Alrosa nixes dividend as economic sanctions bite

The board of Russian diamond major Alrosa (MCX: ALRS) has suggested shareholders vote to receive no dividend for 2021 during the upcoming general meeting.

Alrosa reported a net profit of 91.32 billion rubles ($1.89 billion) in 2021, nearly triple the 32.25 billion rubles ($662.87 million) profit in 2020. Dividends for the first half of 2021 amounted to 64.7 billion rubles ($1.3 billion), topping 70% of the company’s net profit in 2021. The final dividend in 2020 amounted to 70.3 billion rubles ($1.45 billion).

The company is subject to stinging economic sanctions levied by the West against Russia for its war in Ukraine.

On April 7, 2022, the U.S. Treasury Department announced blocking sanctions against State-owned Alrosa, the world’s largest diamond mining company. Already subject to Directive 3, Alrosa accounts for about 28% of global diamond mining.

Under General License 9C, transactions ordinarily incident and necessary to dealings in debt and equity of Alrosa (or any entity in which it owns a 50% interest, directly or indirectly) issued before April 7 are authorized until July 1. General License No. 21A permits had a wind-down period for U.S. persons having business with Alrosa until June 3.

A day following the sanctions, Alrosa suspended its membership in the Natural Diamond Council, a market alliance of the world’s leading producers of precious stones. It had also decided to step down from its position as vice-chair of the Responsible Jewellery Council, a global business standard-setting organization for the jewellery and watch industry.

Shareholders of record on June 6 will be eligible to vote on the proposal during Alrosa’s annual general meeting scheduled for June 30.

Meanwhile, De Beers, the world’s top diamond producer by value, has once again increased the price of its smaller stones as sanctions on Alrosa have worsened a global shortage caused by two years of covid-related shutdowns.

The Anglo American (LSE: AAL) unit had hiked prices by about 8% at its first sale this year, with the sharpest increases of up to 20% affecting small-scale roughs as demand reached pre-pandemic levels.

Anglo American reported record financial results for 2021. “Copper and PGMs – essential to the global decarbonization imperative – and premium quality iron ore for greener steelmaking, supported by an improving market for diamonds, all contributed to a record financial performance,” said Anglo American chief executive Mark Cutifani during its full-year 2021 results reporting in February.

The company plans to pay a final 2021 dividend of US$1.18 per share, as well as a special dividend of US$0.50 per share, bringing its total return to shareholders to US$6.2 billion (including a share buyback).