Nizhne-Lenskoye, a public company established in 1994, is engaged in mining natural diamonds in Eastern Siberia (Yakutia). It is the first diamond-mining enterprise in Yakutia which is independent of ALROSA Group. The company’s only shareholder is the Republic of Sakha (Yakutia) represented by its Ministry for Property Relations. Nizhne-Lenskoye produces about $100 million worth of diamonds a year. Vladimir Kychkin, CEO of Nizhne-Lenskoye, answers the questions of Rough&Polished.

What is the current state of your company’s mineral base?

Currently, mining operations are underway on four allotments (Billyakh, Tiglikit, Molodo and Khara-Mas) and on two prospecting sites (Prilensky and Kuonamka) in four districts of Yakutia (Anabarsky, Bulunsky, Zhigansky and Oleneksky). Those reserves which we have today will keep our company busy approximately for 10 years. We have won the auction for geological prospecting and mining on new areas of about 4000 sq. km (in the district of Big Kuonamka) and we are expanding our operations there. If our new predicted resources will be confirmed, we shall be able to increase our output by 25-30%.

In 2009, due to a difficult situation in the diamond market you offered Gokhran to buy $20 million worth of diamonds. What was the fate of this offer and do you plan to turn to Gokhran for help this year?

Gokhran did not refuse to buy, but it also did not buy, since we were not on the list of enterprises which were liable for assistance. This year we are not going to sell to Gokhran.

What is the sales pattern of your company?

About half of our output is exported to Belgium, India, Israel and the United Arab Emirates. We have no representation offices in these countries. Our customers come to Moscow, look at the goods on the Gokhran premises and sign contracts. The high reputation enjoyed by Nizhne-Lenskoye and top quality of our goods allow us to have advance payments – from six months to one year. In the home market our clients include Kristall of Smolensk, the Committee for Precious Metals and Gems of the Republic of Sakha (Yakutia), the Pokrovsk Diamond-Cutting Factory and several small-scale Yakut companies.

You are both the CEO with your diamond-mining company and the member of your republic’s parliament being Deputy Chairman of the Committee for Economic, Investment and Industrial Policy in the State Assembly of Yakutia. What kind of legislative problems are critical from the point of view of a diamond miner?

First of all I would mention the regulations governing diamond export. If in African diamond-mining countries the export procedure takes from 15 minutes to about one hour, in our case it is one or two months. This inevitably affects the velocity of turnover and in the long run has a repercussion in terms of competitiveness. There is another problem in the legislation connected with obtaining licenses for developing subsoil on the territories immediately adjacent to our sites. Nizhne-Lenskoye pays much attention to exploration and prospecting for new deposits; the geological prospecting license we have allows us to explore while our mining license may end at a certain place where we see further reserves but cannot take them because it is necessary to announce an auction - in other words, I have to pay again for what I explored.

Quite a long time ago, the State Duma of the Russian Federation was submitted a bill in favor of a special economic zone for the diamond industry, including a specialized customs terminal in Yakutsk. What is your attitude towards this project?

I think that such a zone should be created. And a customs terminal in Yakutia is just a necessity. The more so as there is China quite nearby and there are growing south-east markets. If we have such a terminal our work will be much easier and more effective.

Recently the issue of transforming ALROSA into a public company and its further IPO has triggered a heated discussion. Fears are expressed that Yakutia’s stake in ALROSA may be essentially reduced. Is there any chance it will be decided to merge ALROSA and Nizhne-Lenskoye in any foreseeable future to preserve Yakutia’s share in ALROSA’s equity?

The government of the Republic of Sakha (Yakutia) which is the shareholder of Nizhne-Lenskoye did not consider such an issue. Personally I think that Nizhne-Lenskoye should develop independently, it is impossible to put money in one basket, even if it is a diamond basket, there should be several of them, at least two.

Is there any possibility that Nizhne-Lenskoye will venture an IPO?

So far our shareholder has not taken such a decision. Although quite a variety of alternatives is being mulled including a possibility of attracting additional shareholders.

Galina Semyonova, Rough&Polished, Yakutsk