Angola mining minerals diamonds

Angola aspires to become a global player in the supply of critical minerals

Angola aspires to become a global player in the supply of critical minerals
Catoca, the Angolan state-owned diamond company, is opening the world's biggest diamond mine at Luele. / bne IntelliNews
By Jason Mitchell May 14, 2024

Angola  the world's second-biggest diamond producer  possesses abundant reserves of critical minerals, vital for the green energy transition. With a strategic focus on reducing dependence on oil exports, the country is actively pursuing an economic diversification drive.

In 2023, Angola was Africa’s third-largest crude oil producer after Nigeria and Libya. With a daily output of around 1.098m barrels, it closely followed Nigeria's 1.23m barrels and Libya's 1.18m barrels. Commercial oil exploration in Angola only began in the 1950s – the first offshore field, located close to Malongo in Cabinda province, started to produce oil in 1968, a few years before the country’s independence from Portugal in 1975. Today, Angola is the biggest deep-water offshore oil producer in Africa, with fields located close to the Northern provinces. 

But the government is eager to transition away from its over-reliance on oil and gas – which make up around one-third of GDP and half the country’s fiscal revenues – and embrace the exploration and extraction of minerals, in a bid to ramp up the country’s economic and industrial development. In recent years, the Angolan diamond industry has been thriving but the government also wants to move beyond its dependence on gems, which make up 5% of exports and account for 20% of the world’s diamond production. 

The country possesses other vast mineral resources – gold, platinum, nickel, chrome, iron, copper, manganese, kaolin, gypsum, quartz, zinc, phosphates, granite, marble, uranium, lead, wolfram, tin, fluorite, sulphur, feldspar, mica, asphalt and talc. It hosts 36 of the 51 most critical minerals in the world, including chromium, cobalt, graphite, lead, lithium and nickel.

Angola has a $92bn economy, with the IMF forecasting growth of 2.6% for the current year and 3.1% next year. With a population of 37.9m, its income per capita stands at $2,430 a year. However, inflation is a significant concern at 22% and the government is grappling with a gross debt to GDP ratio of 70%, high by African standards. In 2021, the mining sector – excluding oil and gas – contributed only 1.6% of GDP.

Furthermore, Angola's abundant mineral resources are sparking renewed international interest. Analysts estimate that around 60% of its territory is unexplored for metals and minerals. They argue that the country appeals to investors because it has so much mineral wealth but so few mines. Enormous swathes of land have no real information about them apart from some basic geological maps.

Within these unexplored areas, there are believed to be considerable reserves of critical minerals – including copper, cobalt, manganese and lithium – and rare earth elements. There are also big opportunities in iron ore and phosphates. 

Moreover, one of the reasons for the renewed international interest in Angola is the perception that the country has become a lot more stable in recent years – an image the government has been eager to cultivate. João Lourenço has been the country’s president since 2017 and was last re-elected in 2022. 

The country had a long history of civil war, beginning in 1975 and continuing with interludes until 2002. It also had a well-documented corruption issue – Isabel dos Santos, the daughter of the former president, and her advisers are accused of defrauding the state of $219m. She now lives in self-exile in Dubai. 

However, President Lourenço has taken a number of steps to improve the country’s international profile. In 2022, Angola joined the Extractive Industries Transparency Initiative, a Norwegian-based organisation that seeks to establish a global standard for the good governance of oil, gas and mineral resources. The move subjects the country to increased scrutiny but also opens up opportunities for more foreign investment.

The government has also been trying to reform the mining sector. It established the National Agency of Oil, Gas, and Biofuels as the national concessionaire. Additionally, it approved the implementation of Presidential Decree 143/20, a governance model aimed at reducing the state's involvement in the mining sector. It also strengthened the role of private industry, promoted transparency and introduced fiscal incentives to encourage the exploration of minerals.

Furthermore, the government has embarked on a major drive to reform and privatise parts of the economy, including the partial listing of the state-owned oil behemoth Sonangol and the state-owned diamond producer Endiama. In addition, Angola’s National Development Plan up to 2027, approved last year, should help the country to attract foreign investment.

The country’s diamonds are mainly mined in the province of Lunda Norte. In 2023, the country produced 9.7m carats but expects to expand output by 50% in 2024. In 2022, diamond exports generated a revenue of $1.95bn. In 2021, it was estimated that the country had only exploited 40% of its diamond reserves. 

Angola's diamond industry is enjoying increasing global demand, particularly from China and Japan. While China remains the largest market for Angolan diamonds, Japan is emerging as an important destination as well. Currently, most of the country’s diamonds are exported to China and Hong Kong for processing and resale. However, Angola is investing significantly in improving its diamond processing capacity.

In November 2023, the Luele diamond project – owned by state-controlled diamond miner Catoca – started production and has the potential to transform Angola’s diamond industry. It is the country's biggest diamond mine and one of the world’s largest by estimated resources, which are expected to be in the region of 628m carats to be mined over 60 years, according to the company’s estimates. The $600m project has an initial annual processing capacity of 4mn tonnes per year of ore, with a gradual increase to 12mn tpy in several years' time.

