RAPAPORT… Standards and Poor’s (S&P) reinstated its long-term corporate credit rating for ALROSA, offering a positive outlook for the Russian diamond mining company. Fitch Ratings also upped its ALROSA rating, noting that its new evaluation reflected the miner’s reduced operational and financial risk, as well as the expected growth of the global diamond mining industry.
S&P suspended its ALROSA rating in April 2009 due to a lack of current operating and financial data, but said that it had since received sufficient data to assess ALROSA’s ratings. Its current long-term rating of “B+” was based on ALROSA’s standalone credit profile and a “high likelihood that the government of the Russian Federation would provide timely and sufficient extraordinary support to ALROSA in the event of financial distress,” S&P explained.
Fitch forecasted an improvement in ALROSA’s full-year 2010 financial performance, which could see revenues and earnings before interest, tax, depreciation, amortization and rent (EBITDAR) jump by 20 percent to 25 percent, compared with 2009.
Fitch also upgraded ALROSA’s long-term foreign currency issuer default rating to “B+” from “B,” removed it from rating watch negative (RWN) status and assigned the company a stable outlook.
De Beers Posts Net Loss for 2009
De Beers reported a net loss of $743 million in 2009, compared with net earnings of $90 million for the previous year, due to the impairment of its Canadian mining assets. Group sales sank 44 percent year over year to $3.8 billion, with the rough sales conducted through its Diamond Trading Company (DTC) down 45 percent to $3.2 billion. The De Beers Diamond Jewellers (DBDJ) retail business saw its sales drop 30 percent during the year, while sales at Element Six, the company’s industrial diamond business, fell 34 percent. De Beers did not provide separate sales figures for its Diamdel unit, which supplies rough to nonsightholders.
The company also reported that it had received credit approval to renew a $1.5 billion borrowing facility, which is up for renewal in March. A definitive agreement is expected by the end of the first quarter, the company said.
Negotiations with international banks did not come easy, however, and as a result, De Beers shareholders pledged $1 billion of combined equity capital to strengthen the group’s balance sheet — in addition to the loans they have already granted the company. At the end of 2009, De Beers debt consisted of shareholder loans totaling $759 million, bank borrowing of $3.2 billion and other liabilities amounting to $709 million.
De Beers production declined 49 percent to 24.6 million carats during the year. Output in the second half reached 18 million carats, which was 25 percent lower than that of the same period of 2008.
The company’s Botswana-based Debswana operations saw production drop 45 percent to 17.7 million carats in 2009, while De Beers Consolidated Mines (DBCM) in South Africa reported that its production decreased 60 percent to 4.8 million carats. De Beers Canada’s production fell 30 percent and output at Namdeb in Namibia declined 56 percent.
Delhi to Set Up Jewelry SEZ
India’s capital city will have two Special Economic Zones (SEZs) — one for gold and jewelry and the other for information technology (IT) — that are to be set up for a total cost of $170 million (INR 7.9 billion), an official told Right Vision News. The gold and jewelry SEZ will occupy 41.4 acres in Baprola in northwest Delhi and include a section for the identification, grading and certification of diamonds, as well as a world-class gem and jewelry training institute. Both SEZs are expected to provide direct employment to 54,000 people and indirect employment to 162,000, the news agency reported, citing a written statement from Chetan Sanghi, the chairman of the Delhi State Industrial and Infrastructure Development Corp. (DSIIDC).*
Russia to Tender Large Diamonds
Russia’s Ministry of Finance an-nounced that it plans to tender special size rough diamonds above 10.8 carats through the state repository, Gokhran. The first tender of the year is scheduled to take place on March 16, the ministry stated on Gokhran’s website. Applications to participate in the tender closed on February 26. In a recent interview with Interfax, Valery Bogomolov, the head of the Russian Gem Manufacturers Association, noted that Russia’s cut and polished diamond output has shrunk by more than three-quarters over the past three years.*Additional reporting provided by Acquire Media.
