Alrosa Diamond

World’s top diamond miner Alrosa hit by US sanctions

Alrosa, the world’s top diamond producer by output, has been hit by fresh sanctions imposed by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC).

The OFAC announced late on Thursday it had placed Alrosa on the Specially Designated Nationals (SDN) list, which effectively kicks a sanctioned company out of the US banking system and bans its trade with Americans.

The measure against the Russian state-owned diamond miner seeks to cut off additional sources of revenue for Moscow, the government agency said.

It also affects any entities in which Alrosa has a 50% interest or more, either directly or indirectly.

The company’s customers well as other counterparties must stop all dealings with the state-controlled Russian miner by May 7, Treasury said.

Shares in the company collapsed on the news, closing nearly 13% lower on Friday trading in Moscow.

Alrosa and its chief executive Sergei S. Ivanov were included in the first wave of restrictions announced by Washington, which restricted the company’s ability to raise new debt and equity in the US.

“These actions, taken with the Department of State and in coordination with our allies and partners, reflect our continued effort to restrict the Kremlin’s access to assets, resources, and sectors of the economy that are essential to supplying and financing Putin’s brutality,” Treasury said in the statement.

The European Union and the UK have also imposed sanctions on the miner following Russia’s invasion of Ukraine.

Diamonds are one of Russia’s top ten non-energy exports by value, with exports in 2021 totalling over $4.5 billion, it noted.

Alrosa is responsible for 90% of Russia’s diamond output and 28% of global supply, with 32.4 million carats produced in 2021 and sales topping $4 billion thanks mainly to consumer demand from the US.

Loopholes
Experts have noted the sanctions against the miner carry a significant loophole. Russia’s rough diamonds are sent to another country — usually India — where they are polished and cut, which makes them the product of that nation in the global market.

Another issue is that diamonds of various origins are often mixed once polished, which can make it more difficult for companies that independently vow to stop buying Russian goods.

The Responsible Jewellery Council (RJC), the leading standards organization of the global jewellery and watch industry, took steps into that direction in early April and suspended Alrosa’s membership.

“Fundamentally, we remain focused on RJC’s purpose, which is to ensure all jewellery is responsibly sourced,” the group’s char David Bouffard said in the statement.

World’s top diamond miner Alrosa hit by US sanctions
The main markets for Alrosa, which employs about 32,000 people, are the US and Asia (Photo: Dmitry Amelkin, Transformation Director of Alrosa’s Polishing Division. Courtesy of Alrosa | Twitter. )
US-based jewellers Tiffany & Co. and Signet Jewelers said in March they would no longer buy new diamonds mined in Russia.

Alrosa withdrew in March from the Natural Diamond Council (NDC), a market alliance of the world’s leading producers of precious stones. By doing so, the company not only stepped down from the board, but it also cut all financial contributions.

The Mirny, Sakha-based miner also has a 41% stake in Angolan diamond production firm Catoca, which is not affected by the latest US sanctions given the OFAC.

While the full effects of the sanctions on the already undersupplied global rough diamonds market are not yet clear, the Antwerp World Diamond Centre (AWDC) has said there was a chance the restrictions could prove counterproductive.

“It is a blow that should hurt Russia but there is a chance that we do more damage to ourselves,” spokesman Tom Neys told Belgian newspaper Gazet van Antwerpen. “The Russians can easily trade their diamonds with non-EU countries and outside the US.”

The diamond jewelry industry is going into the year with diamond supply at historically low levels, estimated by Bain & Company at 29 million carats in 2021. “Upstream inventories declined ~40%, driven by high demand and slow production recovery, and are near the minimal technical level,”

Source: mining.com

Alrosa Leaves the Responsible Jewellery Council

Russian miner Alrosa has suspended its membership in the Responsible Jewellery Council (RJC), both organizations announced last week.

The development came just over a month after Russia’s invasion of Ukraine. The RJC board of directors voted to accept Alrosa’s decision, the standards groups said Friday.

Alrosa exited the RJC board in early March, but remained a member of the organization. RJC received criticism for not removing the company: Last week, luxury group Richemont and jeweler Pandora both stood down from the organization in protest, while RJC executive director Iris Van der Veken resigned over the issue.

The organization defended itself, noting that it was waiting for the outcome of a legal review.

“Beginning on March 3, the [RJC] board immediately began a comprehensive, third-party legal review to ensure it had the appropriate authority, within its constitutional documents, to take action,” the RJC statement continued. “The law firm selected — having concluded its own standard conflict of interest assessment — commenced their review of RJC’s governance, the board’s authorities, training modules and many other documents and processes.”

Sanctions by the US and UK governments during February and March complicated the situation and delayed completion of the review, the RJC explained. The board received the final document in the middle of last week.

