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Trans Hex turnaround in Angola?
Allan Seccombe
Posted: Wed, 12 Nov 2008
[miningmx.com] -- TRANS HEX reckons it has turned the corner at its troubled diamond projects in Angola where it has had a long, expensive and trying time to turn the mines to profit over the past five years.
Trans Hex CEO Llewellyn Delport sounded the upbeat note about Angola at the group’s interim results presentation, which was a litany of falling grades, rising costs and depressed sales prices over the past six months in which the group posted a loss of R56m from a loss of nearly R3m in the same period a year ago.
Trans Hex holds minority stakes in three assets in Angola. One of those, Luana, is an early stage project for which bulk sampling and drilling is underway to upgrade a reported resource of 10 million carats.
“We are beginning to prove we can function there,” Delport said of the company’s most difficult and cash-draining assets.
“One of our key
messages is that we have either turned, or are turning the corner, in Angola and we are looking forward through the production of results to prove this to the market,” he said.
It’s going to take some proving. The loss for the Angolan operations deepened to R63m in the six months to end-September from a loss of R44m a year earlier. The Luarica mine in Angola is in financial and operational trouble.
Last year, Trans Hex poured more than R100m into Angola, following three or four years of similar such numbers, but there’s a hope that this flow of cash will be reduced as Fucauma shows signs of turning to profitability, Delport said.
Unit costs have halved since Trans Hex took management control in May 2008 of its 32% held Fucauma operation. These are now at $26 per cubic metre and Delport said they will be brought down into the early $20s, giving the partners a very healthy margin.
However, the 35% held Luarica, which has a better orebody than Fucauma, is described by Delport as being at the height of a financial crisis.
How much more capital it’s going to take to restore Luarica to financial health is an open question. So too is the question of if and when Trans Hex will gain management control of the operation.
“We do not at this stage have control of Luarica. The financial distress is currently at its high
point. As a shareholder we are in discussions with our partners to firmly point the way forward,” Delport said.
Luarica’s diamond production fell to 29,000 carats from 51,700 in the same period a year ago.
The Angolans are notoriously sensitive about the image of the mining projects they are involved in, meaning it is virtually impossible for foreign management to give the market a clear steer on what exactly the issues confronting mining operations are or how they will be resolved.
The hard lessons learnt at Fucauma and Luarica are being applied to Luana, said Delport, adding it should produce up to 5,000 carats/month by the end of the year from a pilot plant, meaning it would be self funding.
The grade at Luana is said to be 25 carats per hundred cubic metres, double that of the other two Angolan projects.
Delport declined to say when the mine would be moved into full scale production or what the capital expenditure would be to do
so. In the current global financial environment, where it is nearly impossible to raise capital, this could be some time away.
In South Africa, Delport described Trans Hex’s exploration programme as being in “neutral” and unlikely to yield much in the short term.
It is in talks with De Beers about the acquisition of that company’s Namaqualand diamond mine, which produces around 300,000 carats a year. Delport declined to make any comment on the process.
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