The pivotal changes currently taking place in the world diamond business have direct influence on the domestic rough and polished diamond industry. In the opinion of experts, diamond prices may significantly rise in the nearest years.  The reason behind is the drastic decrease of world diamond output due to depletion of easily developed primary deposits and the large-scale transfer to the less productive underground diamond mining. According to their estimates, diamond demand may go up to $18 billion, while diamond output may go down to $9-10 billion in current prices.  If Russia will merely manage to preserve the present level of diamond output, this will make it possible to increase its share in the world diamond supply, which is a high-priority problem up to date.
 
An exceptionally important role in solving this problem is played by industrial development of a whole range of small alluvial deposits in Russia and Yakutia, which may be worked out at an accelerated pace by petty (small) enterprises set up for these purposes.  Setting up new diamond-mining companies in the Republic of Sakha (Yakutia) will not only facilitate greater diamond output, but will also increase their efficiency and competitiveness and later on may lead to clusterization of all the rough and polished diamond complex in Russia. The successful operation in the Republic of such small diamond-mining companies (SDC) as OAO Almazy Anabara (51% of stock in Almazy Anabara, which is an open joint-stock society, are owned by AK ALROSA and 49% by the Ministry of Property Relations in the Republic of Sakha (Yakutia)) and OAO Nizhne-Lenskoye during the last years requires searching scrutiny.  Their experience may be used in generating further strategies for developing alluvial and small-scale primary diamond deposits in Yakutia.

By this time, the share of these enterprises has already reached about 6% of the total diamond output and sales in the Republic of Sakha (Yakutia). While comparing basic indicators of SDC and those of major enterprises in the industry, one may note their fast growth, but after 3 or 4 years, when they reach the scheduled level, they stabilize their production.  Maintaining their output at this level is possible by way of extending their raw-material base and developing new deposits.  Therefore, they put into operation additional diamond-mining facilities and take an active part in auction biddings for development of alluvial diamond fields. Thus, in 2007 OAO Nizhne-Lenskoye, developing the Billyah Diamond Field on the territory of the Anabar Ulus, started to erect the fourth seasonal concentrating factory on the Billyah River (the right-hand tributary of the Anabar River), which will process up to 300,000 cubic meters of sand.  In February 2008, OAO Almazy Anabara, while bidding in Yakutsk under the auspices of the Federal Agency for Subsoil Use, purchased a subsoil use license with a view to perform geological exploration of alluvial diamonds and their further prospecting and mining in the basin of the Khara-Mas and Kychkin Rivers.  Within the licensed sites, the forecast resources of Ð1 and Ð2 categories amount to 5.7 million m3 of sand and 3.6 million carats of diamonds.

One of the promising ways of further SDC development is their diversification, which has a sizable effect on economic and social development of the Republic.  OAO Almazy Anabara is an unconditional leader on this path, having established an industrial lumber complex producing sawn goods not only to meet the Republic’s demand but also to export them to Europe.  Another way to diversify the activities of this enterprise is to develop agriculture and process agricultural products.  Taking into account that diamond mining is more profitable than other types of business serving to diversify SDC, their general profitability went evidently down permitting to boost other low-income industries. 
To size up the grade of SDC diversification in the Republic of Sakha (Yakutia), here are some data on cash receipts from sales summarizing their activities (Table 1):
Table 1
Distribution of cash receipts from sales split between types of business of small diamond-mining companies in the Republic of Sakha (Yakutia) in 2006
 

Denomination	OAO Almazy Anabara		OAO Nizhne-Lenskoye
	Million roubles	%	Million roubles	%
Primary business (diamond mining)	2138.6	80.4	2148.9	95.8
Other types of business, including:	522.5	19.6	94.5	4.2
- lumber business	320.8	12.0	–	–
- milk processing	26.1	1.0	–	–
- trade	159.2	6.0	–	–
- other types of business	16.4	0.6	–	–
Total cash receipts from sales	2661.1	100	2243.4	100

The above data are based on the companies’ annual reports for 2006.

The diversification scale in 2006 defined as percentage ratio of cash receipts from other types of business to cash receipts from the primary business was: 24.4% in OAO Almazy Anabara and 4.4% in OAO Nizhne-Lenskoye. 
The last figure does not evidently include the financial results of subsidiary businesses, since in our opinion the current diversification scale of both SDC should be commeasurable. OAO Nizhne-Lenskoye has 13 subsidiary and dependent enterprises engaged in mining minerals, sorting out and cutting diamonds, construction, transportation and investment business. It is worthy of note that the diversification scale of these companies is rather high, taking into consideration the specific character and competitiveness of the diamond business.
 
Thus, the diamond mining has a significant impact on economic development raising the living standards of population where it is performed.   This influence may be direct due to higher incomes of that part of population, which is immediately engaged at the diamond mining enterprises, as well as indirect by way of tax payments to provincial budgets and participation in the development of social and production frameworks in the mining areas. Tax deductions and payments to budgets of different levels from SDC play a significant role in the economy of the Republic and in the economy of those areas where these enterprises operate (Table 2).
Table 2
SDC tax payment pattern in the Republic of Sakha (Yakutia) split by budget levels
 

Ordinal No.	Denomination	Paid-in taxes
		OAO Almazy Anabara in 1997-2006		OAO Nizhne-Lenskoye in 2006
		Million roubles	%	Million roubles	%
1	Federal budget	902	38.8	146.1	35.1
2	Republican budget	863	37.1	166.4	40.0
3	Local budgets	197	8.5	35.5	8.5
4	Extra-budgetary funds	363	15.6	68.3	16.4
Total		2327.5	100	416.3	100

The above data are based on the companies’ annual reports for 2006.

The problem of attracting and engaging the local population at industrial enterprises is of great significance for the Republic of Sakha (Yakutia). At present time, OAO Almazy Anabara is operating on the territory of four uluses in the Republic (Anabarsky, Oleneksky, Lensky and Olekminsky) as well as in the City of Yakutsk.  During the eight years of its activity in the Republic, OAO Almazy Anabara created about 2,000 jobs mainly attracting local people. Only 42 (2.1%) persons were hired outside the Republic.

The personnel policy pursued by OAO Nizhne-Lenskoye is aimed at establishing production and social conditions facilitating higher working efficiency based on economic incentives and social guarantees, combining the interests of the society with those of the employees; it is aimed at higher production efficiency to obtain maximum profit by way of staffing the industry with skilled and competitive personnel.  It is remarkable that 99% of the company’s workers are residents of the Republic of Sakha (Yakutia) of which 50.3% of the pay-roll workers are from Yakutsk, 6.2% from the Meghino-Kangalsky Ulus, 2.6% from the Ust-Maysky Ulus, 4.1% from the Aldansky Ulus and 35.8% from other uluses. 
 
The diamond mining companies initiated by the administration of the Republic of Sakha (Yakutia) were successful in their performance.  OAO Almazy Anabara and OAO Nizhne-Lenskoye, mainly staffed by local personnel and headed by gifted high-level managers, prove there are real possibilities to apply their experience in developing alluvial diamond fields in Russia.  The performance of small diamond-mining companies in the Republic of Sakha (Yakutia) may become an example not only for the diamond industry, but also for other industries.  This is of particular interest today, especially in connection with the forthcoming implementation of the mega-projects in Yakutia.

Yu. Danilov, Acting Chief of Mining Complex Economics Department
Institute of Regional Economy of the North (Federal State Scientific Entity)