Angola's Endiama sees higher diamond output in 2008 (Source: Reuters)

Thu Feb 7, 2008 7:38am EST

By Paul Simao

CAPE TOWN, Feb 7 (Reuters) - Angola's state-owned diamond firm Endiama said on Thursday it expected to produce more than 10 million carats in 2008, continuing a robust expansion that began after the end of a civil war in 2002.

The Luanda-based firm produced 9.7 million carats in 2007.

"We are forecasting production of more than 10 million carats this year," Tiago Dias, head of strategic planning and investments for Endiama, told Reuters in an interview at the Indaba Africa mining conference in Cape Town.

Dias said most of the production would again come from Luanda Norte and Luanda Sul, the northeastern provinces that are the traditional diamond-producing areas in the country, though he added that exploration was proceeding elsewhere.

Angola, Africa's third largest diamond producer and the world's fifth biggest in terms of value, has explored only about 40 percent of the territory believed to have potential for diamond mining.

The provinces of Bie, Malanje and Uige have been identified as among the areas that should be explored.

Arranging financing for exploration of diamonds is one of the key challenges facing Endiama and the Angolan government, which is presiding over an oil-fuelled economic boom.

Endiama's efforts to expand exploration is seen as key to diversification of the country's economy from the oil sector.

The lion's share of Angola's diamond production comes from alluvial deposits -- stones found in and around rivers -- but Endiama has high hopes for major discoveries of gems in shafts of volcanic rock, known as kimberlites.

"The future of the diamond industry in Angola is in the production of kimberlites. We think there is very big potential," said Dias, who predicted that Angola could soon surpass South Africa among the ranks of top diamond producers.

South African mining giant De Beers, 45-percent owned by mining group Anglo American Plc (AAL.L: Quote, Profile, Research), has invested in such a concession in Angola's northeastern region. Other foreign firms have also expressed interest in exploration there.

But kimberlite exploration and mining is a time-consuming and expensive undertaking that has forced Endiama to look to companies such as De Beers and BHP Billiton (BLT.L: Quote, Profile, Research) (BHP.AX: Quote, Profile, Research) for financial and technical assistance.

Poor infrastructure -- Angola's roads, ports and rail links were destroyed during its 27-year civil war -- also remain a barrier to a diamond exploration boom in the southwest African country.

Dias conceded that transportation problems were a concern, though he noted that the government in Luanda was working to build and repair roads, railways and airports.

(Editing by Chris Johnson)

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