Sergei Vybornov of Alrosa Co.LtdRussia's largest diamond company
accounts for about 100% of all rough diamonds produced in Russia
and for about 20% of the world's rough diamond output
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ALROSA ISSUES NEW STATEMENT ON VYBORNOV
By John Helmer in Moscow
By John Helmer in Moscow
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Responding to a request from PolishedPrices.com for clarification of the June 20 election of a new Alrosa board of directors, without chief executive Sergei Vybornov, Alrosa spokesman, Yelena Nikiforova, has provided the following company statement.
“The largest shareholder of the company in the name of the government of the Russian Federation does not consider necessary the presence of representatives of executive management as a part of the Supervisory Board of Alrosa… According to the government decision, the structure of boards of directors of state companies should include professional counselors, Alrosa says, and so representatives of the Russian Federation voted for inclusion in the structure of the Supervisory Board of the company of independent directors. The President of Alrosa [the chief executive] in any case participates in the Council work as the head of an executive office of the company. As to the election in the structure of the Supervisory Board of Alrosa vice-president Ivan Demyanov, this [was the] decision of the second-largest shareholder, the Government of the Republic of Sakha.”
Nikiforova also said that Vybornov is a member of the presidential delegation, led by President Dmitry Medvedev, which leaves Moscow today for a tour of Africa, with stops in Egypt, Nigeria, Namibia, and Angola.
by John Helmer - Tuesday, June 23rd, 2009
by John Helmer - Tuesday, June 23rd, 2009
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That company statement sounds like a lot goobly gook to me.
Pardon the pun but has Mr Vybornov been ” throne ” off or not ? : The Diamond Guru
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Historical Perspective
Sales to Gokhran is not salting away,» ALROSA is President Sergey Vybornov says
Alexandra Terentyeva, Vedomosti, 02.02.2009.
The demand for polished diamonds has slackened because of the crisis. The world largest diamond mining companies have decided to restore the market of polished diamonds jointly, said ALROSA is President Sergey Vybornov.
Alexandra Terentyeva, Vedomosti, 02.02.2009.
The demand for polished diamonds has slackened because of the crisis. The world largest diamond mining companies have decided to restore the market of polished diamonds jointly, said ALROSA is President Sergey Vybornov.
There is no sector in the global economy that the crisis has not influenced. The luxury market is not an exception - people have ceased to spend money on polished diamonds. President of ALROSA Sergey Vybornov said in an interview to the newspaper Vedomosti about how the diamond mining companies are going to hold the market, and how ALROSA will go through the hard times. After Mr.Vybornov was interviewed, Metalloinvest is controlling shareholder Alisher Usmanov expressed an unexpected idea: he told Vedomosti that the first step on the way to establishing a diversified ore mining and smelting giant in Russian «would have been a merger of Metalloinvest, the largest ore producer, and Norilsk Nickel, the leader in production of nickel, copper and platinoids. Later, some coal producer, for example, Mechel may join them. ALROSA fits perfectly into this line as well.»
Biography
Sergey Vybornov was born in 1958. He graduated from the Moscow State University of International Relations (MGIMO), with a diploma in International Relations.1992Head, Financial and Investment Cooperation Section, RF Government Office1994
Vice Chairman of the Board, The Business Development Bank; hold the same office in 1997-1998.
1995
Director General, Federal Centre of Project Financing;
2000
Head, Investment and Credit Department, Norilsk Nickel;
2002
Director General, Investment Group ALROSA;
2007
President, ALROSA
«I know nothing of this idea and there is nothing to comment on yet,» said Mr.Vybornov to a request to comment on this statement
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Q.: How has the current crisis in the global and Russian economy influenced the diamond industry?
