In the next eight years, ALROSA plans to increase production by 17%, according to the Vedomosti Daily, which says that in the opinion of experts this will allow the company to remain the world’s largest diamond producer.
Today, ALROSA’s Board will consider the company's development strategy until 2018. The Vedomosti managed to get acquainted with the document (its contents were confirmed by a source close to ALROSA).
According to the presentation, by 2018 ALROSA plans to increase its diamond output by 16,8% to 39.6 million carats, while its investments in core business will reach RUB 215.3 billion in the next eight years. The document does not specify for which projects this money will be spent, but earlier the company announced that in the coming years it will focus on the construction of three underground mines, Mir, Aikhal and Udachny. A certain part of the money for these projects the company is going to attract by way of floating its shares (ALROSA will be ready for an IPO by the end of this year; the company is estimated at about $10.8 billion and is going to raise $1.5-2 billion).
In the coming eight years, ALROSA will invest RUB 25.6 billion into exploration. This will enable it to increase its reserves by 40 million carats to 1.48 billion and remain the world’s leader by this indicator. By 2018, the company's revenue will grow by one third to RUB 127.1 billion, while its net profit will go up 2.5 times to RUB 15 billion, according to the presentation. The company will halve its total debt down to RUB 59.7 billion.
Sergey Goryainov, the expert of Rough&Polished, says the plan is ambitious if it will be possible to implement and in this case ALROSA may remain the largest producer of diamonds in the world. Before the crisis, De Beers produced about 48 million carats per year, but due to a sharp fall in prices in the fourth quarter of 2008, this corporation almost ceased production, while ALROSA did not stop its operations (selling diamonds to Gokhran) and pulled ahead. Now, that diamond prices climbed, De Beers has sold some of its assets.
It seems that ALROSA is confident about the market, since it is projecting such growth rates for its financial and operational indicators, Sergey Goryainov says. ALROSA’s faith is partly justified for diamonds are going up in price: according to Bloomberg, the Rapaport Diamond Index rose by 18.71% to $ 8,344 (for a diamond weighing 1 carat) from the beginning of 2010. It is noteworthy, that rough prices are the fastest, and if at some point they will outstrip polished prices the market will collapse, as it happened during the crisis, the experts warns. ALROSA should think of developing jewelry production, he says. The company’s representative declined to comment.
