By John Helmer in Moscow
If the senior management of Alrosa, the world’s number-2 diamond miner, mounted the review platform above Lenin’s tomb in Red Square, and stood in line for a two-hour military review, the goings-on inside the corporate executive suite wouldn’t be any clearer. But the body language might signal whether the company’s boss, Sergei Vybornov, is out of line, terminally.
But without that, all that can be read into an announcement from last Friday’s session of the Executive Board, is that the company management had an important visitor on Friday, and that after he had left, all that could be announced was uncertain.
Alrosa, the Russian diamond miner, is to reduce its dollarised production target for this year by 15.9%, according to the company’s record of an Executive Board meeting, held at Mirny, in the Sakha republic, on Friday.
The future of CEO Sergei Vybornov is also being considered by the company board, according to sources, who have told Polished Prices that Vybornov has agreed to step down once a replacement has been found for him. The board has also agreed, according to these sources, that Sakha President, Vyacheslav Shtirov, will not be Vybornov’s replacement.
The board’s new communique says nothing explicitly about the long-running feud between Vybornov and Shtirov. However, it notes that the Executive Board, a senior management body, included Shtirov in its deliberations on Friday. This is unusual. Shtirov is formally a member of the company’s Supervisory Board, equivalent to a corporate board of directors, which includes members nominated by the shareholders, and is chaired by federal Finance Minister, Alexei Kudrin. The last Supervisory Board meeting was held on December 30. The last public notice of an Executive Board meeting, convened on December 12, did not include Shtirov.
After summarizing the main production and financial parameters for 2008 and 2009, the announcement says: “other matters relating to the Company’s current and future activities were also discussed.” Vybornov’s spokesman declined to respond to a request for details. Sources close to the company claim Vybornov has already signed a resignation document; and that the official announcement has been delayed by the failure of the board to settle on who will be the new chief executive.
On the company’s production planning, the board announced that it will reduce the value of rough diamond production for 2009 to $1.53 billion from the 2008 level of $1.82 billion, and from the previous target for 2009, announced last December, of $1.87 billion. Although this is a year-on-year decline in value of 15.9%, the communique fails to say whether carat production is to be reduced by this proportion, or whether the decline reflects a combination of falling dollar diamond prices. the weakening rouble, and the cost-price formula agreed with the government for this year’s rough production to be sold to the state stockpile agency Gokhran. Until now, Alrosa has insisted there will be no cuts to mine output. The company does not issue carat data for its mine output, although the information is not a state secret.
The announcement says that production at the Nyurba mine, which is jointly owned by Alrosa and the Sakha republic government, will be reduced in value from $538.5 million in 2008 to $336.9 million, a cut of 37.4%. Last December, the Supervisory Board thought the Nyurba production target for this year should be $493.9 million. Cuts in production from the Catoca mine in Angola, in which Alrosa has a third share, are also expected, but no details have been released.
Alrosa also reports that its sales of polished diamonds for 2008 was $157.6 million; that is fractionally greater than the figure of $157.2 million previously announced, which was in turn less than 1% above the 2007 level. Sales of polished for this year are now targeted at $100 million.