Our value addition

Our Value Added Statement reflects the wealth created through the sale of our uranium oxide, payments for services and suppliers, taxes to the Government and investments made in the community in which we operate.

Due to our significant demand for goods and services within the Namibian economy, we give rise to a significant 'multiplier effect', where spending by one company creates income for and further spending by others. This leads to a long chain of value adding throughout the economy.

Enhancing our strength to secure our long-term future, we boldly continued on the investment path we embarked upon in 2009. Although we produced 512 tonnes less uranium oxide than the previous year, better uranium market prices compensated for the lower volumes, resulting in a 16 per cent increase in our turnover – from N$3.2 billion in 2009 to N$3.6 billion in 2010.

"Wesbank Transport has been a service supplier to Rössing for the past 11 years in various logistical areas. We also manage the on-line procurement system on behalf of the mine at our warehouse in Johannesburg to assist with their vendor management. In 2010, we received the Supplier Recognition Award in recognition of excellence in the category of HSE. It remains a huge privilege to be associated with a world leading mining company like Rössing Uranium Limited, within the Rio Tinto Group, and we will continue to endeavour to always add value and to strive for excellence by assuring we keep up with the standards set, and to conform to Rössing's requirements and expectations." Fritz Lambrechts, MD of Wesbank Transport, Walvis Bay

 

However, materials and services purchased from our suppliers increased by nearly N$800 million, of which N$247 million was utilised as capital expenditure. Furthermore, a large amount had to be invested in waste stripping – an activity which put a major strain on us in the short term, but which was a necessity for our future.

Rössing continued to demonstrate its value to Namibia through contribution to the fiscal authorities. We paid nearly N$214 million in royalties tax to the Receiver of Revenue, whereas pay-as-you-earn taxes amounted to nearly N$145 million.

We are also a major consumer of utility services, of which state-owned enterprises (SOEs) represent an important group of suppliers. In 2010, we spent nearly N$125 million on electricity purchased from NamPower, N$35 million on rail transport, N$25 million on water, and N$8 million on tele-communications (Telecom and MTC), representing a total payment of N$193 million to SOEs.

"Rössing Uranium remains a critical and reliable partner of NamPort. Their ongoing commitment to providing quality infrastructure, use of local suppliers, support for tertiary learning and overall development of Namibia is an inspiration to all companies operating in Namibia. For us, Rössing remains a significant player in the mining industry in the country, and we are committed to a long term, mutually rewarding relationship." Bisey /Uirab, CEO of Namibia Ports Authority (NamPort), Walvis Bay

 

Employment creation continues to increase as we expand our operations, as indicated by the rise in employment costs. Since 2007, when we embarked upon our Life of Mine expansion programme, our employment costs have more than doubled from N$310 million, and increased from N$535 million in 2009 to N$627 million in 2010. While our expansion has created more employment opportunities in the region, it is also an area of concern, since it increases our salary bill, thus impacting on our cost competitiveness.

"Rössing contracted my business, Uibasen Services, for cleaning services at the mine for a three year period. I really appreciate that Rössing gave me, as a small local SME, the opportunity to provide this service to them. I will do my utmost not to disappoint them and to give them the best service possible. I also like their strict safety standards and the communication between us and the mine's management is excellent. They kick-started my business and have really put me in a position where I can grow it with confidence." Victoria Emma Naoxas, owner of /Uibasen Cleaning Services, Arandis

 

Procurement

In 2010, we spent a total of N$2.4 billion on purchasing goods and services to run our operations. Many of these purchases were for items that are not locally available, such as sulphuric acid, manganese and iron oxide. Thus, we have to balance our need to buy goods and services from the best suppliers worldwide, with maximising our contribution to the local economy.

As in the previous year, most of the procurement expenditure was on Namibian-registered suppliers, amounting to N$1.6 billion, accounting for 67 per cent of our total procurement expenditure. N$475 million was spent with South African suppliers – 19 per cent of our procurement expenditure – and N$336 million with international suppliers.

An increasing number of suppliers are local businesses in the Erongo Region, where N$936 million was spent, representing almost 60 per cent of Namibian expenditure. A total amount of N$658 million was spent in the Khomas Region.

