ALROSA Weighs Cutting Production in 2016

(IDEX Online News) – ALROSA first vice president Ilya Ryashchin, who has responsibility for finance and economy, admitted that the Russian miner might be forced to cut production if the rough market remains weak.

Ryashchin said that the company expected the market to pick up in 2016, following a historic pattern of prices taking anywhere from 18-24 months to recover, as was the case after the 2008 economic crisis. However, if 2016 did not see a return to “normal consumption” levels, the company would most likely have to reconsider production volumes.

In a conference call with analysts, Ryashchin said in a response to a question about inventory levels that ALROSA’s normal inventory is 12-14 million carats, but that it currently stands at around 20 million carats.

He said that all diamond producers’ attempts to revive the flagging market through a constraint of supply had not produced the desired results, including ALROSA’s dropping the sale price by 15 percent in the year-to-date; adding that large inventories of cut diamonds remain with cutters and jewelry manufacturers, particularly in India.

When asked whether the current market climate may postpone developments, Ryashchin replied that investments are usually based on a longer-term strategy, but that the market environment could cause the delay of some projects.

Ryashchin said ALROSA’s inventory at today’s prices are valued at more than $2 billion. He had previously stated that the company’s loans and borrowing were at around $3 billion, but since the start of the year its debt had been reduced by $500 million.

ALROSA’s revenue for the first nine months of fiscal 2015 increased by 17 percent to RUB172.5 billion ($2.65 billion), despite a 20-percent decline in year-on-year sales volume.