ALROSA’s Q1 2020 Operational Results Reflect Dip Due to COVID-19 Despite a Promising Start

Announcing its operational results for Q1 2020, ALROSA reported diamond production of 8 milllion carats and increased sales of 9.4 million carats. Total revenue from the sale of rough and polished diamonds for the period amounted to US$904 million (rough: US$881 million; polished: US$23 million) marking a decrease of 1% q-o-q and 10% y-o-y.

“Diamond production seasonally declined by 9% q-o-q to 8.0 m cts,” ALROSA stated. “A 2% y-o-y growth was due to increased diamond production at the Jubilee pipe and the Aikhal and International underground mines.”

As a result of a seasonal decrease in production at the Mirny Division’s alluvial deposits, ore and gravels processing decreased by 18% q-o-q (down 7% y-o-y) to 5.9 mt. “The average diamond grade stood at 1.36 cpt (seasonal growth by 11% q-o-q due to reduced production at low-grade alluvial deposits),” the Company said.

Diamond sales, however, increased by 15% q-o-q to 9.4 million carats, including 7.1 million carats of gem-quality diamonds (up 19% q-o-q) “amid demand recovery in the first half of Q1” the Company explained. “Since the end of February, markets have seen a sharp drop in consumer activity …which caused Q1 2020 sales to decline by 10%,” ALROSA noted.

In line with this, diamond inventories at the end of Q1 were lower by 6% q-o-q to 21.1 million carats “as sales volumes exceeded diamond production”, the Company said.

The average price realised for gem-quality diamonds in Q1 stood at US$123/ct; registering a decrease of 17% q-o-q (flat y-o-y). This was due to stronger demand for large-size diamonds at the end of 2019, the Company noted.

“Q1 diamond price index declined by 1.2% q-o-q, and down 1.9% year-to-date,” ALROSA stated.

Unlike most other rough diamond producers, ALROSA has ventured to put out its outlook for 2020. The Company estimates a production of about 34.2 m cts. However, sales volumes will depend on the COVID-19 epidemiological situation and respective measures taken globally, the Company stressed.

Providing its assessment of the diamond market ALROSA said: “The diamond industry started 2020 in a good shape as consumer sentiment improved across key markets for diamond jewellery, inventories at the midstream normalised, polished diamonds prices began to recover, and diamond sales were quite robust in December and January.

“However, the trend reversed as early as February, following the closure of markets in China and Hong Kong. The plunge worsened after COVID-19 spread to Europe and the US. The coronavirus pandemic had an impact on the economy across the world. China, which was hit first and was also the first to recover, will be the key driver as demand starts to pick up again.”

The Company reiterated its support of its clients saying: “In response to current global restrictions aimed at limiting the spread of the COVID-19 pandemic and amid suspended operations all along the diamond pipeline, ALROSA has been making efforts to offer improved flexibility to our customers during the April sales session.”

Courtesy: GJEPC