Alrosa production grew 15% QoQ yet down 18% YoY
According to Alrosa, report for Q2 2018 production performance and preliminary trading update, diamond production grew 15% QoQ yet that remained down 18% YoY to 8.5 m carats, due to seasonal return to production at alluvial deposits supported by the recently ramped-up assets, the Udachny underground mine and Severalmaz.
A YoY decrease in diamond production was due to the closure of the Mir underground mine (UM), a lower diamond grade at deep horizons of the International UM as well as the share increase of processing of a lower grade ore at the Jubilee pipe and the Aikhal UM of the Aikhal Division.
The average diamond grade per tonne of ore was lower by 35% QoQ & also remained -18% YoY to 0.84 cpt, mainly due to seasonal return to production at lower-grade alluvial deposits operated by Almazy Anabara and a lower diamond grade at alluvial deposits developed by the Mirny Division.
Q2 Group rough diamond sales were 9.0 m carats registered down 32% QoQ including 6.3 m carats of gem-quality rough diamonds lowered by -38% QoQ and 2.7 m carats of industrial diamonds resultant -16% QoQ. Inventories as at the end of Q2 2018 declined by 11% QoQ, -23% YoY to 11 m carats on stable underlying demand for the entire product mix.
Growth of average realized prices for gem-quality diamonds: following sales in April through June, average realized prices grew 6% QoQ that was up 18% YoY to $164 per carat on the back of higher demand and cutters’ lower inventories.
In money terms, sales decreased by 33% QoQ to $1.057 bn in Q2 2018, polished diamond sales increased to $26.2 m: up 11% QoQ and up 15% YoY.
According to the Alrosa 2018 forecast, production outlook remains unchanged at 36.6 m carats, a decrease of 8% YoY. Average realized price is also impacted by changes in product mix through out the reported period. While their Market overview says, the Company’s estimates, in the first three months of 2018, the diamond jewellery market grew by 7% as all key markets enjoyed rising sales on the back of a stronger consumer sentiment and a better macro environment.
The largest market of N. America (USA and Canada) saw diamond jewellery sales rise by 5% YoY. Sales in Asia Pacific grew 11% YoY, largely driven by higher sales in the Mainland China and stronger demand in Hong Kong and S. Korea supported by a growth in tourists’ flow. In dollar terms, sales in Europe added 14%, mainly on the back of a stronger euro.
In Q2 2018, the rough diamond market demonstrated increased demand across the entire product mix, driven by both a reduction in rough diamond supply from diamond miners, normalized stock levels at the consumers’ (mid-stream) and ongoing diamond jewellery demand growth in key markets, in particular, in the USA, Europe and China.
As a result of the above factors, no traditional seasonal slack was observed in Q2 2018. Hereinafter data on 2018 Q2 and H1 production, sales, prices, inventories is preliminary and can be updated. Data on a diamond market is the Company’s estimate.
