ALROSA Unveils 2018 Full-Year Performance: Production, Sales, and Market Dynamics Highlight Resilience Amidst Evolving Global Landscape
Moscow, January 24, 2019 – ALROSA, a global leader and one of the world’s largest diamond mining companies, has released its comprehensive production and sales results for the full year 2018. This detailed report sheds light on a robust financial performance achieved despite operational shifts and dynamic global market conditions, reaffirming ALROSA’s strategic and dominant position within the international diamond industry. For the calendar year 2018, ALROSA announced a total diamond production volume of 36.7 million carats. Concurrently, the company successfully navigated the market to sell 38.1 million carats of diamonds, a figure that, while substantial, represents an 8% decrease in volume compared to the preceding year. Crucially, despite this slight reduction in sales volume, ALROSA’s strategic focus on optimizing its sales mix and capitalizing on market opportunities led to a significant and impressive increase in sales proceeds, which surged by 6% to reach a remarkable $4.5 billion. This outcome powerfully underscores ALROSA’s inherent capability to adeptly navigate complex market environments and fine-tune its sales strategies for enhanced revenue generation. The full report offers invaluable insights into the company’s operational efficiency, its responsiveness to market demands, and provides a forward-looking perspective for the upcoming year.
- Q4 2018 Production Dynamics: Strategic Adjustments and Operational Stability
In the fourth quarter of 2018, ALROSA’s diamond production exhibited a marginal decrease of 2% when compared quarter-on-quarter. However, this figure also demonstrated a positive year-on-year growth of 2%, culminating in a total output of 10.3 million carats. This nuanced production trend was primarily driven by the anticipated and routine seasonal suspension of production activities at various alluvial deposits. Such suspensions are standard operational practices in diamond mining, often influenced by climatic conditions and environmental considerations during specific periods of the year. Nevertheless, the potential impact of these seasonal shutdowns on overall production was largely mitigated by a commendable and strategic increase in output from ALROSA’s more stable underground mines. This successful offsetting action vividly highlights the company’s diversified mining portfolio and its intrinsic capability to maintain a relatively stable production trajectory, even in the face of scheduled operational adjustments. The strategic balance between different mining methods, encompassing both open-pit and underground operations, empowers ALROSA to effectively manage inherent production fluctuations and ensure a consistent and reliable supply of diamonds to the global market. - Full-Year 2018 Production Overview: Impact of Strategic Operational Changes
Throughout the entirety of the 2018 fiscal year, ALROSA’s total diamond production recorded a 7% decline, settling at 36.7 million carats. This reduction in overall output can be primarily attributed to two significant and strategic operational developments. Firstly, the ongoing and full-year impact of the shutdown of the Mir underground mine, which ceased operations in August 2017 following a serious incident, continued to exert a notable influence on the company’s overall production volumes throughout 2018. The Mir mine was historically a substantial and high-grade contributor to ALROSA’s total output, and its prolonged closure necessitated a comprehensive re-evaluation of production targets and strategic operational shifts across the company’s other assets. Secondly, the completion of open-pit mining activities at the Udachnaya pipe also played a significant role in the observed full-year decline. The strategic transition from open-pit to underground mining at Udachnaya, while a critical long-term move aimed at unlocking deeper and extensive reserves, inherently involves a period of adjustment and may temporarily impact immediate production levels. These two pivotal factors collectively explain the year-on-year decrease in ALROSA’s total diamond production for the full fiscal year 2018. - Q4 2018 Processed Ore and Gravels: Seasonal Variations in Processing Volumes
