Vybornov Joins Penny in Calling for Shift Away from Dollar
May 25, 08
Alrosa President Sergey Vybornov said recently that people “on every level of the pipeline” in the diamond industry are being affected by the U.S. dollar’s weakness, a fact that may cause the industry to change the currency in which it does business, according to the Telegraph.
“The volatility of the dollar is a real danger which is affecting everybody in the industry,” Vybornov said. “The average life of a mine is 30 years so you have to plan this horizon, but you can’t with all this uncertainty going on. We just don’t know what will happen with the dollar tomorrow.”
According to the publication, Vybornov recently said that there is a widespread belief in the diamond industry that calculating diamond prices in the “mobile” U.S. dollar has become unprofitable, and suggested that one attractive alternative would be “something stable like the Swiss franc.”
“I understand that it will be hard to enforce, but [De Beers Managing Director] Gareth Penny has also started to talk about it. So if De Beers and Alrosa decide sometime to change I think the other companies will follow," he was quoted as saying.
Penny had suggested abandoning the U.S. dollar as the trade’s currency at the Rough Diamond Conference in Tel Aviv in February, suggesting that such a move would serve to energize the industry.
Vybornov noted that Alrosa’s net profit decline in 2007 was due to “the dollar issue,” and said that it was also very problematic for diamond and jewelry manufacturers. "They are losing money because it takes up to three months to make a ring," he said. "They buy their gold and diamonds, but when it comes to selling their jewelry three months later, the dollar may have dropped even more."
He also predicted that, for 2008, Alrosa would see profits down about 25 percent, but that they would rebound for 2009 due to a change to more productive underground mining.
Along with the recession in the