The Strategic Planning Committee of ALROSA’s Supervisory Board reviewed options to cut spending and optimise production as proposed by the management and recommended that the management be guided by proposals envisaging lower output, the company said. According to preliminary estimates, when implementing measures to reduce production, ALROSA’s production in 2020 may reach 28-31 million carats compared to the initial plan of about 34 million carats due to the crisis in the global diamond market.
The coronavirus pandemic had a major impact on the gem and jewelry market, which began to show signs of recovery earlier this year.
In this context, major diamond producers allowed cutters not to purchase the volumes contracted before in an attempt to pull all players across the value chain out of the crisis while also maintaining the stability of prices in the diamond market. This step requires that the Company show proof of operating and financial resilience, with cost cutting and proactive production management viewed as the key tools for achieving this objective amid the slump in sales.
Production cuts are expected to come at the expense of operations that have weaker margins due to lower diamond quality and price. Temporary shutdown of such production sites will help avoid the build-up of stocks of diamonds least sought after in the market.
Following the suspension of operations at Zarya and Aikhal, the Company’s management took a decision to halt commercial production at the Verkhne-Munskoye deposit. By early June, all operations at the deposit are set to be closed. Mining is expected to resume on October 1, 2020.
Victoria Quiri, Correspondent of the European Bureau, Rough & Polished, Strasbourg
