Alrosa Mulls Long-Term Contracts For Supply Of Polished Diamonds (IDEX)

Original publication on the IDEX website

(IDEX Online News) – Russian diamond mining giant Alrosa is considering the possibility of entering into long-term contracts for the supply of polished diamonds or a joint venture with some large retailers.

"A year ago we started test work to optimize our cutting facilities and redistribute the assortment inside the country depending on the cost of its treatment," vice president Andrey Polyakov told IDEX Online

"This work proved to be effective. We will study the possibility of concentrating the cutting and polishing operations for the whole range of Alrosa’s assortment at the company’s facilities in Barnaul and of engaging a strategic partner there."

He also said that Alrosa has started negotiations with potential long-term clients for its new 2015-2017 contract period, with talks centering on the volume and assortment of supplies. The signing of new long-term contracts is to take place in November, with the complete list of clients to be announced in December, the company said.

The number of long-term clients for gem-quality diamonds will rise from the 45 clients the company has currently, with some companies that have purchased Alrosa’s rough diamonds on the spot market and via tenders entering the list.

"Our aim is to form a balanced clients’ base from the participants of different stages of the diamond pipeline, i.e. dealers, cutters, polishers and diamond jewelry manufacturers from various regions," said.

The principles of Alrosa’s client policy are fully transparent, and are agreed with the Russian Anti-Monopoly Service and posted on the company’s website, he explained. "Companies who are in accordance with qualifications based on a number of objective criteria, including stable financial standing and a sufficient solvency level, may become our long-term clients. In the selection process Alrosa will take into account the volume of purchases in the previous period, especially during a period of weak market conditions, and responsible business practices.

"We will pay more attention to our clients’ responsible business practices. Each long-term client will be granted the right to use the Alrosa Alliance logo. We want to make Alrosa Alliance not only a conventional sign of our long-term clients’ group but a kind of quality mark. That way any market participant knows that if he deals with an Alrosa Alliance member he can be sure it is a reliable partner."

Alrosa Alliance Members must comply not only with financial and legal standards, but with the responsible business practice rules, he said. Alrosa approved the Guidelines on Responsible Business Practices. Each Alrosa Alliance Member must fully share the principles of the Kimberley Process, operate in accordance with the principles of lawful and fair competition, anti-corruption, financial transparency and information disclosure, and observe human rights. "A failure to meet any of these requirements can be regarded as a basis for terminating a long-term contract."

On the issue of synthetic diamonds, Polyakov said that Alrosa considers them to be "a pressing challenge requiring joint efforts at all the levels of the diamond pipeline. Synthetic diamonds must occupy their market niche, and buyers need to be informed that the diamonds they buy are synthetic.

"We are ready for cooperation and exchange of information regarding this problem with all the market players and industry organizations. The fact that [some] synthetic diamonds are traded as natural stones damages the reputation of the market as a whole, and it is better for diamond-mining companies to get involved in the problem solving process.

"In Russia we are working on an amendment to legislation obliging sellers to disclose the synthetic origin of diamonds. Today there is no concept of ‘synthetic diamonds’ in Russian legislation. It appears that any unscrupulous sellers can sell synthetic diamonds as natural with impunity, and buyers are not protected in any way. We are discussing with the Ministry of Finance the possible amendments to the effective laws and the possible control mechanisms. We hope our initiative will be supported, and we will be able to recommend this experience to other countries. We believe that joint efforts by mining companies and jewelry retailers might guarantee the origin of stones to users and promote natural diamonds."

This page was last updated on 09 October 2014 at 06.15