ALROSA will go to look for diamonds in Africa

ALROSA will go to look for diamonds in Africa

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The company plans to become more active on the African continent after 2021, since the cost of exploration in Russia is 14 times more expensive

Photo: TASS/ Yuri Smityuk

The world’s largest diamond company ALROSA has estimated the cost of exploration per carat in Africa, which today is 14 times cheaper than in Russia. The company has developed more than 50 proposals to change the legislation in terms of licensing and warned of an Agency responsible for subsoil use that if no steps will be taken, “ALROSA” after 2021 will go to Africa, because the cost of exploration per carat there’s 8 roubles, and in Russia — 114. This was in the framework of the international forum “exploration in 2016” said Vice-President AK “ALROSA” Rinat Gizatulin.

Analysts believe that the company’s stock in Russia is enough for 30 years, in addition, current production will eventually be offset by new assets. Experts also believe that seriously expect African assets prematurely — today is a zone of interests of many investors.

According to the Vice-President of ALROSA, the diamond projects in Angola, Sierra Leone and Namibia.

— The main region for us — Angola. We are negotiating to expand its presence in the project “Katoka”. Until the end of the year, the Supervisory Board will consider increasing the proportion of our participation in this project, — said Gizatulin, stressing that it is necessary to convince the shareholders that investment in Angola will bring to ALROSA additional economic effect in 2017-2018.

ALROSA owns 32.8% of the mining company “Catoca” in Angola and regularly receives dividends from the project. The Russian company is interested in increasing the share in this project and in improving the effectiveness of sales, said Gizatulin.

The interest of the miner to the African continent appeared on the background of the low cost of geological exploration in Africa compared to Russia. According to the Vice-President of AK ALROSA, this is due to climatic factors: the contents and equipment of the exploration expeditions that require special equipment in our country more expensive. In addition, the density of geological exploration in Angola is much higher than in Russia, and in Africa it is easier to find supplies. Also takes into account the tax base, which in Russia is higher, said Gizatulin.

The company’s reserves in Russia are estimated at 0,66–1 billion carats of diamonds depending on the counting standards. These reserves provide a stable production company at 38 million carats per annum for 17 years. Diamond mining in Russia in the years 2016 to 2030 is estimated at 586 million carats.

To 2032-2035 years we need to find another 500-700 million carats. We are already in 2020-ies need to go beyond Yakutia. It is necessary to study the Arkhangelsk oblast, and Northern Krasnoyarsk Krai and the North of the Irkutsk region, — said Gizatulin.

In the past year, investments ALROSA in exploration amounted to 7 billion rubles. In 2016 this level will be maintained. The Vice President of ALROSA noted a need to increase exploration at the expense of the state.

— We believe that the state should annually invest at least 5 billion rubles in exploration for diamonds. Now this amounts to 500 million rubles per year, — said Gizatulin.

According to him, you need to think about how to attract investors in search of work. Gizatulin believed that this region needs additional incentives and benefits.

The main initiatives offered by ALROSA, are the reduction of terms of issuance of the license, the abolition of single payments in case of increase in the licensed area, creating the conditions for juniors, reduce the tax burden and the change in legislation to more effectively carry out the geological exploration (GE).

Group Director of corporate ratings ACRA Maxim Hudalov notes that in their documents “ALROSA” refers to the difficulty of finding new diamond deposits (pipes). So the last pipe was discovered 15 years ago. Open-facing surface of the tube have been discovered. According to experts, the company’s inventory is enough for 30 years, so 17 years is an extremely negative scenario.

— In Angola from the “ALROSA” is the enterprise “Katoka”, which by the end of 2015 paid 2.5 billion rubles in the form of dividends. Nevertheless, Africa is an area of active interests of De Beers and Chinese investors, therefore, seriously to count on African assets is premature, noted Hudalov.

Expert-analyst of “Finam” Alexey Kalachev believes that the company is more like blackmail, intended to push his proposals through the government.

— I wouldn’t take such statements very seriously — 2021 too soon. Who knows how the situation will change in Russia and the world market — said Kalachev.

According to him, the talk about the depletion of stocks regularly rise in all sectors related to subsoil use, but the timing every time you move in connection with the discovery of new deposits and development of exploration and production.

— Current reserves enough for 17 years of stable production, and is a long time to confidently move forward. I have no doubt that the disposal of stocks over time will be offset by new assets, — said the analyst of “Finam”.