RAPAPORT... ALROSA is predicting that it will recover 102.3 million carats of diamonds in the next three years and it will achieve rough diamond sales of $9.6 billion during the period, according to a financial model for the group through 2012 revealed after a meeting of its executive committee. The Russian government-owned diamond monopoly had sales of $2.2 billion in 2009, indicating that it expects sales to increase 31 percent to reach its projected average for the next three years.
ALROSA’s forecast would result in an accumulated net profit of $756 million (RUB 22.05 billion) through 2012, which it said would help reduce its debt. The company plans to decrease its debt by $524 million (RUB 15.3 billion) to $3.1 billion (RUB 90.37 billion) by the end of 2012.
Mining operations will continue at its Udachnaya, Komsomolskaya, Aikhal, Jubilee, Mir, International and Nyurbinskaya kimberlite pipes through the three-year period, according to the model. By 2012, the Aikhal and Mir underground mines are expected to reach their capacities of 500,000 and 1 million tons of ore per year, respectively, while the Udachny underground mine is forecast to produce its first 25,000 tons of ore in the same year.
Israel’s Trade Minister to Help with Diamond Sourcing
Benjamin Ben Eliezer, Israel’s minister of Industry, Trade and Labor, pledged to assist the local diamond industry in sourcing rough diamonds directly from producing countries at a meeting held at the Israel Diamond Exchange (IDE). Ben Eliezer also noted signs of recovery for the industry, following the ministry’s report of a 55 percent rise in polished exports during the first quarter of 2010, but added that it is still far from attaining its previous peaks.
Lazare Kaplan Estimates Sales Drop
Lazare Kaplan International (LKI) notified the Securities and Exchange Commission (SEC) that it would be late in registering its third-quarter fiscal report for the period that ended on February 28, 2010. LKI anticipates that the quarterly report will reflect net sales of approximately $28.9 million compared with $42.2 million one year ago. LKI received a deficiency letter from the New York Stock Exchange (NYSE) regarding this failure to file, with the NYSE reminding the retailer that the timely filing of its financial reports is a condition of maintaining its listing on the exchange. In January, NYSE accepted LKI’s plan to regain its compliance by May 31 of this year.
RBC Foresees Rough Diamond Price Stability
Analysts at RBC Capital Markets expect rough diamond prices to remain stable in the short term as by now, mining companies should have completed their restocking, which should result in major diamond producers supplying more diamonds to the market, according to the firm.
Des Kilalea, an RBC analyst, stressed that the gains that rough prices have made in the past year should also bring significant gains in terms of revenue and cash flow for all diamond miners in 2010. Kilalea favors companies that are currently engaged in production or are near production and singled out Petra Diamonds, Harry Winston and Gem Diamonds as his preferred stock choices within the sector. Kilalea noted that the two largest producers, De Beers and ALROSA, “both appear wary of pushing prices too hard, which is leaving customers with good premiums on what they buy.”
Court Approves Sale of Zimbabwe Diamonds
The Zimbabwe High Court approved the sale of 300,000 carats of rough diamonds from the country’s Marange diamond fields, the country’s state-run media reported, according to AFP. The government initially halted this sale pending its authorization by local authorities and the KP. The diamonds belong to British-owned African Consolidated Resources (ACR), AFP said. Mines minister Obert Mpofu reiterated the government’s determination to defy the KP, even though Zimbabwe is a member of the group. Mpofu also claimed that the “country’s detractors” were manipulating the process in order to prevent Zimbabwe from benefiting from diamond sales.
In addition, Zimbabwe’s Ministry of Mines and Mining Development has again barred a parliamentary team from touring the fields, marking the second time in 30 days that the committee has been blocked from touring Marange, the Zimbabwe Standard reported. This refusal came despite the fact that the team had been cleared by the country’s Ministry of Home Affairs and the police. — Additional reporting provided by Acquire Media.
Article from the Rapaport Magazine - May 2010. To subscribe click here.