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Russia
While year-end results are yet to be announced, Russia’s largest diamond miner ALROSA reported a 48 percent year-on-year increase in revenue in the first nine months of 2016, totaling $4.2 billion. Notably, the company’s net profit in the same period tripled year-on-year to reach $1.9 billion. This increase, as the company President Andrey Zharkov shared in a recent televised interview on TV channel Russia 24, secured enough liquidity for the miner to be able to offer its shareholders dividend payments amounting to as much as 50 percent of its net profit in 2016. Speaking of the overall market situation and the company’s production policy, Zharkov said that after the pipeline meltdown in 2015, which prompted the miner to respond by cutting production by about 6 percent to help stabilize the situation, the market was recovering quite well in 2016, and this may allow ALROSA to boost production in 2017. “The plans we are making now include a possible 5 percent rough output increase,” he said. Overall, Zharkov believes that global rough production is likely to grow by about 10 percent in the next two to three years. This growth will be driven, in his opinion, by a number of diamond mining projects transitioning from the investment to production stage. ALROSA itself is planning to launch production at the Verkhne-Munskoye diamond field in Yakutia by the end of 2018. Discovered in July 2007, the Verkhne-Munskoye counts among the richest deposits in Russia and the world, with estimated total reserves of 40 million carats and the average diamond ore grade of .65 carats per ton, in line with ALROSA’s most recent assessment according to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC code). Earlier Zharkov shared during the Eastern Economic Forum in Vladivostok in 2016 that the company expects its Angola-based project Luaxe to begin production in three to four years’ time.
Zharkov also announced the company’s intention to run regular international rough and polished auctions at the Vladivostok-based Eurasian Diamond Center (EDC), which launched in September 2016. “In 2017, we are planning to hold auctions of extra-large rough and polished at least on a quarterly basis,” he said, “and we’ll continue running small-sized gem-quality and industrial-grade rough auctions in a testing mode throughout the year, once every month or two.” To date, the miner has run two EDC-based auctions. The first EDC trading session that took place in the run-up to the EDC’s official opening raised a total of $14.6 million in sales of extra-large rough — from 10 carats and up — and a total of $3.62 million in sales of ALROSA-produced extra-large and fancy-colored polished. Further, the miner raised another $5 million in sales of small-sized gem-quality and industrial-grade rough at the trading session that took place on November 21 through 25. The auctions were held to probe the region’s potential demand for the company’s wide range of products and were assessed by ALROSA management as successful. According to Zharkov, the EDC trading sessions may raise over $150 million in sales in 2017. “Over the next two to three years, we would like to at least double our trading volumes in the Asia Pacific,” he added. As the company’s Vice President Rinat Gizatulin further elaborated in a press release, the miner also “needs Vladivostok as a trading platform because, sadly, we expect a certain slump in domestic demand for our rough in 2017 and 2018. Russian buyers traditionally accounted for a 10 percent share in our sales; and now we hope to redirect some of this turnover east.”
On December 8, ALROSA held its annual meeting with the company’s long-term clients, where it introduced the trading sessions schedule for 2017 and announced new developments to take place in its trading activity. In 2017, the company plans to hold all competitive bidding online using ALROSA’s proprietary e-auction system that was tested in 2016 and received positive feedback from participants. In addition to announcing regular trading sessions in Vladivostok, the miner also revealed plans to resume trading its extra-large rough and polished in New York City. An ALROSA representative office is on track to open in Mumbai, India. The company also informed its long-term clients of the procedures pertaining to preparation for its new long-term contract period that will begin in 2018. In the wake of the meeting, the company announced yet another of its initiatives to rebrand all of its internationally based trading subsidiaries and affiliates from ARCOS to ALROSA. This is part of the company’s continued effort to create a single corporate brand that would be recognizable worldwide. Article from the Rapaport Magazine - January 2017. To subscribe click here.
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