Uralalmaz is looking for investor into halted production
ZAO Uralalmaz is on the verge of shutting down, the Kommersant Daily reported. The company’s owner, Israeli diamantaire Lev Leviev allegedly refused to bankrupt this business, but agreed to a bailout scheme, which actually involves a halt in production and search for an investor into exploration. The situation may be saved if the company will win the auction for the right to extract diamonds in the Silurian area, where resources are estimated at 500,000 carats. However, even if Uralalmaz will manage to do this, it will be able to start commercial diamond mining at least in three years, the time needed for exploration.
The local Zvezda Daily recently reported that Uralalmaz had ceased diamond mining and laid off most of the employees. The released workers are seeking employment at Solikamskbumprom, Uralkhim and other companies operating in the north of this territory.
Leonid Lozhkin, CEO of Uralalmaz, told the Kommersant that his company plans to retrench 420 people, mostly workers. About 130 employees will continue to work with the company. Leonid Lozhkin explained, that at the end of the season it was decided to mothball mining operations and continue exploration on the diamond fields owned by the company.
Leonid Lozhkin says the deposit is to be mothballed as none of the developed diamond fields is able to keep production at the required level of profitability. According to him, this year the company actually finished mining at its major diamond field, which is Volynskoye, because it was exhausted. Allegedly, this field was able to cover losses of other operations, but now it is impossible. Mr. Lozhkin said that out of the existing 450,000 carats remaining on the miner’s balance only 10% are viable for mining purposes. "In previous years, the problem of increasing the company’s resources was paid insufficient attention, which brought about this situation," he added.
At the same time, according to the Kommersant, the company discussed a bankruptcy option in earnest, since it owes a few tens of millions of dollars to its owner, Israeli diamantaire Lev Leviev.
Uralalmaz is part of the Ruiz Group belonging to Lev Leviev. This year, Uralalmaz maintains mining operations on three diamond fields. The company produces 1% of all diamonds mined in Russia. Uralalmaz posted a revenue of RUB 791.7 million in 2011, while its net loss reached RUB 124 million. The company’s output in 2012 was about 40,000 carats.
"Judging by the documents, Uralalmaz has enough reserves to continue mining for no less than ten years maintaining the current level of production (about 40,000 carats)," Andrei Belokon, heading the Perm Regional Department of the Russian Agency for Subsoil Management, said. According to the Kommersant, this issue was discussed at the agency on October 31 and it was decided that Uralalmaz will analyze its reserves in the course of next year. The Perm Regional Department for Subsoil Management explained that Uralalmaz was issued 11 licenses for diamond mining, including one for exploration and production. Mr. Lozhkin claims that only six of them are for diamond mining.
In the near future, the company intends to participate in the auction for the exploration and diamond mining in the Silurian deposit. The auction will be held on December 6. The Silurian deposit resources are estimated at 500,000 carats.
However, even if the company manages to win the auction for the right to extract diamonds in the Silurian area, its commercial diamond production is stopped for at least three years. "It will be possible to start developing the Silurian diamond field only in three to four years and before that it is necessary to carry out exploration," Victor Pankov, the head of the Krasnovishersky District, said. Also, the company has plans to expand the boundaries of the Volynskoye deposit, but this is only possible if the proven reserves will be re-auctioned. "If we succeed to do this, then in this situation the company will employ about 200 people for the next year," Mr. Pankov said. According to him, Uralalamaz is facing some problems regarding the federal property, which is being released - the four electric power substations. "Today we are negotiating with PermEnergo to make them rent this property," he said.
"Due to the fact that exploration works require large cash infusions, we are looking for a general partner or investor to explore and further develop the unique diamond placers in the Urals," Mr. Lozhkin said.
