Russia is preparing to sell its largest diamond company in the country

According to a report on February 5th by the Russian news network, the Russian Ministry of Economic Development has begun preparations for the sale of 7% of the "Alrosa" diamond, and has begun to select investment bank consultants. The company is one of the world's largest diamond producers and a wholly-owned state-owned enterprise in Russia. It is jointly owned by the Russian Ministry of Finance and the Republic of Yakutia, with a mining share of 30%. The sale of some of the company’s state-owned shares has been included in the 2011-2013 privatization plan.

Relevant information:

Russia's diamond industry Russia's Sakha (Yakutia) Republic "Alrosa" diamond company is an industry monopoly in the field of diamond raw materials in Russia, and its operation scale is second only to South Africa's "De Beers" company. The diamond industry plays an important role in the Russian industry and is one of the sources of funding for federal budget revenue.

The annual global diamond market has a total capacity of about 7-8 billion US dollars. The main producing countries are Botswana, South Africa, Russia, Canada, Angola, Belgium and other countries. Russia's output currently accounts for about a quarter of the world market, and the overall situation of its industry is as follows:

1. Main origin and output

Russia’s largest diamond mining site is in the western part of the Republic of Sakha (Yakutia). The diamond mines in the region were discovered in 1949 and began to be mined in the 1970s. Kaliting, president of the “Alrosa” company in the Republic of Osaha, said in March this year. According to the current annual production of 1.8-1.9 billion US dollars, the company can guarantee production for 40-50 years. The company issued a five-year US$300 million European bond in April 2003. The release shows that demand is much larger than circulation.

Arkhangelsk is mainly producing diamond sand mines; Lomonosov is the largest diamond producer in Europe. It is estimated that the proven reserves are more than 12 billion US dollars, but Russia has not carried out large-scale mining. Another diamond production site, Gribe's proven reserves, is about $5 billion and is of superior quality. In 2002, Russia mined more than 2% of the planned diamonds and paid $1,584 million to the federal budget. It is expected that the amount of production in 2003 will remain at this level, one of the reasons is that there is no need for greater demand and mining; the second reason is to protect and rationally use mineral resources. In the next five years, the Republic of Sakha plans to reduce the proportion of diamond revenue from fiscal revenues from 60% to 40%, increasing oil production. Russia began to reduce diamond mining in the early 1990s. The current mining volume accounts for 20%-25% of the world market, ranking second; the country with the highest mining volume is Botswana; the third country is South Africa. Canada said that by 2006, its diamond production will account for 15% of the world market, when it will surpass South Africa's mining volume to rank third. From the perspective of development, if there is more market demand, Russia will increase the amount of diamond mining and occupy its own share in the world market like oil production.

In February 2003, Russian media reported that Russian geologists discovered diamond deposits in Bashkir, which can be used to extract industrial diamonds. Bashkir is likely to become Russia’s second Republic of Sakha (Yakutia).

2. Management and sales

Russia's jewellery industry is completely monopolized by the state. It is headed by the special committee of the Russian Ministry of Finance. The company is operated by the “Alrosa” stock group company located in the Sahara Republic, the main producing area of ​​diamonds. The amount of diamond digested by the Russian market is very limited. In 2002, there was a slight increase in market sales compared to 2001. The main trading partner of Alrosa is South Africa's “De Beers” company, which ranks first in the world in terms of trade volume, which controls two-thirds of the world's gemstone trade market. The main trade method is that most of the diamonds produced in Russia are sold on the international market through De Beers. In recent years, Russia intends to operate independently, but due to the pattern formed over the years, the sales business is still dependent on De Beers. From the 1930s, Russia sold diamonds through the company. Not long ago, De Beers signed a contract with Alrosa for a trade volume of $1.6 billion. In March of this year, the Russian company received a five-year export quota for the first time. The annual trade volume with De Beer can reach 800 million US dollars, and 5 years can reach 4 billion US dollars. Russian companies are also seeking to sell diamonds through other means, and currently 5% of processed diamonds in the export share are freely sold under the agreement. The primary price of rough diamonds is: at least $80 per carat, depending on shape size and quality; the other is typically $200-400 per carat. More than 50% of the processed diamonds are sold to the United States each year.

By the beginning of 2003, Russia’s foreign debts totaled 123.5 billion U.S. dollars and entered the peak of debt repayment. In 2003, a total of 17.2 billion U.S. dollars was repaid. In 2002, Russia repaid 14 billion U.S. dollars in foreign debt. The Russian government said that Russia will repay its foreign debts on time and will no longer require new loans from international financial institutions. The performance of debt repayment obligations will not affect the improvement of residents' living standards and social welfare expenses. If the market of the international oil market is still optimistic in 2003, there will be no problem in repaying debts, otherwise it will only find other sources of funds for debt repayment. In 2002, Russian Finance Minister Kudrin said that Russia will take some of the diamonds preserved in the treasury for sale in exchange for cash to pay off debts; the diamonds sold in Russia will not affect the price of the world gem market. However, he declined to disclose the specific amount of diamonds that Russia will sell, but some media reported that the amount is about 20 billion rubles.

Russian President Vladimir Putin signed the "Order on the Import and Export Procedures for Natural Diamonds and Diamonds" in December 2002. The “Alrosa” company has a quota for long-term export of gems; merchants in the processing industry can purchase 15% of the gems from the “Alrosa” company. Russian Finance Minister Kudrin said that the order will promote the long-term and stable cooperation between the "Alrosa" company and its partners, and it is also a key step for the Russian diamond market to go to the market economy. In December of the same year, the Russian Ministry of Finance agreed in principle to open the quasi-platinum market in stages and gradually phase out the quasi-platinum export restrictions.

Since 4% of the trade in the world diamond market is illegal trade, the UN Security Council is preparing to impose sanctions on the illegal use of diamonds for weapons. Therefore, dozens of countries in the world have reached an agreement and the diamond trade adopts a unified certificate.

In 2002, the distribution of world diamond consumption market share was 48% in the US; -15% in Japan; -11% in Asia and Arab countries; -10% in the Pacific countries; -11% in Europe and -5% in other countries and regions.

3. Status of the Russian diamond market

Russian Deputy Prime Minister and Finance Minister Kudrin said in 2002 that we are considering removing restrictions on diamond sales to make trade in the industry more open and transparent.

"Alrosa" company president Ka Liting believes that the US-British war against Iraq has not had a major impact on the world diamond market, but currently it is affected by the global economic downturn, purchasing power is suppressed, diamonds in the next 5-6 years There will be no major developments in the industry, which is the main reason why Russia currently controls its mining scale. Russia believes that although the number of diamond-minching countries in the world is gradually increasing, by 2005 Russia will dominate the various businesses in the industry. Due to the increasing competition, the price of diamonds in the world market has dropped. It will take some time to return to the original price level, so the investment attracted by this field is obviously insufficient.

In Russia, due to the government's gradual implementation of loose management methods, especially the monopoly on the diamond processing industry began to decline, the first diamond processing plant was opened in the Primorsky Territory of the Far East. Currently all raw materials come from the Republic of Sakha, and the factory is provided for the local area. Employment opportunities, the size of the factory will also expand.

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