De Beers Suspends Operations in Angola

May 25, 2001

De Beers Suspends Operations in Angola

Citing an impasse in its negotiations with the Angolan government, De Beers, the giant mining company, has suspended all operations and investments in the West African nation. In August 2000, De Beers Chairman Nicky Oppenheimer met with Angolan President Jose Eduardo Dos Santos to express the company's long-term commitment to Angola and to discuss the possibility of freezing a loan De Beers had made to the state-run diamond company Endiama. De Beers says it was looking for a new contractual arrangement with Endiama to mine and market diamonds from economically feasible kimberlitic pipes discovered by De Beers prospecting operations in northeast Angola. But De Beers officials say that over the past 12 months, the legal status of its investments as well as any guarantees regarding De Beers' past and future investments have become uncertain.

Principal among those agreements is the $50 million loan De Beers made to Endiama in April 1991 at the government's request to help finance the development of the mining area in the diamond-rich Cuango Valley in northeastern Angola. It was agreed then that all diamonds produced in the Cuango Valley would be marketed through De Beers. Endiama subsequently declared a number of setbacks in its operations in the Cuango Valley and mining was suspended from 1992 to 1998. In 1998, SDM, the company with the legal mining title to the area, resumed marketing diamonds through De Beers. That arrangement too was short-lived. In February 2000, the Angolan government decreed the suspension of all contracts previously signed with Endiama. SDM awarded its production for marketing to another private company, Ascorp, which has close connections to the Angolan government.

De Beers says it complied with all the agreements it made with the Angolan government, which also included the building of a state-of-the-art $30 million diamond sorting house in Luanda, Angola's capital. The building was completed in November 2000.

Since the August meetings with the president and the Ministry of Geology and Mines, De Beers says there has been no progress in reaching an agreement. "There are no legal guarantees that underwrite the continued operations and future investment of De Beers in Angola," a De Beers press release states. "Under these circumstances, the Board of De Beers is unable to justify continued investment in its projects in Angola."

- by Robert Weldon, G.G.