A.: The present situation is unique - nothing of the sort has ever happened. Basing upon our industry is experience I can say that the crisis has a psychological tinge. Sales of diamond jewelry unveil people is moods. It is not the article of prime necessity, but a symbol of relations. We sell a service, rather than goods. The crisis has affected our clients is moods and we see sales to have fallen. According to the results of Christmas sales in the U.S., the luxury market dropped by 20-25% - this being just preliminary figures. I think, demand will have been restored by the end of the year, however, there is an essential unfavorable thing at that - the market has accumulated very big stocks of, first of all, rough diamonds, and of polished diamonds as well. The stocks started to accumulate at the Indian manufacturers, and now the stocks are distributing across the whole chain. By different estimates, the volume of stocks is about -20 billion, assuming that the annual sales volumes of rough diamonds are about billion. The situation in Russia is unique: diamond jewelry sales grew by 40 percent in Q4, though in the segment of inexpensive goods. Unfortunately, the sales volume is not too large. In Russia, people initially invested in diamond products, estimating separately stones, separately gold, frequently not of the highest quality.
Q.: How has the current crisis in the global and Russian economy influenced the diamond industry?
A.: The present situation is unique - nothing of the sort has ever happened. Basing upon our industry is experience I can say that the crisis has a psychological tinge. Sales of diamond jewelry unveil people is moods. It is not the article of prime necessity, but a symbol of relations. We sell a service, rather than goods. The crisis has affected our clients is moods and we see sales to have fallen. According to the results of Christmas sales in the U.S., the luxury market dropped by 20-25% - this being just preliminary figures. I think, demand will have been restored by the end of the year, however, there is an essential unfavorable thing at that - the market has accumulated very big stocks of, first of all, rough diamonds, and of polished diamonds as well. The stocks started to accumulate at the Indian manufacturers, and now the stocks are distributing across the whole chain. By different estimates, the volume of stocks is about -20 billion, assuming that the annual sales volumes of rough diamonds are about billion. The situation in Russia is unique: diamond jewelry sales grew by 40 percent in Q4, though in the segment of inexpensive goods. Unfortunately, the sales volume is not too large. In Russia, people initially invested in diamond products, estimating separately stones, separately gold, frequently not of the highest quality.
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Q.: Who has mostly suffered from the crisis among the segments of the diamond pipeline: diamond miners - cutters - jewelers?
A.: Cutters are the most vulnerable part in the diamond pipeline not only during the crisis but also during any changes of the market condition. The margin is 40% on average at the level of diamond mining, on the other end, at the level of brands it is 60-70%, and in the middle is only 1-3%. Any move, even a mistake at purchasing rough diamonds, quite frequently causes difficult situations with such a margin. The banks which work with rough and polished diamonds have suffered. Both we and our business colleagues are afraid of fall in prices. Polished diamonds are not cheap goods but here the laws of supply and demand work at a sentimental level, whether a person wishes to make a gift or not. Banks, for example, do not discharge stocks, neither do the mining companies. We have withdrawn from the market and sell exceptionally to Gokhran. We wish to support the market, our colleagues, we are the only who can afford this «luxury» because we are supported by the Ministry of Finance and Gokhran. De Beers and other mining companies close operations. We should go through the complex juncture, winter and spring, and after that we will probably be slowly coming back to the market. It is difficult for us also because the year 2009 is the most active year for ALROSA in terms of scheduled underground mines construction. We’ll spend a ceiling amount of money on them. We cannot cut financing, as it will mean a refusal from extraction.
Q.: Who has mostly suffered from the crisis among the segments of the diamond pipeline: diamond miners - cutters - jewelers?
A.: Cutters are the most vulnerable part in the diamond pipeline not only during the crisis but also during any changes of the market condition. The margin is 40% on average at the level of diamond mining, on the other end, at the level of brands it is 60-70%, and in the middle is only 1-3%. Any move, even a mistake at purchasing rough diamonds, quite frequently causes difficult situations with such a margin. The banks which work with rough and polished diamonds have suffered. Both we and our business colleagues are afraid of fall in prices. Polished diamonds are not cheap goods but here the laws of supply and demand work at a sentimental level, whether a person wishes to make a gift or not. Banks, for example, do not discharge stocks, neither do the mining companies. We have withdrawn from the market and sell exceptionally to Gokhran. We wish to support the market, our colleagues, we are the only who can afford this «luxury» because we are supported by the Ministry of Finance and Gokhran. De Beers and other mining companies close operations. We should go through the complex juncture, winter and spring, and after that we will probably be slowly coming back to the market. It is difficult for us also because the year 2009 is the most active year for ALROSA in terms of scheduled underground mines construction. We’ll spend a ceiling amount of money on them. We cannot cut financing, as it will mean a refusal from extraction.
