Announcing its operational results for Q3 and 9M 2018 today,  ALROSA reported a mixed bag of results for the two periods: while some areas grew, others went down.

Q3 2018 diamond production at  10.5 m carats  marked a   23% growth as compared to the previous quarter (q-o-q), but it was higher only by  2%  as compared to the same period of the previous year (y-o-y). The organisation put this down to “seasonal growth in output at alluvial deposits, an increase in ore and gravels processing, and the ramp-up of the recently launched assets to design capacity”.

However, for 9M 2018 output decreased by 11% to 26.4 m carats. This was mainly   due to the shutdown of the Mir underground mine and the completion of open-pit mining at the Udachnaya pipe, the Company noted.

The volume of ore and gravels  processed in Q3 2018, rose 70% q-o-q  and  10% y-o-y  to 17.2 m tonnes, “due to seasonal return to production at alluvial deposits”, the Company said.

In  9M 2018, the volume of processed ore and gravels  was higher  by 4% to 33 m tonnes, “mainly driven by an increase in ore processing at alluvial deposits”.

The average diamond grade per tonne of ore  in  Q3 2018, decreased by 28% q-o-q and was down 7% y-o-y  to 0.61 cpt. This, ALROSA said, was “mainly due to seasonal growth of production at alluvial deposits”.

However, the 14% dip in diamond grade in 9M 2018 to 0.8 cpt was attributed to  the closure of the Mir Underground Mine  in 2017 and “production growth at lower-grade assets”.

Rough diamond sales  of the Group in Q3 2018 of  6.7 million carats marked a decrease of  26% q-o-q. This included the sale of   4.7 million carats of gem-quality diamonds which also dipped  26% q-o-q;  and 2.0 million carats of industrial diamonds which were lower by 27% q-o-q. 

Diamond sales for  9M 2018 touched  29.1 million carats marking a decrease of   9% y-o-y. These  included sales of  21.1 million carats of gem-quality diamonds, down 12% y-o-y; and 8.0 million  carats of industrial diamonds,  up 1% y-o-y.

In value terms, sales in Q3 2018  decreased by 10% q-o-q to US$ 973 million but were higher by  13% y-o-y, with gem quality diamond sales (ex. polished and industrial diamonds) amounting to US$ 949 million.

While inventories as at the end of Q3 2018 of 15.5 million  carats were up by 42% q-o-q , they were down 11% y-o-y, “driven by a seasonal production growth at alluvial deposits and lower sales volumes”, ALROSA stated.

The Company reported a growth in the  average realised prices for gem-quality diamonds.  Following sales in July through September, average realised prices  (including product mix change effect), grew by 22% q-o-q (up 18% y-o-y) to US$ 199/ct due to improved mix as sales of +10.8 and +2 carat stones grew,  ALROSA reported. The Company  noted that average realised prices (sales revenue divided by the sales volumes in carat terms) was also impacted by changes in product mix throughout the reported period.

“The diamond price index grew by 5.2% year-to-date, driven by improved demand,” ALROSA added.

ALROSA declared that its 2018   production outlook remains “unchanged” at 36.6 m carats, which marks a decrease of 8% y-o-y.

Providing a market overview, ALROSA said that in  H1 2018, the diamond jewellery market grew by 6% as all key markets “enjoyed rising sales”, with the exception of India. “The stagnant growth in India was due to local banks' reluctance to fund the diamond industry,” the Company stated.

“The North American market saw diamond jewellery sales rise by 5% y-o-y,” ALROA elaborated. “In Asia and Europe, sales in dollar terms added 8% y-o-y (up 3% and down 3%, respectively, at constant exchange rates).”

The Company pointed out that in Q3 2018, the rough diamond market experienced a traditional seasonal slowdown due to summer holidays. “Beginning in the second half of August, cutters were loading production facilities to accumulate sufficient diamond inventory ahead of the Diwali festival holidays starting on 7 November,” ALROSA said. “Resumed market activity following the summer slowdown saw weaker demand for inexpensive goods due, in part, to the depreciation of the world currencies against the US dollar.”