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. Last Updated: 07/27/2016

Diamond Giant Coy on Secrets

VedomostiAlthough Alrosa now has permission to disclose mining secrets, the company has no plans to do so soon.
Diamond giant Alrosa could keep a veil of secrecy over the size of its mining reserves for years to come despite long-awaited state permission to reveal the crucial data.

Alrosa, which produces one-quarter of the world's rough diamonds, received a government note last month officially allowing it to tell global markets about the amount of diamonds it has left under soil in the Far East after 50 years of mining.

President Vladimir Putin's decision to disclose mining secrets -- a legacy of Russia's Soviet past -- is part of his plan to make Russian business more transparent and accessible to foreign investors. But Alrosa seems to be in no rush to open up.

"The finance ministry's note offers a legal possibility to publish data. But it's not an obligation," said Andrei Gusenkov, an aide to Alrosa president Alexander Nichiporuk.

"At the moment, Alrosa has no plans to publish information on reserves as well as on production and sales in carats," he added. "It's possible that we would provide this data to certain investors within the framework of certain projects, but at the moment there is no need for that."

Analysts said Alrosa's plan to register itself as an open joint-stock company, facing tougher transparency rules, and raise cash on international debt markets could force it to unveil the data after all -- but that may take years.

"Since Alrosa is not a public company, there is no point in exposing their reserves anyway," said Aton brokerage analyst Timothy McCutcheon. Alrosa's web site states it has enough reserves to keep going for another half-century.

The same disclosure measure applies to data on production, reserves and sales of platinum group metals, directly affecting another mining giant, Norilsk Nickel, the world's No. 1 producer of palladium.

Immediately after the notification, Norilsk announced it would publish its data until the end of 2005.

"If Alrosa decides to tap global markets, by issuing bonds for example, it may have to make [reserves] public because investors would demand that sort of information," said Maxim Matveyev, a metals analyst at Alfa Bank.

Alrosa, based in the far eastern region of Sakha, has so far reported production and sales only in dollar terms -- unlike diamond giant De Beers, which states output in carats.

This year, Alrosa, which has two eurobonds outstanding, seeks to sell $3 billion worth of diamonds, up from $2.4 billion last year, and mine the equivalent of $2.1 billion of stones.

Russia's total production was 17.763 million carats of uncut diamonds in the first half of 2004, and 33.019 million carats worth $1.676 billion in the whole of 2003. By comparison, De Beers output last year rose 7 percent to 47 million carats.

The company, which has existed in one form or another since the 1950s when Soviet geologists first discovered diamond-rich kimberlite reserves in Siberia, is developing a number of mines in Russia, Congo, Angola and elsewhere.

Explorations of further mines in minerals-rich Sakha could further boost its reserve base, analysts say.

There have been moves within Alrosa to make operations more open. Nichiporuk said in May he wanted Alrosa, currently a closed joint-stock company, to become an open one over the next year and a half. But some analysts remain skeptical.

"I don't think you are going to see anything [in terms of reserve numbers] until ... they go public, if they ever do," said Aton's McCutcheon.

"It's in their interests to have the situation around the reserves to be sort of hazy because it keeps the supply situation in the world a little more fuzzy and more under the control of the producers."