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Q.: What other measures will you undertake to hold the market?
A.: In February, rough diamond producers ALROSA, De Beers, BHP Billiton, Rio Tinto, Harry Winston will announce the launch of a marketing campaign to promote diamonds. The project is called Generic Diamonds Marketing, and we will promote diamonds irrespective of where they were cut and who produced them. It is a joint contribution of miners into the market development. I think that large players in other parts of the diamond pipeline will join us. Historically, nobody has ever invested into advertising of diamond value. There were very good, effective marketing campaigns, such as The right-hand ring campaign, The Trinity campaign, but nobody has ever thought that diamond is an investment value. What is more, diamonds are really forever. For example, at Udachny - it is one of our pipes - stones is 2,4 billion years old. The age of the Earth is 2,8 billion years. Furthermore, each stone is unique and it was always extremely difficult for people to consider diamonds as an investment object.
Q.: What other measures will you undertake to hold the market?
A.: In February, rough diamond producers ALROSA, De Beers, BHP Billiton, Rio Tinto, Harry Winston will announce the launch of a marketing campaign to promote diamonds. The project is called Generic Diamonds Marketing, and we will promote diamonds irrespective of where they were cut and who produced them. It is a joint contribution of miners into the market development. I think that large players in other parts of the diamond pipeline will join us. Historically, nobody has ever invested into advertising of diamond value. There were very good, effective marketing campaigns, such as The right-hand ring campaign, The Trinity campaign, but nobody has ever thought that diamond is an investment value. What is more, diamonds are really forever. For example, at Udachny - it is one of our pipes - stones is 2,4 billion years old. The age of the Earth is 2,8 billion years. Furthermore, each stone is unique and it was always extremely difficult for people to consider diamonds as an investment object.
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Q.: How much do you plan to sell to Gokhran in 2009?
A.: We sell 2,8 billion worth of diamonds in total [annually]. We would like to keep the same sales volumes this year. Sales to Gokhran is a market measure, it is not salting away. We have created a deficiency of the Russian rough diamonds. It affords us good negotiation position with the holders of big stocks - the largest dealers and cutting companies, those whom we build long-term contract relations with. This is our work for the future.
Q.: How much do you plan to sell to Gokhran in 2009?
A.: We sell 2,8 billion worth of diamonds in total [annually]. We would like to keep the same sales volumes this year. Sales to Gokhran is a market measure, it is not salting away. We have created a deficiency of the Russian rough diamonds. It affords us good negotiation position with the holders of big stocks - the largest dealers and cutting companies, those whom we build long-term contract relations with. This is our work for the future.
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Q.: How will relations with De Beers be built after termination of a rough diamond sale agreement, under which all exported diamonds were sold only to De Beers?
A.: We have terminated our agreement; moreover, this was done by mutual consent in December, 2008. We won a lawsuit against the European Commission, after that we could further export diamonds only to De Beers, but we will not do this. ALROSA should have its own distribution network and its own clients. ALROSA has too long or, rather, always been under De Beers wing. Much to my regret, now they cannot control the market, as their share in the market has terrifically decreased and they have neither power, nor means [to control the market]. A joint marketing initiative of all mining companies has actually emerged from here.
Q.: How will relations with De Beers be built after termination of a rough diamond sale agreement, under which all exported diamonds were sold only to De Beers?
A.: We have terminated our agreement; moreover, this was done by mutual consent in December, 2008. We won a lawsuit against the European Commission, after that we could further export diamonds only to De Beers, but we will not do this. ALROSA should have its own distribution network and its own clients. ALROSA has too long or, rather, always been under De Beers wing. Much to my regret, now they cannot control the market, as their share in the market has terrifically decreased and they have neither power, nor means [to control the market]. A joint marketing initiative of all mining companies has actually emerged from here.
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Q.: How will the marketing policy of ALROSA be built? Will you have your own sightholders?
