Angola’s diamond industry is on the mend, following a battering brought about by the global economic downturn.
Like other diamond producing nations, Angola which is endowed with both extensive alluvial diamond deposits and hundreds of kimberlite formations, suffered greatly when the global financial recession wreaked havoc on demand and prices of gems, forcing it to take a nose-dive.
Before the onset of the crisis, Angola had relayed a positive message to the globe saying that it wanted to be among the world’s three leading diamond producers by 2010.
The country’s state-owned diamond mining company, Endiama, had set a target of 10-million carats for 2008 up from 9, 7-million carats realised in 2007.
Angola, without a crystal ball to ‘predict’ the future, was indeed optimistic of a growth in the local diamond industry as several projects (poised to boost output) had been lined up.
In that year (2008), Angola had 167 diamond projects that were in concession areas.
It also had 15 functioning prospecting projects, as well as 20 production projects, of which 14 were operational. Unconfirmed reports also claimed that the kimberlite pipe of the Catoca diamond-mining project contained 190-million carats of diamonds, and this was expected to contribute greatly to the projected increase in output, while on the other hand Trans Hex was bullish about its Facauma joint venture with Endiama and the local Fucauma Association.
Then, Trans Hex had also begun a feasibility study into its third-owned Luana prospect, which was said to have a 10-million-carat orebody.
This was indeed a picture of a country that had its diamond industry moving northwards, despite glitches experienced here and there, especially in the regulation of the industry, as operations of artisanal miners blossomed thereby prejudicing the state’s fiscus of the much-needed revenue.
Disaster, however, struck during the later part of 2008, as the world’s biggest economy, the US announced that it was in a financial squeeze.
As the whole world caught up with the cough, when the US had an economic sneeze, so was demand for diamonds, given that the US is the world’s leading consumer of gems. Diamond prices tumbled 8.5 percent that year (2008).
The global diamond market and indeed in Angola never looked the same at all.
Sad reports on the state of the diamond industry started flowing in, with Angola’s Endiama saying in March 2009 that the country’s production targets had been revised downwards.
The diamond miner further sent shock waves when it announced that Angola’s diamond industry was close to shutting down.
“There is a great prospect of the industry shutting down,” Sebastiao Panzo, Endiama’s marketing and communications director, said then. “The situation is critical. We’re hoping government policies to help the industry will have some effect.”
It was even reported that 10 of 14 diamond exploration ventures in Angola’s Lunda Sul region alone had shut down.
However, if one looks at the developments obtaining in Angola’s diamond industry now and indeed on a global scale, it can be concluded that the industry is on the mend.
Globally, the wheels of the diamond industry are being greased, after a rusty encounter for almost two years.
Reports say demand for stones in the US is returning to pre-crash levels and retail jewelry giant Tiffany & Co recently released favorable sales figures with a 22 percent increase for the first quarter, year to year.
The retail jewelry giant said its sales went up in all regions, including an increase of 50 percent in the Asia-Pacific region and 25 percent in Europe, with the exception of Japan, which fell 2 percent.
Rapaport also reported that US’ polished imports rose 73 percent to 4.08 billion USD during the first quarter of 2010.
It said by volume, they went up 57 percent to 3.172 million carats, with average prices up 10 percent year over year to 1,286 USD per carat.
Russian diamond giant ALROSA is also planning to boost its output through 2012 with an annual production of 34 million carats at 3.18 billion USD.
Coming back on Angola, the Sociedade Mineira do Lucapa (SML) recently reported that it would soon re-launch its diamond mining activities after a 10-month ‘production holiday’ due to a drop in demand.
Aim-listed diamond producer and exploration company Pangea DiamondFields also reported that sale prices from its Angola operations were on an upward trajectory.
It noted that the sale of 2 813 ct, which took place in Angola recently, yielded an average price of 160 USD/ct, representing 89 percent of the company's long-term target price of 180 USD/ct.
This target was set prior to the fall in the price of diamonds in 2009, and is well in excess of the currently budgeted level of 140 USD/ct.
Last year, around this time, Pangea was complaining of lower prices, saying it had lowered its production expectations at the Cassanguidi diamond project, in Angola.
Although, most diamond producers remain ‘cautiously optimistic’ about the future of the market, notwithstanding the recent improvements and emergence of China as a major player on the diamond market had brought some level of relief.
The Shanghai Diamond Exchange, which is the only channel for general import and export of diamonds in China is said to have achieved a steady growth in 2009 when others curved in.
Diamond Administration of China (DAC) said the country’s imports of finished diamond for jewelry overtook that of Japan to become the world's second largest diamond consumer market.
DAC said that the diamond imports and exports trading volume in Shanghai Diamond Exchange reached 1.521 billion USD, the first time to exceed 1.5 billion USD, with an increase of 16.4 percent over the previous year.
Demand for diamonds in China was attributed to the country's sustained economic growth and the continued growth in consumer demand for diamond ornaments in domestic jewelry market, especially the wedding market.
Angola even benefited from the burgeoning appetite of diamonds by China as the Asian giant overtook the US as the biggest consumer of its diamonds.
The US was the main destination of Angola’s diamonds between 2006 and 2008 with a per carat price that ranged from 87 USD to 154 USD.
With the economic crisis giving the US some tough times, the world’s biggest economy was forced to consume just a mere 3 percent of Angola’s diamond production in 2009.
Angola produced 9.8 million carats of diamonds worth 833 million USD in 2009 up from 8.67 million carats in 2008.
So with the positive sentiments being shown by diamond miners operating in the Angola, it remains to be seen if the country, which is currently the world’s fifth largest producer of diamonds by value, will meet its initial projection of moving two steps forward to become the third-largest producer of rough this year.
Whether that appears to be a moonshine dream for now, one cannot ignore the fact that Angola’s diamond industry is on the mend, since the dark days appears to be over.
Mathew Nyaungwa, Rough&Polished, from Namibia
