stand-alone South
African diamond mining company. This led to the announcement in November 2005 that a Memorandum of
Understanding had been signed for the sale of 26% of the equity of DBCM to Ponahalo, a broad-based black
economic empowerment company. The deal, signed on 5 April 2006, gives momentum to the bold strides we
have taken to retain our leadership role in everything we do.
De Beers group annual review 2005 67
The sale of 26% of the equity of De Beers Consolidated Mines (DBCM) to Ponahalo for approximately
R3.7 billion ensures that DBCM transforms in accordance with the Mining Charter. Importantly, the deal
facilitates meaningful empowerment of DBCM employees and pensioners and recognises the value of their
contribution to DBCM.
Ponahalo Capital and De Beers South African-based employees and pensioners now jointly own Ponahalo.
The shareholders in Ponahalo represent the broadest possible cross-section of South African society: men and
women; business leaders and the urban skilled; people with disabilities and the rural poor. They include the
communities around DBCM’s mines and all the people who work or have worked in those mines and elsewhere
for DBCM. Key De Beers employees, and a new generation of historically disadvantaged South African
entrepreneurs, will also form part of this broad-based group.
Ponahalo will utilise R10 million (escalating at 5% per annum) of its dividend income each year, or more than
R100 million in aggregate over the first 10 years, to make other investments in South Africa. It will set aside
R5 million each year, or R50 million in aggregate over the first 10 years, which will flow directly through to trusts
for the benefit of disadvantaged women, people with disabilities and communities around DBCM mines.
De Beers’ empowerment partners will assist in driving transformation throughout DBCM and provide key, value-
adding input into the management and strategic direction of DBCM. Ponahalo’s chairman will be appointed
deputy chairman of DBCM and serve on DBCM’s executive committee. Two other Ponahalo nominees will be
appointed to the DBCM board.
Over the first 10 years, the balance of Ponahalo’s dividend income will be used for debt service. De Beers will
provide meaningful financial facilitation to ensure a robust and sustainable transaction.
De Beers group annual review 2005 68
This historic transaction has been lauded as a model for the future and De Beers is proud to have been a
partner in a deal that ensures diamonds continue to work for South Africa and one that provides avenues for
sustainable community development and true economic empowerment.
Gary Ralfe (left), Nicky Oppenheimer and Manne Dipico at the signing of a Memorandum of
Understanding for the sale of 26% of DBCM to Ponahalo on 8 November 2005.
The structure
Key Employee Trust 15% Equal Allocation Trust 35% Ponahalo Capital 50%
De Beers group annual review 2005 69
De Beers
Consolidated
Mines
(South Africa)
100%
Williamson
The Mwadui resource presents particular
challenges as one of the lowest grade resources
currently being exploited
Tony Guthrie
Tony Devlin
Williamson statistics
Location
Tanzania
Established
De Beers group annual review 2005 70
1940
Type
Open-cast and tailings
dump retreatment
Safety statistics (LTIFR)
0.33
Fatalities
0
De Beers group annual review 2005 71
Williamson
continued
285 778
207 328
190 384
190 634
152 234
01 02 03 04 05
Carats recovered
2001 – 2005
Williamson Diamonds Limited (WDL) is owned 75% by De Beers and 25% by the government of Tanzania, and
is one of the longest standing government/private sector partnerships in the world.
In the 65 years since the first diamond was discovered at Mwadui, nearly 20 million carats have been
recovered. However, the Mwadui resource, despite being the largest mined diamond-bearing kimberlite pipe in
the world, presents particular challenges as one of the lowest grade resources currently being exploited.
In mid-2005 the company was issued a Special Mining Licence, which secured the company’s tenure over an
area of 29.92 square kilometres for a 25-year period.
Production levels
3.4 million tons of material was processed through Williamson, New Alamasi and the Multi Purpose Plant (MPP)
during 2005. This was the second highest level of treatment since the return of the mine to De Beers
management in 1994.
Despite this achievement, diamond recovery decreased 33% to 190 384 carats as a direct result of a fall in
grade, which is largely attributable to the dump and gravel operations. Plant enhancements have been
identified to increase the treatment volume of the higher-grade in-pit material.
De Beers group annual review 2005 72
Improvements to the MPP resulted in improved performance during the last quarter of the year, but consistent
throughput has still not been achieved over an extended period.
Future plans to increase production
The Williamson team has committed itself to the vision of being recognised as the world leader in the mining of
low-grade kimberlites.
In June 2005, the WDL board reviewed a conceptual study that proposed the construction of a new processing
plant at Mwadui, which would quadruple throughput. The aim is to process 16 million tons of material annually
and to increase diamond production to one million carats, a level not previously achieved in the company’s
history.
The board has approved a pre-feasibility study at a cost of US$1.7 million. The results of that study will be
presented to the board in May 2006 when approval for the full feasibility study will be sought. The full feasibility
study will be completed by 30 September 2006. The goal is to have the new processing plant in production by
December 2008.
In the shorter term, Williamson continues to focus on optimising its existing plants.
The possible expansion of production presents an opportunity for Williamson to restore production to the levels
achieved when a higher-grade resource was available. This is an exciting technical target.
