The LUÓ consortium is bullish about its prospects and has already created 1,200 new jobs

The underground volcanic formations called kimberlites are the richest diamond deposits on the planet. Of the world’s total known kimberlites, one-quarter lie within the borders of Angola. The wealth this represents is so large as to be almost immeasurable, but the country’s rugged terrain, vast size, and underdeveloped infrastructure make it difficult to mine Angola’s diamond-bearing areas. The Luo mining concession, covering 116 square miles in Angola’s far northeastern province of Lunda Norte, embodies the promise and the challenge of the Angolan diamond industry. Exploiting the five kimberlite pipes located on the Luo concession is an enormous undertaking, and the effort is changing the way that international investors think about Angola’s potential.

Formed in March 2003, LUÓ – Camatchia-Camagico is a joint venture between state-run diamond group Endiama, Angolan private firms Hipergesta and Angodiam, and ESCOM-Alrosa. The consortium started operations in 2005, with a $200 million initial investment, using equipment with a processing capacity of one million tons per year. Already, newer facilities have enabled the mine to process three million tons of diamond-bearing rock per year, and additional investments will boost it to ten million tons per year by 2010, making Luo one of the world’s largest diamond mines. $400 million of investment is planned for the life of the project, creating 1,200 jobs.

It’s a project that many mining companies would find intimidating, but Luo director general Dr. Mefira Adamou holds that the size of the opportunity requires bold moves. “When you’re operating at this level, it’s essential to be ambitious”, he says. “We can’t make big investments like this for a small return. We have to be daring. Luo has all the attributes needed to become one of the world’s most important mines, not just because of the huge deposits in the five kimberlites that are located there, but because of the level of production we will be able to achieve. Ten million tons per year will definitely make us one of the world’s largest producers. We’re planning a modern diamond processing and treatment center as well, with next generation equipment and very little human intervention needed in the process.”

The Luo venture brings together a range of financial and mining expertise from three different countries. Endiama has interests all along the chain of production in the Angolan diamond industry, from extraction to processing, transportation, marketing, and export. Hipergesta and Angodiam are both Angolan holding companies with growing experience in the diamond sector and in the logistics surrounding diamond production. Their participation is key to the government’s goal of helping Angolan firms and citizens share in the profits of development and collaborate with established international partners.

Mefira Adamou, Managing Director -LUO

The other Luo partner is Escom-Alrosa, a joint venture between Russian government diamond company Alrosa and Escom, the mining arm of Portuguese investment group Espírito Santo. Espírito Santo is reviving its historical ties to Angola, connecting the country with its global networks through mining projects and BESA, its new Angolan bank. Alrosa, owned by the Russian federal and regional governments, produces nearly all of Russia’s diamond output, and its various projects make up 25 percent of global production. In addition to the Luo concession, Alrosa is involved in the Catoca mine — Angola’s most productive diamond deposit, and the only other Angolan kimberlite currently being mined — and is building a hydroelectric plant on the Chikapa River to power its projects in northeastern Angola.

Dr. Adamou believes that joining different kinds of enterprises on the Luo project will ensure that social benefits come from business success. “When we bring the public and private sector together, we can apply principles of private management to the development of public resources. Endiama, Hipergesta, and Angodiam take the Luo project beyond business interests and into a social component. Mining companies have an obligation to bring social development into areas where the resources are being produced, so we build schools and clinics, and pay special attention to providing the local population with basic needs.”

With such a large project and so much at stake, it’s tempting to dream about the future. Dr. Adamou, however, says that he prefers to keep both feet on the ground. “Luo’s diamonds are of extremely high quality — almost surprisingly good. The technicians are telling me that the diamonds are pure and transparent, and that they really don’t find this quality in other deposits. But right now, I am focused on making sure that the partners maintain their commitment to the project, because this high quality creates such great potential.”