IGE Resources AB must be ruing the day it decided to enter Angola in search for diamonds.
It appeared the Swedish miner had been in some kind of a fire-fighting situation while strong winds raged recklessly in the African country rated as the world’s fourth leading diamond producer.
Put plainly, IGE had been hopping from one problem to another over the years it had been in Angola.
Now its future participation in the country’s diamond industry looks gloom as it recently announced the freezing of further financing of its 65 percent owned Cassanguidi diamond project.
“IGE is not prepared to increase its financial exposure in the project and has actively sought alternatives for the Cassanguidi mine,” it said in a statement.
Such alternatives included bringing a partner into the project, a full sale or a termination of the project, it said.
IGE also noted that insufficient funding for major equipment had caused persistent operational interruptions, which in turn impacted revenue generation from the project.
It said the termination of the project would result in an impairment loss of SEK 140 million ($21.9 million) for the company and closure of its remaining operations in Angola.
Apart from Cassanguidi and Luxinge, IGE had interests in Cariango, Luanguinga and Lacage diamond projects, in Angola.
“IGE’s focus within its diamond business is now on optimising cost structures and establishing a sound financial platform, enabling the company to progress its other diamond projects with reduced risk,” it said.
This was a tacit admission that IGE’s bid to have commercial diamond operations in Angola had crashed to the smithereens.
IGE’s woes in Angola are on record as it announced early this year its withdrawal from the Luxinge diamond project saying diamond recoveries and grades 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," it said then.
"It is also IGE’s opinion that the current partner model and its administrative requirements challenge the viability of the project."
The Swedish miner went on to announce last February in its fourth quarter report of 2010 that following a thorough review of the Angola diamond assets, it had also decided a write-down of its Cariango, Luanguinga and Lacage diamond projects.
Total write-down for the projects amounted to SEK 128 million ($20,3 million).
“In addition the company has impaired the book value of the investment guarantees related to the Angolan projects. IGE considers these deposits doubtful receivables, as the contracts related to the projects are restored,” it said.
IGE went on to paint a somewhat optimistic picture on Cassanguidi, as it said in the same report that the project was moving towards full commercial operations.
The miner said it was also preparing for an additional investment of $1.5 million in order to ramp up production at Cassanguidi and reach the revised production target of 7 000 carats per month by the end of 2011.
Although IGE indicated that the availability of funding was crucial in achieving the desired production target for Cassanguidi this year, many did not expect the miner would make an announcement three months later of a possible termination of the project.
So should the Swedish miner decide to terminate the project it would be rather an unfortunate experience for them in Angola.
From “bad” Luxinge partners that embarked on a “smear campaign” to “discredit” its image to a financial cul-de-sac on Cassanguidi project, IGE would surely ruin the day it ever thought of joining the search for diamonds in Angola.
One hopes the firm would find some financial solace in the Bakerville project that was awarded a mining right by South African authorities last January, as well as in the Democratic Republic of Congo where it also had interests in diamond projects.
By Mathew Nyaungwa, Rough&Polished
