Diamantino Azevedo lures private investors

2019-02-14T12:31:25+00:00 October 24th, 2018|In Conversation With|

Earlier this year, Leon Louw attended a mining roundtable with an Angolan delegation where Diamantino Pedro Azevedo, the new Minister of Mineral Resources, was the keynote speaker.

Diamantino Pedro Azevedo, Angola’s Minister of Mineral Resources and Petroleum. Image credit: Leon Louw

Diamantino Pedro Azevedo, Angola’s Minister of Mineral Resources and Petroleum. Image credit: Leon Louw

Late last year, Angola appointed a new Minister of Mineral Resources. A mining man to the core, Diamantino Azevedo made no secret of the fact that he is on a mission to place mining squarely on the map of Angola. Since then, several private investors have tentatively entered the Angolan market.

Azevedo’s long list of qualifications, accomplishments, and experience includes a PhD and a master’s in mining engineering from the Technical University of Berlin and the Mining Academy of Freiburg, Germany. He studied geology at the Agostinho Neto University in Luanda, Angola, and was one of the first students at the National Oil Institute of Angola (INP), where he studied drilling and oil production.

Azevedo held various positions in the Ministry of Geology and Mines of the Republic of Angola, including advisor to the minister; national director of International Affairs and deputy president of the Mining Development Fund; general director of the Southern and Eastern African Mineral Centre, Dar Es Salaam, Tanzania; chairman and CEO of Ferrangol’s board of directors; and non-executive chairman of several mining companies in Angola. He became Angola’s Minister of Mineral Resources and Petroleum in October 2017.

The following is an extract from his speech.

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Even if I am minister, I don’t see myself as a politician and I am not good at it. I’m a mining engineer, and I have been involved in mining my whole adult life. When I was studying to become a mining engineer in Germany, I had many arguments with my professor about beneficiation. He tried to convince me that beneficiation of minerals is not always that easy for a country, and that you first had to start with exploration, then development, then mining, before you could beneficiate. We discussed this matter for almost five days, as I believed otherwise.

Then we discussed the reasons why Angola had state-owned mining companies, and he argued that it is not good for a country’s mining industry to be state-owned. He tried to convince me then that the government first and foremost task is to regulate and devise policies and not become involved in the actual mining of minerals. Although we didn’t agree, we are still friends today.

For the past few years, I have actively been working with other colleagues present here to set up a new mining code for Angola. It is extremely important for the country to have a new mining code and to do some work on exploration and impart knowledge about the huge potential of the country.

To be in government is not an easy task. It is much better to be a mining engineer. To be a politician is really not that great, there is way too much protocol and I have a bodyguard now! However, I feel proud to be part of the government because there are 25-million people in Angola and they asked me to be there, so I am trying my best.

One of the first things I did was to appoint engineers, geologists, and economists to work with me in the state-owned companies and in the ministry. This group of people are helping me to understand politics and to change the mindset of the world about the Angolan mining industry. Our president appointed me and combined the Ministry of Mines and Geology and the Ministry of Oil and Gas (which was previously separated), so I am now the minister of both.

We also changed the leadership of the four state-owned oil companies: Sonangol, Endiama, Sodiam, and Ferrangol. There are many Angolans with a lot of skills working outside the country. We need these people to return and work in Angola again. Many of the geologists have returned and we want to appeal to all those Angolans with industry knowledge to come back and assist us in talking to investors and to understand their needs. We have to try and change the culture of these big state-owned companies. Sonangol has more than 10 000 employees and they produce more than 1.6 million barrels of oil per annum. The private sector needs to become involved. However, we cannot change things in a few months as we will have to change or adapt legislation. What is needed is for people to sit down and discuss how we will change the current environment.

New legislation is needed for the gas industry, which is obviously associated with oil. There are big gas deposits in Angola, but there is just one refinery that caters for only 20% of our needs, and that is not great. If Angola wants to focus on beneficiation, we need to change this, and build more refineries. Our refineries need to cater for at least 80% of our needs. Within two months after we opened tenders to set up more refineries recently, we had 62 companies interested. These companies all met with us to discuss what is needed, and we expect to have a second refinery within the next four years, which will then cater for at least 50% of our needs.

In our view, Sonangol, our petroleum and gas state-owned entity, should only be an operator and not an owner and operator. What is needed are independent oil agencies to own the concessions. The vision is exactly the same for the solid minerals mining industry. At the moment, the state-owned companies own, award, and operate the concessions.

