De Beers was confident of finding a gem deposit in Angola that would allow it to more than recoup the $250 million (R2.2 billion) it had spent on exploration, the diamond giant said on Friday.
The company, owned by Anglo American, had found diamonds in a 3 000km² concession near Lucapa in the Lunda North province, De Beers Angola business manager Pedro Lago de Carvalho said last week. The site was the only remaining concession out of five De Beers had explored in the country since 2005, he said.
De Beers pulled out of Angola in 2001 after losing the right to sell more than $800m of gems. It went through three arbitration rounds with Endiama, the state diamond company, before returning in 2005. Angola, which had the fifth-largest gem output by value in 2011, lay behind only Russia and Canada in unexplored potential, Lago de Carvalho said.
“We are confident we can find something that will allow us to recover all our investment,” he said. “The contract is clear, there is no debate.”
The results of the evaluation studies of three ore bodies known as kimberlites at Mulepe, about 800km east of Luanda, were due in about two months, and would be followed by meetings with Endiama on how to proceed, Lago de Carvalho said.
Diamond producers have struggled to find new, large deposits to replace aging assets. Production at many of the biggest operations is falling as supplies of more accessible gems near the surface are depleted.
Typically only 1 percent of kimberlite pipes hold gems.
A reserve’s economic viability would have to be determined and a mining contract would still need to be negotiated, Lago de Carvalho said.
“We don’t have a deposit per se, it’s still in the exploration phase,” he said. “There is no formal time line.”
The country was a “high priority” for De Beers, which had allocated a $30m annual prospecting budget that was unlikely to diminish soon, he said.
Angola, Africa’s biggest oil producer after Nigeria, sold 8.33 million carats valued at $1.16bn in 2011, according to the Kimberley Process, a global treaty with 54 participants representing 80 countries to prevent the sale of gems mined in war zones. The top producers by value that year were Botswana, Russia, Canada and South Africa.
De Beers has a 49 percent share in the Mulepe concession, with Endiama holding the rest, according to an exploration deal signed before a new mining law was enacted in late 2011.
The legislation lowered the minimum stake the government must have in future projects to 10 percent and reduced taxes to 25 percent from 35 percent.
Mines Minister Francisco Queiróz, who was appointed following elections in August and who drafted the new code, said in November that Sodiam, the state-run gem seller, would hand its market-regulating duties to a new, independent body. Queiróz is also promoting diversification into gold and iron ore mining.
While this fitted into Anglo American’s options to pursue other minerals, the company had not yet decided whether to do so, Lago de Carvalho said.
Anglo American shares rose 1.58 percent to close at R269 on the JSE on Friday. – Bloomberg