(IDEX Online) – ALROSA reports diamond production volume in 2018 at 36.7 million carats and sales of 38.1 million carats (down 8%). Sales proceeds increased by 6% to $4.5 billion.

 

In Q4 2018, diamond production decreased by 2% q-o-q (up 2% y-o-y) to 10.3 million carats driven by seasonal suspension of production at alluvial deposits, which was almost fully offset by increased output at underground mines. In 12M 2018, production declined by 7% to 36.7 million carats due to the shutdown of the Mir underground mine (UM) and the completion of open-pit mining at the Udachnaya pipe.

 

In Q4 2018, the volume of processed ore and gravels went down 2.3 times q-o-q (up 3% y-o-y) to 7.5 million tonnes, due to seasonal suspension of production at alluvial deposits. In 12M 2018, it grew by 3% to 40.5 m tonnes mainly due to increased gravel processing at Almazy Anabara alluvial deposits (up 8%) and Mirny Division (up 10%).

 

In Q4 2018, the average diamond grade per tonne of ore increased 2.3 times q-o-q (down 0.2% y-o-y) to 1.38 cpt, mainly due to seasonal suspension of production at alluvial deposits.

 

For all of 2018, the average diamond grade was flat at 0.91 cpt. A 10% y-o-y decrease was mainly driven by the shutdown of the Mir underground mine in August 2017 and increased production at lower-grade assets.

 

Q4 rough diamond sales (ex. polished diamond sales) were 9 million carats (up 34% q-o-q), including 5.3 million carats of gem-quality diamonds (up 12% q-o-q) and 3.7 million carats of industrial diamonds (up 87% q-o-q).

 

Diamond sales in 2018 were 38.1 million carats (down 8% y-o-y), including 26.4 million carats of gem-quality diamonds (down 12% y-o-y) and 11.7 million carats of industrial diamonds (up 5% y-o-y).

 

Diamond inventories at the end of 2018 saw a seasonal increase of 10% q-o-q (down 6% y-o-y) to 17 million carats.

 

In Q4 2018, average realized prices for gem-quality diamonds fell by 23% q-o-q (up 10% y-o-y) to $153/ct due to a lower share of large diamonds sales. In 2018, average realized prices grew by 21% and reached $164/ct.

 

The diamond price index in 2018 gained 3.7% on the back of recovering diamond demand.

 

In value terms, Q4 sales declined by 13% q-o-q to $845 million (down 7% y-o-y), with diamond sales (ex. polished diamonds) amounting to $824 million.

 

Total sales in 2018 increased by $241 million (up 6% y-o-y) to $4.51 billion. Diamond sales rose by $242 million, despite lower sales in carats by 8%.

 

2019 forecast: production outlook is expected at 38 million carats (up 4%).

 

Market Overview

In the first nine months of 2018, the global diamond jewelry market grew by 5% y-o-y. North America, the world's largest diamond jewelry consumer, showed stable sales growth through the year, up 5% over 9M 2018.

 

In most of the South Eastern Asia, including India, the diamond jewelry sales growth slowed down, with some countries showing a decline triggered by devaluation of local currencies against US dollar. High demand in China in early 2018 drove a 7% sales growth in the region in 9M 2018. The preliminary data on the diamond jewelry sales in China in Q4 2018 shows further decline.

 

The trend of weaker demand for lower priced stones that emerged in Q3 continued into Q4 2018. Demand for rough diamonds echoed the situation on the polished diamond market, where uncertified melee diamonds saw the strongest price decline due to oversupply, weak rupee and lower liquidity in India. Lower prices for small-size diamonds coupled with flat personnel expenses decreased the profitability of melee diamond polishing.