The placement of its shares on the stock exchange carried out by ALROSA worked out well. It is the first time in recent years that one of the largest diamond mining companies got listed. What does this mean for the industry and what is the attitude of its other players to this event? That’s what our correspondents tried to find out turning their questions to industry participants.
Ari Epstein, CEO, AWDC:
What kind of impact can ALROSA’s listing produce on the diamond market and its prospects?
First and foremost, this IPO is a financial transaction and as such it is not expected that this will have immediate effects. On the longer term, the IPO may provide ALROSA with a varied source of capital that it may apply to pay for its ambitious expansion plans both in Russia and in developing diamond mines in Africa.
ALROSA intends to remain a state-owned company. Is this good or bad for the industry and the market?
In the current difficult financial conditions – for all industries, not just diamonds - the fact that ALROSA remains a (mostly) state-owned company may provide for the added stability and solvability that is required by the present circumstances. The fact that the largest diamond mining company in the world is owned by a country the size of the Russian Federation should be enough to reassure those who see a negative future for our industry.
Maxim Shkadov, CEO of Kristall Production Corporation and President of the International Diamond Manufacturers Association (IDMA):
What kind of impact can ALROSA’s listing produce on the diamond market and its prospects?
In my opinion, it will be positive. The emergence of this company on the stock market will attract the attention of investors in our challenging industry. It will be more understood how luxury goods behave in the market, what factors they depend on and what we should expect in the future.
Will non-core investors now holding stakes in ALROSA be able to influence the policy of the company and in what way?
Certainly, they will not be able to do that in a radical way, but the demand for transparency in the company’s reporting, marketing policy and other aspects of its activities fr om minority shareholders always attracts attention of majority shareholders. And this translates into influence on the company’s policy in general.
To what extent the fair market value of ALROSA established after the IPO, may become a market driver contributing to continued investments in the diamond industry?
It is definitely a powerful driver. However, it is not yet clear what such drivers will be based on. The industry has one or two smart analysts, who understand that diamonds are not just a gray mass of commodities, but a very specific product. I would suggest analytical agencies to work more closely in team with all market participants to produce an objective picture.
ALROSA intends to remain a state-owned company. Is this good or bad for the industry and the market?
In my view, this is good. Our market needs a regulator, and there is no chance to find a better regulator than the state. Russia has paramount influence on the diamond market and this should determine the strategy of behavior. And then stability - this is an extremely important factor for our industry. The state in this case is its guarantor. Remember the crisis of 2008-2009. Whatever the strength the company had, its private stakeholders, if there were any at that time, would have stopped mining to save assets.
Do you think there will be any difference between the shares of other listed diamond miners traded on the stock market and those floated by ALROSA?
Other companies are so small that their value will be determined only by their internal factors. As for the global investment boom in our industry, ALROSA and De Beers have to agree on long-term concerted actions. The industry has more than enough problems. We must urgently address the issue of how to increase prices for polished diamonds - the only product made from rough diamonds.
Arik Chicota, Diamonds 4 U:
I don’t know details but for me the intention of ALROSA to sell all the other businesses not related to diamonds and concentrate only on diamonds means that the diamond industry will very soon have a new leader, bigger than De Beers, in a time when we see De Beers in big difficulties and when De Beers becomes very unpopular for sightholders due to the difficulties in making profit by their goods. If ALROSA will be, like they say, the biggest producer not only by carat, but also by total USD value by 2018 and if it will continue to leave same profit to manufacturers, it will become the new syndicate.
David Vardi, a member of the Israel Diamond Exchange:
As long as minor companies achieve to "increase" polished prices, then and only then there is a chance to push up the whole diamond industry. All other interests only contribute to the global diamond market. It is no good that ALROSA will remain a state-owned company. It is against the interest of the whole diamond industry.
Tom Charlton, an independent market advisor and analyst, who worked at Debswana, Nabdeb and BSG Resources LTD:
The diamond industry remains more or less mute, indifferent about ALROSA's IPO, because this IPO will have little or no affect on the diamond industry itself! So, there is no significant probability of any dramatic impact to the tissue of the diamond market. Its prospects will be wh ere they are now: on the lower level of average.
The company’s value is less than fair from this IPO, but it could be a market driver to further investments in the industry, if the global market's conditions would be somehow improved, especially in bordering China and India.
Veronica Novoselova, Galina Semyonova and Alex Shishlo, Rough&Polished
