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ALROSA bought $ 15 million worth of rough from Severalmaz in late 2011

22 february 2012

As it follows from the statistics released by Severalmaz, ALROSA bought $ 14.7 million worth of rough diamonds from its subsidiary Severalmaz in the fourth quarter of 2011.
This was reported by the Finmarket News Agency. It says that Severalmaz is developing the Lomonosov Diamond Field, which accounts for 20% of Russian diamond reserves.
The transaction involving the purchase of 137,100 carats of diamonds was approved by the Board of Directors of Severalmaz.
ALROSA got the lion's share of the total rough recovered by Severalmaz in the fourth quarter of 2011 - the subsidiary exported only 206.3 carats worth $ 0.7 million during this period.
Severalmaz planned to extract 555,000 carats of diamonds in 2011, while the export license granted by Russia’s Ministry of Industry and Trade permitted to sell overseas 434,960 carats of rough.
Severalmaz sold diamonds to the parent company "due to the complicated market situation in the fourth quarter and in order to maintain price stability with regard to rough diamonds," the company says. During this period ALROSA declined to sell at auctions as well. At the same time, from the beginning of 2011, Severalmaz used to sell their produce mainly at tenders, which made it possible to retrieve maximum gains on the backdrop of positive market conjuncture. In October and December last year, Severalmaz drove its actual revenues to exceed the planned figure of $ 5.3 million.
Severalmaz’s sales reached about $ 36 million in the first 9 months of 2011, up 18% versus January-September 2010 ($ 30.4 million). The average selling price of rough distributed by Severalmaz in January-September 2011 was about $ 80 per carat, compared to $ 50.4 per carat a year earlier.
In mid-February, ALROSA, given the positive trend in demand, said it would resume auction sales, which in the second and third quarter accounted for 28% of the company’s total sales. The first auctions will take place in March.
Severalmaz is the most problematic mining subsidiary of the diamond monopoly. In 2010, ALROSA planned to attract an investor to Severalmaz by selling a 50% stake in the company. ALROSA received three confirmed bids, including one from Rio Tinto, but later refused to sell its subsidiary because the latter managed to stabilize its performance, as well as due to positive market prices for diamonds.
Using funds allocated by its parent company (ALROSA is investing $ 800 million into its subsidiary) Severalmaz is gearing up for construction of the second phase of the Lomonosov GOK (mining and beneficiation works) capable to process 3 million tons of ore. The construction is expected to begin in early 2012. The first phase, currently in operation, provides processing of one million tons of ore per year. Under the license terms, the construction of the second phase should be completed no later than December 31, 2014 bringing the whole works to full capacity (5.6 million tons of ore) until the end of 2015.
ALROSA, which produced about 34.438 million carats of diamonds in 2011, owns 99.62% of shares in Severalmaz.