AFRICA SPECIAL — United Reef finds risk and reward in Central African Republic

Political instability is a risk that mining companies must be prepared to take in many parts of Africa, as United Reef (URP-T) discovered earlier this year when insurgents captured part of Bangui, the capital of the Central African Republic (CAR).

Having operated in the CAR since 1993, the emerging diamond producer has witnessed the country’s transformation from dictatorship to democracy, as well as its attempts to introduce market reform. Transformation for the former French colony, however, has been difficult.

January’s uprising was triggered by the government’s inability to pay its army and civil servants. Insurgents held part of Bangui for seven weeks, and demanded the ouster of President Ange-Felix Patasse, who rose to power in 1994 following the country’s first free election in more than a decade.

French troops reclaimed the capital on Jan. 5 using helicopter gunships and armored personnel carriers from its two military bases in the CAR.

Although the company’s operations were barely affected during this latest insurrection (staff at the Bangui office worked half days until the stand-off ended), a similar uprising last summer forced United Reef to evacuate employees and shutdown operations there for several weeks.

Notwithstanding such unrest, Ken Johnson, United Reef’s vice-president, says finding people willing to work in CAR is not difficult. “There’s a romance to working in Africa,” he says.

Johnson notes similarities between the CAR today and Latin America a few years ago. Ghana, he says, is where African governments look to for inspiration. “Talk to mines ministers or other government representatives — they’re all following the Ghanaian model,” he says. “We’re going to see prosperity move in from the west coast towards Zaire, the Congo and the CAR.” He predicts an eventual supply shortage, owing partly to efforts by De Beers Consolidated Mines to create new end-markets in the Far East and South America.

Diamond mining is a vital source of hard currency for the CAR, one of the poorest nations in Africa. Indeed, the country’s main export is diamonds, the outside sale of which accounts for half the value of the CAR’s exports. From United Reef’s operations, the government receives a 4.5% royalty on the gross value of diamond exports and a 3% royalty on gold exports.

In addition, United Reef is one of the largest private employers in the landlocked country, employing 87 Central Africans at its diamond operations and another 22 at its gold property. Labor costs were cut virtually in half in 1994 when the French-backed CFA franc was devalued 50% relative to the French franc. (The former is the unit of currency circulated in member nations of the Communaut Financire d’Afrique.)

Gem quality

United Reef owns two alluvial diamond properties in the CAR: the Bamingui and Boungou. The properties lie along rivers in the western edge of the Mouka Ouadda plateau, a Cretaceous sedimentary sequence 650 km northeast of Bangui.

Gem-quality diamonds are found under four metres of overburden in a gravel horizon lying directly on bedrock.

The Bamingui property totals 526 sq. km. and contains several river systems, including the Bamingui and Bangoran. The Bamingui River site, where United Reef is currently recovering diamonds, has an estimated resource of 160,000 carats grading 11 carats per 100 tonnes, or 0.11 carat per tonne. The resource at the Bangoran site is estimated at 100,000 carats of 9 carats per 100 tonnes, or 0.09 carat per tonne.

At Boungou, 150 km south of the Bamingui property, United Reef is exploring two alluvial diamond deposits.

The firm operates a diamond recovery plant at Mbala, on the Bamingui site, that can process 30 tonnes of gravel per hour. The plant also has a circuit for recovering gold concentrate.

In 1995, the plant and other heavy equipment were flown in from North America. Since then, the company has been shipping supplies by marine transport to Douala, Cameroon, then overland in the CAR. The entire process can take up to two months.

Pilot diamond mining and processing at the Bamingui site in 1995 recovered 3,300 carats, which were sold in Antwerp at an average price of US$181 per carat. Since then, an additional 2,400 carats have been recovered and sold at an average price of US$183 per carat.

Working and social conditions are difficult in the CAR. During the dry season, work begins early to avoid stifling afternoon heat, whereas operations must be moved to higher ground during the wet season.

Health risks

Health risks in the CAR include malaria, particularly during the wet season, and acquired immune deficiency syndrome, which has affected the country’s population growth rate. A French-trained doctor works on-site at Mbala.

United Reef has also learned to co-exist with the country’s artisanal diamond miners, who number up to 40,000. The company contracts them to mine areas with a resource too small for mechanical exploitation, or where the resource fails to meet the firm’s cutoff grade. United Reef also supplies the artisanal miners with equipment such as pumps on a rental basis, deducting the cost from their earnings.

“You can’t go into these countries and just force the artisanal miners out,” Johnson explains. “You would pay in the long run. You’ve got to find a way to live with them.”

United Reef holds a 50.1% interest in the diamond properties, which are a joint venture with South African firm Trans Hex Group, which holds 29.9%. CAR nationals hold the remaining interest.

United Reef is the operator under the direction of managers from both companies, with technical direction provided by Trans Hex. United Reef began a $2.5-million exploration program last summer, funded entirely by Trans Hex.

United Reef also manages exploration at the Roandji gold concession, which is owned by sister company Asquith Resources (ASQH-C). The concession, 300 km northeast of Bangui, comprises six gold prospects within 2,000 sq. km. of mineralized saprolitic bedrock. Surface and airborne magnetic surveys, as well as geological and geochemical surveys, have already been performed.

Drilling at the Agoudou Manga prospect in November 1996 produced encouraging results, and more drilling is scheduled to begin this month. United Reef retains a 3% net smelter return royalty on the property.

United Reef plans to expand this year into neighboring countries such as Chad, Cameroon and Zaire, using Bangui as a base. The company may also enter into more joint ventures with South African mining houses.