Alrosa must make decisions on mining investments to maintain output after 2030 - Yakutia leader

MOSCOW. March 15 (Interfax) - Russian diamond giant Alrosa needs to make decisions about investing in mining that will ensure it maintains production after 2030, the leader of Yakutia, Aisen Nikolayev said during talks with the Russian president.

He recalled that the company is starting construction this year on Mir-Gluboky (Mir-Deep), a huge mine that will ensure Mir will be able to produce diamonds "for 50 years."

"But there are also other projects," Nikolayev said, proposing to discuss the future investment cycle during the president's visit to Yakutia.

"The investment cycle is very long in diamond mining, 10-15 years. Decisions need to be made today already, otherwise we might have objective problems after 2030 related to depletion of some deposits and failure to put others into operation," Nikolayev said.

This issue has already been discussed with the Finance Ministry and the finance minister issued instructions, "but we need some acceleration," Nikolayev said.

In addition to restoring the flooded Mir mine, Alrosa also considered transitioning the open-pit mine at the Yubileinaya pipe to underground mining.

Production at Yubileinaya, one of Alrosa's main deposits, totaled 5.2 million carats in 2021. At its peak in 2013-2018, this deposit accounted for a quarter of the company's total output, but by 2021 this figure had fallen to 16%.

The project to build an underground mine at Yubileinaya sees production starting in 2032 in the amount of 2.3 million carats, with output of 1.8 million tonnes of ore. The reserves of the underground mine are estimated at 43.2 million carats. The cost of building the mine was estimated at 72 billion rubles in 2019.

The decline of diamond production due to depletion of high grade ore is a long-term problem for Alrosa, Vasily Danilov of Veles Capital said. Before 2020, the company was able to produce more than 38 million-39 million carats in some years, but current capacity enables it to produce no more than 35 million-36 million carats.

Building an underground mine at the Yubileinaya pipe is necessary to maintain current production, Danilov said. "The company is not yet disclosing the possible cost and duration of the project, but judging by the fact that Alrosa began restoring Mir in 2023, on can conclude that sanctions are not a barrier to the implementation of large-scale and complex investment projects in underground diamond mining," he said.

The restoration of the Mir mine could cost 150 billion-200 billion rubles and take six to seven years, Boris Krasnozhenov of Alfa Bank said. Production could amount to about 4 million carats of gem quality diamonds, or about 15% of Alrosa's business, he said.