CPPT DD: Russia's ALROSA eyes Congo deals
Wed Sep 20, 2006 8:24 AM GMT
By Dmitry Solovyov
UDACHNY, Russia (Reuters) - Russian diamond giant ALROSA said on Wednesday that it was in talks to develop local diamond deposits in Guinea and the Democratic Republic of Congo.
ALROSA President Alexander Nichiporuk told a news briefing the company also planned to team up with Russian state-run oil firm Zarubezhneft to develop oil fields in Angola as part of a strategy to diversify its business away from diamond extraction.
"We have now launched work in Guinea and we have plans for other countries as well. As for Guinea, we have made real progress and we are now in talks with the government to obtain licences," Nichiporuk told Reuters after the briefing.
Nichiporuk, speaking in the northern town of Udachny in eastern Siberia, did not give further details on these planned deals or say how much they would be worth.
"The main thing is to have political stability in those countries. We're now considering possibilities of doing business in the Democratic Republic of Congo. They are gearing up for an election right now and we hope for stabilisation there," he said.
Nichiporuk said the continuing rouble appreciation were hurting ALROSA's exports.
"As a whole, the situation in the world is stable but we are worried by the weakening of the dollar rate because we are an export-oriented company and therefore we suffer certain losses," he said.
"We hope that hedging our risks will help us stabilise the situation despite the further appreciation of the rouble rate."
LOOKING FOR PARTNERS
Nichiporuk said the company expected its share of world diamond output to stabilise at the current level of 25 percent, up from 18 percent a few years ago.
Taking into account its assets in Angola, ALROSA last year sold diamonds worth between $3 billion and $3.4 billion. ALROSA directly controls 97 percent of Russian diamond output.
Last year ALROSA made a net profit of 15 billion roubles.
Nichiporuk said ALROSA was actively looking for reliable partners "to offset potential losses" from smaller sales of rough diamonds to its main partner, South African giant De Beers.
In a sign of just how fickle market conditions can be, De Beers -- the supplier of half the world's diamonds -- will buy $600 million worth of Russian gems this year, $500 million next and just $400 million in 2008.
The reason for the falling sales to De Beers is a European Union market monopoly probe. Under a five-year deal signed in 2002, ALROSA had planned to sell $800 million worth of diamonds a year to De Beers.
ALROSA has appealed to the European Court of Justice, hoping to overturn a February settlement between the European Commission and De Beers, according to which the South African firm will stop buying Russian rough diamonds from 2009.
Nichiporuk said there was a glut in global diamond trade, and according to ALROSA's own estimate, the value of the total world supply of diamonds outsized demand by at least $500 million to $700 million.
He said that ALROSA's sales of Russian diamonds totalled $2.8 billion in 2005 including $160 million of cut diamonds. The company said in a statement that diamond sales in the first half of 2006 were worth $1.71 billion including $778 million of Russian domestic sales.
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