A number of issues outside of the immediate technical focus remain unclear and we are liaising with various
government bodies to clarify and resolve land tenure, water extraction, security, taxation and marketing
questions.
• Revision of the Environmental Impact Statement and the Environmental Management Plan and submission to
the relevant government body for approval.
Williamson
continued
Business development
By emphasising local procurement WDL supports more than 150 small- and medium-scale businesses within
the mine lease area and the surrounding towns and villages. In addition, seed capital has been provided for the
establishment of local enterprises in brick making, mushroom growing, furniture making and honey production.
Corporate responsibility
The Williamson Mine in Tanzania is located in an arid and generally low-income region and this is where the
company focuses its corporate responsibility activities.
Water management remains an area of particular attention and in 2005 WDL co-funded a dam at Idede-seke in
cooperation with the government and local villages. A significant donation was also made to the President’s
Drought Relief Fund. Continued funding of the Mwadui hospital, and financial support for a new clinic at
Bukanika, helped ensure the health and wellbeing of employees and the local community. Africa Malaria Day
was marked by the distribution of insecticide-treated mosquito nets to new and expectant mothers.
WDL continues to provide financial support to local schools, in particular for the construction of additional
classrooms. The company runs a popular annual tree-planting competition for schools, which complements its
environmental awareness campaigns. In the year under review, the Mwadui library reopened. It is currently the
only significant library open to the public in the Shinyanga district.
Artisanal diamond mining is an important source of income and employment for many Tanzanians and
significant small-scale activity takes place in the areas surrounding the Williamson lease. Although the company
has no involvement with the artisanal sector, De Beers is currently looking at ways to improve the livelihoods of
these diggers through its involvement in the Diamond Development Initiative (DDI).
The company made presentations on the aims and progress of the DDI to the Tanzanian Ministry of Energy and
Minerals during 2005 and is in ongoing liaison with the Ministry.
In January, Tony Guthrie, managing director of Williamson Mine, joined the Group Mining and Exploration team
in Johannesburg, reporting to Ed Dowling. He was succeeded in Tanzania by Tony Devlin.
Richard Molyneux
Jim Gowans
De Beers group annual review 2005 76
De Beers group annual review 2005 77
De Beers Canada
continued
As De Beers Canada makes the transition from an exploration to a producing company, its vision is
encapsulated in the audacious goal of producing a ton of diamonds by 2009. This will be achieved by bringing
two mines into production by that year. In addition, a third project is currently undergoing an environmental
assessment.
Developments in 2005 saw the Victor project well positioned to begin construction of the mine in 2006. The
three-year-long Federal and three Provincial Class Environmental Assessment processes were successfully
completed and approved in the second half of the year. This, along with the conclusion of an IBA with the
Attawapiskat First Nation, cleared the way for orders to be placed. Additional fuel storage and a lay down area
were created to prepare for mobilisation on the 2006 winter road to the site.
At Gahcho Kué in the Northwest Territories engineering studies were completed, which resulted in approval to
advance the project to the Environmental Assessment (EA) phase. In November, De Beers Canada initiated this
process by filing the necessary permit applications and the application was referred for an EA well ahead of
schedule. Community consultation to support the EA process will continue, along with further evaluation work
and engineering studies.
In February 2005, the Advanced Exploration and Evaluation plan at the Fort à la Corne joint venture in
Saskatchewan was approved and work continued throughout the year. This consisted mainly of core drilling
and micro diamond analyses. Final results of the micro diamond analyses will be ready in 2006 and will assist
in formulating further work programmes. In October De Beers’ joint venture partner, Kensington Resources
Limited, was acquired by Shore Gold and shortly thereafter Shore Gold purchased the voting rights of the other
partner in the joint venture, Cameco Corporation. This gives Shore Gold a majority vote in the joint venture
while De Beers remains the operator of the project. De Beers is challenging the validity of the voting pool.
De Beers group annual review 2005 78
Management will continue to address all aspects of organisational capability and readiness. A significant
component of this will be the recruitment of the right people to bring the Canadian projects into production and
to carry them through operations. Besides recruiting quality employees, retaining them is a high priority. The
company is facing considerable competition for talent from large-scale oil and gas projects in northern Canada,
as well as from the general boom in mineral exploration and mining.
Exploration efforts in Canada are becoming increasingly focused. Broader access to exploration projects will be
maintained though targeted joint ventures with Canadian exploration juniors.
For a number of years, De Beers Canada has been implementing a sophisticated approach to partnerships with
Aboriginal communities, government agencies and exploration juniors. During the course of 2005, five new joint
venture agreements were concluded with Canadian and offshore companies, demonstrating De Beers’ flexible
and innovative approach to exploration partnerships.
Corporate responsibility
De Beers Canada has developed a policy and a set of guiding principles that determine how we direct our
social investment. Our focus is on benefiting the local Aboriginal and other communities within which we
operate, to improve the quality of community life as well as to contribute to capacity-building and skills transfer.
Literacy is one area where we believe our investment can have an exponential and long-lasting positive impact.
