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. Last Updated: 07/27/2016

Alrosa Extends Gem Deal With De Beers by 3 Years

LONDON -- South African diamond giant De Beers signed a three-year extension to its trade agreement with top Russian producer Alrosa on Tuesday, securing its grip on the global market for gemstones.

The new accord runs until the end of 2001 and guarantees De Beers access to at least a third of output from Alrosa, or Almazy Rossii-Sakha, which produces virtually all of Russia's diamonds.

"As the world's two major rough diamond producers, De Beers and Alrosa both recognize the need to maintain stability on the diamond market, particularly in the current difficult economic situation," the two companies said in a statement released in London.

Under the deal, Alrosa will sell a minimum of $550 million worth of diamonds a year through De Beers' Central Selling Organization (CSO), out of planned production of $1.5 billion. That is the same amount as stipulated under last October's initial deal.

The upper limit on Alrosa sales has been set at 26 percent of CSO turnover, which last year totalled $4.6 billion but is expected to be sharply down this year due to a slump in Asian demand.

The minimum sales requirement refers only to "run of mine," or freshly mined production. In addition, the CSO will take diamonds from Russia's stockpile and goods which Russia cannot cut domestically.

Russia will sell $900 million worth of diamonds to De Beers in 1998, Alrosa president Vyacheslav Shtyrov said.

Analysts said the three-year extension of the Russian deal had been widely anticipated by the market but the conclusion of the agreement was important to both concerns.

"Both sides were always going to be very keen to do this deal and make it stick. For De Beers it is important to underscore stability in the market," said Richard Norman, analyst at stockbrokers Simpson McKie in Johannesburg.