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Alrosa (MCX: ALRS).

The company provided the mineral resource base for 30 years.

ALROSA was established by the decree of the President of the Russian Federation through the establishment of the joint stock company Almazy Rossii--Sakha, dated 19 February 1992 (Decree 158C).

ALROSA is the world's leading diamond mining company, accounting for more than 29% of global diamond production in terms of carats ALROSA accounts for 95% of Russia's overall diamond output.

Production overview

* In 2016, ALROSA Group's enterprises produced 37.4 million carats of rough diamonds.

* ALROSA has operations in Republic of Sakha (Yakutia) and Arkhangelsk region. The company operates 11 kimberlite pipes and 16 alluvial deposits.

* Our development strategy is focused on our core business, and we aim to produce over 41 million carats by 2019. The rough diamond production will increase due to current operations and new projects.

* We use the most advanced scientific knowledge and state-of-the art technology available worldwide.

* We build on our unique technological experience of mining in the harsh climate of the Russian Far North.

Our resource base

* ALROSA's proved and probable reserves total more than 650 million carats - this volume gives us a 17 year heritage. Approximately 66% of ALROSA's total diamond production (in terms of volume) is composed of gem and near-gem quality diamonds; in terms of value, it is more than 97%. ALROSA has its own advanced exploration complex, allowing us to maintain and expand our proven reserves. The company also has exploration activity in some African regions.

Marketing and sales

* In 2015, ALROSA's revenue from the sale of rough and polished diamonds was 317.1 billion rubles. Rough diamonds sales totaled 40 million carats in 2016, including 28.7 million carats of gem quality stones.

* We have created and are actively developing our own sales system, based on long-term agreements with manufacturers of polished diamonds and jewelry.

* As a core principle of our trade policy, we ensure all customers have equal access to rough diamonds.

* We have sales offices located in the world's major diamond trading centers of Antwerp, Ramat Gan, Dubai, Hong Kong, New York, and London.

* ALROSA considers partnership with industry's organizations to be very important in the context of exchanging information and increasing market transparency. The company signed Memorandums of Understanding with Antwerp World Diamond Centre (AWDC), Gem Jewellery Export Promotion Council (GJEPC), Dubai and Israel Diamond Exchanges (DDE and IDE), Diamond Dealers Club of New York (DDC).

ALROSA Q2 and 6M 2019 operating results.


ALROSA, a global leader in diamond production, reports its Q2 2019 diamond production of 9.7 m carats and sales of 8.3 m carats or $0.8 bn.

* Q2 diamond production grew 24% q-o-q (up 14% y-o-y) to 9.7 m cts primarily due to seasonal return to production at alluvial deposits.

* A 10% y-o-y increase in diamond production in 6M 2019 to 17.6 m cts was mainly driven by the launch of production at the V.Munskoye deposit in Q4 2018, increased output at the Udachny underground mine, and a growth in ore processing at the Botuobinskaya pipe as operational efficiency initiatives scale up.

* Q2 ore and gravels processing seasonally grew by 65% q-o-q (up 4% y-o-y).

* Ore and gravels processing in 6M 2019 increased 6% y-o-y to 16.8 mt supported by the ramp-up of production at the V.Munskoye deposit and increased productivity at Nyurba Division and Udachny's processing plants.

* Q2 average diamond grade seasonally decreased 25% q-o-q to 0.93 cpt. Another affecting factor was a lower average diamond grade at the Nyurba Division due to the processing of ore from lower-grade blocks in line with the mining plan. 6M average diamond grade increased 4% to 1.04 cpt.

* Q2 diamond sales decreased 22% q-o-q (down 8% y-o-y) to 8.3 m cts, including 6.0 m cts of gem-quality diamonds (down 24% q-o-q, down 5% y-o-y), against the backdrop of declining demand due to excessive stocking of rough and polished diamonds by cutters and retailers, and continued difficulties faced by India's cutting business in securing affordable financing. Ongoing consolidation in the jewellery sector and growth in jewellery sales through on-line channels in the US result in a non-recurrent reduction in polished diamond stocks across the retail sector as businesses embrace more efficient stock management practices, which is in turn impacts rough diamonds purchases by mid-stream. These factors were behind lower 6M diamond sales (down by 16% y-o-y to 18.9 m cts).

* Inventories as at June 2019 went up 12% q-o-q (up 36% y-o-y) to 15.9 m cts due to seasonal production growth at alluvial deposits and lower sales.

* In Q2 2019, average realised prices for gem-quality diamonds rose 5% q-o-q (down 21% y-o-y) to $130/ct as small-size diamond sales returned to normal (early 2019 saw a rise in the share of small-size diamond sales on mid-stream were replenishing their stocks of this product category).

* In Q2 2019, the diamond price index came lower by 1.6% q-o-q, down 4.6% year-to-date.

* Q2 diamond sales in value terms decreased 19% q-o-q to $796 m (down 25% y-o-y) with 6M sales amounting to $1,784 m (down 32% y-o-y).

Rough and polished diamond market overview:

* In 6M 2019, the rough and polished diamond market saw weak activity in all segments. The key jewellery markets registered a decline in demand amid global macroeconomic uncertainty due to unravelling trade tensions between US and China and depreciation of Chinese yuan against US dollar, resulting in lower purchasing power of Chinese consumers and tourists.

* The consolidation in the jewellery sector and an expanding share of online jewellery sales in the US result in a non-recurrent reduction in polished diamond stocks across the retail sector as businesses embrace more efficient stock management practices, translating into lower diamonds volumes purchased by cutters and polishers.

* Cutters stocked up on end products, which also affected the demand for rough diamonds. To reduce excess stocks the Indian cutters have been decreasing output since May. The lower diamond demand was also caused by the ongoing financing difficulties experienced by the cutters due to the banks tightening the loan security and repayment terms.

* Currently demand from jewellery consumers remains stable, which bodes well for renewed activity and higher demand for rough diamonds closer to the end of Q3 2019 in the run-up to 2019-2020 Christmas sales season.
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Title Annotation:Leading Companies
Publication:Russia Metal & Mining
Date:Aug 15, 2019
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