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Alrosa Cuts 2020 Production Plan

May 24, 2020 9:48 AM   By Rapaport News
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RAPAPORT... Alrosa is set for its lowest annual rough-diamond production in at least a decade, after the Russian miner reduced its outlook by up to 6 million carats due to the weak market.

The company now expects to produce 28 million to 31 million carats this year, compared with an earlier plan of around 34 million carats, it said Friday.

It will achieve this by shutting mines containing lower-priced diamonds that offer thin profit margins, thereby avoiding an inventory buildup in categories for which there is currently weak demand, Alrosa explained.

To that end, output will stop until October 1 at the Verkhne-Munskoye deposit, which contributed 1.5 million carats last year. Earlier this month, the company paused production at the low-value Zarya and Aikhal mines, which together yielded 2.6 million carats in 2019.

As a result, group production could drop by up to 27% this year from 38.5 million carats in 2019, making it the lowest since Rapaport archives began in 2008.

Since the coronavirus crisis began, Alrosa has allowed customers to defer rough purchases to which they had previously committed through long-term buying contracts. Having offered this concession, the company must cut costs and manage production to prove that its operations and finances are sound, it explained. Alrosa’s strategic-planning committee recommended the lower output after the company’s management had put forward different options for reducing spending and ensuring optimal production levels.

The recommendation was a “response to the crisis unfolding in the global rough-and-polished diamond market,” Alrosa added.

De Beers made a similar move last month, shaving 7 million carats off its full-year production guidance because of the impact of COVID-19 on mining activities and the weak consumer demand.

Image: Rough diamonds. (Alrosa)
Tags: Aikhal, Alrosa, Production, Rapaport News, Rough Diamonds, Verkhne-Munskoye, Zarya
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