On the right path ? – recent developments in the Angolan diamond industry

The last couple of months witnessed a string of interesting news coming from Angola.

The Lulo project (perhaps currently the hottest diamond exploration property in Angola) gained international attention as a result of a recent presentation in New York and well planed media actions. The project is located in the heartland of Angolan diamonds, in the catchment of the mythic Cuango river. The area was poorly studied in the past (with hundreds of kimberlites known in the region, impossible for DIAMANG to study them all in the early seventies, a question of more tides than sailors – mais marés que marinheiros, I do like Portuguese proverbs). Recent exploration activity by the Australian Lucapa Diamond Company (formerly Lonrho Mining) discovered new kimberlites and found several large diamonds (no, not the usual press release macrodiamonds, but some really big 100+ ct diamonds) in their concession. We are still years away from an eventual mine, though. This is a good opportunity but risk and uncertainty are still high; Lucapa Diamond Company will have to keep working hard (both in the field and obtaining funds).

The reorganisation and reopening of the cutting facility in Luanda has been announced. The initial partnership turned sour (10 MUSD initial investment, with plans for 20 MUSD per month production, 600 jobs creation), with the foreign partner being blamed of poor management by the Angolan Government. The opening of a high volume diamond cutting facility is a risky and demanding endeavour in a country with no previous experience in this activity. According to the Mining and Geology Minister, Mr. Francisco Queiróz, SODIAM, the state-owned diamond trading company, is working to restart this project.

Recent news announced the start of production in the Maua alluvial project in September. The project is located in Mundundo (in the left basin of the Cuango River, 85 km from Marimba, Malange province) and owned by Sociedade Mineira do Maua, with Israeli capital in association with the state-owned ENDIAMA and a group of local private companies, SOCIM, SOMOA and Cuango Internacional.

26 MUSD is the investment in the project, which seems adequate for an alluvial production project in Angola of industrial scale (100 jobs, local and expatriates). The investment value and stated dimension add credibility to the project; this seems not to be the recurring illusion of  some garimpeiros convinced that they will fund production investment with the proceedings of exploration (pagar com o pelo do cão, a Portuguese expression). METCO (misspelled in the original news) is supporting the initial stage of the work. The downside is that the project, already due to begin last year, will be starting in September, the end of the dry season, a fact that may have a major impact in their initial profitability (heavy rains will take a toll on the project’s productivity and income, in a critical stage). I have analysed some projects in the general area in the past and should all go as planned I would expect a deposit with good grades, with smaller, high quality diamonds coming from this new source.

Meanwhile, the Angolan diamond production topped 651 MUSD in this year’s first half. The value is divided between the formal production (468.4 MUSD and 3.759 Mct) and the artisanal (garimpo) activity, representing 466.6 thousand ct and 183.29 M USD. Angola now posts regular news regarding its production levels. This is very important for the international investor, as it signals a new, more transparent approach.

There are also other interesting exploration projects looking for a place under the sun, frequently being led by Angolan companies (SOMIPA, SOMILESTE as examples). This is especially true in alluvial deposits, kimberlites still being the turf of international technically sophisticated, well capitalised companies.

All these seem to be good news, at least good ideas or good intentions. Will they materialize? Is the Angolan diamond industry on the right path? I believe so. New projects have been launched and seem to have reasonable prospects, despite the inevitable delays and incorrigible Angolan optimism. The new Mining Code is a step in the good direction and it has had a positive impact in the industry activity. A National Geology Plan is also underway to further the knowledge about Angolan geology; the results of this plan will not be immediate but will have a major impact in the future. Despite the bumps on the road, all in all, Mr Francisco Queiróz should be given credit for the promising good news, in part the result of the new policies being pursued by his ministry.

Luís Chambel

luischambel@sinese.pt