Alrosa director of sales Evgeny Agureev, who joined the company last August, spoke to JCK last week at the JCK Las Vegas show. In a wide-ranging interview, he talks about the possible effect of U.S. sanctions, why Alrosa thinks blockchain is important, and offers a surprising comment on De Beers’ Lightbox plan.
JCK: So the big news is Alrosa is reopening its office in New York City.
We are reopening the office. We had a past office in New York but for two years it was closed. For us, it’s very important. The main consumer market is here.
The initial idea is to sell polished goods in the United States. But the main idea is to see the trends, understand the dynamics, and see the changes.
When will it open?
We have started with the first auction in May. We are still looking for a person that will take over the [office].
There is a lot of talk in the United States about the president and Russia, and further sanctions against Russia.
It’s a very important question. We are working without any sanctions. If we will see the negative impact from sanctions, we will change our business model. We see a lot of other opportunities from other regions. It is not our strategy. But if this will happen, we will change our strategy.
The big talk at the show is De Beers’ decision to go into lab-grown diamonds.
We see some interesting issues. If we are talking about the segregation of the markets, that is very important. It’s important to explain to the customers, there are two markets: natural diamonds and synthetic diamonds. If we are talking about the real emotions, real feelings, of course that should be linked to natural stones.
For Alrosa, that is a real opportunity: We are the main supplier that is focused only on the natural.
A lot of people in Russia grow diamonds. Can you see Alrosa getting into the lab-grown market?
In Russia, we have some companies working in this manner. The market is very unorganized. With this activity, De Beers is trying to organize this market. From my point of view, they are trying to kill some of the suppliers of the lab-grown diamonds.
But, still, this is a question is for the Diamond Producers Association. How will it be structured [now]? The other story is linked to trust. For the last 10 years, De Beers was explaining to the market that they had this subsidiary responsible for lab-grown diamonds, but they said it was an institute, that they are doing research. And now they have started with [Lightbox]. So it becomes question of trust for the industry.
Does this lessen the trust of De Beers?
It’s a question. [Laughs] It’s a question for [De Beers]. As I said, for us, it’s a new opportunity to be more efficient in the main market.
[Ed. note: Alrosa CEO Sergey Ivanov was later quoted as saying that Alrosa has no intention of selling synthetic diamonds.]
Diamonds from Russian diamond miner Alrosa
What do you think of De Beers’ idea for an industry-wide blockchain?
The blockchain is the technology. But what is behind is the traceability of the goods. That is a very important topic. One of the biggest opportunities here is to explain to the customer the origin of the stones and the story of the stones. We are spending a lot of money in [diamond-producing region] Yakutia for social programs. We are an absolutely transparent and conflict-free company. For us, it’s something to explain to the customer. It’s not that we will create a huge marketing program [on that topic]. But we see a lot of opportunities to explain that.
If we are talking about the blockchain, there are a lot of initiatives on the market. De Beers is running something. Other companies are running [projects]. We have some internal research. We are communicating. Let’s see. We haven’t decided what we will do. But for us it’s important to look at the different proposals. We are open.
Do you expect to do more with brands?
Branding is very important for us. We will launch a few marketing programs this year.
We are working in a lot of different directions. One direction is cobranding programs. The other story is about traceability, to provide more information about the final product. The other story is about fancy colored diamonds. We see a big opportunity in that market.
An Alrosa diamond mine in Yakutia
There is talk you are going to buy the cutter Kristall.
That is another good question. If you compare us with the other companies, we have some cutting expertise. We have Brilliance of Alrosa, our internal company, with more than $100 million annual turnover. But now, with Kristall Smolensk, it’s a new opportunity to bring efficiency. How will we will consolidate all our subsidiaries?…
But the decision is not done. There is a decision in principle from our supervisory board. We will see. It’s a question of the price. But I see a big opportunity for the company that will bring a lot of expertise, and that will allow us to increase the profitability of our subsidiaries.
Will buying Kristall bring you into competition with your customers?
[Laughs] Again, absolutely the right question. We are looking at how to find the balance because we are miners, and [that is] our main business model.… It’s not a question that we will provide hundreds of thousands of carats to Kristall. We will keep it in balance.
What do you think of the industry’s issues with getting bank financing?
I came from the banking sector. In general, I see that banks are in this industry and new blood is coming in. Some banks are going out of this industry and some banks we see as newcomers.
The problem in the banking sector in India is not linked with the diamond industry. It’s an institutional problem there. Who are the real regulators for the sector? Because what we see now is the banking sector has low level of capital for consideration and has increased the interest. For the diamond sector, it means that margins will be less because banks will increase the interest rate.
In April, I spent one week in India and I spent two days in Surat. All the companies are decreasing leverage and they are increasing capital investment. It’s a good trend.
How have you found the diamond market so far this year?
This year, and first quarter especially, was very positive with good news from the United States and China. Even India, with all the banking issues, was very positive. My expectations for the second half of the year are just as positive.
(Images courtesy of Alrosa)