Trans Hex (JSE:TSX) is tackling challenges at its Angolan diamond operations to turn a corner in the country with difficult operating conditions within a year, while the company expects to reap the fruit from recovery work in South Africa in the next six months.  

Chief executive officer Llewellyn Delport said after the company, mainly an alluvial diamond miner, announced a loss of R1.5m ($195,421) from continuing operations for financial year 2007 that Trans Hex was now entering a poised for sustainable growth phase as the company has shed loss-makers in the diamond business.

The greatest challenge for Trans Hex was now to increase diamond production in Angola that was mainly suffering due to wet conditions in the country which experienced rain for eight or nine months of the year. Problems experienced at its joint venture operations in the country included the use of dry mining equipment.

However, Trans Hex has now taken operational control at its Fucauma operation (32% interest) in Angola where production fell from 73,000 carats in 2006 to 41,800 carats in 2007 and grade fell from 15 carats/100 m3 to 12ct/100m3.

The company has won operational responsibility of Fucauma for the next four years and has initiated a recovery plan that has already involved the appointment of a general and a financial manager.

Delport said Trans Hex has managed to resolve a number of technical problems at Fucauma, including difficulties with recoveries and its testing and planning on site was at such an advanced stage that the company was relatively confident it was onto a solution to turn the operation around.

He believed Fucauma would be cash positive and profitable by the middle of next year, while its Luana project (33%) in the feasibility phase has proven very special and will become instantly profitable when production starts here.

Bulk sampling tests at Luana has indicated exceptional potential at the project where a 2.3m carat indicated resource and 1.9m carat probable reserve at an average grade of 31ct/ m3 have been defined.

Delport said the company currently had at least the size of the Baken resource in South Africa  in hand, in situ at Luana. In addition, Trans Hex would have a proper diamond facility to explore the rest of the project properly within 18 months.

At Laurica, its most southern property in the northeast of Angola owned 35% by Trans Hex, the company has seen a 16% increase in production to 88,500 carats over the last year and a sustained grade of 13ct/100m cubic as well as a 40% decrease in its operating loss. The company is now setting out to do neglected exploration work here ahead of mining and plans to fully turn this Angolan business around as well.

In South Africa, which accounted for $109.7m of the group's $128.8m sales in the 2007 financial year, Trans Hex expects to sustain production and keep costs stable as its Bloeddrif  operation contributes to production again, efficiencies are improved and diamonds fetch higher prices.

The Bloeddrif operation next to the lower Orange River, was transformed to a large-volume, low-cost mining operation during a shutdown last year and is expected to add to the company's bottomline again by the end of August this year.

The mine life has been extended to in excess of 20 years as higher volumes and lower costs have turned a large portion of previous uneconomical resource into probable reserve. Gravel treated has been increased from 28.000 m3to 40 000 m3 and operating costs have been cut from R129/ m3to R70/ m3.

Trans Hex's South African operations produced 107,305 carats in the year compared to 129,950 carats in 2006. Baken accounted for production of 71,856 carats.

The operation (Baken), another lower Orange River project, is expected to stabilise at is average reserve grade of 1.7carats/100 m3over the rest of its eight year life, after it suffered from temporary lower grades (1.63/100 m3) in the last quarter. This mine life has also been extended to remain at eight years with the help of lower unit cost, higher diamond prices and exploration work.

Trans Hex's loss of R1.5m ($195,421) in financial 2007 compared to a profit of R51.8m ($6.74 million) in the previous year was mainly due to the temporary shutdown at Bloeddrif and lower grades at Baken, but the company said its R41m ($5.34m) headline earnings in the second half on a first-half loss of R32m ($4.16) has set the course for the future.

Headline earnings per share was 8.6 cents (1.12 US cents) compared to 31.2cents (4 US cents) in 2007, but the company still declared a dividend of 5 cents (0.65US cents) per share.