By Michelle Graff
Rough diamond production totaled 8.5 million carats in the second quarter for Russian diamond mining company Alrosa, up 15 percent from the first quarter but down 18 percent year-over-year. The company picked up production at Severalmaz and the Udachny mine (pictured here) in Q2.
Moscow—The loss of the Mir underground mine and the sell-off of 6 million carats of rough diamonds in the first quarter dinged second quarter sales and production results for Alrosa.

The Russian diamond miner reported Monday that diamond production rose 15 percent quarter-over-quarter in Q2, from 7.4 to 8.5 million carats, due to a return to seasonal production at alluvial deposits and a ramp-up in production at Udachny and Severalmaz.

However, production is down 18 percent year-over-year due to the closure of Mir, as well as a lower diamond grade at the International underground mine and the processing of more lower-grade ore at the Jubilee pipe and the Aikhal division’s underground mine. Mir has been shuttered since August 2017 when a flood resulted in the deaths of eight workers.

(The company recently lost another worker in an explosion at another underground mine, Udachny.)

Rough diamond sales (in volume terms, counting both industrial and gem-quality stones) totaled 9 million carats, down 32 percent quarter-over-quarter and 12 percent year-over-year.

Breaking it down by type, sales of gem-quality diamonds totaled 6.3 million carats, down 38 percent from the first quarter and 21 percent year-over-year. Industrial diamond sales accounted for the remaining 2.7 million, declining 16 percent quarter-over-quarter but increasing 23 percent year-over-year.

Alrosa said the quarter-over-quarter drop is due to the 6 million in rough diamonds it sold from stock in the first quarter while the year-over-year decline is attributable to lower production.

Dollar-wise, rough diamond sales totaled $1.06 billion ($1.03 billion gem-quality, $3 million industrial), down 33 percent from $1.58 billion in the first quarter and 6 percent from $1.13 billion year-over-year.

The average realized price for gem-quality diamonds, however, grew 6 percent from the first quarter and 18 percent year-over-year to $164.

Alrosa attributed the increase to general demand growth and more large (10.8 carats or more) diamonds in the product mix. Large stones’ share of dollar-denominated sales grew from 5 percent in the first quarter to 14 percent in the second quarter.

Polished diamond sales totaled $26.2 million, up 11 percent quarter-on-quarter and 15 percent year-over-year.

Looking ahead to the second half of the year, the diamond mining company said it expects sales to slow—as rough diamond sales generally do in the latter half of the year—and is maintaining production guidance at 36.6 million carats, which is 8 percent below 2017.

Alrosa estimates that globally, diamond jewelry demand was up 7 percent in the first quarter of 2018, including a 5 percent increase in North America (the United States and Canada).

The rough diamond market recorded a strong second quarter as well, driven by a reduction in supply from diamond miners, “normalized” stock levels in the mid-stream and, as mentioned above, strong consumer demand, Alrosa said.

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