The year under review was the year of supplier relationships – the strategy for Rio Tinto Procurement (RTP) was to strengthen our relations with suppliers. To underscore this, we visited suppliers during the year, and the RTP team was accompanied by our Chief Financial Officer. The objective was to understand the suppliers' value chain, where we as a customer fall within their chain, and how we can strategically work with them to ensure better flow of service. This supplier-customer engagement as a strategic partnership is becoming increasingly important.

The management of supplier relations was put to the test when the mining team ceased to mine at the bottom of the open pit due to an unsafe rock face. The RTP team had to engage our contract mining service provider with the utmost good faith in order to ensure continued service and reassurance of contractual commitments.

We foresee that operational challenges will demand continued focus on supplier relations management in the coming years.

Local development and SME growth remained a focus for us, but with a different approach taken in 2010. In order to foster this facet of our outreach activities to economically empower our region, we concluded a consulting contract with the Polytechnic of Namibia to assist in the development and outsourcing of selected SMEs within and outside our supply chain.

The objective is to have these SMEs grow and become independent and competitive players in the Erongo market. We are one of the major consumers of goods and services in the Namibian economy, and thus give rise to a significant 'multiplier effect' where our spending generates income and triggers further spending by others, which leads to a long chain of value adding throughout the economy.

Through this initiative, we will be able to identify the opportunities and threats within our business communities, enabling us to further support the sustainable growth and development of local enterprises where necessary.

It will also provide us with a uniform approach to better understand the needs of upcoming entrepreneurs and how to address these needs, thereby providing sustainable development. We consider our partnership with the Polytechnic to be one of longevity and significance within the Erongo Region.

With regard to secure supply and risk management, we have really locked into the Global Rio Tinto Procurement supply network. Close contact and interaction with the Global Heavy Mining Equipment contract management team enables us to negotiate global contracts with large mining equipment houses. Furthermore, we receive support in the management of sulphuric acid from a global perspective. This allows for a wider strategic perspective, and enables us to tap into the global network of Rio Tinto.

In 2011, we will concentrate more on supplier innovation and technical support, especially in terms of processing chemicals and mining techniques. We will be commissioning the automated Flocculent Plant during the first quarter of 2011 and foresee similar developments occurring with the Caustic Lye Plant.

This will establish some of the procurement efficiencies and effectiveness that we envisage for our company. We will encourage and influence our suppliers to be "green focused" in managing their businesses, thus allowing us to measure our green credits.

"The innovative initiative that Rössing and the Centre for Entrepreneurial Development of the Polytechnic of Namibia have embarked upon to train and build capacity of SMEs on the mine's supply chain, has started to yield positive results. The SMEs involved in this project are already applying the different learnt concepts to their day-to-day operations to enhance effectiveness and efficiency. What Rössing has embarked on will go a long way in creating sustainable businesses that will contribute significantly to the socio-economic development in the Erongo Region, and Namibia at large." Margaret Bennett, Director, Centre for Entrepreneurial Development: Polytechnic of Namibia, Windhoek

 

Employment and skills development

The economic and social well-being of the people of the Erongo Region, and the Namibian economy at large, continue to be a key priority for us. Our commitment to our key asset, our employees, is evident in the above-inflation increase of 8 per cent of basic salaries for employees.

Thus, total payments benefiting employees in 2010 amounted to N$627 million, up from N$535 million in 2009. Given that the majority of employees are residents of the surrounding towns of Arandis, Swakopmund and Walvis Bay, it is anticipated that most of these incomes were spent in the domestic economy, thus stimulating economic activity not only in the Erongo Region, but elsewhere in the country as well.

In addition, we invested heavily in skills development of our people and retained our position as the second largest employer in the mining sector, accounting for about 25 per cent of the sector's total permanent workforce. Supplementing the permanent employee numbers were 1,800 contractors who were on site every day during 2010, bringing total employment to 3,392.

Having moved from potential closure a few years back to extending our mining activities into 2023 and possibly beyond, our focus is to enhancing our strengths, to ensure that we continue to be a relevant and valuable contributor to the Namibian economy.