Russia's Alrosa diamond giant reveals profits, reserves

25th May 2011, Comments 0 comments

Russia's secretive state-owned diamond giant Alrosa disclosed its reserves and profits for the first time on Wednesday in its latest attempt to improve transparency ahead of a planned public listing.

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

"Our estimates give us reason to believe that Russia has the world's largest reserves," the Finmarket news agency quoted company chief Fyodor Andreyev as saying.

"At current extraction rates, the company's reserves will last more than 40 years," Andreyev said.

More than 90 percent of the company is held either by the state or the local government of Sakha -- the diamond-rich region of Siberia where the firm is based.

Alrosa hopes to list shares toward the end of the next year in order to erase debts and invest in new mining deposits.

But the plan has been repeatedly delayed because the company is still viewed as a strategic asset by the Russian government.

Alrosa painted a surprisingly bleak financial picture that contrasted soaring reserves with crushing debts that were only partially helped by the booming diamonds market.

Alrosa reported a 2010 net profit of 11.8 billion rubles ($415 million) and a short-term debt of 12.9 billion rubles ($455 million).

The diamond producer said its net debt stood at 97.8 billion rubles ($3.5 billion) and down 13 percent from the previous year.

Analysts attributed the drop to an October eurobond placement that generated $1 billion and said the company does not plan to tap foreign capital markets again this year.

The company's 2010 production figure of 34.3 million carats of diamonds placed it slightly ahead of South Africa's private mining giant De Beers.

The Renaissance Capital investment house said 64 percent of Alrosa's 2010 sales -- which were up 45 percent -- came from exports that fetched far higher prices than the diamonds on the Russian market.

Alrosa also predicted an extended stretch of spiking global prices that comes on top of a 26 percent jump in the first three months of the year.

The company's president said outpaced Asian demand had created a $16 billion diamond market for an annual production base worth about $12 billion.

"The trends we are seeing in India and China are blowing everything away," Andreyev said.

"The vendors in Europe are not even unpacking their shipments -- they are sending everything directly to India," he said.

Renaissance Capital said Alrosa was now also preparing an independent review of its reserves in preparation of the initial public offering.

© 2011 AFP

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