Angola Mining Report Q3 2008

Angola intends to prioritise a geological survey of its entire territory, according to comments from the deputy minister of Geology and Mining, Mankenda Ambroise at the end of July 2008. Clearly, a national geological survey will increase knowledge as to the likely extent of the mineral wealth the country holds, which can only be a positive for the sector.

Ambroise also stressed that any future development of a domestic polished diamond industry would be structured so as to benefit all Angolans, with any resultant profits used to combat poverty in the south- west African nation.

Angola was historically a major producer of diamonds, iron ore, gold and copper before its independence.

However, the ensuing civil war that disrupted its infrastructure resulted in significantly slowing the pace of exploitation of its considerable metals and minerals base. After the end of the 27-year-long conflict, the Angolan mining industry, along with the economy, is treading towards rapid growth. Angola is globally the fifth-largest producer of diamonds by value and supplies 7-9% of the world diamond output. The country hosts intensive diamond reserves, principally in the provinces of Lunda Norte and Lunda Sul.

Since 2002, the significant interest shown by foreign companies in exploiting Angolan mineral reserves has given the much needed boost to the nation's mining industry. To bolster the attractiveness of the diamond industry in Angola, the first diamond polishing factory - The Angola Polishing Diamond - was set up in 2005 as a joint venture (JV) between state-owned diamond company Endiama and Israeli diamond magnate, Lev Leviev. However, there are a number of issues and challenges facing the Angolan mining industry. Both illegal mining and illegal immigration dampen prospects for growth. The smuggling of diamonds has cost the country several million dollars in lost revenues. To put a stop to this practice, the government plans to establish an export certification scheme to identify legitimate diamond production. Poor infrastructure also acts as an impediment to the full development of the sector, as does the risk of renewed political instability.

In the latter regard, Angola is to hold parliamentary elections on September 5 2008, the first national poll since the 1992 presidential election, which acted as a precursor to the resumption of civil war (see Political Environment section for more information).

The Ministry of Geology and Mines is the apex government body responsible for all mining-related matters in Angola, including the granting of relevant prospecting and mining licences. The Mining Law of 1992 is the primary legislation that governs the country's mining industry. The law envisages a freely competitive mining sector with minimum state intervention and reduced dominance of state-owned firms.

To extend its role in cracking down on illegal mining, the government of Angola plans to form a commission that will define and limit the areas for artisanal exploration, register and licence small mining groups, and repatriate illegal foreigners.

Industry Forecast Angola been registering rapid economic expansion since its independence. However, it needs to a find a solution to problems of poor infrastructure, single-entry visas and heavy registration costs that act as constraining factors. Having said that, the opportunities in the Angolan diamond mining industry point to its latent potential. Angola's mining industry is forecast by BMI to log an average growth of almost 24.2% during 2008-2012, to cross US$12bn in value terms by 2012.