Tough times for Russian Diamond Mining Companies

08/13/2017 04:28 am ET Updated Aug 16, 2017

Moscow-listed diamond mining giant Alrosa (ALRS:MICEX Main) which accounts for almost a third of global diamond production, had its mines flooded over a week ago. According to Associated Press, 142 people were in Alrosa’s open pit mine when water surged into it. Most were unharmed but to date, rescue operations are still underway for 8 miners who are missing. Alrosa chief executive Sergey Ivanov recently told CNBC that there was still hope for the missing miners to be brought out alive. An industry representative from a diamond exchange who wanted to remain anonymous mentioned that the flooding was caused by an uncontrolled increase in the flow of water out of an abandoned crater. He added that it was sabotage made to look like an accident, and was likely motivated by Alrosa’s rapid expansion into Africa. Alrosa’s Mir mine is one of the largest excavated holes in the world and just a few days prior to its mining incident, the company launched a selection of rare diamonds under the Dynasty collection. The collection, dedicated to the Tsar Peter the Great, includes a rare 51 carat polished diamond that will be auctioned online.

On the other hand, Russian consortium World of Diamonds Group (WOD) which is almost fully integrated in diamond mining, polishing and high jewelry creation had to deal with a cyber attack on its website (which at this time of writing, is still compromised). According to the company’s press statement, a competitor had engaged hackers to deface its website and mutate photos of its operations and information. The press statement also states that a journalist was then bribed to leverage on the hacked website to discredit World of Diamonds Group. World of Diamonds Group is launching a defamation suit against media company Rough&Polished. The Group’s marketing efforts in recent years included the sale of the world’s most expensive perfume collection, the launch of a US $2 million dinner and a US $14 million vacation, both of which were also the world’s most expensive.

As corporations become larger in magnitude and attract more visibility through marketing campaigns, they are inevitably subject to fierce competition. Sometimes, underhand tactics by competitors exert pressure on a company’s resources to respond efficiently. Alrosa and World of Diamonds are just two such cases. Perhaps the war over Russia’s resources has a part to play in a nation where mining rights are awarded almost exclusively.

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