Yakutia grapples with diamond shortage – ALROSA's next steps?
Venturing Beyond Diamonds: ALROSA's Diversification Aim
YAKUTIA.INFO. Under the chill of Eastern Siberia, whispers of trouble brew in Yakutia's diamond-rich mines. ALROSA, the region's economic lifeblood, is grappling with falling diamond prices and international sanctions resulting from Russia's involvement in Ukraine. Can Yakutia's mainstay weather this storm, and what impact will this have on the region's budget, particularly amid the crisis in housing and utilities?
On the frigid first day of 2025, the American consulting firm Rapaport slashed diamond prices in their index. Months prior, in the frosty twilight of November, Rapaport announced that diamond prices had sunk to a multi-year low. The index for 1-carat diamonds plummeted a staggering 22% compared to the same period the previous year.
Bank of America reports that diamond prices have plunged to their century's lowest levels. The downslide is attributed to the slowing global economic growth, dwindling demand for diamond jewelry, and the proliferation of synthetic diamonds.
Back in 2024, we raised the alarm when taxes on Yakutia's natural diamond extraction plummeted by more than a third. This downward spiral could be a consequence of Western sanctions hammering ALROSA, with their impact only starting to bite.
In the first quarter of 2024, Yakutia's state revenues slumped by a chilling 33.9%. Personal income taxes and mineral extraction taxes on natural diamonds took the brunt of the blow.
Experts from the Gaidar Institute's 'Monitoring of the Economic Situation,' reporting on the 'Author's opinion' Telegram channel, revealed ALROSA's staggering 15% drop in profit and a 9% slide in revenue for the preceding year. To prevent the company from folding, the state will for the first time since 2009 purchase precious stones from ALROSA to prop it up.
Facing the tempest of market challenges, Deputy Prime Minister and Presidential Envoy to the Far East, Yuri Trutnev, mooted back in 2020 that companies should shift their focus towards gold and lithium deposits. However, Pavel Marychev, General Director of PJSC "ALROSA," hinted at exploring other possibilities, pending the imminent escalation of sanctions, which could push the company into the extraction of gold, oil, gas, and rare earth metals.
Fast forward to today, ALROSA's subsidiary, "Alrosa Anabara," can boast the acquisition of the "Magadan Geological Exploration Enterprise," holding the "Degdekansky" deposit license.
Besides gold mining, ALROSA has caught oil and gas fever, planning to develop the Uluğur and Ergedey deposits in collaboration with the republican company "Sakhatransneftegaz." The exploratory stage and the registration of reserves on the state balance are scheduled for completion by 2026.
Yet, plans for diversification wear a glossy sheen only on paper. Restructuring demands time and resources. Analyst Leonid Hazanov cautioned that ALROSA may have to up its investment levels due to increased expenses for technological equipment, mining equipment, and a drop in gold prices on global markets.
Gold sales present another hurdle. Russia consumes approximately 150-170 tons of gold per year, and there's little chance of this expanding significantly in the near future. ALROSA faces fierce competition on the domestic market, and it would have to rely mainly on exports to foreign markets, where demand remains capped by the jewelry industry and hoarders alike.
As the coming years unfold, Yakutia can't ignore the need to diversify its reliance on diamonds. Strengthening its interactions with other resource users, through social and economic cooperation agreements, becomes crucial.
- Tags:
- ALROSA
- Anabar diamonds
- Sakhatransneftegaz
- Pavel Marinichev
- Bank of America
- diversification
- NeдраYakutii
- Degedekhan deposit
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- Despite the challenges faced by ALROSA in the diamond industry, the company is venturing into other sectors to ensure survival, focusing on gold, lithium, oil, gas, and rare earth metals.
- As ALROSA diversifies its business, it will require significant investments for technological and mining equipment, and the fluctuating gold prices on global markets present another hurdle that must be addressed, especially considering limited domestic demands.