Our Books in Homes programme is one of a number of initiatives through which we support literacy and
De Beers group annual review 2005 79
encourage Aboriginal students in remote northern communities to stay in school. Over the past three years
De Beers has run the Books in Homes programme in the Northwest Territories and, by 2005, the company had
spent C$180 000 to provide 10 680 books to Aboriginal schoolchildren. Importantly, this programme provides
an opportunity for De Beers to connect directly with the students and our employees deliver the books
personally, spending time in the classrooms reading to the students and inspiring them to continue their
education. De Beers’ Books in Homes programme is being expanded in 2006 to include a number of Aboriginal
communities in Northern Ontario.
De Beers Canada
continued
De Beers recognises the concerns around climate change. Although our projects are instituting the best
available technology for energy efficiency and minimising greenhouse gas emissions, the company will
continue to strive for further enhancements.
Along with the multi-layered and multi-jurisdictional government structures, De Beers will continue to work with
Aboriginal groups across the country and assure these groups of the company’s support.
An ongoing challenge for resource development in Canada remains the complex and onerous regulatory
regime. The company will continue to work with industry and government to seek ways to streamline these
regulatory processes.
Gareth Penny
Varda Shine
De Beers group annual review 2005 82
De Beers group annual review 2005 83
Diamond Trading Company
continued
Marketing, genuine returns on investment in improved or efficient distribution downstream, and the ability to
offer consumers unique and enticing product propositions have put our sightholders in a strong position to
invest in sustainable development enterprises in these countries.
The DTC is unique, not just within the diamond industry, but across all metal, mineral and gemstone industries.
No other selling and marketing organisation can match its expertise and track record in creating demand and
realising value for producers.
As part of this, the DTC creates new marketing ideas and advertising programmes to drive consumer demand
for diamond jewellery. In tandem with our efforts to drive consumer demand, we run extensive programmes
designed to support consumer confidence in the integrity of diamonds, nature’s most valued gifts.
Our new Strategy and Business Development business unit has taken on the crucial role of enhancing our
vision of creating long-term, sustainable value for our partners.
In March 2005, the DTC announced the launch of its Value Added Services (VAS) programme to DTC
sightholders. These services are designed to directly support our sightholders as they evolve their businesses
to compete in the 21st century diamond and luxury goods industries. Benefits to sightholders include a more
stable planning environment in which to manage their business, access to key market insight and expertise,
and opportunities to harness the power of global marketing campaigns.
The DTC believes the VAS package is one of the mechanisms that can assist our sightholders in the most
fundamental of business objectives: future profitability in an ever-changing and more competitive market.
De Beers group annual review 2005 84
Consistent assortments
Our sightholders have continued to provide positive feedback on the consistency and accuracy of assortments.
Throughout 2005, we continued to concentrate on maintaining and improving our efficiencies and sorting
standards. We also consolidated the process of extending the sorting operations currently carried out in
producer countries and began work on the construction of the new DTC Botswana building in Gaborone.
Sorting rough diamonds at the DTC in London.
One of the DTC’s core offerings as a business is to provide accurate and consistent diamond assortments to its
sightholders, and therefore the process of moving aggregation to Botswana must be seamless. This process
will be carried out by the DTC UK.
The DTC Diamond Academy, tasked with developing and maintaining diamond skill levels, established training
facilities in South Africa and Namibia in 2005 and will open an Academy at Botswana Diamond Valuing
Company (BDVC) in Gaborone in March 2006. The DTC UK will also provide global monitoring of rough
diamond sorting to ensure that the highest standards are maintained in all centres.
The DTC’s Research and Development division also continued to develop increasingly sophisticated rough
diamond sorting technology. The state-of-the-art technology gives a strong competitive advantage to the DTC
and its producer partners as it provides cost-effective and enhanced levels of sorting consistency to enable true
global sorting standards to be achieved.
Supplier of Choice
De Beers group annual review 2005 85
In June 2005, we finalised applications for the 2005 – 2007 sightholder contract period under our sales and
marketing strategy, Supplier of Choice. All existing sightholder groups were awarded supply contracts for the
new contract period, which began in July, and 10 new DTC sightholders were selected in accordance with the
DTC’s objective assessment criteria. This brings the total number of DTC sightholder groups to 93.
Demand for rough diamonds in the cutting centres was fair and sales in 2005 reached US$6 539 million,
15% higher than in 2004. During the year, the DTC raised its rough diamond prices on two occasions, the
cumulative effect of which was that sales in 2005 were at prices on average 9.5% higher than in 2004.
Diamond Trading Company
continued
We continued to invest heavily in diamond marketing, with teams in 15 major markets working to encourage
consumer demand for diamonds and diamond jewellery. Preliminary indications are that for 2005, global
diamond jewellery retail sales value grew by approximately 6% in US Dollar terms.
These activities are supported by vital services from our Research and Development facility, which has
developed technology to detect synthetics and simulants. Such technology may ultimately help to maintain
consumer confidence in diamond purchases and increase the demand for services of DTC sightholders and their
downstream partners. In turn, this should also maximise the potential commercial benefits of our unique product.
The past year was one of achievements – record sales of rough diamonds, the launch of VAS, the
De Beers group annual review 2005 86
announcement of a new client list and major changes to the international structure of the DTC. The company
is well positioned for the future.
• DTC managing director, Gareth Penny, became managing director of the De Beers group in February 2006.
