New Diamond Mining Regulations Favour Domestic Companies - International Law Office

Alluvial Deposits
Kimberlites
Comment

The Angolan government has adopted new regulations on the granting of diamond mining rights (Decree-Law 36/03). Different principles apply depending on whether the mining rights refer to alluvial diamonds or kimberlites.

The new regulations aim to prevent the illegal exploration of diamonds, thus allowing the Angolan government to increase its revenues from diamond resources. A further goal is to create more favourable conditions for the granting of mining rights to Angolan companies.

Alluvial Deposits

The new regulations recognize that the exploration of alluvial deposits is less expensive and concludes that preferential rights to these deposits should be given to Angolan companies.

The principles established for granting mining rights for alluvial deposits are as follows:

• Mining rights will be granted by the Ministry of Geology and Mines;
  
  
• Preferential rights will be granted to Angolan companies, owned by Angolan citizens;
  
  
• Administrative incentives will be granted to Angolan companies for the exercise of mining rights; and
  
  
• The mining companies or their associates must meet specified financial capability requirements.

Kimberlites

In contrast, the exploration of kimberlites is a long-term project which requires substantial financial investment. Therefore, mining rights should only be granted to companies of sound technical and financial reputation.

The principles established for granting mining rights for kimberlites are as follows:

• Mining rights will be granted by the Council of Ministers;
  
  
• Mining rights may only be granted to companies that can demonstrate the required technical and financial capacity; and
  
  
• ENDIAMA (the state owned concessionaire) must have a minimum 51% interest in all companies to which mining rights are granted, with the remaining 49% to be held by the private investor.

The principles pertaining to kimberlites are only recommendations and exceptions may be permitted on a case-by-case basis.

Comment

Tighter regulation of the diamond mining industry will be beneficial to the country, as it should go a long way towards reducing illegal practices. However, an important issue is whether the new regulations might distort competition between foreign and national entities that wish to enter the diamond mining business. Regardless of the goals, it appears that some of the principles established may be over-protective of Angolan companies, thus creating disincentives to foreign investment.

For further information on this topic please contact Alberto Galhardo Simões at Miranda Correia, Amendoeira & Associados' Lisbon office by telephone (+351 21 781 4800) or by fax (+351 21 781 4802) or by email (Alberto.GalhardoSimoes@mirandalawfirm.com).