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Production and Investment Forecasts of Angola's Mining Industry
Frost & Sullivan, Aug 2011, Pages: 69
Robust Demand from Emerging Economies Enables Strong Traction for Angola's Mining Industry
Angola’s Abundant Diamond Reserves Keep Market Prospects Upbeat
The Angolan mining industry generated $1.1 billion in export receipts and accounted for approximately 1 percent of the country’s gross domestic product (GDP) in 2010. The diamond mining sector is the single largest sector in Angola’s mining industry. It accounted for 95 per cent of the country’s mineral export receipts. Angola’s diamond production rose sharply between 2000 and 2010 following the end of civil war and increased mining activities. Angola’s abundant diamond reserves, estimated to be worth approximately 180.0 million carats, are located in the Lunda Sul and Lunda Norte provinces in the central and north eastern parts of the country. Rising diamond prices, escalating demand from emerging economies, substantial inflows of foreign direct investment (FDI), and partnerships with Alrosa of Russia and Odebrecht of Brazil resulted in Angola’s diamond production reaching a historic peak of 13.9 million carats in 2010. Angola’s diamond production has witnessed an upsurge in response to favourable diamond demand and supply fundamentals. “Capital expenditure in Angola’s mining industry is expected to rise steeply from $380.0 million in 2010 to approximately $1.33 billion between 2011 and 2015,” notes the analyst of this research service. “Angola’s mining companies – Endiama, Alrosa and Odebrecht Ltd. – are planning to spend the bulk of their capital on expanding the capacity of the existing mines and upgrading mine infrastructure and equipment.”
Although the market has progressed steadily, there are some aspects challenging its landscape. The significant presence of small-scale miners in Angola has resulted in the country failing to adequately contain the illegal diamond trade. Small scale artisanal mining is unorganized and chaotic. It does not contribute much to the government’s fiscal revenue. “Intermittent conflicts between artisanal miners and large-scale mining companies have resulted in the destruction of mining equipment and machinery,” says the analyst. “Mining companies are spending more money on security to safeguard mine shafts, equipment and areas over which they have mining claims, from illegal entry by the artisanal miners.” The geographical proximity of the country to the strife-torn Democratic Republic of the Congo has further exacerbated the situation. Apart from this, the country’s diamond mines have been operating below optimal levels due to electricity shortages.
Going forward, Angola’s highly prospective geology, enabling regulatory framework and steady FDI inflows are likely to result in the significant growth of its mining industry. International diamond mining companies can arrange joint ventures and partnerships with the state-owned diamond mining company, Endiama, to participate in Angola’s promising mining industry
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