Angola’s three state-owned mining companies

Endiama holds the exclusive rights to research, exploration, mining, trading, and polishing of Angolan diamonds. For investors seeking to share in the wealth of the Angolan diamond industry, there are five available kimberlitic projects, namely Camafuca-Camazambo, Mulepe, Chiri,Sangamina, and Tchegi, as well as four alluvial concessions at Muanga, Cabuia, Sanjungo, and Muriege.

Sodiam is the national diamond trading company. It was declared a state-owned enterprise (SOE) in 2017, and a new board of directors appointed. Sodiam is responsible for marketing Angolan diamonds internationally and is in the process of reviewing the current selling model to ensure a more competitive model that will in turn attract investment into the diamond mining sector.

Ferrangol is tasked with unlocking the mineral to attract strategic partners with the know-how and funding to develop a number of pipeline projects in the iron ore, manganese, and gold space. It currently has three major projects: the Kassinga iron and steel project, the Kassala Kitungo iron ore project, and the Mpopo gold project. The Kassala Kitungo iron ore project is an advanced conceptual study that indicates total resources of 217 million tonnes (Mt). Based on an iron ore grade of 30% and a stripping ratio of 1:18, the annual production estimate is six million tonnes per annum (Mtpa).

The Mpopo gold project is a joint venture between Ferrangol and private investors, aimed at developing an opencast mine near Jamba with the first phase expected to produce some 22 000 ounces per annum. It is the first gold project in Angola since independence.

Ferrangol is also actively seeking investors in Geoangol, a state-of-the-art geo-analytical lab opened in 2015.

At the moment, Endiama and Sodiam are concession holders, which (in my eyes) is wrong; ministries should not hold concessions. I don’t want that, and I don’t like that. Power is only good if you share it and I want the ministries only to do the policies and regulate the industries. The concession owner should be an independent entity. Endiama is looking to exploit diamonds, Ferrangol is looking to iron ore, so we want to form partnerships and joint ventures with investors. The big problem in Angola is that we do not have enough knowledge and we do not have enough financial capacity. We need companies that know the mining industry to come and work with us. Not to come and assist us, I don’t like that; they have to come and do business in Angola, and come to make profits, and share those profits in the form of paying taxes.

When doing exploration, a company can hold on to an exploration licence for five years before reapplying for another year, and then another. But they cannot hold an exploration license for longer than seven years. You have to present feasibility studies, proven reserves, and do an environmental impact assessment. A mining company will pay a maximum of 5% royalties for diamonds and gold. For other minerals it starts from 1 to 5%, in addition to profit taxes of 25%. In think it is a fair system, and therefore we do not plan to fiddle too much with this part of the regulations. We are open to discuss the mining code with investors though, and if you can convince us and have a solution that will benefit all of us, we will have a discussion and look at your suggestions.

Angola is a rich country. We have good conditions for mining and will try to create the right conditions for you. We are more known as an oil and diamond country; however, what many people do not know is that in the 1960s, Angola was exporting almost six million tonnes per year of iron concentrate. In 1967 and 1968, there was a Japanese ship with 156 000 tonnes of iron ore — that was not a small thing in that time. Today, of course, there are massive ships, but at that time, it was really big. In comparison to other African countries, Angola has good road infrastructure for mining. The country has done a lot of work in the power sector, but we are working on a new gas plant. Second to the DRC, Angola is the country with the best water resources for hydropower development. We are focused on power; we know how important it is for mining.

If you really want to come to Angola to invest in exploration or exploitation, there are several deposits ready to be developed, like copper, iron ore, gold, manganese, and diamonds. There are various brownfields projects and even projects in feasibility studies.

Maybe you have heard about the bureaucracy or corruption in Angola, but we are working on changing that. I don’t know the word ‘corruption’. In my home language, the word corruption doesn’t exist; we don’t know that word. Someone brought that word to Angola; we are not corrupt. In the new government, we don’t like that word. If you enter Angola and someone asks you for something, you just tell them you are not corrupt.

Another important point to remember is that we don’t want too much automation in Angola. We have to create jobs in our country. If mining companies come into Angola with all this new technology and automation where there are no workers, and all you see is vehicles and trucks without drivers and operators, like in Australia, we don’t want you in Angola. We want companies to enter Angola and create as many jobs as possible. Maybe this will happen in the future, but at the moment we need people to work.

Angola has many young people, and Angolans like to work. Our official language is Portuguese, but all Angolans speak two or three languages: Portuguese, English, a bit of German, French, Arabic, Mandarin. We want companies to invite Angolans to be partners in the business. Maybe to have a 10% share in the company, but they have to be real partners and not sleeping partners. We don’t want foreign investors to be afraid to join Angolans and to do business with them. But just a warning, these companies should be private Angolan companies, not any officials from the ministry or state-owned companies. We will not accept that.