Diversification of Angola’s mining industry reduces dependence on diamonds

18 April 2011

Luanda, Angola, 18 April – The diversification of Angola’s mining industry, which has moved into mining metals and phosphates, is increasing the sector’s production levels and reducing dependence on diamonds, according to the latest Angola Mining Report.

“To minimise the impact of future price fluctuations Angola is moving ahead with measures to diversify its mining base beyond its primary dependence on diamonds,” said the second quarter report published by Business Monitor International.

Some new projects are linked to copper, which is the case of the de-activated Mavoio mine, others to iron and manganese and, in Lubango, Ferrangol plans to open a mine with private partners.

Iron ore is due to be mined at Chipindo over the next two years, whilst in the south of Huila gold reserves were recently discovered.

The start of production of several projects since 2010 is expected to be seen in a rise in production in 2011.

According to BMI, average production growth between 2011 and 2015 is expected to be around 6.8 percent per year.

At the end of that period the Angolan mining sector is expected to be worth some US$7.5 billion.

Diamonds will continue to be the main product, but Angola, “has great potential for base metals and gold.”

The downturn in the diamond market in 2009, which led to a drop in production to US$1.18 billion, brought to light Angola’s dependence on the industry, despite the availability of other minerals.

This year, BMI said, the mining sector is expected to see “string growth” and the four new projects recently approved by the government will have an impact on the country’s production.

As well as this, “relatively low operating costs, together with the current relative political stability in Angola, continue to attract foreign operators to the market, often as an alternative to neighbouring countries,” it said.

An example of this is South Africa’s Trans Hex Mining, which launched pilot production at its mine in Luana in 2010, and which is expected t achieve production of 31,000 carats of diamonds by the end of this year, whilst it is reducing its operations in South Africa.

The sector is still awaiting a mining code, which would implement stricter regulations on how producers can distribute the revenue generated by projects in the country.

An official from Angola’s diamond company, Endiama, cited by BMI said that the new law was expected to require producers to use 50 percent of their revenues to cover operating costs and the other 50 percent for taxes as well as development projects for the local community.

The law currently only requires that companies pay tax on profits to Endiama, the state concession holder, of 35 percent.

The new code may also make it obligatory to carry out government approved environmental impact studies.

Angola is currently the world’s 5th largest diamond producer by value, accounting for 7 to 9 percent of global production.

The main reserves are in the province of Lunda Norte and Lunda Sul and most of the diamonds are found in alluvial deposits.

Endiama has said it believes that there are still large rock diamond deposits across the country. (macauhub)