• Varda Shine, formerly executive director of sales at the DTC, was appointed DTC managing director.
• Des Cavanagh moved from his role as executive director of purchasing to take up the position of executive
director of sales at the DTC.
• David Lamb took on the role of executive director of marketing at the DTC, following extensive earlier
involvement in diamond marketing campaigns through his work at J Walter Thompson.
• Tekolo (TeeKay) Modungwa joined the DTC as executive director of human resources.
• Jon Savage was appointed as executive director of the newly created business unit, DTC Strategy and
Business Development.
De Beers group annual review 2005 87
Production statistics
Tons treated Diamonds recovered Grade
(metric tons – 000) (carats) (carats/100 metric tons)
2005 2004 2005 2004 2005 2004
Botswana
Damtshaa 1 289 1 322 302 677 338 909 23.5 25.6
Jwaneng 10 007 8 755 15 599 427 13 682 502 155.9 156.3
Letlhakane 3 458 3 402 1 097 231 1 033 162 31.7 30.4
Orapa 16 500 16 888 14 890 436 16 070 076 90.2 95.2
Namibia
Diamond Area No 1 26 371 31 221 797 518 992 872 3.0 3.2
Contractors1 – – 976 891 865 511 0.2 0.2
South Africa
Cullinan 4 608 4 458 1 304 653 1 304 416 28.3 29.3
Finsch 5 937 5 773 2 215 643 2 108 481 37.3 36.5
Kimberley 9 671 9 070 1 896 893 2 050 907 19.6 22.6
Koffiefontein 1 817 1 966 123 505 113 481 6.8 5.8
Namaqualand 6 452 6 385 1 014 132 909 706 15.7 14.2
The Oaks 250 290 85 766 68 943 34.4 23.8
Venetia 5 933 5 871 8 515 045 7 187 300 143.5 122.4
Tanzania
Williamson 3 394 3 415 190 384 285 778 5.6 8.4
Grand total 95 685 98 816 49 010 201 47 012 045 50.2 46.7
Recovered Grade represented as carats recovered per m2 and not carats recovered per hundred tons.
1
Grade (carats per hundred tons) not meaningful as a result of the mixture between land operations (tonnage treated) and marine
2
The BPP include business ethics, social and environmental requirements. They require a range of policies and
practices to be in place and that they are implemented and monitored. The principles are linked to best practice
external codes and standards. The BPP will be rolled out across the De Beers family this year. Further refinement
will be undertaken based on feedback received. The Assurance Programme will be further developed and
implemented in selected operations and sustainability reporting will be piloted in line with best practice.
While the principles cover a wide range of requirements, core BPP compliance is essential. Everyone subject to
these principles must ensure from the outset, and at all times, that they:
• do not use child labour;
• do not trade in conflict diamonds;
De Beers group annual review 2005 90
The Kimberley Process is considered an extremely good example of an effective cross-sectoral cooperative
partnership in action. The private sector was instrumental in eliciting change which could not have been
achieved solely by governments and the donor community. De Beers was one of the front runners in bringing
about the Kimberley Process, galvanising the international diamond industry and, in tandem with NGOs,
pressed governments to agree to its implementation. The Kimberley Process Certification Scheme (KPCS)
came into effect on 1 January 2003 and required all participating governments – more than 40, plus those
represented by the European Commission – to enact new diamond laws and regulations. Under the KPCS, all
international rough diamond shipments must be accompanied by a forgery-proof certificate issued by the
government of the exporting country. The certificate includes a detailed description of the diamonds, and
signifies that they are conflict-free. Certification is backed by a system of new internal controls in each country,
including those that produce diamonds as well as those that trade, cut and polish diamonds.
De Beers, through its work with the World Diamond Council, was also instrumental in extending the
commitment to prevent conflict diamonds beyond the trading of rough diamonds through a voluntary system of
warranties. This is a voluntary agreement to trade only with companies that provide a warranty declaration on
their invoices that the diamond is conflict-free. This is also why both the Kimberley Process and the Voluntary
System of Warranties is one of the cornerstones of the Diamond Best Practice Principles. De Beers provides
ongoing support for the Kimberley Process and the Voluntary System of Warranties due to the potential for
renewed conflict in some African countries.
www.kimberleyprocess.com
relation to the alluvial diamond-mining sector. Its intention is to encourage and develop cooperation between
governments, NGOs and business, on a policy level. The focus of the DDI will be the creation of a partnership
framework that will allow interested parties to pool their resources, experience and knowledge as well as
optimise the synergies from the various initiatives that are being developed in this field.
The mission statement of the DDI states that its purpose is “To gather all interested parties into a process that
will address, in a comprehensive way, the political, social and economic challenges facing the artisanal diamond
mining sector in order to optimise the beneficial development impact of artisanal diamond mining to miners and
their communities within the countries in which the diamonds are mined”.
Photo by Andrew Harrington, UK
Left: Karate lessons in progress at Kleinzee. Right: African wild dog in the Venetia Limpopo Nature
Reserve.