During the fourth quarter of 2018, the total volume of ore and gravels processed by ALROSA experienced a pronounced decrease, dropping 2.3 times quarter-on-quarter to a total of 7.5 million tonnes. However, when assessed on a year-on-year basis, this figure surprisingly represented a 3% increase, indicating a stronger processing performance compared to the corresponding period in the previous year. The significant quarter-on-quarter reduction in processed material was directly and predictably linked to the aforementioned seasonal suspension of production activities at the company’s alluvial deposits. These specific deposits typically involve the processing of substantial volumes of gravels, and their temporary closure during the colder winter months naturally leads to a sharp decline in the overall quantity of material processed. This phenomenon represents a recurring and anticipated operational pattern for ALROSA, clearly reflecting the cyclical and climate-dependent nature of its mining operations in certain geographical regions. - Full-Year 2018 Processed Ore and Gravels: Enhanced Processing Efficiency Drives Growth
For the full twelve months of 2018, the total volume of processed ore and gravels across ALROSA’s operations demonstrated a healthy and encouraging growth of 3%, reaching an impressive 40.5 million tonnes. This positive upward trend in processing volumes was predominantly driven by intensified and optimized gravel processing activities across several of the company’s key operational divisions. Specifically, the Almazy Anabara alluvial deposits reported a notable 8% increase in gravel processing, contributing significantly to the overall annual growth. Similarly, the Mirny Division also showcased enhanced processing capabilities, recording a substantial 10% increase in processed material. These improvements underscore ALROSA’s unwavering commitment to continuously optimizing its processing plants, investing in advanced technologies, and maximizing the efficient recovery of diamonds from the extracted material. Investments in technological upgrades and operational efficiency at these critical sites have demonstrably enabled the company to process greater volumes of material, thereby potentially improving its overall diamond yield. - Q4 2018 Average Diamond Grade: Seasonal Impact on Yield Concentration
In the fourth quarter of 2018, the average diamond grade per tonne of processed ore experienced a substantial and noteworthy increase, rising 2.3 times quarter-on-quarter to 1.38 carats per tonne (cpt). In stark contrast, when assessed on a year-on-year basis, the grade showed only a marginal decline of 0.2%. The dramatic quarter-on-quarter surge in the average grade was a primary and direct consequence of the seasonal suspension of production at the company’s lower-grade alluvial deposits. When these specific, lower-grade operations are temporarily halted for seasonal reasons, the remaining active mines, which frequently include higher-grade underground operations, contribute a proportionally larger share to the overall production mix. This strategic and seasonal shift in the operational mix naturally elevates the average diamond grade observed during that specific quarter, effectively reflecting a temporary concentration of higher-quality or more densely diamondiferous ore being processed. - Full-Year 2018 Average Diamond Grade: Stability Amidst Operational Shifts
For the full twelve months of 2018, the average diamond grade across ALROSA’s comprehensive mining operations remained relatively stable at 0.91 carats per tonne (cpt). However, this figure did represent a 10% year-on-year decrease when compared to the average grade achieved in 2017. The primary factors driving this decline were multifaceted and interconnected. A highly significant factor was the full-year impact of the shutdown of the Mir underground mine in August 2017, which was historically renowned for its consistently high-grade ore. The absence of this key asset from the production mix inevitably lowered the overall corporate average. Furthermore, the company experienced an increased proportion of production originating from its lower-grade assets. This strategic decision to intensify mining activities at certain lower-grade deposits, while potentially ensuring optimal long-term resource utilization and extending mine life, had a discernible and quantifiable impact on the average diamond concentration recovered per tonne of material processed throughout the year. - Q4 2018 Rough Diamond Sales: Robust Demand for Both Gem-Quality and Industrial Diamonds
