RAPAPORT... Severalmaz, the ALROSA-owned miner operating the Lomonosov deposit in the north of Russia, held its first tender in late April. Participants included both domestic and foreign companies.
The Arkhangelsk-based company sold 42 lots of stones smaller than 10.8 carats that included diamonds in pink, green and yellow colors. The company didn’t disclose the volume and the price of the diamonds auctioned. “We don’t reveal the details because this is our first sale and our stones are different from those mined at Yakutia,” said Svetlana Denisova, Severalmaz spokesperson. She said the company is planning to hold a second auction within months.
Severalmaz received a license to sell stones in late 2007. By that time, it already had mined 1 million carats, including more than 476,000 carats mined in 2007. The deposits of its Lomonosov mine are estimated at $12 billion. The biggest stone mined since the operation started in 2005 was 48 carats.
The company is planning to sell its production though tenders, auctions and direct sales. “We are new to the market; the auction will help us develop connections and form a pool of permanent clients,” said Denisova.
ALROSA Pays DividendsALROSA, Russia’s largest diamond miner, has decided to pay the same level of dividends to its investors for 2007 as it did in 2006, despite a decline in its sales and net profit last year. ALROSA’s supervisory board has recommended paying $94.5 million in dividends for 2007, equal to the dividends paid in 2006, when dividends made up almost 16 percent of the net profit. In 2007, ALROSA’s net profit fell almost 10 percent to $594 million, according to preliminary results.
The company reported a 38 percent net profit decline in the first quarter of 2008 against the same time the previous year, due to the falling dollar rate and a slump in rough demand. ALROSA also said it incurred higher production costs in the first quarter of 2008 due to inflation.
Production for the company increased 1.7 percent in 2007 to $2.37 billion worth of rough, including stones mined at its subsidiary, ALROSA Nyurba. Yet, its dia-mond sales for the year declined 2.6 percent from $2.8 billion to $2.79 billion.
In 2006, the company’s total sales, along with those from Africa, totaled $3.4 billion. The final figures will probably be released following the shareholder meeting in June. So far, ALROSA has reported that the sales from the Angolan mining company Catoca LTD, where ALROSA holds 32.5 percent stake, were $451.4 million, a 6 percent increase over 2006.
Kommersant has reported that ALROSA, in its continuing diversification, has paid $225 million for a license to develop four iron ore deposits in its native Yakutia. The company is expected to spend up to $10 billion on the project over time.
Appraisal: Catching Up With The World
The appraisal business is on the rise in Russia as more people buy jewelry and stones for both pleasure and as an investment. There are more than a dozen companies that have the right to issue certificates for diamonds and hundreds of small companies and individual appraisal specialists who can make a price evaluation of a stone or a piece of jewelry.
“The certificates market is growing at around 30 percent a year,” said Yuri Shelementiev of Moscow State University Gemological Center. “People are getting richer and they want to invest in stones,” said Anatoly Bocharov, the director of Smolensk Gemological Center, which has issued more than 1,000 certificates since its launch in March 2007.
Most of the demand comes from companies that sell jewelry. “Companies are pressured by the consumers who want to see the certificates for the stones they are buying,” said Shelementiev. The Russian Jewellers Guild has been calling on Russian jewelers to make a certificate a requirement, and many of the big companies have responded. “People want and appreciate transparency,” said Bocharov.
Russia is using its own system of color, clarity and other characteristics in the certificates but jewelers and those who do appraisals do not see any problem with that. Most of the companies issue certificates that have both Russian and Gemological Institute of America (GIA) characteristics. There are also special tables available that correlate the two systems. Yet, Shelementiev said some difficulties arise when stones are imported into the country. as there is no one-to-one correlation between the two charts.
While the demand is growing, there is still a shortage of professionals who can do appraisal work. “Few people were trained as specialists in the 1990s, so there is a shortage of people to do this work throughout the country,” said Shelementiev.
Marketplace • 4/4-grainers in SI1 and better grades are steadily increasing in price.
• 4/4-grainers in piqué and SI qualities, 6/4-grainers in SI2 qualities and ½-
grainers in piqué qualities are moving relatively well because of stable
supply.
• 3- and 5-carats and larger stones of VS qualities and better colors are
difficult to find.
• Pointers of SI qualities are weak, especially 30 pointers.
• Fancy shapes of well-made stones are strong, while poorly made stones
are sold at a huge discount.
• Heart-shaped pointers are very popular.
• Capes of 4/4-grainers and 2-caraters are weak, while 3-caraters+ are
sustaining their prices.
• Smaller star-size melees are expensive.
Article from the Rapaport Magazine - June 2008. To subscribe click here.