ALROSA Sells $286M Rough Diamonds in July, Lowest Month of Year

Mining and Exploration
10/08/2017 16:24

In July 2017, ALROSA Group sold US$293.5 million worth of rough and polished diamonds. Rough diamond sales by value amounted to US$286.1 million, its lowest sales month for the year, while polished diamond sales achieved US$7.4 million. For the year thus far January-July 2017, ALROSA’s rough and polished diamond sales amounted to US$2.79 billion. The Russian miner has sold US$2.728 billion in rough diamonds on the year, while earning US$62.3 million from polished diamonds. “In July, there was a seasonal drop in demand on the market in the run up to August holidays. A good demand for rough diamonds with an upward trend in prices was demonstrated in the first half of the year. The Company cut down the stock accumulated by the start of the year,” ALROSA Vice President Yury Okoemov commented on the sales in the first seven months of this year.

The low sales figures were not unanticipated, as last week president Sergei Ivanov told reporters, "August is a dead season. August sales will be the lowest in the last eight months. It has traditionally been the lowest sales month, but in September we should have good growth."

Rough prices could decline in Q4, will not ramp up production

In remarks prior to the recent crisis at the Mir mine where eight miners are still missing after an underground flood, president Sergei Ivanov told journalists that Russian diamond mining giant ALROSA is not ruling out a decline in diamond prices in the fourth quarter to the level of the beginning of the year, although no steep drop is foreseen. "Numerous experts believe that the price in the fourth quarter may correct a little and return to the level of the beginning of the year. We are allowing for various scenarios, but no one is expecting a steep drop on the market. If there is a correction, it will be fairly moderate," he said. Ivanov pointed out that ALROSA's stock of diamonds has declined to a minimum (about 13 million carats), which affords flexibility if prices drop. "We are currently at a minimum inventory level. So if the price declines, we can decide whether to sell product in the same volume as previously or increase reserves, in expectations that prices will rise in Q1," he said.

He further noted that ALROSA's production guidance for 2017 will not change much, since the market would not be able to digest additional volumes of rough diamonds. It was reported earlier that Alrosa is reviewing its plans for diamond sales and production in 2017, currently both targeted at 39 million carats. The new targets will be announced in September, when the company will present its revised budget. "For production, we might increase slightly... There's no point in ramping up production at present, because the market can't digest additional volumes.

Ivanov adds, "We certainly don't intend to trigger a drop in prices due to growth of production. If there is an increase, it will be small." ALROSA is now analyzing indicators by deposit, he added. Alrosa's financial results might also exceed plans, Ivanov said. "For FOREX revenue we'll exceed the plan. For ruble revenue, due to the exchange rate, revenue will be lower than a year ago," he said. "In regard to the budget, we're comfortable and are proceeding in line with the projections that we had. There will certainly not be any increase in the investment program or purchases of assets," Ivanov said.