The examples of the Kimberley Process and the DDI highlight the possibility of constructive engagement on
development issues through partnerships at an international level. There are other ways in which the private sector
can and does play a role in development projects. For example, De Beers has worked with the government of
Sierra Leone in post-conflict reconstruction. In a country where diamond revenues are the key to its growth
potential, De Beers has transferred knowledge and expertise to the Government Diamond office in Freetown to
assist in the rebuilding of the country. De Beers is also a member of the Peace Diamond Alliance in Sierra Leone.
www.ddiglobal.org
Participants have decided to focus on: governance and transparency; climate for business; trade; enterprise
and employment; human development; and perceptions of Africa.
www.businessactionforafrica.org
De Beers group annual review 2005 93
www.eitransparency.org
Corporate responsibility
continued
www.weforum.org
www.responsiblejewellery.com
The Global Compact asks participants to communicate with their stakeholders on an annual basis about
progress in implementing the Global Compact principles through their annual financial reports, sustainability
reports, other prominent public reports and through their websites.
We have described our work in the area of the principles as follows: human rights through the Kimberley
Process, the Diamond Development Initiative and the development of our Principles and Community Policy;
labour standards through our BPPs and through our prevention and treatment programmes for HIV/Aids;
environmental protection through our Environment Policy and ISO 14001 certifications; and anti-corruption
through our BPPs as well as our active participation in the EITI and PACI.
De Beers group annual review 2005 94
http://www.unglobalcompact.org
The Kimberley Field Band is sponsored by the De Beers Fund.
Yet, facilitating access to testing at our operations is not enough; there needs to be an ongoing and concerted
effort to educate and empower employees to make this important decision. The Global Business Coalition
(GBC) acknowledged this effort at its annual Business Excellence Awards in Washington DC where De Beers
was given the award for its VCT programme. Encouragingly, the high numbers of testing achieved at some of
our mines in 2004 was directly reflected in the increased uptake in the treatment programme early in 2005.
While the VCT programmes are adapted for each environment, there are a number of generic critical success
factors:
• All stakeholders need to be well briefed and prepared.
• Management at all levels must lead rather than instruct the programme.
• Labour union support and involvement must be encouraged, where this is relevant.
• Strong peer educators must be empowered and supported to communicate the reasons for being tested.
• There should be easy accessibility to VCT facilities and services.
De Beers group annual review 2005 95
The focus on VCT continued into 2005, and was cemented towards the end of the year when Jonathan
Oppenheimer pledged to encourage all employees in South Africa to be tested. This public commitment was in
support of the South African government’s HIV/Aids campaign, Khomanani. By the end of the year, 80% of the
permanent and contracted workforce had presented for free HIV testing and, where possible, this was extended
to families and community members too.
Innovative work in the fight against HIV/Aids
continued
Debswana is considering innovative ways of building the VCT programme into business processes and
ensuring that those testing positive are linked into the treatment programme.
Namdeb has demonstrated its commitment to the management of HIV/Aids through an Integrated Prevention,
Care and Support Programme. At the end of 2005, 70% of all Namdeb and De Beers Marine Namibia
employees knew their status through participation in VCT campaigns.
A rigorous study into the impact of the treatment programme, both on the company and on the beneficiaries,
was commissioned at the end of the year. This project will reflect on the assumptions made in the past, include
company-specific data, which has been collected over the last two and a half years of treatment, and anticipate
some of the challenges going forward.
The company will now focus its efforts in the workplace on ensuring that the correct management information
systems are in place to properly measure and evaluate the services that have been implemented. We need to
move beyond just providing antiretrovirals to implementing innovative ways of monitoring compliance and
supporting adherence. The importance of stretching our thinking to anticipate the consequences of our actions
cannot be underestimated.
Thanks to continuous registration efforts in Botswana, there are now over 600 participants on the Debswana
treatment programme for employees and spouses.
In Namibia, over 130 employees are registered on Namdeb’s comprehensive treatment programme and the
company is beginning to note a decrease in absenteeism as a result.
Namdeb is an active participant in the Namibian Business Coalition on Aids and is forging working relationships
with external stakeholders such as the Namibian Ministries of Health and Social Services, Mines and Energy,
and Education.
In South Africa, the De Beers Fund supported 22 HIV/Aids-related projects in 2005 alone, to the value of
R3.5 million, accounting for 14% of the company’s total social investment budget for the year.
Photo by Chris Greenberg, Getty Images for the Global Business Coalition
Jonathan Oppenheimer (right) with Ambassador Richard Holbrooke and Angelina Jolie at the Global
Business Coalition on HIV/Aids Annual Awards for Business Excellence Gala in Washington DC.
Jonathan accepted an award for the company’s workplace response to HIV/Aids counselling and
testing.
De Beers has committed R10 million per year, over the next three years, to implement effective programmes to
address the challenges of HIV and Aids. The focus will be mainly on the communities around the company’s South
African operations. Partnerships with non-governmental organisations and community-based organisations will form
the basis for collaborative research, development and delivery of these programmes.