“Taking any action prior to the delivery of the legal opinion would have exposed the RJC to significant legal risk,” it argued.

Alrosa — in which the Russian government owns a 33% stake — confirmed its suspension, saying it cared for the industry “as much as it cares for its mining communities.”

The company “believes in the diamond industry and the people who work to make it great all over the globe,” the statement continued. “We are one of the major contributors to the sustainable development of this industry. We will continue to uphold our highest standards of responsible business conduct and business ethics that are an integral part of our culture and principles.”

Source: diamonds.net

US Bans Imports of Russian Diamonds

US President Joe Biden has issued an executive order prohibiting the import of “nonindustrial” diamonds originating in Russia.

The measures, which the White House announced on Friday, follow Russia’s continued war in Ukraine and build on earlier US sanctions outlawing debt and equity transactions with Alrosa and its CEO, Sergey Ivanov. Those previous rulings did not constitute an outright ban on shipping Russian goods into America.

The latest order will affect goods from Russian miner Alrosa, which supplies around 30% of global rough supply by volume. Biden has also prohibited the export of luxury goods from the US to Russia.

On the same day, Signet Jewelers — an Alrosa contract client — announced it had “suspended business interaction with Russian-owned entities since the beginning of the invasion.” The Gemological Institute of America (GIA) has stopped taking submissions of Russian products for its Diamond Origin Report service, and has also paused all transactions with laboratory submissions from sanctioned entities.

Meanwhile, Alrosa has delayed publication of its monthly sales data until further notice. The company was unavailable for comment at press time on Sunday.

Source: Diamonds.net

Alrosa Profit Soars as Focus Turns to Sanctions

Alrosa has highlighted concerns about the impact of the US’s punitive measures after reporting its strongest annual earnings in five years.

Revenue jumped 51% to RUB 326.97 billion ($2.99 billion) in 2021 as the diamond market recovered from the previous year’s downturn, the Russian miner reported Wednesday. This drove net profit to RUB 91.32 billion ($834 million), almost triple 2020’s figure of RUB 32.25 billion ($297.3 million).

However, the fallout from Russia’s invasion of Ukraine has become the most pressing issue for the company, with the US imposing sanctions on Alrosa and its CEO, Sergey Ivanov. This blocks American firms from extending credit to the miner. An alliance of Western governments has also excluded several Russian banks from the Swift international payment system.

“These sanctions are preventing the group from obtaining financing from persons and entities connected to US and from effecting payments through sanctioned banks,” Alrosa said in its results statement.

Management said it was continuing to run the business as usual and “service its obligations,” but noted that the impact of the actions was unpredictable.

In the fourth quarter of last year, revenue fell 28% year on year to RUB 70.73 billion ($642.7 million), reflecting an unfavorable comparison with the sharp market rebound a year earlier as well as scarcities of goods for the company to sell. Profit slid 43% to RUB 12.14 billion ($111.1 million).

With rough in short supply globally, Alrosa made a slight increase to its 2022 production plan, forecasting output of 34.3 million carats, compared with earlier guidance of 33 million to 34 million carats.

Source: Diamonds.net

US Places Sanctions on Russian Miner Alrosa

The US has imposed sanctions on Alrosa and its CEO, Sergey S. Ivanov, in response to Russia’s invasion of Ukraine.

The diamond miner is one of 11 entities the Department of the Treasury has identified as being owned by or connected to the Russian government, according to a Thursday statement. The measures restrict American companies’ ability to engage in debt and equity transactions with Alrosa after Russia launched military action in Ukraine last week.

“Effectively, this action bans US businesses and persons from entering into debt transactions longer than 14 days with Alrosa but does not impose the harsher sanctions of an asset freeze and outright prohibition of all business,” the Jewelers Vigilance Committee (JVC), a source of legal guidance for the industry, said in an alert to members. “For the jewelry industry, any open memo agreements previously entered into with terms longer than 14 days should immediately be amended to shorten the terms, and/or closed.”

US companies should also evaluate any current transactions with Alrosa or its stateside affiliate, Alrosa USA, to ensure they do not violate the sanctions, the JVC added. The executive order does not apply to goods acquired from Alrosa or Alrosa USA before February 24, the organization pointed out.

Alrosa, a third of which is owned by the Russian state, is responsible for 90% of Russia’s diamond-mining capacity, the Treasury noted. The sanctions include Ivanov because the US counts him among the “leaders, officials, senior executive officers, or members of the board of directors” of the Russian government, and because he is the son of sanctioned official Sergei B. Ivanov, a close ally of Russian President Vladimir Putin, the statement continued.

“Treasury is taking serious and unprecedented action to deliver swift and severe consequences to the Kremlin and significantly impair their ability to use the Russian economy and financial system to further their malign activity,” said US Treasury Secretary Janet Yellen. “Our actions, taken in coordination with partners and allies, will degrade Russia’s ability to project power and threaten the peace and stability of Europe.”

