Alrosa Nearing Diamond Deal


October 26, 2001

Alrosa Nearing Diamond Deal

The Russian diamond monopoly, Alrosa, is reportedly close to a decision about the distribution of its diamond rough – its five-year exclusive marketing agreement with De Beers expires in a few weeks.

Several international diamond players – including South African diamond giant De Beers, UK-Australian mining group BHP Billiton and at least two Russian diamond manufacturers – are vying for a chance to cut and market a percentage of Russia's diamonds. Russia is expected to produce nearly $2 billion worth of diamonds by 2005. Russian diamonds, particularly those from the Mirny and Udachny mines, are considered high quality.

"We've had a lot of high-level meetings recently," says De Beers' spokesman Andrew Lamont. "The process is going according to the same secret approach we had the last time we signed an agreement with them, and of course there is a lot of fine tuning going on. Russia is looking for stable, five-year contracts; that at least is certain. Speculation about other players is simply that – speculation."

Industry reports suggest that while the days of exclusive contracts are numbered, De Beers remains the favored client for Russian goods because of its ability to sign long-term agreements. De Beers reportedly wants to lock into a contract of $500-$550 million worth of diamonds per year. It also wants to ensure local Russian manufacturers like the Ruis Diamond Factory, belonging to the Leviev Group, don't have rights to first pickings and the chance to cull the best diamonds.

- by Robert Weldon, G.G.

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