Angola Mining Report Q2 2010

New Mining Code Expected In 2010
Media reports during the latter part of 2009 stated that Angola looks set to adopt a new Mining Code in 2010, according to minister of geology and mining Mankenda Ambroise. This new code is expected to refresh existing mining regulation dating from 1992, which Ambroise has claimed is ‘inappropriate’ to the current situation within the country. Efforts to draft a new mining law have been ongoing since 2006. BMI will monitor the situation on the ground and report on developments as they occur. As of February 2010, no new announcements had been made by the Angolan government on this key issue,
Diversifying
Angola’s Mining Base Reports in early 2010 indicate that Angola is pressing ahead with moves to diversify its mining base away from a primary reliance on diamonds. The Macauhub website reported that copper mining was set to resume in the Mavoio region later in the year, potentially around the site of the former Mavoio mine, which operated between 1936 and 1961. In addition, Reuters reported that the government is hoping to make a decision on the partnership structure for a planned new US$6bn iron ore and manganese project before year-end. Ferrangol is hoping to launch the mine at Lubango in partnership with a private company, according to media reports.
New Data
For 2010, BMI has made significant changes to the way in which we forecast mining data. As well as using local statistics agencies and associations, we now also draw on the expertise of the UN’s Industrial Commodity Statistics Database, the US Geological Survey and the World Bureau of Metal Statistics for our historical export and production data. We then forecast this data using our own proprietary econometric model. Human intervention also plays a necessary and desirable role in our mining forecasting; experience, expertise and knowledge of industry trends and developments ensuring that we can spot likely future changes and anomalous data that a purely mechanical model would not.
Country Overview
Angola was historically a major producer of diamonds, iron ore, gold and copper before independence. However, the ensuing civil war disrupted its infrastructure, significantly slowing the pace of exploitation of its metals and minerals base. Following the end of the 27-year conflict in 2002, the Angolan mining industry, along with the economy, has grown rapidly. Angola is globally the fifth largest producer of diamonds by value, supplying 7-9% of world diamond output. The country hosts large diamond reserves, principally in the provinces of Lunda Norte and Lunda Sul.
The majority of Angola’s diamonds comes from alluvial deposits. However, state-owned mining company Endiama is confident that there could be large-scale deposits in shafts of volcanic rock throughout the country. However, mining in kimberlite is both expensive and technically difficult, meaning that Endiama has had to partner with global companies, such as South Africa’s De Beers and BHP Billiton, which have the necessary expertise. De Beers has invested in a kimberlite concession in northern Angola, while Russia’s ALROSA also has a partnership with Endiama.
Companies that wish to explore for diamonds in Angola have to do so in partnership with state-owned mining firm Endiama, as is stated in Angolan law. Moreover, their ownership in any diamond mine is limited to 40%. According to the latest reports, the company has around 100 mines throughout the country that are ready for exploration. Indeed, some market watchers claim that less than 50% of Angola’s diamond potential is currently being realised. For example, of the 61 concessions currently operating in the country, only around 14 are thought to be producing diamonds. The country is also taking steps to develop its iron ore mining industry, with news in November 2009 that Empresa Nacional de Ferro (Ferrangol) would be restarting mining for iron ore in the Cassinga region, dependent on receiving financial support from the government for the scheme. Lastly, Angola is also host to some 5bn tons of lignite coal, which could be exploited on a commercial basis in the future. Industry Forecast
The Angolan diamond sector had to contend with a challenging operating environment during 2009, with sales and production levels both down sharply. However, with cautious optimism that the worst of the global economic downturn is now passed, we believe the scene is set for the Angolan mining sector to show steady growth over our newly-extended forecast period to 2014.
In addition, industry experts still believe there is strong prospective potential for base metals and gold in the country. Indeed, Angola is set to resume iron ore mining in the Chipindo region in the next two years. Meanwhile, there are reports of gold reserves being discovered in southern Huíla province and indications that copper mining may soon be resumed in the Mavoio region. BMI has considered all of these factors and predicts the mining sector to reach a value of US$6.35bn by 2014.