RAPAPORT... The first round of hearings on ALROSA’s appeal to the European Court (EC), which seeks to regain the right to sell to De Beers after 2008, is due in early October, and the decision could follow within six months, according to ALROSA President Alexander Nichiporuk.
Nichiporuk said he is hopeful of a favorable outcome. “In the view of our lawyers, we have a good chance to win the case,” he said on September 18, according to Reuters. “It will be a fast appeal case, with two or three court sessions.”
While awaiting the verdict, ALROSA plans to boost cooperation with De Beers in other areas.
“The EU decision covers trade, but those production and exploration plans that we have mapped out will be implemented,” Nichiporuk said.
In early September, ALROSA signed a memorandum with De Beers on joint prospecting in Russia and Africa.
ALROSA sees itself primarily as a seller of rough. “When you cut rough diamonds, you don’t get much added value,” Nichiporuk said, according to Reuters. “Processing rough diamonds is a waste of time and, therefore, money, for us. Cut diamonds do not sell as quickly as rough.”
Third-largest Russian Diamond Purchased by StateGokhran, the government agency in charge of Russia’s state gold and gem deposits, has purchased a 298.48-carat diamond for the state collection from Nizhne Lenskoe, a Yakutia diamond mining company.
The diamond, dubbed Tvorets —“Creator” in English — is the third-largest diamond found on Russian territory. The largest, named XXVII Communist Party Congress, which is 342.5 carats, was mined in 1980 in the Mir pipe. The second-largest, the 320.65-carat Alexander Pushkin, was discovered in 1989 in the Udachnaya pipe. Though smaller, Tvorets excels these two diamonds in color, according to Alexander Akhpolov, department director of the Russian Finance Ministry. Tvorets was found in a placer deposit alongside the Billyakh River in June 2004.
Vladimir Rybkin, head of Gokhran, sealed the sale of Tvorets with Vladimir Kychkin, general director of Nizhne Lenskoe, on September 11. Rybkin refused to disclose the price paid, but hinted it was several million dollars, but less than $10 million. Rybkin also said that this year Gokhran could be offered a few more diamonds of similar quality and, possibly, size. According to Russian law, Gokhran has priority in the purchase of unique gems discovered in the Russian Federation.
Tvorets will join the sizable gem collection of the Russian Federation and eventually will be available for public viewing as part of the Diamond Fund exposition in Moscow’s Kremlin.
Kristall Smolensk Introduces Processing On CommissionKristall Smolensk, the state-owned diamond cutter, is introducing “processing on commission” for Russian companies. Previously, Kristall rarely accepted rough for processing on commission, but now, it has high hopes for the new service.
“Our position in the processing market is strong,” said Nikolay Afanasiev, marketing and sales director of Kristall Smolensk. “We can take on additional processing of up to 10,000 carats a month.” The company says it will accept diamonds sized 4 grainers and up, with a turnaround time of about two months.
Currently, Kristall plans to work only with companies registered in Russia, due to complicated legislation and customs procedures in processing on commission for foreigners.
“The difficulty with foreign companies is that, since we do not own the rough, we must process it under Customs’ control,” Afanasiev told RDR. “These routine procedures are very time consuming and expensive.”
However, this is unlikely to become a major hurdle for the program, since many foreign companies that trade diamonds with Russia establish a local entity anyway. Eventually, Kristall could start working with foreign clients directly, according to Afanasiev. There are several options, including purchasing rough from a foreign client with deferred payment, and selling it back upon processing.
Kristall has relatively low expenses for its cutting quality, and the program could become a convenient loophole for diamond exporters to bypass Russian export quotas for rough without establishing their own diamond cutting plant, some experts say.
Lev Leviev Buys a Diamond Field, Delves Into Gold MiningLev Leviev’s Uralalmaz purchased rights to develop the Bolshe Shugorskoe diamond field in Russia’s Perm region for 4.4 million rubles — $163,000 — according to Kommersant. “It’s a fairly small field, with low gem content per cubic meter of ore,” Roman Golikov, Uralalmaz board member, told the Russian daily. “In the rest of the world, fields like this one are not economical. But we have to work with such fields because the resource base in the area is exhausted.” Development of the field is estimated to cost approximately $1.5 million. Mining could start in about three years’ time.
Leviev could also become one of the ten biggest gold miners in Russia, business daily, Vedomosti, reported. By 2010, Leviev could mine about six tons — more than 190,000 ounces — of gold. These plans would require investment of about $100 million.
Leviev’s companies have four projects in Russia’s Far East: Netchen-Khaya, Perekatnoye and Sopka Kvartsevaya in the Magadan region, and Karalveem in Chukotka, according to Valery Morozov, who represents Leviev’s interests in Russia.
Leviev Group is also viewing gold mining assets in Kazakhstan, Kyrgyzstan and China, Morozov told Vedomosti. In a similar move, Nichiporuk announced in September that his company is seeking to diversify into mining gold, along with coal, oil and gas.
The Marketplace• Hopes are high for seasonal activity.
• Producers expect better performance in the fall.
• Market is quite selective.
• Nobody is buying for stock.
• Prices are increasing for very small — under 0.10 carat — and larger — over 1 carat — cut goods; prices decreasing for medium sizes.
Article from the Rapaport Magazine - October 2006. To subscribe click here.