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Alrosa cuts production target by up to 17%

22nd May 2020

By: Creamer Media Reporter

     

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Diamond major Alrosa on Friday announced that it would curtail 2020 production to between 28-million and 31-million carats, in response to the crisis unfolding in the global rough and polished diamond market.

The 2020 production guidance compares with the group’s initial guidance of 34-million carats for the year.

“The coronavirus pandemic and steps taken to fend it off have had their toll on the demand for diamond jewellery, which saw strong growth earlier in the year,” Alrosa said in a statement.

The company explained that major diamond producers had allowed cutters not to purchase the volumes contracted before, in an attempt to pull all players across the value chain out of the crisis, while also maintaining the stability of prices in the diamond market.

“This requires that the company show proof of operating and financial resilience, with cost cutting and proactive production management viewed as the key tools for achieving this objective amid the slump in sales.”

The production cuts were expected to come at the expense of operations that have weaker margins, owing to lower diamond quality and price. Following the suspension of operations at Zarya and Aikhal, the company’s management took a decision to halt commercial production at the Verkhne-Munskoye deposit. By early June, all operations at the deposit are set to be closed. Mining is expected to resume on October 1.

In 2019, combined production at the Aikhal underground mine and the Zarya openpit mine totalled 2.6-million carats.

Production at the Verkhne-Munskoye deposit in 2019 amounted to 1.5-million carats with an average diamond grade of 0.6 ct/t.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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