Germany Chancellor plans lithium deal with Serbia after Rio ruling
Olaf Scholz plans to visit Serbia this week to secure supplies of lithium that are critical for the nation’s energy transition and auto industry.
The world’s biggest diamond miner Alroso has long mooted a public offering to buy out some of the Russian federal and local government’s 91% stake, but now it may not need to go to the market.
Apart from robust trade and prices for rough diamonds boosting its bottom line Alrosa is also in the process of selling its non-core natural gas assets, which makes raising money on the open market less of a necessity.
The company, which dates back to 1992 in its current form, announced last week that after repurchasing for $1 billion the natural gas assets it parked at VTB Capital during the financial crisis in 2009, it is now ready to divest completely from the energy business, a move which could earn it a tidy profit.
Another reason Alrosa may delay going public is because interested investors now have alternatives to get their hands on diamond assets after both Rio Tinto and BHP Billiton put their diamond divisions up for sale.
The Russian Federal Property Agency (Rosimuschestvo) holds 51% of Alrosa’s shares while the region of Yakutia owns 40%. Government shareholders could reduce their stake to 50% (+1 share) because unlike the country’s energy giants, Alrosa is not considered a strategic asset.
The remaining 9% is traded over the counter in Russia where the company is valued at $7.7 billion. The stock is up more than 15% since the end of last year.
Mid-March the board of Alrosa gave the go-ahead for state shareholders to sell up to 14%, but an IPO has been put off before and the Russian firm still has to convert its books to international accounting standards before that can happen.
At the time the company also cautioned that “the complete withdrawal of the Russian Federation from ALROSA’s authorized capital will result in the necessity to redeem the USD 1 billion Eurobonds placed in 2010 and mature in 2020 from their holders, which will deteriorate ALROSA’s macroeconomic indicators, including the progress rate and completeness of the investment program.”
Alrosa mined slightly more diamonds than global rival De Beers in 2009, 2010 and 2011. Alrosa accounts for more than a quarter of world output and for 2012 predicts more than $5 billion in revenue by selling almost 35 million carats.
Profits for the first 9 months of last year was up more than three-fold .
The company’s 9-month results released in December also showed 19% year on year revenue growth and per carat prices of $142 compared to $84 in 2010.
During a June results announcement Alrosa CEO Fyodor Andreev said “it’s doubtful” whether the company needed an IPO given the stellar numbers.
Alrosa’s reserves are put at 1.2 billion carats while the Russian government is said to hold a stockpile of rough worth more than a $1 billion.
Alrosa remains a prized asset and some analysts believe an IPO is still forthcoming.
With De Beers going private a decade ago and now being subsumed by Anglo-American direct exposure to diamonds has always been hard to come by. And the diamond business’ fundamentals continue to improve.
Rough-diamond prices rose 24% in 2011 (mid-year speculators has chased prices up 50% before it started falling back) had building on strong gains during the two preceding years.
Consultants Bain & Co paint a particularly rosy future for the industry saying global demand will nearly double by the end of the decade thanks to an expanding middle class in China and India:
Diamond demand, in carats, will grow more than six per cent per year through 2020, far outpacing the 2.8 percent annual supply growth, creating a “structural shortage” for the industry and signaling potential price increases, particularly in the larger-carat diamond segments.
While not quite in the league of Gem Diamonds’ rock star mine Letšeng, Alrosa is hitting the sweet spot of larger carat diamonds.
Itar Tass reports Alrosa auctioned off diamonds of special sizes worth about $10.3 million in March.
The lots contained 118 stones – over 2,000 carats in total – including a 88.71 carat (17.6 grams) monster. Buyers were from China, Israel, Belgium and India while 60 Russian companies bid on the stones.
The company has a stake in an Angolan mine and owns and operates ten open-pit mines and nine alluvial deposits in Russia, including the Mirny pit (pictured), the second-largest man-made hole in the world.
