Alrosa
reported a 6% year-on-year increase in production in the first nine months of
2017, having mined 29.5 million carats. The company’s estimated rough sales for
the same period, on the other hand, decreased 6% compared to the same period
last year, totaling about $3.3 billion. The miner achieved an increase in
output by stepping up mining at alluvial deposits and the Udachny and
Karpinskogo mines, said Igor Sobolev, Alrosa’s first vice president. He also
confirmed that the company’s annual plan to produce 39.3 million carats by the
end of 2017 stood unchanged, signifying a projected 5% year-on-year increase.
The company’s annual revenue,
however, might drop by as much as 39% in 2017, according to the estimate the
Russian Accounts Chamber published in late October. The chamber expects Alrosa
to raise a total of $1.5 billion, based on data the miner provided. Russia’s
Ministry of Finance has predicted a 31% year-on-year decrease for the miner,
with a net revenue estimate of $1.7 billion for the year.
On
track in Vladivostok
Meanwhile,
Alrosa vice president Yuri Okoemov summed up the results for the first year of
the company’s Vladivostok-based sales project. The company launched the
Eurasian Diamond Center in September 2016 and has since run four auctions of
extra-large rough, to date selling 4,708 carats for $47 million, which Okoemov
called “a good result.” In October alone, Alrosa sold 66 rough stones weighing
a total of 1,084 carats for $9 million. The most expensive stone weighed 40.47
carats and sold for more than $1 million.
Long-term
contracts optimized
With
the miner’s new three-year contract period for rough buyers set to begin on
January 1, the company announced adjustments to its policy. The contract term
will remain unchanged, as it has proven efficient, according to Okoemov. Since
2009, long-term contracts have been the miner’s main sales channel, accounting
for about 70% of total sales, and Alrosa plans to keep it that way. However, in
the upcoming period, the company is going to allow a yearly revision of the
volumes and mix of rough that clients can purchase under the contract terms to
allow more flexibility in responding to possible changes in the market. At
present, the company’s long-term-client list includes 56 companies, 47 of which
are international and nine domestic.
Upping
its polished game
The
miner’s new sales concept also stipulates increased in-house production of
polished. The company’s polishing branch, Diamonds Alrosa, is Russia’s
second-largest polisher after Kristall Smolensk, and focuses on producing
extra-large and fancy-colored gems that are sold through auctions. Diamonds
Alrosa director Pavel Vinikhin said the company expected to increase its
polished sales to $125 million in 2017 from $122.3 million in 2016.
Angola
investments
Mid-November
saw Alrosa president Sergei Ivanov meet with José Manuel Ganga Júnior, the new
CEO of Angolan diamond company Endiama. The Russian miner confirmed its
intention to increase its share in the Catoca mine from 32.8% to 41% by the end
of 2017 by closing a $70 million deal. Alrosa will also purchase 8% of stock in
Angola’s Luaxe project, which focuses on developing the Luele pipe that came to
light in 2013. Earlier this year, Ivanov noted that “the Luele pipe is the
largest of all those discovered worldwide over the past 60 years since the
discovery of deposits in Yakutia. The total assessed commercial value of the
deposit exceeds $35 billion.” The initial investment in Luaxe is estimated at
$100 million.
Article from the Rapaport Magazine - December 2017. To subscribe click here.