Alrosa said its interactions with international partners would continue and that it was working to avoid any impact.

“Alrosa is carefully studying new working conditions in connection with the imposed sanctions,” a spokesperson for the miner told Rapaport News Sunday. “We intend to offer all our stakeholders the best possible service. We do our best to fulfil our obligations so that their businesses would continue to operate as usual.”

Source: Diamonds.net

ALROSA Takes Steps to Offer the Market Additional Supplies of Rough Diamonds

In line with its approach of fostering long-term sustainable development of the diamond market, ALROSA gives its customers an opportunity to adjust their diamond purchase schedules under trading sessions.

The demand for rough diamonds in early 2022 as well as in the second half of 2021 was outstripping supply, as cutters were actively buying rough to restock and fulfill the orders placed by jewelers and retailers.

Given the primary importance of a balanced market and the need to meet the real-backed demand, ALROSA offers its long-term customers a new option to adjust supply schedules between trading sessions. As a result, holders of long-term contracts can buy rough diamonds from their allocations ahead of the schedule by shifting booked volumes to an earlier date.

“The first quarter of the year is traditionally a period of active rough diamond purchases, as cutters seek to stock up after a holiday season in retail. The high season of 2021 was one of the most successful ones in the entire history, as we see robust demand from our customers underpinned by real orders. By reaffirming its commitment to a prudent and balanced policy aimed at sustainable progressive growth of the industry, ALROSA offers its customers a new option of adjusting diamond purchase schedules within their allocations by requesting the part of the booked rough diamond volumes to be moved to an earlier date. We believe that this innovation, together with the Gokhran auction slated for late February 2022, will speed up progress in addressing current market deficit. With the same goal in mind, we will hold an additional tender between trading sessions. We will offer the rough diamonds highly sought-after by cutters as soon as these goods leave the work-in-progress,” said Evgeny Agureev.

Long-term contracts for a 3-year period with major jewelry holdings, cutters, traders, and consumers of industrial diamonds make up the core of ALROSA’s sales system and traditionally account for the largest part of the company’s turnover. ALROSA makes special efforts to guarantee responsible business practices across the diamond production chain.

Source: instoremag

Alrosa Raises Rough Prices Again

Alrosa has increased prices for the third consecutive contract sale, fueling concerns about unsustainable growth and tight manufacturing profits.

The adjustments were 4% to 5% on average, with a focus on 1-carat rough and larger, insiders told Rapaport News this week. Prices of that category are now higher than pre-pandemic levels, a customer noted.

Alrosa declined to comment on its “commercial strategy,” but a spokesperson said the Russian miner “assures that prices for its goods follow the real, confirmed demand from the midstream sector.”

The sale, which took place this week, came amid strong rough demand following positive holiday seasons in the US and China. But there were warnings of a slowdown as the quiet season approaches.

“Since the rough market is so strong, everyone accepts the [prices], but it’s becoming a bubble that might explode,” a source cautioned.

Industry members highlighted possible challenges for manufacturers. Rough prices have outpaced polished, they claimed, with the upcoming slow months raising concerns about end demand.

“[The miners have] taken away all the profit margin from the manufacturing pipeline, because…when the polished is ready, the polished market will be slightly weaker than today,” an Alrosa customer explained. “Probably, we will all lose some money, and not even make the costs.”

Alrosa maintained its policy of allowing customers to refuse any unwanted goods — a concession that has been in place since the start of the pandemic.

However, some clients felt compelled to buy to ensure they retain their allocations in the new contract period, which begins April 1, one customer pointed out. Even so, rough sales at the trading session will likely be lower than the $421 million it reported for January and the $361 million it garnered in February, reflecting a drop in the miner’s supply, he added.

De Beers: Less availability

De Beers will also offer limited supply at its sight next week as its reduced production plan for 2021 has affected availability. Sources expect sales of around $400 million, compared with $663 million in January and $550 million in February. The company lowered its full-year production forecast in January because of operational issues at some of its mines.

“We continue to take a prudent approach with our mine plans given the ongoing pandemic and associated uncertainty,” a De Beers spokesperson said Wednesday.

With fewer goods on the table, further price increases by De Beers are unlikely at next week’s sale, a sightholder predicted. The miner already increased prices in December, January and February, reversing a sharp price cut it implemented in August.

“There was a major pushback on the goods last month,” the sightholder commented. “In anything that [produces] pointers and large [polished goods], they went way too far, and everybody said so. There were also refusals. If [prices] go up now, everyone will just leave the goods.”

