After the initial publication of the erroneous data, the Kimberley Process Certification Scheme (Kimberley Process Certification Scheme) published its diamond production figures, imports and exports for 2014. These figures are full of surprises, highlighting some of the changes that the global diamond market is undergoing. They indicate a change in the importance of certain diamond centers, and this affects the entire diamond pipeline.
RUSSIA RISES TO FIRST PLACE
In May 2013, Igor Sobolev, then the first vice president and executive director of ALROSA, told me during a trip to their mine in Mirny that by 2018 ALROSA will be the world's largest diamond mining company. It was a clear goal that the company set for itself. Although until three years before 2018, and the economic situation today is very different from that which was in 2013, there are indications that ALROSA may soon achieve this goal.
[De Beers reports a higher volume of production than the one indicated by the Kimberley Process, the discrepancies are 13.8% in volume and 33% in value. Is it possible for the KP to make a mistake about 14% in the volume of products produced worldwide?]
In addition to the mines in Russia, ALROSA owns a stake in one mine outside the country - the Catoca mine in Angola. Except for this, the company's activities in mining are conducted in Russia, and almost without exception, 94.5% of Russian production belongs to ALROSA.
In 2014, Russia produced 38.3 million carats at an announced price of $ 3.73 billion, becoming the world's largest diamond producer by value and volume, according to KP data. Until 2014, for many years, it was the largest producer in terms of carat volume. The increase in production by 19.9% in value compared to 2013 can be an increase only in accounting books (by volume, growth was only 1.1%) or it may be an accidental improvement in the volumes extracted from the bowels, but how can declare ALROSA, there is no accident or game. Russia / ALROSA as a whole simply continues to move along a predetermined path to achieve the goal.
BOTSWANA HAS BROUGHT TO THE 2 nd PLACE
In retrospect, the growth in ALROSA's production volumes may simply be the difference between a diamond mining company supported by the government and a company owned by a shareholder group motivated to generate profits every quarter. When ALROSA encounters difficulties in selling diamonds, it has the support of Gokhran, the state institution for the formation of the State Fund for Precious Metals and Precious Stones of the Russian Federation.
[In total, in 2014, prices at the level of production rose by 7.6 percent].
Gokhran has an annual budget for the purchase of diamonds from ALROSA. This allows the company to keep mining even in the most difficult times. To secure the proceeds, she sells diamonds to Gokhran, which, in turn, only needs to wait until better times to sell the product to the market. Thus, the Russian government protects ALROSA.
In 2014, Botswana produced 24.7 million carats for the announced value of $ 3.65 billion, which is 6.4% more in volume, but only 0.6% more in value. De Beers produced 98.3% of Botswana's production in 2014, making it an important company for the diamond mining industry in Botswana, like ALROSA for the Russian diamond mining industry.
But in terms of De Beers, in 2014, Botswana's share is 74.3% of its global output, as this company has a wide geography of operations. When customers do not buy so much (as is now the case), De Beers cuts production (as it does now). And this explains why the KP figures for 2015, when released in the third quarter of 2016, may show that Russia has even bypassed Botswana.
GROWTH OF GLOBAL VOLUME OF PRODUCTION FROM THE POINT OF VIEW OF VALUE, LEADING TO INCREASING PRICES
According to the KP, the global production in 2014 amounted to 124.8 million carats worth $ 14.5 billion, which is 4.4% less in volume and 2.9% more than in 2013.
This bodes well for what the diamonds diamond production sector has warned throughout the year - that there will be a deficit of a certain commodity and prices will rise. In general, according to these data, in 2014 prices at the level of mining increased by 7.6%.
Open KP data are broken according to the volume of production, the volume of imports and the volume of exports of diamonds that are tracked when they cross the border. The declared value of diamonds at the mining level (and registered KP) is not necessarily the one that diamond buyers pay to diamond mining companies. Nothing reflects this better than the growth in the average value of diamond imports.
According to the KP, 409 million carats worth $ 56.6 billion were imported by 36 countries, which is 5.7% less in volume and 5.3% higher in value.
[The average cost of imports was $ 138.42 per carat, which is higher by as much as 11.7% year-on-year].
Again, this growth in terms of value may reflect a higher proportion of more expensive diamonds that were accidentally mined this year. This may be unreliable due to a wide variety of sources. In addition, this will also be reflected in the output figures.
It is likely that this double-digit increase in value shows what happened in the trade - diamond mining companies take more for their goods, and first-hand buyers (sightholders and ALROSA counterparties) take greater premiums when selling to the secondary market. These are some of the issues related to the current crisis in the diamond pipeline.
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