De Beers is also working with international agencies to extend the reach of credible organisations that run
effective projects, and to strengthen the infrastructure in communities so that they may cope with the impacts of
the disease.
http://www.jhsph.edu
Another partnership with the US-based charity, Jewelers for Children, has contributed additional donor
funding for the implementation of an innovative model of childcare. This means that the Isibindi project, already
piloted in Galeshewe in the Northern Cape Province of South Africa through funding from the De Beers Fund,
can now be extended to a further five sites in the area. Implemented by the National Association of Child Care
Workers in partnership with the local Department of Social Development, Isibindi has been recognised by the
UN as a best practice model of childcare for those made vulnerable or orphaned by HIV and Aids.
De Beers group annual review 2005 97
Environment
De Beers employs a range of environmental
specialists working in a suite of ecosystems,
often in areas where novel solutions to
rehabilitation issues are required
In 2005, the De Beers group focused on a collaborative and strategic approach to enhance environmental
performance across all areas of operation and the groundwork was laid to achieve this. A disappointment was
the loss of ISO 14001 certification at Cullinan Diamond Mine due to various non-conformances.
Processes
Integration
Biodiversity Water
De Beers group annual review 2005 98
Aspects
Energy and
emissions Social
Electronic
reporting system Communication
De Beers group annual review 2005 99
Environment
continued
The annual De Beers Group Environmental Conference provides a platform for internal networking and knowledge
exchange. In 2005, there was excellent participation by environmental personnel from around the group – South
Africa, Namibia, Botswana, Tanzania, Canada, India, Australia and Brazil – and by delegates from many other
disciplines, management and the DBsa board. The Group Mining and Exploration director presented the strategies
of the De Beers group and highlighted that sound environmental management is core to these strategies.
Twenty presentations were given and 27 posters were on display over the two-day conference. Presentations
ranged from group environmental strategy, the cost of closure and rehabilitation legacies, to closure planning
and technical issues such as water and energy. Poster topics were equally broad: assessment and
management of the impacts of marine mining, rehabilitation techniques from Namaqualand to Canada,
conservation of cheetahs in Botswana and of brown hyenas in Namibia, water licensing and global warming.
Other events were also arranged to enhance collaboration. Group Exploration held the first global two-day
SHE review with representatives from around the world. The annual Canadian SHE workshop, involving
projects, exploration and corporate divisions, was another such event. At Jwaneng, a SHE Village of Learning
was held for employees to showcase SHE initiatives, share information and obtain feedback.
On World Environmental Day Williamson Diamond Mine was again recognised for its participation in the
Presidential Award for Leadership and Excellence for Environmental Management. All mines throughout
Tanzania compete for this recognition.
As a result there has been renewed focus on the EMSs across the group to ensure that they meet ISO 14001
requirements. There have been group-wide discussions, evaluations of existing systems and sharing of the
De Beers group annual review 2005 100
lessons learnt. All certified operations are ensuring compliance with the 2004 version of the ISO 14001 standard
and all operations that were audited during the year against this revised standard were successful.
Two new entities received ISO 14001 certification during the year, namely the Diamond Trading Company and
Australia Exploration. De Beers Marine, Venetia and Canada Exploration were recertified for their third triennial
certification periods and De Beers Marine Namibia, Finsch and Brazil Exploration were recertified for their
second certification periods. The group objective for ISO 14001 EMSs is to have these implemented for
Williamson, Supply Chain and Group Exploration in Africa. We have made progress at all of these operations
and will complete the implementation of EMSs at all group mines and key operations.
ISO 14001 Environmental Management System certification table
Grey-green indicates the first three-year certification period. Grey indicates the second recertified period and
turquoise the third recertified period. White indicates a discontinuation of certification.
Conservation of biodiversity
One of the group environmental strategic initiatives is to contribute to the conservation of biodiversity and
ensure the sustainable utilisation of biological resources. Currently, De Beers addresses biodiversity issues in a
number of ways; from the inclusion of biodiversity evaluations in Environmental Impact Assessments (EIAs), to
the incorporation of actions into Environmental Management Plans (EMPs) for exploration activities, project
planning and mining operations. In addition, conservation areas are set aside and actively managed. This,
together with the company’s proud record in wildlife conservation and its contributions to associated scientific
knowledge through research support and facilitation, provides a solid foundation on which to develop an
appropriate formal approach to biodiversity conservation.
We have started to develop and implement a strategic framework for biodiversity good practice and integrate
biodiversity into existing EMSs and business processes. This framework and its attendant guidelines will be
consistent with international best practice, having due regard for the Good Practice Guidance for Biodiversity
De Beers group annual review 2005 101
and Mining being developed by the International Council on Mining and Metals.
A key environmental challenge is to restore our surface disturbances that result from mining – both the
landscape and biodiversity. By the end of 2005, mining activities had disturbed 41 600 hectares or 4.4% of the
942 000 hectares of mining licence areas in which we operate. Our exploration activities have disturbed
47 hectares (0.02%) of the 222 000 hectares of exploration licence areas across the world. In the marine
environment, our mining licences cover 608 000 square kilometres and mining activities to date have directly
disturbed 31 square kilometres with an estimated further 53 square kilometres disturbed by marine tailings
discharged from the vessels (in total this is 0.1%).
Environment
continued
Overburden dumps and excavations make up the vast majority of our mining land footprint (72%) and these
occur almost exclusively at the West Coast operations in Namibia (Namdeb coastal strip operations) and South
Africa (Namaqualand Mines). Fine residue deposits also form a significant component (12%) of the mining
footprint. The EMPs for each of the mines and exploration areas include restoration plans for the various forms
of land disturbance.
