Russian ALROSA eyes active development this year despite sanctions’ pressure

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By Eugene Gerden

Russian ALROSA, one of the world’s largest diamonds’ producers, is considering implementing a significant investment program this year despite the ever-growing sanctions’ pressure.

As part of these plans, the company, which still controls up to 35% of the global diamond market, plans to switch to underground diamond mining and to accelerate the development of small deposits with the aim to ensure stable mining operations for years to come.

As in previous years, most of the company’s production will be concentrated in the Yakutia Republic, which is a center of diamond production in Russia.

According to the company and the authorities of Yakutia Republic, the company is preparing for increasing production on the Mayskaya kimberlite pipe as well as Lindenskaya area, located in the basin of the Kulenke River (the left tributary of the Lena). Lindenskaya area is part of the Yakut diamond-bearing province, which is the world’s largest diamond province in terms of reserves, and which has not yet been properly studied.

In addition, as part of the plan, Alrosa is investing US$1.8 to 2 billion in the construction of the Mir-Glubokiy mine (deep horizons of the Mir pipe, one of the largest pipes, operated by the company).

The volume of diamond production (when reaching the design capacity of 2 million tons of ore) will reach 5.6 million carats per year.

According to Alexey Evstratov, head of the operational geology department of ALROSA, exploration of deep horizons will enable them to increase diamond reserves at Mir pipe by 62 million carats.

ALROSA hopes for a stable demand for its diamonds in the global market, given that India increased diamond imports by 7% in February to 15.22 million carats and reduced exports of polished diamonds by 29% to 1.87 million carats.

The production will continue to increase despite the ever tightening situation for Russian diamonds in global market, particularly in the EU market, where the EU is introducing phased restrictions on the imports of Russian stones and testing a system for tracking the country of origin of diamonds.

Despite sanctions, the company’s revenue in 2023 increased by 9% to 322.6 billion rubles, but net profit decreased by 15% to 85.2 billion rubles. Diamond production decreased by only 3% to 34.6 million carats, which is not critical for the financial condition of Alrosa.

In general, Alrosa expects that in the next two to three years, new ore bodies and diamond mines will be discovered in Russia along with 20 kimberlite pipes that were discovered over the past five years.

Denis Koshkarev, head of the forecast department of Alrosa’s mineral resource base department, commented, “We have good chances of discovering new ore bodies or mines in the next two to three years and even this year.”  According to Alrosa, the current reserves of deep diamond deposits are sufficient until 2060.

The company intends on maintaining the average annual production within the next decade at the level of 2021-2024. Over the past five years, more than 20 kimberlite bodies have been discovered, with assessment works being carried out on 8 of them.

In regard of sanctions, most of analysts remain skeptical regarding with the plans of Western regulators to trace the origin of diamonds, which, according to them, will be associated with enormous costs. According to experts of the Russian Investing business paper, when diamonds are mixed with stones from other mines, it is almost impossible to distinguish them. Only the largest and most valuable diamonds are packaged in separate bags, while Alrosa mainly specializes on the production of small diamonds.

The company also has plans to continue its foreign expansion, including in the market of Angola despite the recent statements of local media about the pressure of the local government on ALROSA to withdraw from the stake of the local Catoca diamond mine (in which ALROSA owns 41%), without any compensation. The pressure was mainly due to Western sanctions, imposed on the Russian company.

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