Angola Mining Report Q1 2013

Angola's mining industry is set to reach US$2.4bn in 2017, growing at an average rate of 3.6% perannum. The rate of growth will remain stable thereafter with diamonds providing the main thrust forproduction growth over the medium term. New areas of mining including iron ore, copper and phosphatesare also receiving increasing international interest from investors and are expected to provide furthermomentum for Angola's mining sector over the long term.

Angola Goes For Gold

According to reports in July 2012, production was close to starting at gold mining facilities in themunicipalities of Jamba and Kuvango in Angola's Huíla province. Gold extraction will follow thetermination of exploration work in the region, which is reported to be in the final stages. The projects willbe opened up for investment from interested local and international parties following the termination ofthe exploration process. There are currently no details regarding the size and grade of the deposits.

Prospecting To Begin In Kwanza Sul

In Q312 Angola-baseddiamond miner SociedadeMineira de Catoca (SMC) wasawarded the rights to carry outprospecting for diamonds in theprovince of Kwanza Sul. Theannouncement followed thecompletion of surveying workby SMC in the mining zones ofGango and Quitúbia, both ofwhich encompass a concessionarea of 3,000km sq. Thecompany is due to installequipment for prospecting inthe area over the coming weeksin addition to carrying outdemining and geologicalanalysis of the region. Theproject will be the first diamond mining enterprise in Kwanza Sul province and is the culmination ofongoing attempts to launch exploration projects at Gango and Quitúbia since 2001.

Mining Dwarfed By Oil Mining & Oil Sector Value (US$bn)
Source: BMI, UN Regulatory Environment

Operators within Angola's mining sector are starting to reap the benefits of a new mining code, whoselong-awaited introduction came into effect at the end of 2011. In compiling all existing mining laws andregulations, it is hoped that the new code will ensure greater cohesion within the country's naturalresources sector than the original code, introduced in 1992. The new legislation will apply to all aspectsof the prospecting, exploration, research, appraisal and exploitation of all natural resources located withinthe country's borders with the exception of gaseous and liquid hydrocarbons. A specific section of thecode is dedicated to offshore mining activities and licensing. Among the greatest benefits of the new codeto overseas investors has been the removal of obstacles preventing investors from taking a majority stakein locally owned companies. In addition, contracts for prospecting and exploration will now be coveredby a single mining agreement with the government while the amount of tax payable by mining firms tothe state has been lowered from 35% to 25%.

Key Players

Angola's mining industry is dominated by diamond exploration and production. Major reserves ofdiamonds are located in the provinces of Lunda Norte and Lunda Sul. Local firms dominate the market,with state-owned Endiama the exclusive concessionary of mining rights for diamond-mining in Angola.

Sociedade Mineira de Catoca (SMC) operates the Catoca mine, the world's fourth-largest kimberlitefacility. SMC is 32.8% owned by state-controlled Endiama, 32.8% by Russian concern ALROSA, 16.4%by Odebrecht and 18% by Israeli company LLI Holding. There is increasing interest from overseas firms,with companies such as Trans Hex Mining, a South Africa-based miner, making entries into the market inrecent years. The company has a stake in the Luana, Luarica and Fucauma mines.