Chinese demand helping Angolan diamond industry

24 May 2010

Luanda, Angola, 24 May – The Angolan diamond industry has revived in recent months following the 2009 international crisis, due to demand from emerging markets and particularly China, which is now the biggest buyer of Angolan precious stones.

The diamond company Espirito Santo Commerce (Escom) has indicated that “the tendency for long term demand continues to present good prospects of success” for Angola.

“Demand will be driven by the eventual recovery of the United States and by growth boosted by China and India,” indicate forecasts recently released by the company.

The forecasts indicate that China’s market share will double and that demand from India should grow 10 percent by 2015, whereby those export markets “will help turn a new page”.

Escom is participating in the Luo project in partnership with the Russian diamond company Alrosa, while Escom Kimberlites holds group interests in 14 concessions (eight kimberlite and six alluvial) awarded by the Angolan state.

China last year became the top buyer of Angolan diamond production, overtaking the United States.

The increase in diamond sales to China is largely due to their use in barter transactions (diamonds in exchange for goods) or for amortising Angola’s debt, indicates the Africa Monitor newsletter.

Endiama figures show that the United States was the main destination of Angolan diamonds from 2006 to 2008, with the price per karat varying between US$87 and 154.

At the end of last year the mining sector counted 45 projects prospecting for primary diamond deposits, occupying an area of 107,000 square km. The Catoca mine in Lunda Sul province is the world’s fourth biggest and annually extracts an average of about US$500 million in diamonds. In 2009, however, that figure was just over US$430 million due to the crisis.

In the international diamond market the crisis led to an unprecedented drop in precious stone prices and caused production to halt in many Angolan diamond projects.

“Available financing for sector transactions became scarce, causing an inevitable exit of companies from the market. The reduced demand for raw diamonds from traditional clients and the consequently lower price led many production units around the world to suspend operations or close,” Escom indicates.

Prices on the Angolan informal market, the company asserts, fell from 65 to 70 percent for stones above 5 karats and from 50 to 55 percent for smaller stones.

“In Angola a major drop has been noted in prices offered for raw diamonds, which is beginning to affect the viability and continuity of some projects,” it adds.

One of those projects, Sociedade Mineira do Lucapa (SML), announced last week that it will resume operations in the next few days after a ten-month suspension.

Five countries currently account for more than 80 percent of the value of global production, with Botswana producing 28 percent, Russia 20 percent and Angola about 10 percent. (macauhub)