Angola’s Escom to Start Production From New Diamond Mine in May

Escom Investimentos e Participacoes SA, an Angolan company with interests from mining to property, plans to start output from a diamond deposit in the southern African nation in May, company President Helder Bataglia said.

The Tchegi alluvial site will produce, together with Escom’s existing Luo kimberlite mine, a total of about 35,000 carats a month by the end of the year, Bataglia said. Tchegi is one of two new sites deemed viable by the company in Lunda North province, about 850 kilometers (530 miles) east of Luanda, the capital. Escom and former partner BHP Billiton Ltd. (BHP), the world’s biggest mining company, spent $200 million over eight years prospecting 14 concessions, he said.

“By next year we hope to arrive at normal production in Tchegi,” Bataglia said in a telephone interview from Lisbon yesterday. “Our aim is kimberlite mining where the stones are heavier, but we have alluvial projects because the quality in that area is very good.”

Diamond producers have struggled to find new, large deposits to replace aging assets. Production at many of the biggest operations is falling as supplies of more accessible gems near the surface are depleted. Companies such as De Beers, owned by London-based Anglo American Plc (AAL), have shown renewed interest in Angola, which had the fifth-largest gem output by value in 2011.

Escom and partner Endiama EP, the state diamond company, also intend to expand mining at the $300 million Luo site after evaluating three new kimberlites, the eroded remnants of ancient volcanoes that sometimes formed diamonds under intense heat and pressure. A feasibility study is expected by March 2014, Bataglia said.

Reserve Reports

“We won’t do anything without at least 120 million tons in reserves, but I think we have a little bit more than that,” Bataglia said. Reports on the other viable alluvial concession, Itengo, should be ready by December, he said.

Angola, Africa’s biggest oil producer after Nigeria, sold 8.33 million carats valued at $1.16 billion in 2011, according to the Kimberley Process, an international body with 54 participants representing 80 countries to prevent the sale of gems mined in war zones. The top producers by value that year were Botswana, Russia, Canada and South Africa.

BHP Billiton pulled out of Escom’s prospecting phase in 2010, while Russia’s OAO Alrosa left the Luo project two years ago, Bataglia said. Since then, the Angolan government has revised its mining code, simplifying regulations, lowering the government’s minimum stake in future projects to 10 percent and reducing taxes to 25 percent from 35 percent.

To contact the reporter on this story: Colin McClelland in Luanda at cmcclelland1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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