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Reaping the rewards of faith and commitment

CEO of Koidu Holdings

As soon as you enter Koidu Holdings’ operations you can sense a slight change in the atmosphere. Whilst employment remains one of the principal challenges facing President Kabbah’s government, in the Kono District, an area of Sierra Leone renowned for its rich mineral resources, people are working with a steady focus, characteristic of the company. As the only diamond mine currently in production in Sierra Leone, Koidu Holdings is one of the country’s most important foreign investors. The company is planning for the long-term, and is fully focused on performance.

Jan Joubert, the CEO of Koidu Holdings explains, “We have established a culture focused on the need to perform on a daily basis. Every day we monitor our performance against a plan and a set of short-term objectives. Staff and management are very hungry for a post-war success story in Sierra Leone. They put a lot of effort into their work, and that makes it easier to be successful.”

By January 2004, following a 10-month program to reestablish the plant and infrastructure at the mine, Koidu Holdings’ treatment plant was commissioned and the company began production. With the build-up program for the K1 pipe at Koidu hitting record levels in July 2005, results are beginning to show. In that month alone, Koidu Holdings produced 10,500 carats of gem quality diamonds and 2,600 carats of industrial quality diamonds.

Alhaji Deen (INTERVIEW), Minister of Mineral Resources, welcomes the news saying, “Koidu Holdings is reaping the rewards of the management and its shareholder’s foresight and their faith in the government’s vision and the country’s stability. Kimberlite diamonds represented only 11 percent of official exports in 2004 and the prospects for setting up more mines are good. Sierra Leone has diamond deposits with an average run-of-mine carat value that competes well with other diamond producing countries.”

Government officials are especially happy because 40 percent of the company’s profits go to the government in the form of corporation tax, surface rent, and royalties. It is this record of performance delivery, of creating profit for shareholders and the Government of Sierra Leone alike that has given rise to a relationship based on mutual understanding and support.

Plans are being made to double the company’s investment with a new mine

Jan Joubert elaborates, “A vital element of our success to date is due to the support we receive from all government officers in the Ministry of Mineral Resources, the Ministry of Finance, and the Ministry of Labor. We do everything in accordance with the relevant regulations, and the Ministries appreciate this. They are also eager for us to succeed, which is why they support us. Without this support we would not be where we are today.”

Koidu Holdings was one of the first foreign investors to return to the country after the war was declared officially over in January 2002. By June of that year, the team was laying the groundwork for the establishment of a mine to exploit the famous Koidu Kimberlite pipes, and preparing what would eventually amount to a US$26 million investment. This was not blind faith, but a judgment based on an intimate knowledge of the country.

The controlling shareholder, the Beny Steinmetz Group Resources Limited (BSGR) together with the minority shareholder Energem Resources Inc, a natural resources company listed on the Toronto Stock Exchange, have been committed to Africa for many years. Recognizing that the Koidu Kimberlite Project was able to offer unique opportunities, they formed Koidu Holdings S.A. It is the combined operational expertise, technical, and financial capacities of the shareholders that form the final ingredient in Koidu’s success. For instance, BSGR was able to draw on one of its affiliates, Bateman Engineering B.V., to provide the processing and recovery plant for the mine. Bateman Engineering B.V. is a leading, AIM-listed engineering company, and one of the leading solutions providers to the diamond industry in Africa and the Russian Federation.

However, the rewards for the foresight and faith they had in the government’s vision and in the country’s stability are just beginning. With its winder and head frame only commissioned in October 2005, the step up in production won’t see the Koidu mine hit full production volume until the beginning of 2006. There are also plans in place to double the company’s investment by developing another mine after it recently beat out competition from ten other international companies to win the concession for Sierra Leone’s Tongo Fields.
Commenting on the tender process, Vice President Solomon Berewa states, “Koidu Holdings’ commitment to a rapid evaluation of the Tongo Diamond Field, the experience of their staff in appropriate mining methods and technology, and the work the company has already done in bringing the Koidu pipes into production was considered in the evaluation of the bids. We reached a unanimous decision. The best company won—on its merits, and only on its merits.”

Production got under way early in January 2004, following a 10-month program to reestablish the plant and its infrastructure.

As the only operational diamond mine in Sierra Leone, Koidu Holdings could demonstrate what no one else could—practical evidence of operational ability. And whilst there is often criticism about “weak governance” and “corrupt regimes”, the transparent way in which this tender process was conducted inspires confidence and is encouraging for foreign investors. And, of course, it also means that Sierra Leone will optimize the benefits for its own people.
Mr. Joubert adds, “If we look at the historical and geological information, we see that there are very good indications with respect to the grade and size distribution of the diamonds that could be found in Tongo. From a technical point of view, we believe we have the capacity to prove whether it is feasible or not within a reasonably short time.”

Tongo could just be the beginning. BSGR also has interests in the minerals and metals sectors. Using the success of its Koidu operations as a springboard, BSGR is now looking at additional investment opportunities in the country and the West African region, motivated in part by the relationships formed with the government and people of Sierra Leone. Indeed, creating a consensus with the local people also formed a major part in the success of their bid. Although the government owns Sierra Leone’s mineral resources, the local Paramount Chiefs own the land. Knowing this, the company became the first to go to the people of Tongo and seek their consent. They explained what they had achieved in Kono and what they would like to achieve in Tongo if given the opportunity.

This consensual approach had already come into play in Koidu when, in February 2004, some NGOs and civil society groups expressed concern about environmental damage caused by the mining operations. Peace Diamond Alliance convened a meeting of its executives whose attendees included representatives of the Ministry of Mineral Resources, parliamentarians, Chiefs, and the personnel of Koidu Holdings, who sought to resolve the issues and concerns raised. Subsequently, in order to keep all stakeholders happy, Koidu Holdings stepped up its relocation program for local residents and made the decision to switch to a vertical rather than a conventional open pit. President Kabbah went to Kono a few days after the meeting, calling it “a job well done” and urging the people of Kono to cooperate with Koidu Holdings.

Today, walking the streets of Koidu, the evidence of years of civil unrest is plain to see. Koidu was a rebel stronghold for years and the burnt out interiors of buildings are visible through the missing windows and roofs; however, there is a renewed sense of optimism. Immediately after the war it was a ghost town, but the bustle of people and trade is returning. Newly painted buildings with reconstructed roofs are springing up amidst the devastation.

There is no doubt that this renaissance is due in large part to Koidu Holdings. The company employs around 400 Sierra Leoneans of whom 80 percent are from the local community. With an average wage of US$350 a month, Koidu Holdings is the highest salary payer in Sierra Leone by a noticeable margin. Assuming, as is often the case, that each worker is supporting ten people, then its operations impact almost 4,000 people directly. Indirectly, the business opportunities generated by its presence mean that the mine is benefiting thousands more. Needless to say, it is difficult to find anyone who is critical of the company.

If Koidu Holdings can bring the Tongo Fields project on line it will be great news for the country. With his fierce commitment to the country, its people and the shareholders, Jan Joubert is determined to make it a reality.

“There is no doubt that Africa is the future in terms of resources and, having worked in many African countries, my passion is Sierra Leone. We are not an NGO, we are here to make money, but we are also committed to the country. There is a lot of potential here, it is only a question of studying the opportunities well and then committing yourself to making things work.”

“I’ve been here since 1995, I saw it in 2002, and now, almost four years after the war, it seems like a different world. People have hope and are more positive. Obviously, there is still a lot to be done in Sierra Leone in terms of development and education, and in terms of industry and investment to create jobs, but due to my understanding of Sierra Leone and its people, I feel a moral obligation to make sure that Koidu Holdings delivers.”

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