Alrosa ups Q4 diamond output, mulls Mir mine future

Russian state-controlled diamond miner Alrosa increased fourth-quarter production by 6 percent year-on-year to 10.1 million carats as a shutdown at its Mir mine was offset by higher output at other assets.

The Russian government has been considering selling part of its stake in Alrosa, the world's largest producer of rough diamonds, as part of its privatisation programme.

But that is off the agenda until the company decides on the future of the Mir mine.

The key drivers for diamond production growth in the last quarter of 2017 were higher output at the Udachny mine in Siberia and higher diamond grades in the ore at several deposits, Alrosa said in a statement.

"This signals, in our view, that the company might manage to partly mitigate the loss of the Mir mine by ramping up elsewhere," analysts at VTB Capital said in a note.

The Siberian underground Mir mine had accounted for 9 percent of Alrosa's annual diamond output before it was partly flooded when water seeped in from an open-pit mine above it in August.

Alrosa is yet to decide what to do with the mine, and TASS news agency quoted the company as saying on Thursday that production at the mine would resume no earlier than in 2022.

Russia does not plan to reduce its stake in Alrosa in 2018 and has not thought yet whether its privatisation would be possible in 2019, Russian Deputy Finance Minister Alexei Moiseev said earlier on Friday.

"Taking into account the situation at the (Mir) mine, it is clear that there is a need to decide what will happen with it before selling something to investors. That is why this is the main task now, and all questions related to the privatisation have taken second place," he added.

Alrosa produced 39.6 million and sold 41.2 million carats of diamonds in 2017, it said. Its rough and polished diamond sales totalled $4.2 billion and $96.9 million, respectively.

Its sales are higher than production due to previously accumulated reserves. According to VTB Capital's estimate, its inventory was at around 18 million carats at the end of 2017.

The company has said it would produce 36.6 million carats and sell around 40 million carats of diamonds in 2018.

Alrosa and Anglo American's De Beers produce about half of the world's rough diamonds. (Reporting by Polina Devitt; Editing by Mark Potter)