Just two companies account for almost half of the world’s diamond production: In 2012 De Beers mined 22% of the worlds supply and ALROSA produced 26%. While De Beers does not need an introduction, ALROSA is relatively unknown to even natural resource investors. In preparation for an IPO later this month, the closely held state-run Russian diamond giant has made significant strides in providing the public with information on the company’s assets and financials, shedding light on what traditionally has been a very private enterprise.
The Udachny mine in Northeast Russia. Photo property of ALROSA.
In the mid-1950s the first diamondiferous kimberlite was discovered in Russia. Over the next 50 years the Russian diamond program expanded to nine major diamond mines (see figure 1.1), producing a considerable amount of global supply. The high quantity of Soviet diamond production cut De Beers global market share in half by the 1990s, greatly reducing De Beers’ ability to control prices.
ALROSA has nine primary diamond mines, 10 alluvial mines, and two mines in development. The company also holds a 32.8% stake in the Catoca mine in Angola, Africa. According to the Kimberly Process, in 2012 Russia was the largest diamond producing country in the world, supplying 27% of the world’s diamonds, with ALROSA representing approximately 95% of all Russian production.
[a] Sakha, also referred to as Yakutia, is an autonomous republic in Northeast Russia
[b] Production at Udachniy is scheduled to go underground in 2014
[c] Primary production at Zarnitsa has been suspended since 2010 as a result of unfavorable production economics
[d] ALROSA is the largest diamond producer in the world in terms of carats produced, however De Beers is the largest diamond producer in the world in terms of total carat value produced.
Source: ALROSA, Paul Zimnisky analysis