Dec 26, 2017

ALROSA Plans Production of 36.6 Mn Cts for 2018; Expects Higher Average Price Per Ct

The Supervisory Board of ALROSA which reviewed and approved the Group’s budget for 2018, said that it expects the global diamond market to remain stable in 2018. This is based on a “slight upward trend in the global jewellery demand and virtually flat global production”, ALROSA explained.

The ALROSA Group’s diamond production next year will be at 36.6 million carats, as     higher output is expected at ALROSA’s strategic mining assets. The Udachny underground mine will see production go up from 1.6 million carats to 3.9 million carats; and Severalmaz  production will increase from 2.4 million carats to 3.3 million carats.

ALROSA also announced that in 2018 its diamond sales will include rough from accumulated diamond inventories; it will thus represent an “improved sales mix” and hence  attract a “higher average price of gem-quality diamonds vs 2017”.

The Company also said it will be implementing “a comprehensive programme to manage costs and improve efficiency”, and that it has taken measures “to decrease working capital by minimising receivables, limiting supplies and reducing end product inventories”.

“These initiatives are expected to keep the Company’s costs flat in 2018,” the Company stated. “ALROSA’s costs may be brought down even further through the disposal of non-core gas assets, which are expected to be sold at an auction in Q1 2018.”

The Company has planned a capital expenditure of RUB 32 bn for 2018. This will include  investments in existing strategic mining assets. Measures  planned include ramping up output at the Udachny underground mine, completing the construction of the Verkhne-Munskoye deposit infrastructure, developing the Zarya pipe, and maintaining production at the current level, including at the International and Aikhal underground mines.

“The budget for 2018 approved by the Supervisory Board of ALROSA Group provides for stable financial performance despite the temporary downtime of the Mir underground mine,”said Alexey Philippovskiy, CFO of ALROSA. “In 2018, the Company’s main focus will be on increasing efficiency, controlling costs and selling non-core assets. ALROSA keeps generating significant free cash flow, which is mostly used for dividend payments and debt repayment.”