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Alrosa Aims to Compete in the Coloured Stones Market

Russia’s Alrosa, has added weight to the market prospects of polished coloured stones by releasing its own plans to boost revenue from selling rare,...

Russia’s Alrosa, has added weight to the market prospects of polished coloured stones by releasing its own plans to boost revenue from selling rare, coloured stones where demand is stable, stating that, it is a niche business. The stones that can be blue, pink or green form a special asset class, relying on a consumer passion for something exotic and unusual. This also means they are less affected by other factors driving supply and demand in the main diamond market.

ALROSA 1Alrosa Mining Technology, Photo Credit: eng.alrosa.ru

The global market for polished coloured diamonds is now dominated by Rio Tinto, De Beers and now Alrosa aims to compete.

ALROSA 3Alrosa Mining Technology, Photo Credit: eng.alrosa.ru

"We hope that Alrosa will become one of the global leaders in sales of polished coloured diamonds," Evgeny Agureev, the head of Alrosa sales division, told Reuters this week.

alrosa 2Alrosa Mining Technology, Photo Credit: eng.alrosa.ru

He said the stones would come straight from the producer, ensuring "transparent origin" in an industry that has been working hard to prevent stones that have been mined in areas that could fuel conflict from reaching the market.

ALROSA 8Alrosa Polished Diamonds, Photo Credit: eng.alrosa.ru

Where Alrosa differs from rival De Beers is that it’s marketing system isn’t as sophisticated – suggesting that this is due to Alrosa’s Soviet past – so the mine has sold more rough diamonds in bulk – without sifting out the coloured stones that they could have sold at a premium. As an example, until now Alrosa’s diamond polished business of both clear and coloured stones has amounted to only 2% of its revenue - however that’s about to change. Agureev, said that starting this year the mine will be sorting its diamonds into 19 categories of stones and would aim to polish most of these to secure higher prices.

ALROSA 4Alrosa Polished Diamonds, Photo Credit: eng.alrosa.ru

While profit margins are lower in the global polishing industry than the rough diamond business, the mine reports that it is confident that it can earn more by selling cut and polished coloured gems - which have been largely ignored in the past. "The polished diamond should be more expensive because it is a readymade final product for which there is a demand, and we have taken all the production risks on ourselves," said Vinikhin, head of Alrosa’s polishing division.  Alrosa plans to process coloured stones that are mined from its remote Russian regions in its Moscow cutting and polishing facility. It also has another facility in Siberia.

Last year, the company mined a 27.85-ct pink diamond and a 34.17-ctyellow one. The number, size and shape of polished gems to be produced from these stones has yet to be determined.

Image-1(2)-1Photo Credit: Sotheby's

Prices for diamonds depend on their colour, size and cut quality. In 2017, a huge 59.6-ct pink polished diamond, the "Pink Star", was sold for a record $71.2-million in Hong Kong.

"The market for fancy diamonds is relatively small given the inherent limited supply and the end-demand is primarily a relatively small group of wealthy individual buyers that are less sensitive to price," said diamond analyst Paul Zimnisky.

"Selling fancy diamonds through a separate channel could allow for more price efficiency as it would attract a more competitive niche group of industry buyers" he added.

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