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Russia
By Anastasia Serdyukova
Russia’s largest diamond miner ALROSA produced 17.1 million carats in the first six months of 2013, which is 5 percent more than during the same period in 2012. The company attributed the increase in output to its underground mine Aikhal reaching its full capacity and to the purchase of the Nizhne Lenskoe diamond deposit. The production at Aikhal diamond field increased by 2.6 times to 1.435 million carats. The site has 25.5 million carats of indicated deposits and 29.2 million carats of inferred deposits, according to the figures released by ALROSA in August. Jubilee pipe, located close to Aikhal, produces the biggest output of diamonds among all of ALROSA’s sites, with 4.172 million carats mined there in the first half year of 2013. That was a 47 percent increase in production compared to 2012. The biggest production decline year on year was at the International diamond field, which fell 40 percent to 2.129 million carats. The company said that was a planned production decline because the ore from International goes to the same processing facility as the ore from Mir field, where the production increased. Mir is the third-largest deposit owned by the company, with 140.8 million carats of indicated and inferred deposits, according to the JORC Code for reporting mineral resources. The second biggest is the Jubilee pipe with 158.4 million carats and the richest deposit is Udachnaya field with 206.233 million carats.
ALROSA won the licenses for two diamondiferous areas in Western Yakutia: Zakonturnaya deluvial placer of Udachnaya pipe and Piropovy Ruchey, paying around $760,000 and $3.1 million, respectively. Both deposits are located close to the sites already owned by the miner. According to the Russian State Register of Mineral Reserves, the placer contains 109,500 carats of indicated and the Piropovy Ruchey deposit has on balance indicated reserves of 595,500 carats of rough diamonds and inferred reserves of 279,000 carats of rough diamonds.
The Russian diamond miner has conducted its first tender at the Shanghai Diamond Exchange (SDE), selling rough diamonds worth $505,362 and polished diamonds worth $245,389. Members of the exchange showed much interest in the auction and 25 companies participated, according to ALROSA. ALROSA also has scheduled an auction in Israel in the end of September. The company was planning to sell 32 stones weighing 725.84 carats worth $4.4 million. The gems weigh between 12 carats and 69.54 carats and include two stones of over 50 carats. The stones are priced between $22,000 and $388,000.
Creating jewelry brands in Russia involves a number of challenges that are specific to the country. First of all, Russian consumers do not have a perception that there could be a good domestic brand. “Many people believe that only foreign brands are good,” said Dmitry Kuntsev, director of Smolensk Diamonds. As a result, some Russian jewelers in the high-end segment start building up their brands abroad. “It’s easier to enter the domestic market from outside,” said Mikhail Epstein from Mousson Atelier, adding that his St. Petersburg–based company has been taking part in international shows over the past few years. The other problem for domestic jewelry makers is a lack of financial resources for advertisement. Only a few big companies can afford television advertising, and some choose banners in the streets and in subway stations. Most small companies advertise only seasonal sales. “This does little for creating a brand because customers are not looking only for cheap items, but to be associated with a brand,” said Ilya Adamsky, of Moscow Jewelry Factory (MJF). Those companies that manage to create a recognizable local brand are usually backed by big production facilities. Adamsky attributes their success to the fact that they can provide good-quality diamonds at a good price because MJF is part of the Leviev Group, which includes Ruis Diamonds. Having 250 stores across the country also helped the company with its brand recognition. Smolensk Diamonds is affiliated with Smolensk Kristall, the country’s largest manufacturer. “Being able to provide quality cut diamonds and being associated with an established company is a big value for the brand,” said Kuntsev. Russian jewelers agree that they can’t charge as much for their brands as established foreign brands such as Tiffany and Cartier even if their items have the stones and design of similar quality. Fyodor Poludenny from Estet said that more people with money look for the quality and design they like without overpaying for the brand, so they come to Russian companies. But Russian jewelers understand that creating a brand name is essential for moving forward. Estet, which is one of the biggest jewelry producers in Russia, launched its first brand Estet Moscow earlier this year. “The situation at the market is tough and creating a strong and thought-through brand becomes an important competitive advantage,” Poludenny said. The company is also planning to launch another brand, Gevorkyan, named after the company’s founder, which will include 17 existing collections under one name. The other problem for companies, all jewelers say, is the lack of qualified personnel who know how to advertise and sell branded items.Article from the Rapaport Magazine - September 2013. To subscribe click here.
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