A.: We were not ready for the crisis from the point of view of marketing. A simple comparison: our clients disappeared at the very beginning of the crisis because there were too many of them. And De Beers for some time continued to market rough diamonds to its sightholders, though sales volumes decreased. Certainly, it would be logical to have our own clients, sightholders, whose business needs to be supported in tough times. With the understanding that when happens what is going on now, they will support the miners. Unfortunately, ALROSA did not have time to redistribute its sales: 50% were bought by De Beers, 50 was sold to the local market with a huge discount. So the things worked for 50 years. Only in 2007 Vladimir Putin signed a decree on quotas cancellation - that was the final step to the diamond market liberalization. Before that the market had been strictly divided into not ours, De Beers, and ours. The latter is actually not entirely ours because the investors from Israel, India, and China stand behind the most cutting enterprises of Russia. Now all our clients are equal. For the last half a year we have been working with large producers of polished diamonds, especially with those who also have a niche on the jewelry market.
Q.: How will the marketing policy of ALROSA be built? Will you have your own sightholders?
A.: We were not ready for the crisis from the point of view of marketing. A simple comparison: our clients disappeared at the very beginning of the crisis because there were too many of them. And De Beers for some time continued to market rough diamonds to its sightholders, though sales volumes decreased. Certainly, it would be logical to have our own clients, sightholders, whose business needs to be supported in tough times. With the understanding that when happens what is going on now, they will support the miners. Unfortunately, ALROSA did not have time to redistribute its sales: 50% were bought by De Beers, 50 was sold to the local market with a huge discount. So the things worked for 50 years. Only in 2007 Vladimir Putin signed a decree on quotas cancellation - that was the final step to the diamond market liberalization. Before that the market had been strictly divided into not ours, De Beers, and ours. The latter is actually not entirely ours because the investors from Israel, India, and China stand behind the most cutting enterprises of Russia. Now all our clients are equal. For the last half a year we have been working with large producers of polished diamonds, especially with those who also have a niche on the jewelry market.
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Q.: Who are they?
A.: We sell roughs directly to Tiffany and Co. It is already the back-end of the diamond pipeline - they are the only who has managed to create their own rough team. As far as I know, no other jewelry company has managed to do that. It is ideally as we would be able to sign a contract for long prospect, understanding that a manufacturer needs diamonds of a certain size, quality, and color. It is a sale guarantee for us. Though, to distribute all our rough diamonds among such contracts is very difficult. In addition, the crisis will considerably clean this market and we will see who survives.
Q.: Who are they?
A.: We sell roughs directly to Tiffany and Co. It is already the back-end of the diamond pipeline - they are the only who has managed to create their own rough team. As far as I know, no other jewelry company has managed to do that. It is ideally as we would be able to sign a contract for long prospect, understanding that a manufacturer needs diamonds of a certain size, quality, and color. It is a sale guarantee for us. Though, to distribute all our rough diamonds among such contracts is very difficult. In addition, the crisis will considerably clean this market and we will see who survives.
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Q.: And how is ALROSA is own cutting business developing?
A.: We are in the second place in Russia. Before the crisis we have launched a new brand, now we will develop it, though the time is not the best for that. The brand is in a specific niche – polished made from rough diamonds of high quality and color characteristics. The stones are intended not only for corporate, but also for large private clients who can buy diamonds as investments.
Q.: And how is ALROSA is own cutting business developing?
A.: We are in the second place in Russia. Before the crisis we have launched a new brand, now we will develop it, though the time is not the best for that. The brand is in a specific niche – polished made from rough diamonds of high quality and color characteristics. The stones are intended not only for corporate, but also for large private clients who can buy diamonds as investments.
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Q.: Will it be simply a diamond?
Q.: Will it be simply a diamond?
A.: Right, a very expensive polished diamond. It is a pilot project of a very small volume - 10-15 million. Diamonds, as we have already said, have been never considered as an investment. We consider that now it is a high time to advance this quality of diamonds. It is really a brand, all diamonds will have a hologram, on which it will be seen that it is produced by ALROSA. People will be able to buy them by one or two. It is a new theme for us, not batch production.