Work started on a review of the global prospecting licence portfolio to identify potential overlaps with IUCN-
categorised protected areas. Our mining operations are situated in a variety of biomes across southern Africa,
some areas of which were pristine prior to mining, while others were partially degraded through grazing and as
a consequence of other land use practices, including the effects of livestock overgrazing in brittle, semi-arid
environments.
The Succulent Karoo ecosystem, which is one of the 25 biodiversity hotspots in the world, is the location for
both Namaqualand Mines and Namdeb operations. We are therefore involved in SKEP (Succulent Karoo
Ecosystem Planning), an international programme aimed at promoting conservation and sustainable land-use
in this hotspot. During 2005, Namaqualand Mines became involved with the Namaqualand Restoration Initiative
(NRI) to establish a rehabilitation strategy for the mining area that will result in an acceptable rehabilitation end
De Beers group annual review 2005 102
status. Namaqualand Mines also participates in the Millennium Seed Bank project. This global conservation
programme, run by Royal Botanic Gardens, Kew, aims to collect and conserve the world’s seed-bearing flora,
principally from the drylands, and carry out research on seed conservation.
At Namaqualand, mariculture and tourism remain the focus for parallel and post-mining land use. Investigations
were conducted to increase the facilities for the small-scale oyster venture in 2006. The Namaqualand shipwreck
4 x 4 trail still rates as one of the most popular trails on the West Coast with increasing numbers of visitors. At
Namdeb future land uses include mariculture, tourism, the Kudu gas field operations and any activities that will
be associated with the development of the Sperrgebiet National Park.
Wildlife conservation, research and education
A pack of African wild dogs (Lycaon pictus) is being managed at Venetia Limpopo Nature Reserve as part of a
South African metapopulation of this endangered carnivore. The company’s Dronfield Farm was converted from
a cattle operation to a wildlife reserve. The breeding programme for rare and endangered species at Dronfield
and the company’s Rooipoort Nature Reserve progressed satisfactorily with the addition of roan antelope, sable
antelope, disease-free buffalo and white rhino calves.
Scientific aerial census techniques have been employed for over two decades to monitor animal population
densities and to inform wildlife management decision-making processes on the DBCM conservation areas. In
2005, all sightings of animals were georeferenced to establish trends in habitat use.
Avifaunal research was a priority at Benfontein research centre as a result of cooperation with the Percy Fitzpatrick
Institute of the University of Cape Town and Birdlife South Africa. In conjunction with the National Zoological
Gardens of Pretoria, a project is being supported whereby the hybridisation between black and blue wildebeest in
South Africa is being investigated with a view to developing a national poicy and strategy to ensure the genetic
integrity of both these species. This is seen as highly appropriate in view of the contribution made by De Beers to
the saving from extinction of the black wildebeest in South Africa in the late 1800s.
In Namibia, several monitoring programmes were initiated in 2005, including game and bird counts along the
coast and Orange River, and invader plant monitoring along the Orange River. Namdeb continued to sponsor
and support brown hyena research within the Namdeb licence areas.
A successful environmental education programme was conducted from Rooipoort Nature Reserve, where
selected classes of learners from eight schools in the Kimberley community were treated to activities and
programmes aimed at creating an awareness of, and appreciation for, the natural environment, and
encouraging environmental programmes in their own communities.
Environmental baseline work needs to be ensured and EIAs are included both at the earliest stages of new
projects and where gaps exist at current operations. Some examples are:
De Beers group annual review 2005 103
• A State of the Environment report and a detailed closure plan for Koffiefontein Mine are being finalised. The
closure plan will be implemented to address the outstanding liabilities.
• An environmental and social scan was completed for the Orapa Advanced Exploration project, highlighting
the critical issue of water use and the impacts thereof.
• At Victor, a long-term regional hydrogeological and ecological monitoring programme is being developed
and there is ongoing research into revegetation options and a native plant propagation study by Laurentian
University students. Baseline monitoring is also being conducted, particularly caribou radio-collaring and
population studies, and whitefish spawning studies in Nayshkootayaow River.
Environment
continued
• For Kimberley and Namaqualand Mines, surveys and assessments were completed to contribute to the
development of Heritage Resources Management Plans.
• At Venetia Mine, an independent analysis of ecological data collected to determine the impact of water
abstraction on the Limpopo riverine forest has commenced and follow-up work on this is being done.
• Social impact assessments were conducted for Finsch, and for marine mining in South Africa.
• At De Beers Marine, an assessment of the potential impacts on marine mammals of acoustic surveys off the
west coast of New Zealand was completed. This work was presented at the 2005 New Zealand Minerals
Conference in November.
• At De Beers Marine Namibia, a number of environmental dives were conducted using the submersible, Jago,
to explore the distribution of rock-lobster habitat. As part of understanding the environmental impacts of the
marine dredging project, four Fisheries Independent Monitoring surveys were completed, demonstrating the
locations of rock-lobster areas. Modelling work on the effects of sediment discharges was also completed
and an aerial kelp bed survey partially completed.
