MOSCOW – Russian diamond miner Alrosa reduced its inventory sharply in the first quarter but kept its 2017 production forecast unchanged, the company said on Thursday, as its chief executive met clients to discuss the new contract period.
The state-controlled Russian firm is the world's largest producer of rough diamonds in carat terms. Together with Anglo American's De Beers unit, the two companies produce about half of the world's rough diamonds.
Alrosa said on Thursday that its first-quarter diamond production rose 9% year-on-year to 8.9-million carats. However, diamond sales were well above production and reached 14.1-million carats for the period.
The high sales mean Alrosa's inventory was reduced by 5.2-million carats to about 13-million carats and is now closer to Alrosa's long-term target of ten-million carats, analysts at VTB Capital said in a note.
"The company benefited from abnormally strong Indian demand in the first quarter," they added.
Alrosa built up its diamond inventory in previous years when demand for the precious stones was weaker. The company has said it plans to increase diamond production by 5% to 39.2-million carats in 2017 and to sell about the same amount.
This plan remains unchanged despite the partial sale of inventory in the first quarter, Interfax news agency quoted Alrosa's new chief executive Sergey Ivanov as saying on Thursday.
Ivanov added that the second quarter would be worse than the first quarter for the company but he remained optimistic about prospects for the full year.
The Russian government appointed Ivanov, son of a former head of the Kremlin administration, as Alrosa's chief in March. He has said he will remain committed to the company's strategy, which has focused on selling noncore assets and increasing production organically.
On Thursday, Ivanov met Alrosa's long-term clients to discuss the new three-year contract period, which starts in 2018. He told them the assortment and volume of sales under the agreement would be formed on an annual basis, the company said in a separate statement.
"The heart of Alrosa's sales policy – sale of the major part of rough diamonds through the system of long-term agreements – will not change," Ivanov was quoted as saying in the statement.