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Q.: Has the attitude of Yakutia government to ALROSA changed after the state acquired a controlling stock in the company?
A.: I do not see a fundamental difference between the Ministry of Property Relations of the Sakha Republic (Yakutia) and the Federal Property Management Agency - they represent one state-shareholder. A conflict was between representatives of the Ministry of Property Relations of Yakutia and a part of the management. There is no a conflict now.
Q.: Has the attitude of Yakutia government to ALROSA changed after the state acquired a controlling stock in the company?
A.: I do not see a fundamental difference between the Ministry of Property Relations of the Sakha Republic (Yakutia) and the Federal Property Management Agency - they represent one state-shareholder. A conflict was between representatives of the Ministry of Property Relations of Yakutia and a part of the management. There is no a conflict now.
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Q.: Before the crisis, ALROSA had planned to diversify its business. Are the plans in force? Will they be executed?
A.: The idea was put forward by Finance Minister Alexei Kudrin. It was the question of hedging risks. Diamonds do not have their economic cycle, unlike metals: gold, copper. Basically, the more the mining business is diversified, the less risk a company has. Such global things we observe now, when everything has fallen, happen seldom. But currently, amid the crisis, perhaps it is not necessary to speak about diversification, which can divert funds from core operations. On the other hand, ALROSA has historically created around itself a group of different companies. This began, however, in the first years of capitalism in Russia. Not all of them are worth being preserved now. We have non-core oil assets which we intend to get rid of in Yakutia.
Q.: Before the crisis, ALROSA had planned to diversify its business. Are the plans in force? Will they be executed?
A.: The idea was put forward by Finance Minister Alexei Kudrin. It was the question of hedging risks. Diamonds do not have their economic cycle, unlike metals: gold, copper. Basically, the more the mining business is diversified, the less risk a company has. Such global things we observe now, when everything has fallen, happen seldom. But currently, amid the crisis, perhaps it is not necessary to speak about diversification, which can divert funds from core operations. On the other hand, ALROSA has historically created around itself a group of different companies. This began, however, in the first years of capitalism in Russia. Not all of them are worth being preserved now. We have non-core oil assets which we intend to get rid of in Yakutia.
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Q: Does it turn out that a question of possible purchasing Polyus Zoloto is block of stocks by ALROSA is closed?
A.: Why only of purchasing - there were many other options. As you can see, price for gold is now stable and price for diamonds is unfortunately not. Luckily, we are ZAO, i.e. a closed joint-stock company, and we have not suffered in the security market. But it is unduly now to receive money from Gokhran and give it to private investor.
A.: Why only of purchasing - there were many other options. As you can see, price for gold is now stable and price for diamonds is unfortunately not. Luckily, we are ZAO, i.e. a closed joint-stock company, and we have not suffered in the security market. But it is unduly now to receive money from Gokhran and give it to private investor.
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Q.: What will happen to ALROSA is non-core assets?
A.: We have bought four iron-ore deposits in Yakutia. Now we think what way to choose - we will contact the RF Ministry of Natural Resources. We need capital investments to develop the deposits, which we could find before the crisis, but now, in my opinion, it becomes problematic. There is a foreign interest in these deposits. However, coordination with the government is required because by reserves the deposits are commensurable and even exceed those of the Kursk magnetic anomaly.
Q.: What will happen to ALROSA is non-core assets?
A.: We have bought four iron-ore deposits in Yakutia. Now we think what way to choose - we will contact the RF Ministry of Natural Resources. We need capital investments to develop the deposits, which we could find before the crisis, but now, in my opinion, it becomes problematic. There is a foreign interest in these deposits. However, coordination with the government is required because by reserves the deposits are commensurable and even exceed those of the Kursk magnetic anomaly.
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Q.: Will you sell or invite an investor?
A.: We will not sell, but, maybe, we will find an investor. I cannot say that there is any interest in Russia.
Q.: Will you sell or invite an investor?
A.: We will not sell, but, maybe, we will find an investor. I cannot say that there is any interest in Russia.
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Q.: What is the size of ALROSA is debt as of the end of 2008?
