Catoca raises new hope for diamond industry

Sociedade Mineira de Catoca, which operates Angola’s biggest diamond mine, has been especially active recently, preparing the company for the challenging times ahead and studying projects that can increase production when necessary. The company is well positioned for the effort, according to Jose Ganga Junior, Catoca’s general manager.

“Catoca is an Angolan company and from our point of view we already have the expertise, knowledge and a good financial standing,” he says. “The investments in the domain of new projects are to be performed entirely by Catoca.”

The Catoca mine exploits one of the world’s largest kimberlite diamond deposits, with reserves estimated at 271 million tonnes of diamondiferous ore. The Sociedade Mineira de Catoca was established in 1992 and is controlled by Endiama, the state-owned diamond company, and includes ALROSA, Odebrecht and LLI Holding BV among its other shareholders.

The mine is 685 miles from Luanda in Lunda Sul province. Until five years ago all transport between the two sites had to be by air because the roads were impassable. Now that the roads are largely repaired, much can be carried to and from Catoca by truck. A railroad line leaving the capital reaches about halfway to the mine, which will also reduce the cost of transport.

“With the use of the road, following its improvements, costs have fallen substantially and that has been reflected in the profitability of the business,” Mr Ganga says.

Following the completion of the nearby Chicapa hydroelectric plant, the mine now has access to much cheaper energy. Before the facility had to use diesel generators, consuming some 100,000 litres of fuel per day.

The improvements could not come at a better time. The cost reductions partly offset the drop in demand and revenue caused by the global economic crisis and leave the company in much better shape as demand recovers.

At current capacity the deposit being mined now will last for as many as 35 years, according to geological surveys. However, the Catoca site has only been studied up to a depth of 2,000 feet and there might be mineable diamonds even deeper. In the medium to long term, the company has ample capacity to increase production or to maintain the current level of production by opening new mines as older deposits are depleted.

In addition to sites in Lunda Sul province, promising geographical formations have been found in Kwanza Sul, Malange, Lunda Norte and Bie provinces, adding to the geographical diversification of mining.

Despite these many potential production sites, Lunda Sul province is still the source of almost all of Angola’s diamond exports and the Catoca company is an important employer and contributor to the local economy.

“We operate in a region where the level of development is low,” Mr Ganga says. “When we started working in the region we had to structure ourselves to develop any type of activity that was necessary for our survival: health care, buying and administering medications, taking care of laundry in the hotel, cleaning, etc.”

The company has begun to outsource many of those services; as the local economy has grown, local businesses have sprung up and the workforce has gained the skills to provide them. All of the investments made to date by Catoca in production capacity, infrastructure, training, health care, education and other areas have been funded by the company’s own resources, a remarkable achievement given the amount of work that has been done.