Source: Diamonds.net

Alrosa to Sell 242ct. Rough Diamond

Alrosa will auction a 242.31-carat diamond in Dubai later this month, one of the largest gem-quality rough stones the Russian miner has unearthed in the past decade, it said Friday. The opening price will be in excess of $2 million.

The March 22 sale will mark Alrosa’s 100th large-diamond auction. The company rarely trades Russian-mined rough diamonds of this magnitude — those that can produce a 100-carat polished stone or larger — because the law grants the state the right to examine and buy them.

“Even when it is possible to put them on sale on the market, we prefer to cut and polish the diamond[s] in-house,” said Evgeny Agureev, Alrosa’s head of sales. “Thus, today we are especially pleased to present this exceptional lot as part of our 100th international auction.”

Viewings will take place at Alrosa’s sales office in Dubai from March 14 to 21. Rough diamonds weighing 190.74 and 136.21 carats will also be available, as will several other stones above 10.8 carats.

Source: Diamonds.net

De Beers and Alrosa Raise Rough Prices

The two largest diamond miners increased prices at this week’s rough sales as demand improved due to post-holiday restocking and strong trading ahead of the Chinese New Year.

De Beers raised prices by an average of 4% to 5% at its first sight of 2021, while Alrosa’s increases were around 6% to 7%, industry insiders told Rapaport News Monday. Both companies implemented steeper hikes in larger categories than for smaller goods, sources said.

“Alrosa makes sure that prices reflect the actual market trends and a confirmed real demand,” a spokesperson for the Russian miner said. De Beers declined to comment.

The miners have steadily been reversing the prices cuts they made in the second half of last year. De Beers’ price rise was its second in a row, with January prices almost back to pre-pandemic levels, sightholders noted.

The rough market showed momentum in January following a better 2020 holiday season than many had feared earlier in the year. Cutting factories in India raised polished production to full capacity as shortages emerged and retailers restocked, prompting manufacturers to buy rough in large quantities.

Demand rose on the secondary market, with De Beers clients able to make profits of 5% to 7% by reselling goods ahead of the sight. Those premiums declined slightly following the price increase.

“[Polished] inventory levels are the lowest for at least the past seven or eight years,” an executive at a sightholder said. “That’s the reason people are going to be more aggressive in their purchasing,” he continued, adding that some traders foresaw a spike in consumer demand due to government stimulus packages.

Prices at smaller miners’ tenders were higher still — in contrast to mid-2020, when manufacturers could get goods up to 25% cheaper on the open market compared with De Beers and Alrosa boxes. Tender prices fluctuate with the market conditions more than contract-sale prices do, as the smaller rough producers have greater liquidity needs.

Some traders expressed concern that the surge in rough purchases could lead to an oversupply, as Chinese retailers have almost finished preparing their inventories for the upcoming lunar festival on February 12.

“It’s time to go back to business, but it’s no time to push your production to the max and buy rough at any price with the excuse that your factory needs it,” another sightholder argued. “The end of year has been OK, including in the States. There are great expectations for a fantastic Chinese New Year, but the reality is that any Chinese retailer has stopped buying as from this week.”

Amid the uncertainty, Alrosa kept its policy of allowing customers to defer 100% of their allocations in January, noting that it wished to uphold the balance between supply and demand.

De Beers also allowed sightholders to refuse a proportion of their allocations for goods up to around 0.75 carats, while maintaining its standard flexibility — including 10% buybacks — in larger categories.

De Beers’ sight began on Monday in Botswana and runs until Friday, with viewings also taking place in Antwerp and Dubai. Alrosa’s sale started last Friday and continues for a week.

Source: Diamonds.net

Alrosa’s July diamond sales drop 79%, state help may be on its way

Russian diamond producer Alrosa said on Monday that its rough and polished diamond sales totalled $35.8 million in July, down 79% from a year earlier after the coronavirus pandemic hit demand and the supply chain.

It marked a fourth consecutive month of weak sales as falling demand and supply chain disruptions since March have prompted Alrosa and other producers to reduce output and relax payment terms for clients.

Alrosa’s sales rose from $31.3 million in June but still were only a fraction of the usual sales of the world’s largest producer of rough diamonds. Its sales in July 2019 totalled $170.5 million.

The state-controlled firm has previously said that it was prepared for months of weak sales and that in coming months it will discuss with Russia’s finance ministry whether state precious metals and gems repository Gokhran could buy $0.5 billion-$1 billion of the firm’s rough diamonds.

The finance ministry is yet to take the final decision but is positive about the possibility of such a deal, the Kommersant newspaper reported on Monday, citing an unnamed source at the ministry.

Such a deal would help to improve the situation in the market, as it did in 2008-2009 when Gokhran bought diamonds worth $1 billion from Alrosa during the global financial crisis, the source told Kommersant.

Reporting by Polina Devitt – reuters