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08 january 2024

paul_zimnisky_2022_xx.pngAngola recently opened the Luele diamond project (formerly Luaxe) in Lunda Sul province.

The Luele kimberlite was discovered in November 2013 and has an ore quantity of 647 million tonnes that will result in the production of 628 million carats from 2023 to 2083.

Catoca owns a 50.5% stake in the project, Endiama controls 25%, Falcan owns 19.5%, an unnamed pension fund has a 4% shareholding, and the Geological Institute of Angola controls the remaining 1%.

Independent analyst Paul Zimnisky told Rough & Polished’s Mathew Nyaungwa that Luele is the only large-scale, multi-million-carat per-year diamond mine to start production this decade.

He said such a large economic diamond deposit is rare.

Zimnisky said the mine will in the future dwarf Catoca, which is the current largest diamond mine in Angola.

Catoca’s annual production is between 6 and 7 million carats, while that of Luele will start at 4 million carats before it reaches 8 million carats shortly.

NB: Zimnisky publishes a professional monthly subscription-based industry report called “State of the Diamond Market” that includes all of his forecasts, data and analysis.

He also hosts a podcast where he discusses diamonds with special guests from industry. The podcast is called the "Paul Zimnisky Diamond Analytics Podcast” and it can be streamed on Apple Podcasts, Spotify or online.

Below are excerpts from the interview.

 

Angola recently opened the country’s largest diamond mine, Luele. Was this the right time to open the mine given the weak global demand for diamonds?

With very large, long-lived asset capital decisions such as this mine, it’s almost impossible to thread the needle as it pertains to the market in the short term. The investment decision was likely made based on a much longer-term fundamental picture. 

What is the significance of this mine as far as global supply is concerned?

This is a notable mine because it is the only large-scale, that is, multi-million-carat per annum, diamond mine that is likely to commence production this whole decade anywhere in the world. Economic diamond deposits, especially ones as large as this, are exquisitely rare. There are other large diamond deposits that have been discovered in places such as Siberia; however, for one reason or another, the mining economics are not robust enough to justify a mine-build investment, for example, because of the depth of the resource or other engineering challenges.

Luele’s resource is projected at 628 million carats with a lifetime of 60 years. How does it compare with other major mines in Angola and Russia?

So Catoca is the largest mine in Angola as far as annual output volume, at least until the Luele plant is expanded. For instance, annual production at Catoca tends to be around 6-7 million carats, and Luele will likely initially produce around 4 million carats, with the potential to double that at some point in the future. I would consider both world-class mines in the category of the Jubilee and Udachny mines in Russia.

The mine’s name was changed from Luaxe to Luele. What do you think necessitated the change?

I believe at first the project was referred to as “Luaxe,” which is the name of the surrounding settlement area. Luele is a river that flows adjacent to the mine. Going forward, it seems that the government of Angola will be referring to the mine as Luele.

What are the other main diamond projects in the pipeline?

The Tongo mine in Sierra Leone is currently being built by Newfield Resources. It is comprised of a series of kimberlite dykes that host very high-quality diamonds, but the annual production volume of the mine will likely be in the hundreds of thousands of carats, not millions. In addition, ALROSA and Zimbabwe Consolidated Diamond Company have jointly indicated plans to bring on production at the moderately-sized Malipati project in the near term. Also, the Mayskaya and Beenchime/Khatystakh projects in Russia could be sources of new supply in the relatively near term. Looking further out, De Beers could build the Chidliak mine in Canada’s Nunavut province, and Star Diamond could potentially build the Fort à la Corne (aka Star-Orion South) mine in Canada’s Saskatchewan province—both could be medium-sized mines. 

Is there any appetite for diamond exploration with the potential to produce a mine of this magnitude?

There is always some greenfield diamond exploration going on, but the capital being spent today is much lower than what was being spent, say, 20 years ago. I would note that Angola is probably the most prospective jurisdiction for diamonds right now, which is somewhat evidenced by both De Beers’ and Rio Tinto’s presence.

How will Russian diamond sanctions affect Angola’s banking and diamond sectors?

It’s hard to say for sure right now as the details of the broader G7 sanctions have yet to be formalised, but as it stands today, Angolan goods are being treated as all the other non-Russian goods. The whole global diamond supply chain is likely going to have to apply stricter policies and procedures going forward as it pertains to the movement of goods; however, the result will be a much more transparent supply chain, which I think will be beneficial for the larger industry in the long term.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished