Retaining its global leadership position with an 8% y-o-y increase in output to 19mn The news should be positive for the stock, and we are putting our recommendation under review as diamond prices have risen beyond our original expectations for the year.

ALRS RU: UNDER REVIEW | Current Price: USD 31 475.00
Yesterday ALROSA released 1H 11 operating results, which as anticipated were strong with an 8% y-o-y increase in diamond output to 19mn carats and sales consistent with production volume. ALROSA's average sales price rose by 41% y-o-y to USD 113 per carat in 1H 11 (and by 11% over the first quarter price of USD 102), driven by higher demand from India, China and the US, the largest purchasers of gemstones.
The strong production results allowed ALROSA to maintain its position as the global leader in terms of output. De Beers, the company's main competitor, mined only 15.5mn carats in the first half of 2011 (nearly flat y-o-y results), while Rio Tinto produced 5.2mn carats and BHP Billiton only 1.1mn carats after experiencing operational difficulties at major producing assets. Output for both companies fell by 27% y-o-y.
In the light of the operating results and higher than expected growth in sales prices over the first half, we put our recommendation on the stock under review.

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