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Fyodor Andreev: “We will continue to focus on our core business of exploration, mining and sale of rough diamonds”

03 october 2013

Commenting the officially announced IPO of ALROSA Fyodor Andreev, President of the Company, said: “We are very excited to be offering ALROSA’s shares both domestically and internationally. We expect that the offering will help to reinforce our unique position in the global diamond industry. We also expect that the offering will expand our access to the international capital markets and help to unlock the value of the Company.”

“We will continue to focus on our core business of exploration, mining and sale of rough diamonds, pursuing expansion opportunities in Russia and other regions, such as Africa,” Fyodor Andreev stressed. “We will also continue to improve operational efficiency and consolidate our position as the global leader in the diamond mining industry. Corporate social responsibility will remain among key priorities, especially in Yakutia where most of our operations and the majority of our 39,000 employees are based.”

Olga Dergunova, Deputy Minister for Economic Development of the Russian Federation and Head of the Federal Agency for State Property Management, commented: “This offering marks an important milestone for both ALROSA and the on-going privatization programme in the Russian Federation. ALROSA has an important and unique role in the international diamond market. It is also one of the largest Russian mining companies and a key contributor to the local economy in its areas of operation. The Company’s partial privatization, including the offering of the shares through the facilities of MICEX SE, is a landmark step in the implementation of the government’s policy of reducing the state’s role in the economy.”

“We believe that high standards of corporate governance and transparency required for publicly traded companies are important for improving the efficiency and profitability of ALROSA’s business.”

Egor Borisov, President of Republic of Sakha (Yakutia), said: “I am pleased to see the planned part-privatization of ALROSA under the agreed scheme, which will allow the company to benefit from its engagement with the international capital markets while the state will retain a controlling stake. ALROSA has historically been the backbone of the Yakutian economy, and it remains one of the largest employers and contributors to the regional budget.”

“In Yakutia, we are very proud of the beauty of our land and the wealth of our natural resources. I believe that the offering of ALROSA shares will help to promote our region to the international community. Yakutia is the world’s leading diamond mining region and it has a lot more to offer”.

ALROSA is the largest diamond mining company in the world in terms of production volume. Its strategic focus is on mining and distribution of rough diamonds. In 2012, ALROSA produced 34.4 million carats of rough diamonds, accounting for 27 percent of the world’s rough diamond output by carats, according to the Kimberley Process statistics. In the six months ended 30 June 2013, the Company produced 17.1 million carats of rough diamonds.

ALROSA operates six open-pit mines, three underground mines and thirteen alluvial placers. Its principal mining and processing operations are located in Yakutia in the north-eastern part of Russia, and in the Arkhangelsk Region in the north-western part of Russia.

Based on published reserves, ALROSA has the largest JORC Code-compliant reserve base and its JORC Code resource base is one of the largest in the industry. As at 1 July 2013, the Company’s total JORC Code-compliant measured, indicated and inferred resources amounted to 973.0 million carats (68.3% measured and indicated) with an average grade of 1.38 carats/tonne; and its JORC Code-compliant proven and probable ore reserves were 607.5million carats with an average grade of 1.34 carats/tonne, based on an independent expert report on ALROSA’s resources and reserves by Micon International, mineral industry consultants. In addition, ALROSA owns a 32.8 percent stake in Catoca Limited, which mines the Catoca kimberlite pipe in Angola.

ALROSA has its own marketing and distribution network with offices in all key diamond distribution hubs across the world. In 2012, a majority of ALROSA’s diamonds were sold through long-term contracts, with the rest sold mainly through competitive sales (auctions and tenders) and spot sales. Its customer base includes cutting/polishing companies, vertically integrated jewellery groups and wholesalers.

In addition to its diamond mining and distribution business, ALROSA has some non-diamond assets in adjacent business areas. The Company plans to gradually dispose of selected non-diamond assets over the period of 2013-2020.

In the six months ended 30 June 2013, ALROSA’s revenue was RUB 82,229 million (six months ended 30 June 2012: RUB 76,529 million; full year 2012: RUB 150,880 million); and its net income amounted to RUB 14,616 million (six months ended 30 June 2012: RUB 16,191 million; full year 2012: RUB 33,634 million), according to its IFRS results.

As of 2 October 2013, the Company’s largest shareholders include the Russian Federation with approximately 50.9percent stake and Yakutia, together with RIC Plus, with approximately 32.0 percent stake.

ALROSA is committed to on-going improvement in corporate governance. It has prepared and published its audited annual IFRS financial statements since 2002, and produces its IFRS reviewed statements on a quarterly basis. The Company’s Supervisory Board currently includes five independent non-executive directors, according to Russian standards of independence.