Lucapa's Big Push in Angola

Issue 161, May 2016

In the green swamps of Angola, on both banks of the Cacuilo river, an Australian company is digging through gravel beds, pulling out expensive diamonds. Between crocodiles and the occasional flood, Lucapa Diamond Co has been exploring a vast 3,000 sq km concession on Angola's diamond belt for nearly a decade, but in recent months, it appears to have found the motherlode.

Since January last year, Lucapa has dug-up over 12,000 carats, fetching more than A$50m, by pumping gravel through a processing plant, known as alluvial mining. It has also found fancy pink diamonds and Type IIA stones, the rarest type of diamond found.

One 404-carat diamond it recovered in February sold for $16m, putting Lucapa's average prices on par with the world's highest value diamond mines. It was the biggest diamond ever found in Angola and sold within 20 days of coming out of the ground.

“I wanted to sell it,” says chief executive Stephen Wetherall, who previously worked for De Beers. “I want the money in the bank and I want to expedite my development programme. It is of no benefit to us letting it sit in some glass box in New York.”

Lucapa recently doubled its mining rates from 10,000 to 20,000 bulk cubic metres per month and is planning to double them again, but it has to make the most of Angola's dry season, which began in early April, lasting for six to seven months.

The “world really turned for Lucapa”, Wetherall says, when it entered two mining blocks last year, Block 6 and Block 8. Since then, it has dug up over 100 diamonds weighing more than 10 carats each. “We started to recover one special stone for every operational day. There are not many mines out there that will have that hit rate.”

Alluvial stones have boosted the company's cash flow, putting over $20m on its balance sheet, but small-scale production is not what Lucapa's looking for. Wetherall wants to find the original source. “We're not in it for the alluvial returns,” he says, “even though they are very nice. We're in this to find the motherlode.”

The diamonds Lucapa has recovered to date are unusually large, averaging over one carat each, and many have jagged edges. “Big stones don't travel far. If they've got jagged edges that's also an indication that they haven't travelled far, so we believe we're getting close to the prize.”

One stone in particular, a 133-carat diamond found in January, suggests Lucapa is getting close. It was greyish, made of hundreds of separate crystals. It is largely worthless, but would not have remained intact, if it was far from the original source. “It's not very pretty looking, it doesn't add very much to the cash at the bank, but if that was transported a large distance it would have broken up. All of these recoveries have really been in a localised area.”

Lucapa's concession is 150km from Catoca, a monster diamond mine, once owned by Lev Leviev. Lucapa is also surrounded by other alluvial producers, yet to find the source of their stones. “Potentially their source is on our property,” Wetherall says, “you don't know.”

Gravity and electromagnetic surveys both suggest that “something is sitting below the surface”, directly below Block 8. The company has bought a drill rig, shipped it to Angola and plans to start drilling immediately. “We are a very small outfit, but we are on some very, very prime ground. In Q2 of this year, we'll be holding drill core in our hands.”

“Potentially their source is on our property, you don’t know.”


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