Trans Hex in another Angolan deadlock

[miningmx.com] — JSE-listed diamond producer Trans Hex’s latest
standoff with an Angolan partner centres on the expansion of its sole operating asset
in that country, as none of the parties are willing to contribute their own funds to
advance production at the mine.

Trans Hex CEO Llewellyn Delport said on Monday its Somiluana mine in the south-
western African country – in which Trans Hex holds a 33% stake and acts as
operator – would now be looking at third party finance to take the asset forward.

He said Somiluana’s entire production of 42,000 carats during Trans Hex’s 2012
financial year was mined with pilot production equipment.

Delport made it clear Trans Hex would follow the lead should its partners decide to
contribute from their own pockets after all. Trans Hex had cash reserves of R347m
at the end of March.

“The latest contract [between the partners] said we’ll do funding equal [to each
one’s shareholding],’ said Delport. “They don’t see their way clear, so we don’t see
our way clear.

“It’s not that the partners don’t have money,’ he added. “They have deep pockets
but very short arms.’

Delport also didn’t came across convinced that the project would find third-party
funding easy to come by, predicting that Somiluana’s production in 2013 would not
exceed that of last year.

“Third-party finance is difficult to get in South Africa and even more difficult in
Angola,’ he said.

The impasse over Somiluana comes as Trans Hex continues to try to exit from
Luarica and Fucauma, two discontinued assets in Angola. The Angolan state revoked
the mining rights for these operations in October 2011, as no mining activities have
been performed there since 2009.

The parties have been negotiating over the termination of the mining agreements
since 2009, with the remaining issues seemingly evolving around each party’s share
for the assumption of liabilities. Trans Hex initially took an impairment of R460m,
which included R346m owed by other JV partners to Trans Hex.

According to Delport, Trans Hex now has a right to set-off a portion of the amounts
owed by the other JV parties to Trans Hex against its pro-rata share of certain of the
JV’s liabilities. This set-off has so far resulted in a reversal of impairment of R84.6m.

Delport cautioned it could take some time before the issue was finally settled. “Just
as we are stubborn, our partners are also stubborn,’ he said.

The agreements over Fucauma and Luarica were struck in 2001, when Trans Hex
first ventured into Angola. Delport inherited the troubled agreements when he was
appointed CEO in 2003 and has been battling to sort it out ever since.

NAMAQUA

Delport said Trans Hex’s negotiations over the sale of De Beers’ Namaqualand has
reached a “sensitive stage’, with both parties agreeing to carry on negotiating until
end-July, at least.