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Trans Hex to manage troubled Fucauma
Allan Seccombe
Posted: Thu, 08 May 2008

[miningmx.com] -- TRANS Hex shareholders will breathe a deep sigh of relief at news that their company has taken management control, albeit for only four years initially, of the Fucauma diamond mine in Angola.

It is well known in diamond circles that Trans Hex, the 32% partner in the Fucauma project, had a rocky relationship with their Angolan partners, who preferred to manage the project on their own terms.

The Angolan operations, including Luarica, have never really fired on all cylinders, resulting in a steady flow of losses for Trans Hex from the diamond rich country. Trans Hex recorded a R32m loss at its Angolan division in the six months to end-September 2007.

The bulk of the difficulties Trans Hex had in Angola stemmed from Fucauma, a project it has been involved with for two years.

After much negotiating, the Fucauma Association has given Trans Hex management control of the project for four years from 7 May. If the Association is satisfied with progress made, that term can be extended.

“We know we are good at mining alluvial diamonds. We know what the potential is and that’s why we’ve stuck it out there. Being able to bring our expertise to bear to the problem is, to us, a major step forward,” Trans Hex CEO Llewellyn Delport told Miningmx.

The shares were last down three cents at 900 cents on the JSE on small volumes.

While Delport was constrained in what he could say because the company is in a closed period ahead of releasing its results at the end of May, he said $8m would be loaned to the Fucauma project by Trans Hex, which had R180m in cash on its books at the end of the interim period.

“There will be an infusion of capital to revitalise everything and increase production to ensure we make that mine profitable,” Delport said.

Delport declined to give forecasts on production and what targetsTrans Hex had agreed with its Angolan partners.

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“In those four years, I hope to not only turn Fucauma around, but also get Trans Hex into a fully functional mode over there,” he said.

“More information about the Angolan business will come at the results,” he said. “We are putting in place agreement after agreement that will see us leverage the potential of one of the most prospective diamond countries in the world.”

In the interim period, Luarica’s output was 15% higher at 51,700 carats, of which 18,095 were attributable to Trans Hex. The mine reported an operating profit and cash flows for those six months.

Fucauma increased total production for the interim period by nine percent to 31,600 carats, but this was clearly not up to the mine’s potential. Trans Hex said at the time there had been operational, maintenance and procurement delays.

Gus Maarman, former Trans Hex Middle Orange River operations general manager, has been appointed as the director general of the Fucauma Project. Trans Hex has also appointed the project’s financial director, Luis Pereira.