Alrosa (MCX:ALRS), Russia’s state-owned diamond miner, plans to suspend certain operations and reduce its workforce in 2025 as it confronts falling global diamond prices and the impact of international sanctions.
CEO Pavel Marinychev outlined the measures during an interview with local media in Yakutia, the company’s primary production hub, as reported by Reuters on Thursday (November 21).
The global diamond industry is experiencing a downturn, with Marinychev describing the situation as a ‘deep crisis.’
Prices for the gems have declined for the second consecutive year, a situation that Marinychev said has been further exacerbated for Alrosa by sanctions from the G7 nations and EU. Together, they instituted a direct ban on Russian diamond imports at the start of 2024, and added an indirect ban at the beginning of March.
Alrosa is targeting a 10 percent reduction in labor costs next year, which will affect its 35,000 employees.
Marinychev stated that areas of production deemed less profitable will be paused, though operations in these regions could be resumed swiftly if diamond market conditions improve. ‘We are currently in a rather difficult situation. Our task is to endure and wait out this period, to wait for prices to start rising again,’ he explained.
The company has not published sales data since 2022, the year Russia launched its invasion of Ukraine.
The Russian government, which occasionally buys diamonds from Alrosa to support the industry, plans to continue these purchases in 2025. Deputy Finance Minister Alexei Moiseev confirmed that the government’s budget for 2025 to 2027 includes US$1.55 billion allocated for acquiring precious metals and gemstones.
This measure is intended to stabilize the diamond market and alleviate pressure from oversupply.
Given the diamond market’s challenges, Alrosa has sought to diversify its revenue. In July, the company finalized the acquisition of the Degdekan gold ore field in Russia’s Magadan region through its subsidiary, Almazy Anabara.
The US$276 million purchase, part of a broader strategy to enhance financial stability, marks Alrosa’s entry into the gold sector. Degdekan is expected to yield approximately 3.3 metric tons of gold annually starting in 2030.
Alrosa’s investment in the project underscores its intention to leverage synergies within its mining operations while reducing dependency on diamond revenue, particularly in light of sanctions targeting its primary export markets.
While diversifying into gold mining, Alrosa remains committed to its core operations in diamond production.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.