Alrosa considered permanently closing low-profit deposits - document

MOSCOW. March 20 (Interfax) - Alrosa considered permanently closing low-profit deposits when exploring cost-cutting measures amid the prolonged crisis in the diamond market, according to a letter from the company's management to its workforce, a copy of which is available to Interfax.

The document aligns with Alrosa's official position, a company representative confirmed.

On Tuesday, Alrosa announced the temporary suspension of operations at the Verkhne-Munskoye deposit (the Zapolyarny and Magnitny pits) and the alluvial deposits of Almazy Anabara (Kharamas and Ochuos) in the Anabar river valley.

These sites account for less than 1 million carats of diamonds in the 2025 production plan, or 3% of total output. The impact will only be reflected in the 2026 figures, as ore and sand from the closed sites will continue to be processed until then.

Operations at the alluvial deposits will be suspended from April 1, and at Verkhne-Munskoye from June 15. The deposits will be placed in hot conservation, meaning the company will continue to fully maintain the infrastructure. This will allow for their quick reactivation as the global diamond market recovers, Alrosa said.

The company considered all possible alternatives, the letter said, including optimizing mining operations, transporting ore by truck trains with seasonal suspensions, and temporarily idling one of the pits at Verkhne-Munskoye. "However, a thorough and detailed analysis showed that all these measures are insufficient to continue operations without significant losses for the company in the current situation," it said.

The real alternative to a temporary suspension was to mine the rich sections of these deposits over the next two years and then permanently close them, it said.

In this case, the deposits would eventually be left without jobs, Alrosa's management said.

The Verkhne-Munskoye deposit, part of the Udachny Mining and Processing division, is Alrosa's most recent investment project, officially launched in late 2018. Investments in preparing the deposit for mining amounted to around 16 billion rubles. It was reported that Verkhne-Munskoye would yield around 1.8 million carats of diamonds annually, with reserves sufficient to continue mining until 2042.

However, according to published data, production at Verkhne-Munskoye fell short of the 1.8 million carat target. The diamond content in the deposit's ore is 0.6 carats per tonne, below the company's average of 0.9 carats.

Verkhne-Munskoye produced 1.5 million carats in 2019. In 2020, the deposit was mothballed during the summer due to the pandemic, and production dropped to 0.5 million carats. In 2021, output increased to 2.3 million carats, thanks to the processing of ore accumulated the previous year. Since then, Alrosa, which was added to the U.S. sanctions list in spring 2022, has not published detailed operational data.