Russia’s Ministry of Finance is mulling over the possibility of creating a Russian diamond exchange, www.bigness.ru writes. Alexei Kudrin, Russian Vice-Premier and Finance Minister, told this to reporters at the Krasnoyarsk Economic Forum. There were also reports that the country's major diamond mining company ALROSA may be turned into a public corporation in the middle of this year.
Currently, ALROSA is a closed joint-stock company. According to ALROSA, 50.9256% of its stock is owned by the Russian Federation through the Federal Agency for State Property Management, 32.0002% by the Republic of Sakha (Yakutia) via its Ministry of Property Relations, 8.0003% by eight Yakutia’s uluses (municipalities) and 9.0739% by other legal entities and individual persons.
ALROSA is ranked first in the world by its diamond output in carat and value terms turning out 30% of the world’s diamond production. Floating its stock, the company is almost certain to attract demand in the market. As believed by some experts, the company’s transformation into a joint-stock corporation may be the first step towards an IPO.
Last year, the company posted profit, unlike it was in the loss-making 2009. It produced 34.336 million carats earning a margin of $ 3.483 billion. This year, ALROSA plans its sales revenue at $ 3.5 billion going to drive its output approximately to 34.5 million carats.
ALROSA’s 2010 RAS-based revenue is projected at RUB 96.294 billion against RUB 63.849 billion a year earlier.
The optimistic forecasts are associated with recovered demand for rough and polished diamonds occurred over the last year, when market supply increased by about 10%.
According to a Bloomberg report citing India’s Dimexon Diamonds, by the end of this year polished prices growth will be measured by two-digit percentages.
Thus, the proposal voiced by Finance Minister Kudrin has quite a clear-looking forecast perspective. Diamond-mining companies, with ALROSA and De Beers controlling the rough market, declare their readiness to ramp up output.
But if ALROSA’s raw material base is unobscured and falls within the jurisdiction of the country where it operates, the situation does not look so rosy for the smart De Beers.
The company said it was ready to bring up its annual output to full capacity by the end of 2012.
However, the European Commission imposed a ban on De Beers’ moves to buy operating diamond mines. Besides, the situation with one of the corporation’s major sources of rough, Botswana (20% of the world’s diamond output), remains not clear.
It was reported that Botswana and De Beers extended their previous diamond sales agreement for three more months, until March 31, 2011. The talks could not be completed due to a peculiar reason - some key negotiators were unavailable during last year.
According to business media, Botswana is trying to take some part of rough (10%) out of sales within the monopolistic system of Diamond Trading Company (DTC). WikiLeaks said that Botswana tried to create a diamond trading organization, which would include De Beers, Anglo American and Namibia and which could consolidate 30% of the global diamond trade in Botswana.
The news that the Russian Finance Ministry is prepared to consider establishing their own diamond exchange suggests there is a possibility of imminent changes in one of the most criminal and non-transparent markets in the world.
Speaking about the diamond exchange, the Russian finance minister was cautious. "In the first instance, we have to identify whether there is a market. So far, we have insufficient prerequisites in Russia yet," Kudrin said. “This issue is being studied.”
