IGE Resources, which had so much hope in its 42 percent-owned Luxinge diamond project, in Angola shocked many a people in the diamond industry when it announced early this year that it was conducting discussions with its partners regarding a withdrawal from the project.
It said the reason why it wanted to withdraw from the much-vaunted project was that the diamond recoveries and grades since June last year's granting of the mining permit had not matched the expectations established by earlier bulk sampling results.
"A recent external audit initiated by IGE, has identified on-site operational inefficiencies and procedural shortcomings which would require significant restructuring and thus add further complexity to any decision to continue subsidising operations," read a statement released by IGE then.
"It is also IGE’s opinion that the current partner model and its administrative requirements challenge the viability of the project."
IGE had management control of the Luxinge mining company, while Endiama had an 18 percent stake.
Four local partners, Sheffield, Syntechron, Triade and Compesa also had a 10 percent stake each in the project.
Since 2007, IGE’s total investment in Luxinge was said to have amounted to $15 million, of which $6 million were in equipment.
“We are obviously disappointed that the Luxinge project failed to meet IGE’s expectations and requirements, further to our concerns expressed at our third quarter results presentation in November (2010),” said IGE chief executive Tomas Fellbom.
“We still hope to find a solution acceptable to all parties, including a sale of our interest. We are, however, also prepared to withdraw from the project unilaterally if necessary.”
It did not take long after IGE had made this announcement before its partners - excluding Endiama - had started firing broadsides.
A representative of the four shareholders, Bruno Miguel was quoted by the local media accusing IGE of fraud and corruption.
He said IGE’s unhappiness with the project was “self inflicted”, as it had operational and management control of Luxinge since exploration started in 2008.
The consortium also claimed that IGE owed workers about $3-million in outstanding salaries, holiday bonuses and social security.
However, IGE was forced to counter these accusations, further throwing the relationship into an acrimonious state.
The Scandinavian company scoffed at the accusations saying that they were without “merit” and formed part of a “baseless smear campaign”, which illustrated the “difficult” business climate that the company was up against in the Luxinge partnership.
IGE maintained it wanted to withdraw from the project as the diamond recoveries and grades were poor.
When Rough&Polished sought some clarity on the future of the diamond project from Endiama’s marketing and communications manager Antonio Jose Freitas at the recent Mining Indaba, he said the partners had agreed not to discuss the issue in the media.
He, however, slipped his tongue and said that partners were currently negotiating the way forward.
Neither, IGE itself or its partners had come out in the open - since the corporate mudslinging began - to state if the “marriage” had officially come to an end.
It was rather scary to say the least how JV partners traded insult in the media, when their relationship appeared faltering.
IGE raised a point that is worthy considering when it said the diatribe it had received from its partners goes to show “difficult” business climate it was up against.
With such a comment, it becomes quite axiomatic that it was not only the issue of poor grades at Luxinge that pushed IGE to abandon the ship.
Could it be that its partners wanted to see it out after investing so much when the project kick-started?
If Angola was all that bad a country to do business in, as they wanted us to believe then why are they still operating the Cassanguidi project?
IGE in fact reported last February that an action plan for increasing production at the mine had been implemented.
It said that it expected a growing output from the mine in the coming months.
"We are now moving forward with cautious optimism in Cassanguidi. Areas of higher grade material were identified in January and recovery is improving accordingly,” IGE chief executive Tomas Fellbom said.
“Based on our experiences in Cassanguidi over the last few months, we have readjusted our target and aim for a monthly output of 7,000 carats towards the end of 2011."
IGE said it expected diamond values from the mine going forward to be in the previously announced $160-180 range, even though the recent recovery of larger stones gave grounds for optimism.
It was rather childish for the Luxinge partners to wash their dirty linen in public.
Mathew Nyaungwa, Rough&Polished, from Namibia
