De Beers Waiting For EU Acceptance, Alrosa Considering Options

Following the announcement by the European competition commission on the proposal by De Beers and Alrosa to taper down rough purchases to $275 million by 2010, De Beers says its is looking forward to having it formally accepted early next year.

“De Beers confirms that it has made a number of commitments to the Commission regarding the proposed trading agreement with Alrosa,” the company said in a press release.

“We believe that these proposals address the concerns that the Commission identified on the agreement and look forward to having these formally accepted early in 2005.”

Alrosa has been selling rough diamonds to De Beers on a willing buyer, willing seller basis at least since the commission announced its objection to the deal in January 2003, if not as early as January 2002 after the deal was signed.

A close look at Alrosa’s 2003 results reveals it sold $634 million worth of rough diamonds to De Beers that year, below the $700 million it’s proposing to start with in 2005.

One big question is how Alrosa will market the increasing amount of rough diamonds. Much of it will no doubt be sold to local producers such as Kristall of Smolensk and Lev Leviev’s Ruiz polishing plant.

But Russia might not be the sole market. One option is to re-kindle its relationship with Lazare Kaplan. In July 2003 Alrosa Vice President Sergey Olin was quoted as saying the company has plans to set up a manufacturing joint venture with them, polishing some $150 million worth of goods annually.

Alrosa was not available for comment.