Alrosa Mining

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IRJ takes a look at how this company has carved out a vital piece of Russian diamond history and continued to grow as it works to establish long-term relationships with other diamond conglomerates all over the globe.

Russian based ALROSA Limited, make up an astonishing 97 per cent of the nation’s diamond production and 20 per cent of global rough diamond production. The mining company currently works in the exploration, mining, manufacturing and sale of diamonds, offering a broad spectrum of activities throughout the diamond mining and supply chain.

How it got started

Founded on February 19 of 1992 when a Presidential Decree by the Government of Russia was signed, ALROSA is the official amalgamated successor of a number of historic Russian diamond companies:

•  NPO Yakutalmaz, the former USSR state-owned diamond miner
•  The diamond marketing and sorting arms previously stemming from the State Committee for Precious Metals and Gemstones of the Ministry of Finance of the Russian Federation
•  Numerous divisions previously under the Almazjuvelirexport Foreign Trade Association, the state-owned unitary enterprise-foreign trade association

Since its inception ALROSA’s ties and partnership with the Russian government has continued to grow and develop. The Presidential Decree of 1992, which effectively created ALROSA, came under a decree signed that day by President Boris Yeltsin, essentialy privatised Russia’s diamonds industry. This was done by creating one entity to be responsible for mining, sorting and selling the diamonds, otherwise known as the Almazy Rossii-Sakha (ARS) or, Joint Stock Company (ALROSA today).

The Almazy Rossii-Sakha (ARS) Joint Stock Company officially shortened its name to ALROSA in 1998 following a period of numerous shifts in the Russian diamond industry including discussion over an exportation agreement with De Beers which expired in 1995. In March 1998, Yeltsin signed legislation which placed control of the nation’s diamond industry in ALROSA’s care.

This legislation cemented ALROSA’s monopoly over the mining and selling of Russian diamonds, prevented smaller operators from encroaching on this and defined the governments previously debated hold over selling diamond assets. The clarification offered by this new legislation enabled ALROSA to safeguard its enormous assets base, as well as end confusion and unrest over control of Russia’s diamond industry. Today the Russian government has a 50.9 per cent stake in ALROSA.

ALROSA: from strength to strength

Having been stabilized and defined in its position in 1999, ALROSA moved to increase production beginning with its first underground diamond mine operation—the “Kimberlite Internatsionalnaya Pipe”—which tapped into a vertically extended ore reserve. Various new openings and facilities were put together and total annual production for the year totalled US$1.54 billion. By 2003, annual sales reached an estimated US$1.8 billion. The company’s total profit for 2007 reached US$423 million. When the global financial crisis hit, the company reported that its 2008 profits fell 73 per cent, declining to US$113 million. As a result, ALROSA slashed its sales and profit expectation for 2009, forecasting US$2.8 billion with a net profit of US$65.1 million.

Nearly a decade later, the company estimates its output hit estimated US$2.24 billion with a net profit of over US$102 million. This year has gotten off to a flying start for the company. Recently, ALROSA announced that it has sold US$667 million worth of diamonds in the first two months. The company highlighted the current strong demand for rough diamonds. Alongside this announcement President of ALROSA, Fyodor Andreyev, said that the company is focused on developing long-term relationships with the world’s major diamond players within the coming year. Speculation swirled over a reputed further sales agreement to be signed with India and late in February, a senior delegation from ALROSA made a visit to explore opportunities there.

It wasn’t long before these rumours were confirmed, and on March 12, 2010, ALROSA announced that it has signed three-year supply agreements with the Indian diamond manufacturers Rosy Blue, Diamond India Ltd. and Ratilal Becharlal & Sons. These agreements total roughly US$490 million, and follow over US$500 million in diamonds sold by ALROSA to India in 2009.“ALROSA attaches strategic importance to establishing direct, long-term and win-win relationships with diamond manufacturers and expanding geographic diversification of its trade,” a company official said in a statement.

ALROSA plans to sell an estimated US$3.2 billion in diamonds within this coming year. With over US$600 sold in the first two months and this latest deal with India for another US$490 million, it’s plain to see that the numbers add up and this company is far along in achieving this sum and establishing the mutually beneficial, long-term partnerships central to its plans going forward.

www.eng.alrosa.ru