At its meeting held on 14 December, the Supervisory Board of ALROSA reviewed and approved the Group’s budget for 2018.
ALROSA expects the diamond market to be balanced in 2018 on the back of a slight upward trend in the global jewellery demand and virtually flat global production. ALROSA’s diamond production is planned at 36.6 million carats backed by higher diamond output at the strategic mining assets: the Udachny underground mine will see an increase from 1.6 to 3.9 million carats, Severalmaz – from 2.4 to 3.3 million carats.
ALROSA’s sales in 2018 will be supported by the accumulated diamond inventories, improved sales mix and, therefore, higher average price of gem-quality diamonds vs 2017.
The Company implements a comprehensive programme to manage costs and improve efficiency, and has initiatives in place to decrease working capital by minimising receivables, limiting supplies and reducing end product inventories. These initiatives are expected to keep the Company’s costs flat in 2018. ALROSA’s costs may be brought down even further through the disposal of non-core gas assets, which are expected to be sold at an auction in Q1 2018.
Capital expenditures in 2018 are planned at the level of RUB 32 bn and comprise investments in existing strategic mining assets, including ramping up output at the Udachny underground mine, completing the construction of the Verkhne-Munskoye deposit infrastructure, developing the Zarya pipe, and maintaining production at the current level, including at the International and Aikhal underground mines.
“The budget for 2018 approved by the Supervisory Board of ALROSA Group provides for stable financial performance despite the temporary downtime of the Mir underground mine. In 2018, the Company’s main focus will be on increasing efficiency, controlling costs and selling non-core assets. ALROSA keeps generating significant free cash flow, which is mostly used for dividend payments and debt repayment,” said Alexey Philippovskiy, CFO of ALROSA.