• At Namdeb, trials continue on techniques to revegetate the arid environment and test methods for
rehabilitation of vehicle tracks in sensitive areas.
Stakeholder engagement
Stakeholder engagement continues to play an important role. Specific programmes during the year included:
• De Beers Marine Namibia initiated a comprehensive stakeholder engagement process, involving various
NGOs, universities, government and other parties to communicate on the environmental work being done to
address marine impacts and evaluate stakeholder relationships. One aspect was a highly successful
Scientific Workshop attended by 16 scientists from Namibia, South Africa and Angola to review current
impact research or monitoring done, and to make recommendations for the future.
• At Williamson Mine, the ongoing environmental training and awareness programmes continued with
neighbouring communities.
• The Snap Lake Working Group – comprising licensing and government agencies, Aboriginal communities
and the project group – was established and meets monthly.
De Beers group annual review 2005 104
230
1 520
210
1 420
169
1 338
146
1 299
129
01 02 03 04 05 01 02 03 04 05
The major source of carbon emissions is the indirect emissions from electricity purchased – 1.3 million tons of
CO2 during the year. Direct emissions from hydrocarbons (mainly diesel) consumed during the year amounted
to 0.6 million tons of CO2. Minimal emissions arise from incinerators and landfill sites. In total, the CO2 emissions
from the De Beers group amount to 1.97 tons during the year.
1.35
1.34
1.25
0.63
0.58
0.47
03 04 05
Carbon emissions
(millions of tons CO2)
Water
Water is a key resource for mining, much of which takes place in water-scarce areas. A water management
De Beers group annual review 2005 105
framework is being developed and includes elements on conservation and demand management, best practice
guidelines, performance management, communication and awareness.
Excluding sea water, we used 81.3 million cubic metres of water for our mining operations during the year, up
from 78.5 million cubic metres last year. This was made up of 30% potable water (including naturally occurring
potable water), 50% non-potable water and 20% recycled water. In addition, mines on the west coast of
southern Africa and vessels off that coast use sea water for their operations. The vessels also have desalination
plants onboard to purify sea water for domestic use.
Environment
continued
Material use
During 2005, our operations used 5.6 million litres of hydraulic fluids and oils and 333 tons of grease. This is less
than in 2004, despite the increase in carat production. Hazardous substances used in various operations across
the group include hydrofluoric acid, bromoform, hydrochloric acid, nitric acid, sulphuric acid and trichloroethylene.
These are managed in keeping with the degree of risk and procedures are in place for the storage, handling,
transport, usage and disposal thereof. Of the 1.5 million litres of hazardous chemicals used during the year,
81% of this volume was hydrochloric acid used at Venetia Mine to neutralise the pH of discharges.
6.20
5.60
4.40
4.70
02 03 04 05
2.9
2.1
1.8
De Beers group annual review 2005 106
0.6
0.7
0.4
0.5
02 03 04 05
1 161
743
435
308
270
48
70
56
0
A1 Atlantic 1
ARV Antiretroviral
BAA Business Action for Africa
BDVC Botswana Diamond Valuing Company
BEE Black Economic Empowerment
BPP Diamond Best Practice Principles
CBO Community-based Organisation
CMSL Central Management Services Limited
CRJP Council for Responsible Jewellery Practices
CSI Corporate Social Investment
EBITDA Earnings before Interest, Tax, Depreciation, Amortisation
EV Enterprise Value
DA1 Diamond Area 1
DBCM De Beers Consolidated Mines
DBGS De Beers Group Services
DBI De Beers Investments
DBM De Beers Marine
DBMN De Beers Marine Namibia
DBsa De Beers Société Anonyme
DDI Diamond Development Initiative
DME Department of Minerals and Energy
DTC Diamond Trading Company
DVM Diamond Value Management
EA Environmental Assessment
EIA Environmental Impact Assessment
EITI Extractive Industries Transparency Initiative
EMS Environmental Management System
EMP Environmental Management Plan
EU European Union
GBC Global Business Coalition
HDSA Historically Disadvantaged South Africans
IBA Impact Benefit Agreement
IUCN World Conservation Union
KPCS Kimberley Process Certification Scheme
LTIFR Lost-time Injury Frequency Rate
MD Managing Director
MPP Multi Purpose Plant
NGO Non-governmental Organisation
PACI Partnering Against Corruption Initiative
De Beers Group annual review 2005 108
General enquiries
Should you wish to make any enquiries in connection with the activities of De Beers, please contact either of the following offices of Public and
Corporate Affairs in Johannesburg or London:
Private Bag X01, Southdale, Johannesburg 2135 17 Charterhouse Street, London, ECIN 6RA
Tel: +27 (0) 11 374 7000 Tel: +44 (0) 20 7404 4444
Fax: +27 (0) 11 374 7700 Fax: +44 (0) 20 7831 0663
E-mail
General information: info@debeersgroup.com
Websites
De Beers group: www.debeersgroup.com
Debswana Diamond Company: www.debswana.com
Namdeb Diamond Corporation: www.namdeb.com
De Beers Canada: www.debeerscanada.com
The Diamond Trading Company’s Diamond Information Centre: www.forevermark.com Printed by Ince (Pty) Ltd