The World Diamond Council (WDC) completed its general meeting in Moscow on Tuesday. Such meetings are held annually to discuss and formulate the industry position on issues pertaining to the activity of Kimberley Process. The participants of the meeting discussed the interaction with Kimberley Process aimed at excluding "conflict" diamonds from international trade and improving the control system over diamond trade.
Andrei Zharkov, President of ALROSA addressing the meeting in his inaugural speech commended the significant contribution made by the World Diamond Council and Kimberley Process to develop international diamond trade and increase its transparency. Andrei Zharkov said that the World Diamond Council should continue its efforts to protect the reputation of the diamond industry, as well as to make consumers aware of that significant contribution, which was being made by this sector to the economy of entire countries and parts of the world.
Answering questions from journalists during a break between the WDC sessions, Andrei Zharkov said that the World Diamond Council had elected its Vice President.
"It is the first time that this position was taken by a representative of ALROSA – Andrei Polyakov, the current Vice President of the company, who in keeping with the WDC’s Statute, will actually take over as President of the World Diamond Council next year and this, as I believe, will not only strengthen the position of the diamond industry in the Council as a whole and on the international stage serving to protect their interests, but also will assist in strengthening the image of the company," Andrei Zharkov said.
Referring to the possibility of ruble settlements within new export contracts to be tied in 2018 for the supply of rough diamonds, he stressed that this was an issue to be negotiated with ALROSA customers. "In any case, we envisage such an opportunity for those contracts that we conclude with our customers. Right now, we do not define any specific amounts of ruble payments, that is, we do not practice ruble settlements with our overseas customers, but such an opportunity is provided. It all depends on the negotiations with our customers," the president of ALROSA said.
Speaking about plans to establish a diamond exchange, which has been lately the talk of the town in the media, Andrei Zharkov said the company was considering this possibility and would submit its proposals in the near future to the Chairman of the Supervisory Board and to the Deputy Prime Minister overseeing the company. "Specifically, we speak not even of a diamond exchange, but about a kind of trading platform, which we would like to create in the Far East area, but its creation requires a certain infrastructure,” he said. “Now, these issues have already been dealt with, and we will continue to interact with state authorities, which must also take certain decisions. This project is seen as part of the free port of Vladivostok. The operation modes available in a free port can be used to maximize the efficiency of such a trading platform."
According to the head of ALROSA, possible trading volumes on such a platform primarily come from those existing contracts that ALROSA has with its clients operating in the Asia-Pacific region, so the creation of such a platform is directed generally to increase the company’s sales in the Asia-Pacific region. "The establishment of this trading platform is tentatively set for the end of 2016 - beginning of 2017," he said.
Noting that without taking into account ALROSA’s sales of rough to India, its direct sales to China and Japan in the Asia-Pacific region are insignificant, but adding India, its sales there exceed 50% of the company’s total, Andrei Zharkov stressed that the establishment of such a trading platform there is aimed at strengthening the company's position in the area and that any country can take part in its operations.
Sharing his view on the problem of synthetic diamonds, Andrei Zharkov said that mixing synthetic and natural diamonds harms the image of natural diamond goods in the first place and has a serious negative effect on consumers. Making a purchase, the consumer should clearly realize what he or she gets - synthetic or natural stones, the president of ALROSA said, adding that Russia had already taken certain measures in this direction and that those amendments, which were adopted to the federal law regulating the circulation of precious metals and precious stones, serve to divide the circulation of synthetic and natural diamonds, as well as other precious stones.
Commenting on rough pricing in the diamond market, Andrei Zharkov said: "One way or another, the diamond market is a part of the commodity market and, of course, it is experiencing some negative pressure, but if you compare us with many other commodity markets – those of precious metals, base metals, oil, iron ore – on the whole, diamond market looks much stronger, much more composed." According to Andrei Zharkov, ALROSA’s downward price adjustment versus the beginning of this year has currently reached approximately 15%. Prices will most likely remain stable until the end of the year at the level we are today, he said.
Asked about the possibility of early repayment of its debt by ALROSA for $ 1 billion, Andrei Zharkov said that this hinged upon the capital market and the company would see if it would be essential. "I am sure that we shall repay half a billion this year, but the rest will depend on the situation at the year end," he said. According to the president of ALROSA, the company has currently no need to increase its credit portfolio.
Andrei Zharkov also stressed that the company’s financial performance was strong enough and that it would maintain dividends at a level not lower than last year.
Touching upon the development of diamond manufacturing by ALROSA, Andrei Zharkov said that the company’s core business is diamond mining. "The underlying competence of the company is mining,” he said. “And this competence will be further developed. It is recorded in the company's strategy and long-term development program. As for diamond manufacturing, we have our own cutting and polishing facilities, and we will look at how to make these existing facilities more effective. If we see that all such mechanisms work efficiently, that they are configured correctly, that they generate revenue for the company, then this one thing. Then we can say that we can expand this activity and that it can grow organically. However, if it does not meet the interests of the company’s shareholders in terms of profit, then what is the point to develop it?"
Asked about the impending sale of ALROSA’s stake in Arcos Ltd approved by the Supervisory Board, Andrei Zharkov said that this decision had been taken within the program aimed at disposal of non-core assets. He stressed that the company had currently no plans to sell the functioning trade missions of Arcos.
Vladimir Malakhov, Rough&Polished
