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ALROSA aims to drive its output to 38-40 million carats by 2021

21 june 2012

The Supervisory Board of ALROSA held a meeting in Moscow chaired by Ilya Yuzhanov on June 20, according to a press release received by Rough&Polished.

The members of the Board reviewed and principally adopted ALROSA’s production plan for the period of up to 2021.

At present, ALROSA is the largest producer of rough diamonds in the world.

The company’s key objectives up to 2021 are:

- To attain effective development focusing on its core business, diamond mining;
 - To preserve its leading positions in the world market;
 - To develop its mineral resources base ahead of mining;
 - To increase the company’s market value;
 - To fulfill the investment projects aimed at commissioning new production facilities.

Within the long-term plan, ALROSA Group projects to drive its output to an average of 38-40 million carats from the current level of about 34 million carats by 2021.

The increase in diamond production will be provided primarily by the underground mines of ALROSA currently under construction and by Severalmaz which is to reach its full output capacity.

The share of rough mined in open pits will be gradually reduced from 72.8% in 2011 to 40% in 2021, whereas that mined underground will be increased from 27.2% to more than 60%, respectively.

At the same time, there are objective risks of reducing output due to geological properties of the deposits and hence possible changes in mining operations at the mines under construction.

ALROSA is considering the acquisition of diamond assets, primarily in the Russian Federation.

Pursuing its strategy for non-core assets ALROSA aims to attract strategic investors to its iron ore project Timir and natural gas project (Urengoy Gas Company and Geotransgaz).

ALROSA Group plans to increase its diamond reserves beyond 451 million carats over the mentioned period. The Group’s total volume of diamond reserves as of 01.01.2022 is forecast in excess of 1.19 billion carats.

The most significant risks in achieving the stated parameters of ALROSA’s development plan are associated with:

- Marketing, due to a possible lag between the actual and projected diamond price growth rates;
- Specific events, due to a possible failure to get expected amounts and quality of mined rough;
- Processing techniques, namely due to a more complicated mining and geological environment or failure to bring underground mines to their designed capacity or a backlog in developing mining fields. Possible impacts of technological risk factors on ALROSA’s financial and economic performance were assessed on the assumption of a possible failure to get some part of commercial products from the Mir, Undachny and Solur-Vostochnaya Mines.

ALROSA Group estimates potential losses over the period of 2012-2021 in case of a negative scenario at 8.7 million carats.

This year, the Supervisory Board will revert to the long-term development plan for the company after additional expert evaluation of prospects for the global diamond market.

The Board took note of the report on the implementation of the Program for Innovative Development and Technological Modernization of ALROSA in 2011.

The program received over RUB 1,106 million of total allocations including the company's own funds and grants. A total of 27 scientific and technical solutions were developed and applied in the production process.

The Board approved the contribution in the amount of RUB 147.6 million made by ALROSA in 2012 to form the Endowment Fund of the Skolkovo Institute of Science and Technology and instructed the Executive Committee of the company to prepare proposals for cooperation with the Fund.

The Supervisory Board has made changes in the composition of the Executive Committee of ALROSA suspending the powers of Dmitry Mostovov, the former director of Mirny GOK, as a member of the Executive Committee and deciding to elect Ilya Ryashchin, First Vice-President of ALROSA.

The Supervisory Board also agreed to the company's participation in the following organizations:

- EnergoAuditEkspertiza, a non-profit partnership in the field of energy conservation and energy efficiency (Moscow);
- Solid Commercial Minerals, a non-profit partnership in the field of mining technology (Moscow);
- Club of Directors for Science and Innovation, a non-profit partnership in the field of innovation management (Moscow).