ALROSA reported exceptionally strong rough diamond sales in the fourth quarter of 2018, with total sales (excluding polished diamond sales) reaching 9 million carats. This figure marked an impressive 34% increase quarter-on-quarter, unequivocally indicating a significant surge in market demand and buyer activity towards the crucial end-of-year period. Breaking down these robust sales figures, gem-quality diamonds, which typically command premium prices, accounted for 5.3 million carats, reflecting a healthy 12% rise quarter-on-quarter. Even more remarkably, industrial diamonds, which are indispensable for various technological and manufacturing applications, experienced a substantial jump of 87% quarter-on-quarter, reaching 3.7 million carats. This robust performance across both key categories suggests a broad-based recovery in buyer confidence and increased activity within the entire diamond pipeline, likely driven by aggressive restocking efforts ahead of key retail seasons, or an overall strengthening of global industrial demand, underscoring the versatility of ALROSA’s product portfolio. - Full-Year 2018 Diamond Sales: Strategic Focus on Value Despite Volume Shift
For the entire twelve months of 2018, ALROSA’s total diamond sales reached 38.1 million carats. While this volume represented an 8% decrease year-on-year in terms of carat volume, it is imperative to analyze the strategic composition of these sales for a complete understanding. Gem-quality diamonds, which are the primary drivers of revenue due to their higher value, accounted for 26.4 million carats, showing a 12% year-on-year decline in volume. Conversely, sales of industrial diamonds, essential for various technological applications, demonstrated remarkable resilience with a 5% year-on-year increase, reaching 11.7 million carats. The overall decrease in carat volume for gem-quality diamonds, despite an increase in industrial diamonds, strongly suggests a strategic prioritization of value generation over sheer volume. This strategic shift reflects prevailing market conditions and ALROSA’s proactive sales strategy aimed at optimizing total revenue, as vividly evidenced by the overall increase in total sales proceeds despite lower carat volumes. - Year-End 2018 Diamond Inventories: Seasonal Build-Up and Optimized Stock Management
At the close of 2018, ALROSA’s diamond inventories experienced a seasonal and anticipated increase of 10% quarter-on-quarter, reaching a total of 17 million carats. This quarter-on-quarter rise in inventory levels is a typical and well-established pattern within the diamond industry, as producers commonly build up stock in the fourth quarter in anticipation of heightened sales in the subsequent quarters, particularly following the critical holiday retail demand period. However, when viewed on a year-on-year basis, the inventory levels were notably down by 6%, indicating exceptionally effective stock management and a more optimized pipeline compared to the end of 2017. This significant reduction in year-on-year inventory strongly suggests that ALROSA has been highly successful in aligning its production and sales strategies to maintain healthy and balanced stock levels, thereby avoiding excessive build-up and ensuring liquidity and responsiveness within the market. - Q4 2018 Average Realized Prices for Gem-Quality Diamonds: Product Mix Influences Price Dynamics
In the fourth quarter of 2018, the average realized prices for gem-quality diamonds experienced a 23% decline quarter-on-quarter, settling at $153 per carat. Despite this quarterly dip, the prices remained remarkably robust on a year-on-year basis, exhibiting a healthy 10% increase compared to Q4 2017. The primary and most significant factor contributing to the quarter-on-quarter decrease was a notable and deliberate shift in the product mix offered for sale, specifically a lower share of large diamonds in the overall sales volume during this particular period. The average realized price is inherently and significantly influenced by the size, quality, and characteristic distribution of the diamonds sold. When a smaller proportion of high-value, large stones are sold, even if the underlying demand remains stable for all categories, the overall average price per carat can naturally decline, vividly illustrating the sensitivity of this metric to strategic changes in the company’s sales portfolio. - Full-Year 2018 Average Realized Prices: Strong Growth Reflects Market Recovery and Value Focus
For the entire twelve months of 2018, ALROSA achieved a significant and commendable 21% growth in its average realized prices, with the figure reaching an impressive $164 per carat. This substantial and sustained increase over the full year serves as a clear and unequivocal indicator of a resilient and actively recovering global diamond market, coupled with ALROSA’s highly effective and strategic sales approaches. Despite experiencing some short-term fluctuations in specific quarters, often attributed to product mix variations, the overarching trend for the year points definitively towards a stronger and growing demand for quality diamonds and the company’s notable success in commanding higher prices for its superior output. This strong price performance significantly contributed to the overall increase in ALROSA’s sales proceeds, powerfully showcasing the paramount importance of value optimization in today’s intensely competitive market landscape. - 2018 Diamond Price Index: Sustained Recovery in Global Diamond Demand
