Alrosa in negotiation with De Beers

Alrosa, Russias state controlled diamond miner has been negotiating an improvement in relations with De Beers, with opportunities for cooperation between the two miners in sub-Saharan Africa. The Alrosa negotiations were led by CEO Alexander Nichiporuk, whose team in Johannesburg included Pyotr Glagolev, first vice president and executive director, and Sergei Mityukhin, chief geologist. Alrosa and De beers have made no comments on the talks so far.

Alrosa is not offering De Beers fresh mining projects in Russia. Instead, it is proposing that the two companies should cooperate in third countries. Much depends on what mineable assets De Beers is willing to offer Alrosa in South Africa, Botswana, or Namibia. In Angola, Alrosa with one mine operational, and two in planning -- is already much the stronger of the two companies. De Beers can offer little advantage in the Democratic Republic of Congo either.

The ongoing EU intervention between DeBeers and Alrosa has been an ongoing discussion. Alrosa is not pleased with the arrangement either. Alrosas legal challenge is unilateral; De Beers is not participating, and for the time being not commenting on it. However, the Alrosa management may be hoping to persuade De Beers to revert to its mid-2005 position, and support the preservation of a residual trade between the two companies for the future.

The trade agreement signed by De Beers and Alrosa for the five-year period 2002-2007 provides for aggregate rough sales of $4 billion, with an average annual sale of $800 million. Russia Customs figures released in June, provided for the first time details of the caratage sold by Alrosa to De Beers, as well as to other destinations, and confirm the shrinkage of the De Beers in Alrosas export volume.