Alrosa Mulls Buying Manufacturer Kristall

RAPAPORT...Alrosa is considering acquiring Kristall Smolensk Diamonds,Russia's largest manufacturer of polished goods. The miner's supervisory board deemed the potential deal"expedient" after examining it on April 28, it told Rapaport News Sunday. "Alrosa...sees that such an acquisition, under certainconditions, can give synergy," a spokesperson for the rough producer said. "Inparticular, [its] cutting-and-polishing business will help Alrosa to betterunderstand trends in the diamond market." State-owned Kristall is expected to switch to privateownership by 2019, according to a Reuters report Friday. The miner would onlymake a final decision on whether to buy Kristall once the cutting firm'sshareholders have determined how the privatization should occur, and how much thecompany should sell for, Alrosa noted. The miner - which is also partly ownedby the government - must then assess whether this price is worth paying, itsaid. Kristall, which is based in the Russian city of Smolensk,sources some of its rough diamonds from Alrosa, as a member of the miner'sAlrosa Alliance, and is a De Beers accredited buyer. It cuts about 300,000carats every year, and generates annual revenue of about $200 million, Reuterssaid. That makes it more than twice the size of Alrosa's polished division,which recorded sales of $96.9 million in 2017. "Thepossible acquisition does not mean a fundamental change in the company'sstrategy," Alrosa commented. "The bulk of Alrosa's revenue is received, and will continueto be received, from rough diamonds." A deal would lend support to Russia's struggling cutting industry, while also creatinga potential competitor to De Beers in the downstream sector, according to Reuters.The nation's diamond-manufacturing trade is suffering from increased foreigncompetition after the country abolished a 6.5% export duty on rough diamonds in2016, the news service continued. Alrosa's supervisory board has instructed Sergey Ivanov, the miner's president,to submit a strategy for developing its cutting business - including decisionsrelated to Kristall - by December, Russian press agency Tass reported. Kristall did not immediately respond to a request for commentoutside of working hours Sunday.Image: Kristall polishing factory