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Russia
By Svetlana Shelest
Russia’s top diamond miner ALROSA released preliminary production and sales results for the first quarter of 2017, reporting a 9 percent year-on-year increase in rough output and an almost 17 percent year-on-year surge in sales. According to the company’s report, it produced 8.9 million carats during the first three months of the year and sold 14.1 million carats, including 11 million carats of gem-quality rough that traded at an average price of $117 per carat, and 3.1 million carats of industrial-grade diamonds that fetched an average price of $7 per carat. The miner’s estimated revenue from rough in the first quarter amounted to at least $1.3 billion, while revenue from polished totaled at least $32 million. Of this revenue, $566.6 million came from the miner’s rough sales in March, which showed a 1 percent increase year-on-year. Yet another $12.9 million was raised at ALROSA’s most recent mid-March rough sales at the Eurasian Diamond Center (EDC) in Vladivostok, where the miner sold 21,000 carats of gem-quality rough at an average price of $380 per carat and 440,000 carats of industrial-grade diamonds. The miner recently announced its plan to auction 2 million carats of rough and polished via the EDC in 2017, which would raise an estimated total of $73 million.
On March 15, a specialized customs station was launched into operation at the EDC in a move to reduce the processing time of rough and polished at the state border to two to three days. This is the first and so far only diamond customs station in the Russian Far East set up with the purpose of facilitating development of diamond trade in the region.
On April 20, ALROSA’s new president Sergey Ivanov, who took office just over a month ago, held a meeting with the company’s long-term clients in order to discuss trends in the market. He confirmed that the company is going to keep its best practices unchanged, among them a system of three-year-long contracts with selected clients. At the moment, ALROSA has 56 long-term clients, and the new contract period will extend from 2018 to 2020. The president added, however, that in order to “improve the company’s sales policy to account better for the customers’ opinions and market situation,” the miner will be revising the assortment and volume of rough on offer on an annual basis within the contract term.
Despite the government’s announcement earlier this year that both ALROSA and the country’s number one polisher Kristall Smolensk may see its stocks auctioned off between 2017 and 2018, Deputy Prime Minister and Presidential Envoy to the Russian Far East Yuri Trutnev said, in a follow-up interview to the Russian press during his working visit to India, that he sees “no point in hurrying the ALROSA sale.” As Trutnev pointed out, 25 percent of the diamond miner’s stock is held by the government of Yakutia; yet another 8 percent belongs to Yakutia’s 33 districts, and their sale is prohibited under Yakutia’s law. With the Russian government currently holding only 33 percent of the shares, after ALROSA’s second public offering (SPO) that took place in 2016, selling off a further 6 percent or 8 percent of the federal government-controlled stock will make the company “essentially Yakutian,” according to Trutnev, “which would make little sense.” Regarding the possible privatization, Kristall Smolensk’s general director and two-time president of the International Diamond Manufacturers Association (IDMA) Maxim Shkadov pointed out in a message to Rapaport Magazine that the Federal Agency for State Property Management that controls Kristall’s stock said it currently had no plans to send the polisher’s stock into free float. “In our opinion,” said Shkadov, “our stock can only be of interest to a strategic investor, which in Russia’s case is ALROSA, as it would be logical for a rough producer to be working closely with a rough manufacturer in order to stay alert to all the changes and trends in the market.” He also added, “ALROSA recently saw a change in leadership, and we hope to find a common ground with the new management.”
On April 4, in a press statement summing up the results of a working meeting with president of Yakutia, Ivanov indicated that ALROSA may be open to changes in its policies, saying, “as life goes, strategies change.” He also mentioned that a meeting initiated by Trutnev, aimed at finding ways to facilitate recovery of Russia’s polishing industry, took place the previous week and that a number of decisions have been made to that effect. Trutnev’s press service has not issued any statements on the specifics of these measures as yet.Article from the Rapaport Magazine - May 2017. To subscribe click here.
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