The widely recognized diamond price index for the full year 2018 registered a positive gain of 3.7%. This encouraging movement in the index serves as a crucial barometer, underscoring a sustained and robust recovery in global diamond demand throughout the entire year. The index provides a vital indicator for assessing the overall health and vitality of the rough diamond market, and its consistent upward trajectory indicates a generally favorable and supportive environment for diamond producers worldwide. This notable recovery was likely bolstered by stable consumer demand in key international markets and proactive restocking activities across the entire diamond pipeline, collectively providing a solid and enduring foundation for both price stability and future growth. The moderate yet consistent growth suggests a healthy rebalancing of supply and demand dynamics, fostering confidence within the global diamond trade. - Q4 2018 Sales in Value Terms: Quarterly Fluctuation Amidst Year-End Adjustments
In value terms, ALROSA’s total sales in the fourth quarter of 2018 experienced a decline of 13% quarter-on-quarter, reaching $845 million. When compared on a year-on-year basis, this figure also represented a 7% decrease. Within this total quarterly sales value, diamond sales, specifically excluding polished diamonds, amounted to a substantial $824 million. The observed quarterly reduction in value aligns consistently with the previously noted decrease in average realized prices for gem-quality diamonds, which was largely attributed to the strategic changes in the product mix, particularly the lower share of large diamond sales during this specific period. While a quarterly dip was recorded, the overall context of the annual performance and broader market trends suggests a deliberate and strategic management of sales, carefully executed in response to the specific market conditions prevailing at the year-end. - Full-Year 2018 Total Sales: Value Growth Outpaces Volume Decrease
For the full twelve months of 2018, ALROSA’s total sales demonstrated a remarkable and impressive increase of $241 million, translating to a substantial 6% year-on-year growth, culminating in an impressive $4,507 million. This significant growth in total sales value is particularly noteworthy and stands out given the fact that the company’s overall sales in carats actually decreased by 8% during the exact same period. This compelling divergence between volume and value growth emphatically highlights ALROSA’s highly successful strategy of maximizing its revenue through an optimized and high-value sales mix, and its demonstrated ability to achieve higher average realized prices for its premium diamonds. It powerfully underscores the company’s strategic focus on high-value products and its proficiency in capturing better market prices, thereby significantly enhancing overall profitability even with a lower total carat volume. Diamond sales, specifically, contributed overwhelmingly to this growth, rising by an additional $242 million. - 2019 Production Outlook: Anticipating Growth and Market Recovery
Looking ahead into the new fiscal year, ALROSA has confidently provided a positive and forward-looking production outlook for 2019, with expectations set at approximately 38 million carats. This comprehensive forecast represents a projected 4% increase in production compared to the levels achieved in 2018. This anticipated growth in production volumes signals ALROSA’s unwavering confidence in its robust operational capabilities and outlines a clear strategic plan to gradually ramp up output. This renewed impetus is likely driven by expectations of sustained market demand, coupled with the ongoing optimization of existing mining assets and the potential integration of new or revitalized operational sites. The projected increase in production suggests a strategic move towards restoring and potentially exceeding previous production volumes following the previous year’s operational adjustments, and underscores an optimistic view on future market conditions, strategically positioning ALROSA to proactively meet evolving global demand for rough diamonds.
