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Analysts: Angola's Diamond Production is Poised for Growth, Investment

Oct 24, 2013 1:21 PM   By Jeff Miller
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RAPAPORT... Data intelligence consultant Sínese and investment services firm  Eaglestone believe that Angola’s diamond industry is poised for growth following the enactment of  more investor-friendly mining laws and relatively untapped reserves of high-quality diamonds. Angola's annual production was fairly flat in 2010 through 2012 at about 8.3 million carats, down from a peak of 9.7 million carats in 2007.

Eaglestone stated that mining codes since 2011 now encourage more foreign investment in Angola following changes that included granting of mining and marketing rights through the same instrument, coupled with changes that should make it possible for private sector investors to take a majority stake in mining operations – a right that was previously reserved for just ENDIAMA.

Manuel Reis of Eaglestone said,  “The  Angolan  diamond  industry  is  in  the  midst  of  a  major  restructuring as a result  of  both  external   changes   and   internal   forces. The Angolan government has made a major effort in simplifying the law relating to mining and is also committed to using the country’s oil wealth to diversify the economy and improve infrastructure.  Mining and diamond production should be important beneficiaries of that process as the upgrading of the country’s road and power infrastructure will improve the mining sector’s productivity.”

Sínese cited  signs of an expansion boom at the Lucapa Diamond Company (formerly Lonrho Mining), which has increased  exploration activity at the Lulo concession. De Beers is attempting to establish the economic viability of 22 of 117 kimberlites and diamond production has either begun or will shortly at the alluvial diamond mines of Tchegi, Calonda, Maua, Uári and Cambange.
Luis Chambel of Sinese, said,  “The Angolan government has set very ambitious forecasts for the expansion of diamond production and while current output looks some way off the levels needed to achieve that target, the increased level of activity that we have observed is encouraging. Some foreign investors entering the Angolan market in the past have been disappointed by the lack of quick results so reforms to the Angolan mining laws were an important step.  However, the industry still has a long way to go to reach its maximum potential so dealing with the basic infrastructure problems and an underdeveloped skills base need to stay high on the government’s agenda.”

Sínese and Eaglestone noted that Angola offers significant alluvial diamond deposits, including in riverbeds, which have traditionally been understudied by major mining companies because of the difficulties associated with evaluating and exploiting the reserves.  But new technology reduces the risk in finding and evaluating these deposits, which can often yield a higher proportion of high grade and high value diamonds than kimberlites, according to the firms.

Chambel added,  “We expect the prices of top-quality diamonds to outperform those of lesser grade stones.  That means the successful exploitation of Angola’s alluvial reserves would be particularly rewarding."

Reis concluded, “With a major role in the international diamond industry, Angola is now entering its second century as a diamond producer.  This moment is also one of tectonic reshaping, both of the international diamond industry – from mining through to the diamond jewelry markets – and in the structure and organization of the Angolan sector.”

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Tags: Angola, diamond, investments, Jeff Miller, mining, Production
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