Bain & Company released its fourth annual report on the global diamond industry last December in conjunction with the Antwerp World Diamond Centre (AWDC), which noted that ALROSA was still the leader in absolute earnings before interest and taxes (EBIT), followed by De Beers.
The Russian diamond giant recorded EBIT of $1.8 billion in 2013, delivering a strong growth on the heels of its successful IPO in October 2013, which raised $1.3 billion in a share sale.
The offering was backed by US funds including Oppenheimer and Lazard, as well as the Russian Direct Investment Fund.
Bain & Company said De Beers reported EBIT of $1 billion during the same period.
“Measured by EBIT per carat, ALROSA leads the way, followed by Petra Diamonds and De Beers,” it said.
“While Rio Tinto and Dominion Diamond trail the top three by a considerable margin, both have recovered from losses in 2012 and are steadily improving their profitability.”
ALROSA recorded EBIT of $70 per carat, while that of Petra was $69 per carat.
De Beers also reported EBIT of $48 per carat, while that of Rio Tinto was $9 per carat.
Bain & Company had reported a year earlier that ALROSA’s 2012 operating margin of 33 percent represented only a slight decline from 2011’s margin and resulted in operating income of $1.6 billion, or $46 per carat.
According to Kimberley Process’ 2013 statistics, rough-diamond output, as measured by carats, grew a modest 2 percent to 130 million carats.
Russia claimed the largest share of the production increase - 3 million carats.
“Production rose because ALROSA’s Aikhal underground mine reached its target capacity, ore grade at the Jubilee pipe improved, and ALROSA acquired the Nizhne-Lenskoye diamond-mining company,” said Bain & Company.
ALROSA continued as the volume leader in the world as it produced 37 million carats in 2013, a 7 percent increase from 2012.
De Beers, whose sales increased 5 percent during the year, retained its position as the revenue leader, followed closely by ALROSA.
Bain & Company said in the first half of 2014, the dynamics of production among the major producers changed.
“ALROSA’s output decreased by 7 percent compared with the first half of 2013 because of planned maintenance at the Aikhal and Udachnaya processing plants and despite the growth of output from recently launched Severalmaz production,” it said.
“The pace of growth at slowed from the double digits to 2 percent and 4 percent, respectively. Dominion Diamond ramped up its output by 7 percent.
“De Beers sustained its pace of growth at 12 percent, thanks to higher output at Venetia following the recovery from a flood in the pit and higher output from processing plants at Jwaneng.”
ALROSA commissioned its Udachny underground mine last year perhaps in a bid to remain one of the leading players in the diamond industry.
Udachny was located in the Sakha Republic, eastern Russia.
Upon reaching its design capacity of 4 million metric tons per year (mt/y) of ore in 2019, the underground mine would become the largest underground diamond mine in Russia and one of the largest worldwide.
“An ambitious program for the construction of underground mines is an integral part of ALROSA’s development strategy aiming to keep its world’s leading position in terms of rough diamond mining and ensure the diamond mining growth up to over 40 million carats,” said former ALROSA chief executive Fyodor Andreev.
“Launch of the Udachny underground mine will allow the Company to maintain stable volumes of diamond production in Western Yakutia for many years.”
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