A.: Our whole debt is blank, creditors do not demand security for it, and it is a matter of trust. I can say that we had a big specific weight of a short-term debt. We restructured it completely - 44,2 billion rubles in the long money. We received it in December from the VTB bank. As a whole, the situation is normal. We will get rid of minor assets and, accordingly, reduce the debt.
How much will the debt reduced due to sale of non-core assets?
The sum can be essential - 600-700 million.
Q.: What is the size of ALROSA is debt as of the end of 2008?
A.: Our whole debt is blank, creditors do not demand security for it, and it is a matter of trust. I can say that we had a big specific weight of a short-term debt. We restructured it completely - 44,2 billion rubles in the long money. We received it in December from the VTB bank. As a whole, the situation is normal. We will get rid of minor assets and, accordingly, reduce the debt.
How much will the debt reduced due to sale of non-core assets?
The sum can be essential - 600-700 million.
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Q.: Are not you afraid that this year a covenant under company is eurobonds, which requires the corrected EBITDA to exceed percentage payments by 3.5 times, will be broken?
A.: No, it will not be broken, taking into account that that we have rescheduled and are currently reducing the debt.
Q.: Are not you afraid that this year a covenant under company is eurobonds, which requires the corrected EBITDA to exceed percentage payments by 3.5 times, will be broken?
A.: No, it will not be broken, taking into account that that we have rescheduled and are currently reducing the debt.
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Q.: What is happening to KIT Finance, which 45-percent stake was acquired by ALROSA IG belonging to the diamond mining company in the end of the last year?
A.: The situation enters final straight. It is getting better, the bank is gaining clients, Gazprombank has rendered support, there is an agreement with the creditors, upon which there is a certain period during which they shall not make their demands, but I feel the period will be much shorter, than that we talked about initially. I have an impression that the Russian Railways (RR) is interested in gaining control over this asset.
Q.: What is happening to KIT Finance, which 45-percent stake was acquired by ALROSA IG belonging to the diamond mining company in the end of the last year?
A.: The situation enters final straight. It is getting better, the bank is gaining clients, Gazprombank has rendered support, there is an agreement with the creditors, upon which there is a certain period during which they shall not make their demands, but I feel the period will be much shorter, than that we talked about initially. I have an impression that the Russian Railways (RR) is interested in gaining control over this asset.
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Q.: How did it happen that ALROSA became a co-owner of KIT Finance after the financial problems had occurred?
A.: Any other bank is creditor could have been a shareholder of KIT Finance, simply both we and RR are companies with state participation. Probably, it was comfortable for the state to have such shareholders, rather than some others.
Q.: How did it happen that ALROSA became a co-owner of KIT Finance after the financial problems had occurred?
A.: Any other bank is creditor could have been a shareholder of KIT Finance, simply both we and RR are companies with state participation. Probably, it was comfortable for the state to have such shareholders, rather than some others.
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Q.: How much does KIT Finance owe you?
A.: There is an agreement with the creditors, under which we do not disclose this information.
Q.: How much does KIT Finance owe you?
A.: There is an agreement with the creditors, under which we do not disclose this information.
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Q.: Now, during the crisis period, is there any free time left which you can spend on yourself? How do you spend it?
Q.: Now, during the crisis period, is there any free time left which you can spend on yourself? How do you spend it?
A.: I have almost no free time. I like bikes. I am versed in them and rather experienced in sport biking. It is impossible to bike across Moscow, as you know, anyway it is uncomfortable. Therefore, my friends and I rent tracks and ride there when we have time.
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Q.: You have to travel much across the world. What part of the world do you like best?
A.: You are right. I have to travel a lot from Yakutia to Angola. If consider a country as an interest … I worked in France for five years and, as compared to other places, then probably there.
Q.: You have to travel much across the world. What part of the world do you like best?
A.: You are right. I have to travel a lot from Yakutia to Angola. If consider a country as an interest … I worked in France for five years and, as compared to other places, then probably there.
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Additional Readng :
The Morality of Diamonds : St. Petersburg: A Revolution in The Making
Daniel F Katz Graduate Gemologist ( GIA ) RFC ( Aust. )Proudly NOT a member of the Jewellers Association of Australia
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