In April 2021, the government presented plans to cut 20% of diamonds domestically. In the same year, the country also inaugurated its $77mn Saurimo Diamond Development Hub, which unites the entire diamond value chain and is made up of three major diamond-cutting factories. It also launched a diamond cutting and polishing training centre to improve capacity building and skill transfer.

Furthermore, in December 2021, De Beers, the global diamond company, applied to the government for the rights to explore the country’s northeastern region. It also signed multiple agreements with the government covering diamond processing. 

While diamonds are set to remain the biggest contributor to mining revenue for many years to come, there is mounting interest from foreign mining companies in exploring the country’s other mineral resources.

For example, Angola is home to 28 gold mining projects – 20 of which are in the prospecting phase – with the average production capacity at each mine estimated at 4.5kg per month. 

Yet the government’s current priority is to develop the potential to supply critical minerals for the global clean energy transition. Diamantino Pedro Azevedo, the Minister of Mines, Petroleum and Gas of Angola, highlights the country’s strategy to uphold a conducive mining environment through attractive legislation, infrastructure development and further investment in human capital to support companies investing in the country.

Looking ahead, Angola plans to start producing the rare earth elements neodymium, praseodymium and niobium within the next five years. New copper, manganese and iron ore projects in the Uige, Cuanza-Norte and Huila provinces are also expected to become operational during the next few years. 

The Longonjo project – located near the city of Huambo – is expected to become the first large-scale neodymium and praseodymium rare earth mine in Africa with production targets of 56,000mn tpy. The operation – which has an upfront capital cost of $217m – will extract, concentrate, calcine and chemically refine the free dig material to produce a high-value mixed rare earth carbonate that contains 50% total rare earth oxide, of which 24% is neodymium and praseodymium. The commodity will then be transported by rail 273 km to the Angolan port of Lobito for export.

The initiative is operated and funded by Pensana, the London-listed mining company, with additional funds from the Angolan Sovereign Wealth Fund (FSDEA by its initials in Portuguese), which has $2.2bn of assets under management. This strategic investment underscores Angola's commitment to becoming a leading supplier of energy transition-related minerals.

Moreover, its critical mineral wealth has started to attract the attention of governments from around the world. In August 2023, Nishimura Yasutoshi, Japan’s Economy and Industry Minister, visited the country. A joint agreement was signed between the two countries, aimed at advancing cooperation in the fields of trade and investment and supporting opportunities for Angolan and Japanese companies. 

The global demand for critical minerals could also lead to the revamping and modernisation of Angola’s railways, specifically the Lobito rail corridor. Up until the 1970s, it was one of the busiest transport routes in Africa, linking southern and central Africa’s inland markets with the rest of the world, and facilitating trade in copper, cobalt, coal, zinc, lead, timber, sugar, maize and coffee. But its operations were severely impacted by the Angolan Civil War. 

In October 2023, the US and the European Union said that they planned to team up to construct a new 1,300-km railway line to connect the southern part of the Democratic Republic of the Congo (DRC) and Zambia to the port of Lobito. Feasibility studies are now underway but the initiative indicates how important the central African region has become to the global supply chain of critical materials. The US and its partners have already mobilised $1bn for the project, representing the largest single US and EU investment on the African continent in many years. The revamped railway would slash transit times from the DRC to Lobito to under 36 hours.

A revitalised Lobito rail corridor would also help Angola in several other ways. For example, the Longonjo rare earth deposit is located close to the railway line. 

The project has geopolitical implications, as well. Historically, Angola has maintained strong ties with China and Russia. However, under President Lourenco, it has sought closer relations with Washington. China has considerable influence over mining in the central African region and this new initiative by the US and the EU seems to be an attempt to break China’s dominance of the critical mineral supply chain. 

Furthermore, in November 2023 the Geological Institute of Angola (IGEO by its Portuguese initials) and the United States Geological Survey (USGS) signed a protocol aimed at fostering scientific cooperation. Under its framework, the USGS will provide support to the country in mapping its mineral resources. 

Moreover, in the same month the government granted Ivanhoe Mines, the Canadian mining company, some 22,195 sq km of greenfield prospecting rights for exploration in the Moxico and Cuando Cubango provinces, a previously unexplored area. The prospecting rights were granted for an initial period of five years. Ivanhoe’s exploration activities are expected to start this year.

Yet Angola faces myriad challenges if it wants to bring new mining projects to fruition. For example, some areas of the country are littered with land mines, a legacy from the Civil War. Furthermore, although the government is taking steps to reduce corruption and improve transparency, Angola still only ranks 121 out of 180 countries in the Transparency Initiative’s Corruption Perception Index. Water scarcity is also an issue in the southern part of the country.

Moreover, experts say that mine workers have had to work in hazardous conditions, leading to a rising number of cases of silicosis, a long-term lung disease caused by inhaling large amounts of crystalline silica dust. The lack of stringent health and safety regulations, inadequate protective equipment and limited access to medical care have exacerbated its prevalence. 

Angola's ambition for a global role in critical minerals offers it a path to economic diversification and a chance to move away from over-reliance on oil and diamonds. Its success depends on responsible mining practices, transparent governance and strategic investments. By leveraging profits from the minerals boom, Angola could diversify its economy, become more prosperous and contribute to the global green energy transition.


Angola mining minerals diamonds