Jeweller - April 2022

RUS SI A'S PRIDE
Alrosa's
Record Roughs
by ROBERT BOUQUET
242-carats
White Diamond
February 2021
'The Spectacle' is Alrosa's
largest polished white
diamond. The 100.94-carat
rectangular step-cut diamond
was sold at Christie's in May 2021
for US $14.1 million.
It seems like only yesterday that I was reporting
that the diamond trading centres had
kicked-off the year in a bullish mood and
that there were significant price increases at the
most recent De Beers’ ‘sight’ and that “Alrosa is
expected to follow suit”.
Over the past two years and during the pandemic I had
predicted the diamond industry would recover to much
better times as economies revive, consumer spending
accelerates and demand for the one product that provides
the ultimate expression of love matches the level of
emotional response and outpouring that the world
understandably feels the need to make after COVID-19.
It was only three months ago I concluded that 2022 was
going to be exciting. The industry had a lot of opportunity in
front of it, mining companies were facing a potential bumper
year and the trade must be careful in maintaining margins
throughout the pipeline.
Even though the diamond industry was facing a rosy period,
I also noted that it faced risk on the macroeconomic side,
including geopolitical threats between Russia and the West
over Ukraine. I also noted seemingly worsening relations
between China and the West and increasing energy costs.
I concluded by saying: “Hopefully, none of these issues will
destabilise the positive momentum of the diamond industry;
but these are areas of risk.”
Well, there is no doubt that times have changed.
The current state of play
At the time of writing, the diamond industry is in a confused
state. In recent times the rough diamond segment has
boomed with continuously rising polished prices, diamond
jewellery retail sales surging in the US and recovering in
China; marginal diamond miners performing much better
against a backdrop of seemingly constantly increasing
rough prices.
And yet even though we operate in a unique, exciting and
often dazzling business, we must always remember that the
diamond industry is not immune to external economic and
geopolitical pressures.
Alrosa is the world’s largest producer of rough diamonds
by carats, producing around 32 million carats per annum,
which equates to about 30 per cent of the world supply. It
has the world’s largest diamond reserves (over 1 billion
carats in the ground). The Russian company is expected
236-carats
Intense yellow-brown diamond
August 2020
191.46-carats
White diamond
January 2019
"Sputnik V"
100.53-carats
Yellow diamond
February 2021
"Kyndykan"
91.86-carats
Yellow-brown diamond
January 2022
"Nijinsky"
27.85-carats
Pink diamond
September 2017
to stay in ‘pole position’ as the largest producer for many
years to come.
While there are a number of mining companies operating
in Russia, Alrosa produces more than 90 per cent of all
diamonds. Alrosa also has diamond mining projects in
Angola and exploration development in Zimbabwe, but the
current focus is very much on diamonds being exported
from Russia.
Alrosa is owned 33 per cent by the Russian government,
33 per cent by the Republic of Sakha (in the far east of
Russia, where most of the Russian diamonds are mined)
with the balance being traded on the Moscow Exchange
(Russian stock market).
At the end of February, Alrosa’s share price fell to a low of
68.00 rubles ($US0.62) compared with the 12-month high
of 150 rubles ($US1.37).
Alrosa is the world’s largest producer of rough
diamonds by carats, producing around 32 million
carats per annum, which equates to about
30 per cent of the world supply.
The Russian invasion of Ukraine has created an extremely
volatile and unpredictable situation. It’s a situation that is
certainly out of the hands of the diamond industry itself.
People are dying in Ukraine and for some worrying about
the diamond industry may seem trite.
At the time of publication, sanctions have been further
strengthened against Russian diamond interests. The first
step was sanctions imposed on both Alrosa and its CEO.
The initial sanctions were designed to reduce Russia’s ability
to finance its military operations; in Alrosa’s case specifically
to ‘prohibit transactions and dealings by U.S. persons or
within the United States in new debt of longer than 14 days
maturity and new equity.’
This meant that Alrosa was initially prevented from raising
funds over a period of more than 14 days. But what did this
mean in practice?
It actually meant that the sales of rough could still take
place; and sales are still taking place. Some transactions
are being made in alternative currencies such as rubles or
euros - this was an option that Alrosa had been previously
considering offering to its clients anyway.
Rough diamonds can be shipped using different methods
April 2022 | 33