MOSCOW – The government of Russia's Yakutia region, which has a stake in diamond producer Alrosa, has proposed the company sell rough diamonds worth $0.5-billion to $1-billion to the precious metals and gems repository Gokhran in 2020, Interfax news agency reported.
Diamond miners are battling falling demand, as well as competition from diamonds manufactured in laboratories. Alrosa is the world's largest producer of rough diamonds in carat terms. Together with Anglo American's De Beers unit, it produces about half of the world's rough diamonds.
The proposal was made to President Vladimir Putin and Russia's finance ministry, which is responsible for Gokhran within the government, Interfax quoted Aysen Nikolaev, the head of Yakutia region, as saying on Tuesday.
"We are raising the issue of purchasing up to $1 billion. Almost a quarter of (Alrosa's annual production). But there are different options - from $500-million to $1-billion. Any option suits us," Nikolaev, also first deputy chairman of Alrosa's board of directors, said in an interview with Interfax.
"Perhaps, it makes sense (for Alrosa) not to sell them for several years before demand recovers, but to sell them to Gokhran, as was done in the late 2000s," Nikolaev said.
Gokhran bought diamonds worth $1-billion from Alrosa during years of weak demand caused by the global financial crisis in 2008-2009.
If approved by the Finance Ministry and the government, the proposal would require a sharp increase in Gokhran's current 2020 budget for purchases as it is limited to 10.5-billion roubles.
The Yakutia region, Alrosa's management and the finance ministry agreed to review the idea in detail after Alrosa's first-half sales, Nikolaev said.
Alrosa has not replied to a Reuters request for comment.