Russian diamond producer Alrosa says H1 sales to exceed initial expectations

By Polina Devitt

ST PETERSBURG, May 24 (Reuters) - Russia's Alrosa, the world's largest producer of rough diamonds in carat terms, said on Thursday first-half sales would be significantly higher than it originally planned due to market strength.

Speaking on the sidelines of the St Petersburg economic forum, Alrosa chief executive Sergey Ivanov told Reuters the first four months of the year showed very good sales results for Alrosa. Sales in May will be lower than in April due to seasonal factors, he added.

The whole of 2018 is expected to be good for sales with prices already showing growth of several percent since the start of the year, he said.

Alrosa's 2018 production is expected at 36.6 million carats but its sales will be higher than its production - at about 40 million carats - due to sales from the stockpile in early 2018. Alrosa's stockpile is currently at around 11 million carats.

State-controlled Alrosa and Anglo American (LSE: AAL.L - news) 's De Beers produce about half of the world's rough diamonds. In 2017, Alrosa was hit by a shutdown at its Siberian underground Mir mine, which had accounted for 9 percent of its annual diamond output before it was partly flooded in August.

Ivanov said that the company was still considering ways to resume production at the Mir mine and would be progressing with the project without any rush.

The Mir project is unlikely to require any major capital expenditure this and next year. The feasibility study is expected to be ready in 2019, Ivanov said.

Alrosa said previously it was "expedient" for it to buy state-owned diamond polisher Kristall when the state-owned company is privatised. According to Russia's Finance Ministry, this could happen in 2018. Alrosa still thinks it could consider buying Kristall subject to the price. "We believe that the price for this asset should be quite modest," Ivanov said.

Kristall, along with its smaller local competitors, has been hit by low profit margins in the gem-cutting sector and by strong competition from foreign polishers partially caused by Moscow's decision to cancel an export duty on rough diamonds in 2016. (Reporting by Polina Devitt Editing by Alexandra Hudson)