ALROSA reports its diamond output grew by 62% q-o-q to 9.2 m cts in Q3 2020

ALROSA, a global leader in diamond production, reports its Q3 2020 diamond production of 9.2 m carats and a q-o-q increase in sales to 5 m carats. 9M 2020 diamond production declined to 22.9 m carats, and sales amounted to 15.1 m carats.

  • Q3 ore and gravels output went down to 4.7 mt vs 9.8 mt in Q2 (Q3 2019: 8.8 mt) following the COVID-19-related measures. As a result, ore and gravels inventories dropped by 21% q-o-q to 25.8 mt.
  • Q3 ore and gravels processing rose 57% q-o-q (down 33% y-o-y) to 11.5 mt due to the relaunch of a number of processing plants after the suspension of operations in Q2, as well as the seasonal production growth at alluvial deposits. The 24% y-o-y decline resulted from crisis response measures taken in 2020. 9M volumes were at 24.8 mt (down 27%).
  • Q3 diamond production grew by 62% q-o-q to 9.2 m cts on higher utilization rates at processing facilities. 9M production was down by 23% to 22.9 m cts.
  • Q3 diamond grade improved by 4% q-o-q to 0.8 cpt9M diamond grade rose by 6% to 0.93 cpt as a result of discontinued operations at less profitable assets.
  • Sales: due to a decrease in inventory of end products at cutters and polishers, as well as at retailers as demand for diamond jewelry gradually recovered, the demand for rough diamonds has been improving since August. Q3 diamond sales saw an 8x increase q-o-q reaching 5 m cts, including 4.1 m cts of gem-quality diamonds. 9M sales declined 40% to 15.1 m cts.
  • Diamond inventories as at the end of Q3 grew 16% q-o-q to 30.6 m cts.
  • Q3 average realised price for gem-quality diamonds totalled $133/ct (down 34% q-o-q and 2% y-o-y) due to normalised sales mix as sales volumes increased. 9M prices were 1% up at $129/ct.
  • Q3 diamond price index declined by 7% q-o-q, YTD the index was down 13%.
  • Proceeds from rough and polished diamond sales in Q3 came in at $589 m (a 6.8x increase q-o-q and down 4% y-o-y), including $553 m in revenue from rough diamond sales and $36 m in revenue from polished diamond sales.Sales for 9M totalled $1,580 m (down 35%).

Diamond market overview

  • Loosening of the COVID-related restrictions and a shift in consumer behaviour towards online shopping resulted in the gradual recovery of demand for diamond jewelry in the key US and China markets, which saw y-o-y growth of jewelry sales over the past two to three months. As consumer sentiment improved, jewelry businesses restocked before the festive season.
  • India’s cutters and polishers that were either closed until August or had underutilised capacity due to the COVID-19 pandemic managed to gradually increase activity following the partial lifting of lockdown measures. Their diamond stocks have declined, nearing shortage in some product categories, which led to partial recovery of polished diamond prices.
  • The market saw the demand for rough diamonds rise by the end of August, with jewelry businesses’ stocking up before Christmas holidays. As the Company acts in a responsible way, it decided to slightly adjust prices in order to satisfy the real demand while maintaining the profitability level required by the midstream.
  • The diamond industry began to show signs of improvement. It is, however, too early to talk about a full recovery before we see the year’s key figures – the USA holiday season sales.

Hereinafter, data on Q3 and 9M 2020 production, sales, prices, and inventories is preliminary and may be updated. Data on the diamond market is the Company’s estimate.

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