ALROSA, Reports Its Q2 Down 18% Y-O-Y
Key highlights in Q2 2018:
- Diamond production grew 15% q-o-q (down 18% y-o-y) to 8.5 m carats, due to seasonal return to production at alluvial deposits supported by the recently ramped-up assets, the Udachny underground mine and Severalmaz.
• A y-o-y decrease in diamond production was due to the closure of the Mir underground mine (UM), a lower diamond grade at deep horizons of the International UM as well as the share increase of processing of a lower grade ore at the Jubilee pipe and the Aikhal UM of the Aikhal Division.
• The volume of processed ore and gravels grew by 77% q-o-q (up 1% y-o-y) up to 10.1 m t, due to seasonal return to production at alluvial deposits (up 4.4 m t), while ore output remained flat.
• The average diamond grade per tonne of ore was lower by 35% q-o-q (-18% y-o-y) to 0.84 cpt, mainly due to seasonal return to production at lower-grade alluvial deposits operated by Almazy Anabara and a lower diamond grade at alluvial deposits developed by the Mirny Division.
• Q2 Group rough diamond sales (ex.polished diamond sales) were9.0 m carats (down 32% q-o-q), including 6.3 m carats of gem-quality rough diamonds (-38% q-o-q) and 2.7 m carats of industrial diamonds (-16% q-o-q).
• Inventories as at the end of Q2 2018 declined by 11% q-o-q (-23% y-o-y) to 11 m carats on stable underlying demand for the entire product mix.
• The growth of average realized prices for gem-quality diamonds: following sales in April through June, average realized prices* (including product mix change effect) grew 6% q-o-q (up 18% y-o-y) to $164 per carat on the back of higher demand and cutters’ lower inventories.
• In money terms, sales (ex. polished diamond sales) decreased by 33% q-o-q to $1.057 bn. In Q2 2018, polished diamond sales increased to $26.2 m: up 11% q-o-q and up 15% y-o-y.
• 2018 forecast: production outlook remains unchanged at 36.6 m carats, a decrease of 8% y-o-y.
*Average realized price (sales revenue devided by the sales volumes in carat terms) is also impacted by changes in product mix throughout the reported period.
Market overview
- According to the Company’s estimates, in the first three months of 2018, the diamond jewellery market grew by 7% as all key markets enjoyed rising sales on the back of a stronger consumer sentiment and a better macro environment.
- The largest market of N.America (the USA and Canada) saw diamond jewellery sales rise by 5% y-o-y. Sales in the Asia Pacific grew 11% y-o-y, largely driven by higher sales in the Mainland China and stronger demand in Hong Kong and S.Korea supported by a growth in tourists’ flow. In dollar terms, sales in Europe added 14%, mainly on the back of a stronger euro.
- In Q2 2018, the rough diamond market demonstrated increased demand across the entire product mix, driven by both a reduction in rough diamond supply from diamond miners, “normalized” stock levels at the consumers’ (mid-stream) and ongoing diamond jewellery demand growth in key markets, in particular, in the USA, Europe and China. As a result of the above factors, no traditional seasonal slack was observed in Q2 2018.
