Diamonds help Angola to offset drop in oil prices

15 December 2014

The ongoing recovery of the diamond industry in Angola and plans to strengthen its effect on the economy should help offset the decline in oil prices, which are the country’s main source of revenue.

Figures from Angola’s Finance Ministry showed that revenues from diamonds, including taxes and royalties, reached US$6.5 billion between January and September, in line with last year’s total, and with a whole quarter to go before the end of the year.

Angola, which in January 2015 took on the presidency of the Kimberley Process, shows signs of wanting to streamline the diamond industry, particularly in the area of ​​cutting and other downstream processes, a move applauded by the Economist Intelligence Unit (EIU).

“Value added activities in the diamond sector can have a positive impact on employment and economic diversification,” said the EIU in one of the most recent reports on Angola, while noting that these initiatives are just being launched.

Angola recently resumed diamond cutting and polishing, at a unit in Luanda and is planning to build a second unit in Lobito, Benguela province.

For Angola’s national diamond company, Endiama, the main aim is to create a new industry for cutting precious stones and locally designed jewellery production, involving Angolan designers and artists.

Work by the authorities also includes official registration of the informal mining sector through operating licenses and miners cooperatives, particularly in Bié province.

Recent oil price drops on international markets has caused concern in Angola, as the country largely depends on this raw material for its exports and foreign exchange earnings, both areas that recovery of the diamond sector is expected to offset.

Angola is among the world’s five largest diamond producers by value and among the ten largest by quantity.

The sale of diamonds mined in Angola increased 18 percent in the first half of the year, at an average price of US$155 per carat, and diamond production reached 4.26 million carats, or an increase of 4 percent over the same period of last year according to Endiama.

A total of seven projects, notably Catoca, Cuango and Chitotolo, contributed to increased diamond production.

The United Arab Emirates, Hong Kong and Israel were the main destinations of the diamonds mined in Angola.

Prospecting work is also contributing to the sector’s dynamism, in particular the Lulo deposits that in the next two years may become the largest mine in the country, overtaking the Catoca mine.

Last June, a report from Canaccord Genuity Group Inc. said that even at an early stage, the prospecting work was “hugely encouraging” and that the Lucapa Diamond Co., an Australian company that is the largest shareholder of the Lulo concession, noted the high value of the precious stones found there.

According to the company, the average value of the stones found at Lulo is US$6,533, while Catoca, the fourth largest kimberlite mine in the world, it is around US$100.

The Lulo deposit is located just 150 kilometres and is about four times larger than Catoca, which in 2012 provided revenues of close to US$600 million. (macauhub/AO)