Alrosa VP talks changes for Russian diamond giant

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Alrosa VP talks changes for Russian diamond giant

By Susan Thea Posnock

June 29, 2007

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Amsterdam, the Netherlands—Alrosa Vice President Sergey A. Oulin confirmed the Russian diamond producer has plans to restructure its marketing strategy, selling the majority of its rough to large companies and developing a branding strategy that could include locally cut stones.

"We expect to sell about 80 percent of our rough in Russia," he said.

The remaining 20 percent would be sold outside of the country, mainly to small and medium-sized firms, which he said offer a true reflection of where the market is going. In terms of the larger companies, he said the company would work with those in the range of $300 million to $500 million annually.

The goal is to establish long-term relationships with prominent clients who can take responsibility for a substantial amount of goods, he said.

Oulin said the company must adjust to the new realities in the marketplace and use the advantages it has, such as a reliable mineral base, with an eye toward a branding initiative for Russian diamonds.

Alrosa, which will have about 25 percent of rough production by 2009, also hopes to take a stronger leadership position in dealing with issues impacting the diamond industry.

"The president of Alrosa plans to develop the company up to the modern standards of an internationally operating company," he said.

Oulin said it is an ongoing process, but that the first stage will be submitted by the end of the year, beginning in the fall.

In terms of challenging the European Commission (EC) ruling on selling to De Beers, Oulin said the company expects a decision in the near future. Under the EC antitrust ruling, Alrosa can't sell rough diamonds to De Beers after the end of 2008. He said the company felt the decision violated its rights. A reversal, however, wouldn't automatically mean the company plans to continue the sale of rough diamonds to De Beers.

"We are challenging our rights in principle, regardless of what we're going to do," he said.

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