Global Diamond Market Overview: Key Trends and Influences in 2018
- Global Diamond Jewellery Market Performance: Regional Variances in Consumer Demand
The global diamond jewellery market demonstrated broadly positive momentum throughout the first nine months of 2018, registering a healthy 5% year-on-year growth. This encouraging upward trend was widely supported by sustained and stable consumer confidence in several key international regions. North America, which consistently remains the world’s single largest consumer market for diamond jewellery, continued to exhibit robust and consistent sales growth throughout the entirety of the year, also increasing by a solid 5% over the critical nine-month period. This sustained and powerful demand from North American consumers played an absolutely crucial role in bolstering overall global market performance, reflecting strong underlying economic conditions and robust consumer purchasing power within the region. The remarkable stability in this dominant market segment provided a strong and dependable foundation for the entire diamond value chain, from mining to retail. - Asian Market Dynamics: Currency Devaluation and Shifting Demand Patterns
In notable contrast to the steady and consistent growth observed in North America, the sales growth of diamond jewellery in most parts of South Eastern Asia, including the critically important Indian market, experienced a discernible slowdown during 2018. Some specific countries within this diverse region even recorded an outright decline in sales volumes. A primary and highly significant contributing factor to this challenging trend was the widespread devaluation of local currencies against the dominant US dollar. Given that diamonds are predominantly priced and traded in US dollars, a weaker local currency naturally makes diamond jewellery considerably more expensive for local consumers, thereby dampening demand and impacting affordability. While early in 2018, China displayed unexpectedly strong demand, which propelled a 7% sales growth in the broader Asian region over the initial nine months. However, preliminary data emerging from the fourth quarter of 2018 for China indicated a subsequent and concerning decline in diamond jewellery sales, suggesting a more volatile and intrinsically complex market environment, significantly influenced by macroeconomic factors and rapidly evolving consumer preferences and spending habits across the region. - Rough and Polished Diamond Market: Challenges for Lower-Priced Stones and Melee Segment
A significant and impactful trend that initially emerged in the third quarter of 2018 and conspicuously continued into the fourth quarter was the noticeable weakening of demand for lower-priced rough diamonds. This prevailing sentiment in the rough diamond market directly mirrored the challenging conditions observed concurrently in the polished diamond market. Specifically, uncertified melee diamonds – these are small, often uncertified diamonds frequently used in intricate and pavé jewellery designs – experienced the most pronounced and significant price decline. This particular segment was acutely affected by an pervasive oversupply in the market, further exacerbated by a weaker Indian rupee (which critically impacts the profitability of Indian diamantaires who process a significant majority of the world’s melee diamonds) and persistent lower liquidity within India’s vital diamond trade centers. The combined effect of reduced prices for small-sized diamonds and relatively fixed personnel expenses for polishing operations significantly decreased the already thin profitability margins of melee diamond polishing, thereby creating substantial operational and financial challenges for cutters and polishers heavily focused on this segment, and ultimately highlighting a broader market shift towards higher-value, certified, and larger stones.
ALROSA’s 2018 performance report comprehensively underscores its strategic agility, robust operational capabilities, and inherent resilience within a dynamic and evolving global diamond market. While confronting significant operational adjustments and navigating various market shifts, the company’s unwavering focus on value optimization, highly efficient resource management, and strategic sales initiatives collectively enabled it to achieve impressive and noteworthy revenue growth. The detailed insights provided into production volumes, sales figures, average realized prices, and inventory levels, alongside a comprehensive market overview, collectively paint a clear and precise picture of the company’s strong market position and the broader industry trends that are actively influencing the future trajectory of the global diamond trade. The positive and forward-looking outlook for 2019 production further strengthens ALROSA’s enduring commitment to sustained leadership and continuous growth within the highly competitive global diamond sector.
Please note: The data presented herein for Q4 2018 and the full twelve months of 2018, encompassing production volumes, sales figures, prices, and inventory levels, are preliminary and consequently subject to potential updates and revisions. Furthermore, all information and analyses related to the broader global diamond market presented in this report constitute the Company’s best estimates based on currently available market intelligence and expert assessments.
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[1] Average realised prices (calculated as the total sales revenue divided by the total sales volumes in carat terms) are inherently and significantly influenced by changes in the specific product mix offered for sale – specifically the varying proportions of different sizes, qualities, colors, and overall categories of diamonds sold – throughout the reported financial period. This means that a strategic or market-driven shift towards selling a greater proportion of smaller or lower-quality stones, even if individual prices for specific categories of diamonds remain constant, can demonstrably lower the overall average realized price per carat for the entire sales portfolio.