Thursday, May 26, 2011

Alrosa discloses profits, claims status as largest holder of diamonds

Russia’s secretive state-owned diamond giant Alrosa disclosed its reserves and profits for the first time yesterday in its latest effort to improve transparency ahead of a public listing.

Alrosa said its diamond reserves of 1.28 billion carats had made it the world’s largest holder of the precious stones.

“Our estimates give us reason to believe that Russia has the world’s largest reserves,” Finmarket quoted Alrosa chief executive Fyodor Andreyev as saying. “At current extraction rates, the company’s reserves will last more than 40 years.”

Most of the group is held by the Russian state or the government of the diamond-rich Sakha region of Siberia.

Alrosa hopes to list shares at the end of the next year to erase debts and invest in new mining deposits. But the plan has been delayed as the firm is still viewed as a strategic asset.

Alrosa painted a surprisingly bleak financial picture that contrasted soaring reserves with crushing debts that have been helped only partially by a booming diamond market.

Alrosa posted 2010 net profit of 11.8 billion roubles (R2.9bn) and short-term debt of 12.9 billion roubles. Net debt stood at 97.8 billion roubles, down 13 percent from a year earlier.

Analysts attributed the drop to a eurobond placement that generated $1bn (R7bn) and said the group did not plan to tap foreign capital markets again this year.

The firm’s 2010 production figure of 34.3 million carats of diamonds placed it slightly ahead of De Beers.

Renaissance Capital said 64 percent of Alrosa’s 2010 sales, which rose 45 percent, came from exports that fetched far higher prices than the diamonds on the Russian market.

Alrosa forecast an extended stretch of spiking global prices on top of a 26 percent jump in the first quarter of this year.

Asian demand had created a $16bn diamond market for an annual supply base worth about $12bn.

“The trends… in India and China are blowing everything away. The vendors in Europe… are sending everything directly to India,” Andreyev said.

Renaissance Capital said Alrosa was preparing an independent review of its reserves.

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