Rapaport Magazine

Russia

By Anastasia Serdyukova
ALROSA Amps Up Exploration

Russia’s largest diamond miner ALROSA is planning to spend approximately $173 million on geological exploration in 2013, a 9.6 percent increase from 2012. “Even though the current resource base is sufficient for supporting production at the current level for the next 25 to 30 years,” said the company’s representative, “geological exploration and refilling the resource base remains one of the top priority tasks for the company.”
   The miner, which spent $73 million as recently as 2010, has been increasing its spending on geological exploration every year since. Most of the probes will be done in the western part of Yakutia, Russia’s republic, where the majority of the diamond mines are located. The company is searching for new deposits located close to the established kimberlite pipes. Exploration in the first nine months of 2013 allowed ALROSA to add 14.7 million carats to its resource totals and the company plans to add another 25.4 million carats in 2014.
   According to a 2013 Joint Ore Reserves Committee (JORC) report, ALROSA’s deposits constituted 607.5 million carats of reserves with an average grade of 1.34 carats per ton and 973 million carats of resources with an average grade of 1.38 carats per ton. The company is planning to produce 36.4 million carats in 2013 and increase production to 41.3 million in 2021.

Polished Tense
   The situation in the polished market remains tense and sales are not rising even with the approaching holiday season. “Business is slow and we hit a plateau,” said Rajesh Gandhi, director of Choron Diamond. “Jewelry companies are not buying to refill their stock as they used to, purchasing only what they need at the moment,” said Ekaterina Blinova from Zvezdochka, a manufacturing and jewelry-making company.
   The stones that are most in demand remain .30 carats to .90 carats of medium quality and the manufacturers and dealers say they are not lowering the prices. “The prices will not go down in the upcoming months because people are not making a profit with the current rough prices,” explained Gandhi.
   Although the prices for rough are still considered high by most of the manufacturers, Blinova said there is no problem in getting enough rough. Gandhi said that the situation may become a bit healthier in the beginning of 2014 because dealers will face tighter financing, with banks becoming much stricter in lending to the industry. “People won’t have money for speculation,” he said. “This may affect rough prices.”

Kristall Online
   Russia’s largest diamond manufacturer Kristall Smolensk has started selling certified polished diamonds over the internet after a two-year break. “The internet sales of certified diamonds and jewelry are popular with Russians, so we decided to get back with certified stone sales,” said Dmitry Moiseev, the company’s head of marketing. The company has been offering consumers an option to create their own jewelry by selecting a mold for a ring or a stone and finishing it by choosing a diamond.
   The company offers stones from .05 carats up. Although the market for such small stones was minuscule two years ago — from $500,000 to $1 million — the company regards them as a good marketing tool. “Many sales are done on the internet in Russia, and the industry is losing out to other luxury gifts bought online, as well as electronic gadgets and other goods,” said Moiseev. “We were selling online for a year, and saw a good growth,” said Gandhi.
   Jewelry sales have slowly started picking up in advance of the holiday season, with many companies reporting growth over 2012. Most sales are for less expensive items in the $500 range. Blinova said that people prefer .10 diamonds and melee. The items without stones or with synthetic zircons or phianites, which are popular in Russia, didn’t see much sales increase, according to Maxim Vaynberg, chief executive officer (CEO) of Adamas, one of Russia’s largest jewelry makers and retailers. Yet he said that the demand for items with diamonds has increased by 20 percent compared to 2012. “In each price category, people tend to buy items priced at the higher end,” he said.

Illegal Goods
   The Russian Assay Chamber has joined with retailer 585 Gold to launch a special service for people to verify the Assay Chamber stamp on a purchased jewelry item and its quality at a special service desk. The first location was on a central Moscow street that is home to many jewelry stores. “There is a need to create such an environment so that selling illegal items creates so many problems for retailers that they will stop doing it,” said Sergey Dyachenko, spokesperson for the Assay Chamber.
   Retailers say they are losing sales to illegal exports, which are available at lower prices. Dyachenko said that although big retailers are keeping their standards high, they account for less than 20 percent of the country’s sales. This initiative is targeting small retailers.

Article from the Rapaport Magazine - December 2013. To subscribe click here.

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