Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

De Beers Wins Lomonosov Gem Bid

De Beers, the world's largest diamond producer, has moved closer to prying open Russia's vast gem-mining industry in a venture to tap the Lomonosov deposit, near the northwest city of Arkhangelsk.

The venture is a 50-50 partnership between De Beers and Russia's Soglasiye. Soglasiye is a majority shareholder in Severalmaz, which in turn holds the licensing rights to the multibillion dollar Lomonosov deposit.

But formation of the venture, Soglasiye De Beers Mining Investments, or SDBMI, is no guarantee of production going ahead.

Significant bureaucratic hurdles lie ahead, and news Monday that President Boris Yeltsin had sacked his government demonstrated how unpredictable the Kremlin political arena can be.

If the venture cleared bureaucratic and political hurdles, it would be the first time a foreign company had produced diamonds on Russian terrain, said Raymond Clarke, head of De Beers' Moscow representation.

De Beers beat off stiff competition to join the venture. Russia's main diamond player, Almazy Rossii-Sakha, bid to work with Soglasiye on Lomonosov, but lost out.

Clarke, who has been named general director of SDBMI, said the venture represented a significant shift in De Beers' approach to the Russian market. It marked the move from being a trading partner to becoming a strategic investor and producer.

"This represents a desire on De Beers' part to make significant investments in the Russian economy. It should be seen as a positive move for other potential foreign investors in Russian mining," he said in an interview.

Analysts said Lomonosov probably contained several billion dollars' worth of diamonds. Russian industry officials said it was a significant find, but did not rival Siberia's gem riches.