Angola Mining Report Q2 2008

At the beginning of February, state-owned Endiama said it expected to produce more than 10mn carats of diamonds in 2008, a 3.1% increase on the 9.7mn carats achieved in 2007. Tiago Dias, head of strategic planning and investments at the company, said that most production would come from the key diamond mining provinces of Lunda Norte and Lunda Sul, although exploration was also progressing in other parts of the country. Angola is reported to have explored only 40% of its total potential diamond-producing area.

Apart from diamonds, Angola was a major producer of 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 the path 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 province of Lunda Norte and Lunda Sul of Angola.

Since 2002, the significant interest shown by foreign companies in exploiting Angolan mineral reserves has given a 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 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 the 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.

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. According to BMI's newly released Angola Mining Industry Report Q208, Angola's mining industry is forecast to log an average growth of almost 24.2% during 2008-2012, to cross US$12bn in value terms by 2012.