Alrosa Gives Cautious 2021 Production Outlook

RAPAPORT... Alrosa expects to maintain production at its current low levels next year, aiming to reduce inventories that built up during the pandemic.The Russian miner is discussing a production plan of 28 million to 30 million carats for 2021, which the board will consider next month, it said Thursday. Alrosa ended the third quarter with 30.6 million carats in its safes, up 41% year on year, after sales slumped this year amid the Covid-19 downturn. "Given the accumulated stocks and sales expectations for certain diamond categories, the company's board was recommended to approve, as the base-case scenario, 2021 production guidance of 28 million to 30 million carats, mainly underpinned by production cuts at Almazy Anabara and Severalmaz," said Alrosa chief financial officer Alexey Philippovskiy.Alrosa slashed its 2020 production forecast to 30 million carats earlier this year, from a previous plan of 34.2 million, as the pandemic hit rough demand. Revenue picked up in the third quarter ahead of the holidays, rising 9% year on year to RUB 48.57 billion ($632.1 million) as sales to India and the United Arab Emirates jumped, the company reported.The outlook likely reflects the technical difficulties of ramping up production after this year's sharp drop in mining activity, as well as a cautious approach to the diamond-market recovery, according to Boris Sinitsyn, an analyst at Russia-based VTB Capital. Alrosa will end 2020 with excess inventories of 8 million to 9 million carats, which it will be able to sell next year, he added. "[The excess diamond stocks] are enough to give them a full year of inventory release, such that total sales will equal normal production," Sinitsyn told Rapaport News. "They will for sure be able to release inventory in quite large volumes."Alrosa's profit fell 44% to RUB 7.58 billion ($98.8 million) for the third quarter, weighed down by exchange-rate fluctuation. Image: Rough diamond. (Alrosa)