Diamondcorp has ruled out operating in Angola or the Democratic Republic of Congo at the moment due to what it called “high risks” associated with the two African countries.
The diamond junior said in a statement emailed to Rough & Polished that it had in recent years been offered diamond projects but nothing presented the financial returns or upside potential they considered necessary to be value accretive for shareholders and warrant the management attention required.
It said although it was dangerous to be a “one mine company” it was very tempting for them to focus solely on the development of the Lace Mine, in South Africa.
“We do not see value in most alluvial projects where it is difficult to budget or plan ahead and we are not prepared to take the risk of operating in the Democratic Republic of Congo or Angola at this time,” it said.
“We believe that the high level of risk of grassroots exploration is not what our shareholders want and diversifying too far afield stretches the budget of a small company.
Even though the company admitted it was still a relatively small company, their lack of faith particularly in Angola might have come as shock for those closely following the interest that the Russian diamond monopoly, Alrosa has recently shown in the country.
Alrosa's executive committee ordered last month the preparation of an agreement with Angola’s state-owned diamond miner, Endiama by June to establish a joint venture (JV) to explore the country as well as prioritise prospecting areas based upon the company’s geological documentation.
Alrosa’s chief executive and president Fyodor Andreev recently visited Angola to discuss potential projects with Endiama.
The Russians are of the opinion that chances of discovering a new major diamond deposit was high in Angola having conducted a geological research in the country.
“The geological material already produced by Alrosa’s specialists in Angola proves there is a high probability to discover new large primary diamond deposits in this country,” a company spokesperson was quoted as saying by Rapaport.
Alrosa was not alone in the Angolan forage, as De Beers said earlier in the year that it was confident of finding a gem deposit in the southern African country that would allow it to recover $250 million spent on exploration since 2005.
It explored five concessions in the country during this period and had found diamonds in a 3,000 square-kilometer concession near Lucapa in the Lunda North province.
“We are confident we can find something that will allow us to recover all our investment,” said De Beers business manager in Angola Pedro Lago de Carvalho. “The contract is clear, there is no debate.”
Bloomberg also quoted Endiama spokesperson Antonio Freitas as saying last March that it would likely start production at four new diamond mines within a year.
These included two kimberlite mines in Tchiuzo, Lunda Sul province and Chiri in Lunda Norte province.
The Tchiuzo operation, he said, would be operated by Sociedade Mineira de Catoca, a company owned by Endiama together with OAO Alrosa of Russia and Odebrecht SA of Brazil.
Freitas said the other two, were alluvial mines and would be expected to commence production this year.
These were Tchege in Lunda Sul and Maua in Malanje province near the border with the Democratic Republic of Congo, Bloomberg reports.
Escom Investimentos e Participacoes SA, an Angolan company with interests from mining to property, also planned to start output from a diamond deposit this month.
Company president Helder Bataglia said the Tchegi alluvial site would produce, together with Escom’s existing Luo kimberlite mine, a total of about 35,000 carats a month by the end of the year.
Angola lies behind Russia and Canada in unexplored diamond potential in the world and recently reduced taxes to encourage investors.
It also came up with a new law promotes flexibility for companies to join with partners based on negotiation with the government, not imposition, a break from the past.
Angolan officials, who are preparing for a conference next month to mark a century of diamond mining in the country, will likely find DiamondCorp’s statements a bad taste in the mouth.
There was no doubt that they would use this occasion to market the country as a favourable investment destination for diamond miners.
However, if big players in the diamond industry are saying Angola was worthy investing in, who cares about what a junior miner says?
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
