Russian Diamond Monopoly's Value to Jump on IPO Expectation, Metropol Says

ZAO Alrosa, Russia’s diamond mining monopoly, will surge in value in anticipation of an initial public offering and higher demand for gems, IFC Metropol said.

The company’s shares, which now change hands in an informal market at about $9,500 apiece, may reach $16,345 by the end of 2011 before an IPO the following year, Metropol said in a note, initiating coverage of the company with a “buy” rating.

“China, India and the Middle East will be the pace-setters in an upturn in global diamond demand,” Andrey Lobazov, an analyst at Metropol, wrote yesterday. “Under conditions of rising demand, this could mean a diamond deficit as soon as 2012, which would drive raw diamond prices higher.”

Alrosa may sell shares in an IPO no earlier than 2012, Renaissance Capital said in a note in June, citing unidentified company executives. Sales may rise 67 percent to 130 billion rubles ($4.2 billion) this year, the investment bank said. The information was confirmed by Alrosa spokesman Andrei Polyakov.

The company may be worth $4.46 billion in a year, before the IPO, Lobazov wrote. Alrosa benefited from government support during the global financial crisis with state repository Gokhran buying $1 billion of rough diamonds, he added.

To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net.

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