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Alrosa hedges against rising production costs

Russia’s state diamond company Alrosa is committed to new diamond prospects in Africa as a hedge against the rising costs and technical risks of underground mine production in Russia. This was one of the themes of last month's shareholder meeting. Alrosa reported that its diamond output increased 1.6% year-on-year to $2.37 billion in 2007. Rough diamond sales, including domestically mined rough and Alrosa's share of the Catoca mine output in Angola, had exceeded target figures by $11.6 million, and cut diamonds by $9.6 million, the company said. For this year, Alrosa is expecting aggregate sales for 2008 to stay at the same level as 2007 at about $2.9 billion, vice president Yury Doinikov told shareholders. The ruble's strengthening had reduced the company's sales by 45.8 billion rubles ($2 billion) over the past five years, he added. Alrosa’s CEO Sergei Vybornov said the steep fall in the US dollar rate "has forced us to start talking about a currency change in diamond trading. And not only us, the mining companies, but also manufacturers of diamonds, dealers, jewellers, for whom this was simply not imaginable before." Noting that the recession effect in the US is likely to cut into demand for diamonds this year, Vybornov said there are "very good dynamics of growth for demand of polished in Asia, first of all China, and also, but not least, in the Russian Federation.” “They give us a unique chance. The largest manufacturers of diamonds and global jewellery brands are ready to take the place of De Beers in trade relations with the company."



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