Alrosa cuts 2020 production over falling demand
Alrosa announced on Friday that it was cutting its 2020 output to between 28 and 31 million carats in response to the crisis unfolding in the global rough and polished diamonds market.
The world’s top diamond producer by output had set 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.
Alrosa saw sales for rough and polished diamonds fall to $15.6 million in April, in stark contrast to the $152.8 million the diamond miner fetched in March and the $405 million in January.
According to the company, major diamond producers 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 step 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,” Alrosa said.
Production cuts are expected to come at the expense of operations that have weaker margins due to lower diamond quality and price.
Following the suspension of operations at Zarya and Aikhal, Alrosa halted 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, 2020.
In 2019, combined production at the Aikhal underground mine and the Zarya open-pit 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.