Diamond mining began in 1912, when the first gems were discovered in a stream in the Lunda region in the northeast. In 1917 Diamang was granted the concession for diamond mining and prospecting, which it held until independence. Control over the company was obtained by the government in 1977. In April 1979, a general law on mining activities (Law 5/79) was enacted and gave the state the exclusive right to prospect for and exploit minerals. Accordingly, a state diamond-mining enterprise, the National Diamond Company (Emprêsa Nacional de Diamantes--Endiama), was founded in 1981 and acquired the government's 77 percent share in Diamang. UNITA, which selected the diamond mining industry as a principal target, soon crippled mining efforts, and by the beginning of 1986 the two foreign companies involved in servicing and operating the industry pulled out of Angola. By mid-1986 Diamang was formally dissolved, leaving large outstanding debts.

Attacks by UNITA on mining centers, disruption of transport routes, and widespread theft and smuggling caused diamond sales to fall to US$33 million by 1985 and to an estimated US$15 million in 1986. In late 1986, Roan Selection Trust (RST) International, a subsidiary of the Luxembourg-registered holding company ITM International, began mining in the Cafunfo area, along the Cuango River, the site of Angola's most valuable alluvial diamond deposits (see fig. 9). Mining had been halted there for more than two years after UNITA attacked the mining camp in February 1984, kidnapping seventy-seven expatriate workers and severely damaging the mining equipment. After the subsequent kidnapping of a British expatriate in November 1986, defense forces in the area were strengthened, allowing the resumption of mining operations. In 1987 production there averaged 60,000 carats, and about 120,000 carats were produced in the other two mining areas, Andrada and Lucapa. By 1987 diamond production had risen to 750,000 carats, compared with less than 400,000 carats produced in 1986. The 1987 figure, however, was still not much more than 1985 production and only a little over half of 1980 output (see table 9, Appendix A).

This increase in production has benefited from the rise in the price per carat received for Angolan diamonds. The resumption of mining in the area along the Cuango River and a decline in theft of stones of higher value in the Andrada and Lucapa areas have increased the value of output. Furthermore, Endiama, which was responsible for overseeing the industry and for holding monthly sales, has benefited from a general improvement in the world diamond market as well as dealers' willingness to pay higher prices in the hope of securing favored treatment in the future. As a result, average carat value established by the monthly sales in 1987 exceeded US$110, more than twice as much as in 1985 (US$45) and at its highest level since 1981 (US$119).

In 1987 Endiama signed a two-year mining contract with the Portuguese Enterprises Corporation (Sociedade Portuguêsa de Empreendim9ac imentos--SPE), a Portuguese company that has retained a large number of Portuguese technicians previously employed by Diamang. Former Diamang shareholders founded SPE in 1979 after Diamang was nationalized. The precise terms of the contract were not made public, but it was thought that the company would undertake new prospecting, which had been at a virtual standstill since independence. Through a subsidiary, the SPE also was to help Endiama with diamond valuation, which a British company had been carrying out. In December 1987, Angola also signed an agreement with the Soviet Union to cooperate in mining diamonds and quartz. Under the terms of the agreement, the Soviet Union was to participate in mining enterprises and was to draw up a detailed geological map of Angola.

In 1987 the government also began to revise the 1979 mining law to encourage new companies to invest in the diamond-mining industry, in particular to resume prospecting. Among the companies believed to be considering investing in 1988 was Britain's Lonrho conglomerate, which had taken an increasingly active interest in Angola in the late 1980s. The South African diamond-mining giant DeBeers was also interested after it lost its exclusive marketing rights for Angolan diamonds at the end of 1985 because of government suspicions that DeBeers had devalued Angolan diamonds. DeBeers has expressed interest in studying the kimberlite pipes (deep, subsurface deposits), which, because of the depletion of the alluvial deposits, were thought to represent the future of the Angolan diamond industry.

Data as of February 1989