The Strategic Planning Committee of ALROSA’ Supervisory Board recommended cut in spending and optimization in production, in the wake of the crisis unfolding in the global rough and polished diamond market. It also suggested, guiding the management by proposals envisaging lower output. The board consists of members nominated by the company’s key shareholders and independent directors. As per the preliminary estimates, it is anticipated that cutting down the production will lead ALROSA’s 2020 diamond output to decrease to 28-31 m carats vs the initial guidance of ca. 34m carats.
The demand for diamond jewelry took a downturn due to the outbreak of coronavirus pandemic. Major diamond producers directed cutters not to purchase volumes contracted before; aiming to keep away all players across the value chain out of the crisis while also considering the stability of prices in the diamond market. However, the step requires proof of operation and the financial resilience of the company. Furthermore, the step also necessitates cost-cutting and proactive production management as key tools to achieve the objective amid sales reduction.
Operations registering a weaker margin would likely to see cut in production. Low-quality diamond and price are the major reasons behind the weak margin. It is anticipated that the temporary shutdown of production sites will prevent the stock build-up of diamonds that are least sought after in the market. The company’s management decided to stop the commercial production at the Verkhne-Munskoye deposit following the suspension of operations at Zarya and Aikhal. All operations at the deposits are set to be closed by early June and resumption of the same is expected on October 1, 2020.
