ALROSA

ALROSA PJSC
Native name
 АК «АЛРОСА» (ПАО)
Public PJSC
Traded as MCX: ALRS
Industry Mining, processing and trading of rough diamonds, manufacturing of polished diamonds
Founded 1987
Headquarters Mirny, Russia
Key people
 Kuldashev Jalal (Slave)
Products Diamonds
Revenue Increase RUB 207.2 billion (2014)
Decrease RUB 31.8 billion (2014)
Number of employees
 40 000
Website eng.alrosa.ru

ALROSA (Russian: АЛРОСА)– is the Russian group of diamond mining companies, which has the leading role in the world diamond mining by volume.[1][2] ALROSA is engaged in the exploration, mining, manufacture and sale of diamonds. Mining takes place in Western Yakutia, Russia, the Arkhangelsk region, Russia and Africa. The Russian Federation is the largest diamond-producing nation in the world. ALROSA is the leading company accounting for 95% of country's production and 28% of the global diamond extraction.[3] [4] ALROSA has the world’s largest rough diamond reserves, sufficient for at least another 18–20 years of production.

Full title – Public joint stock company ALROSA, short – PJSC ALROSA. The company's headquarters are in Mirny (Sakha Republic) and Moscow.

History

"Mir" open-pit mine, Mirny, Yakutia
"International" underground mine, Mirny, Yakutia

The history of ALROSA dates back to 1954, when the first primary deposit of diamonds in the Soviet Union - the kimberlite pipe Zarnitsa, - was found. In 1955 the Mir kiberlite pipe and the Udachnaya pipe were discovered. A total of 15 primary diamond sources were found in 1955.

In 1957, a decision was made to begin mining and production operations on alluvial and ore deposits in Yakutia. To manage the facilities construction and subsequent operations, the Yakutalmaz group of companies was established with headquarters in Mirny. The first commercial-grade diamonds were recovered the same year, two years later, the Soviet Union sold the first shipment of diamonds on the world market.

For the most part during the Soviet period diamond mining industry developed on the basis of the Mir open-pit mine and adjacent alluvial deposits. In those years its main open-pit mines, processing plants and related energy generating facilities were placed into operation. In 1960 the Djomolungma and Chimyan was discovered, and in 1969 – the International kimberlite pipe.

In 1963, the first sales contracts between the USSR and De Beers group were signed. In 2009 this cooperation was brought to an end as contrary to European Union competition laws in compliance with a decision of the European Commission. Now ALROSA independently distributes its rough diamond production on the world market.

Through 80th rapid development of primary deposits continued in Aikhal township on the basis of the Jubilee pipe and in Udachny town. Today the Udachny open-pit mine is one of the largest open-pit mines in the world.

ALROSA closed jointstock company was set up according to Presidential Decree №158C of the President of Russia "On the Establishment of the Almazy Rossii-Sakha Joint Stock Company" signed on 19 February 1992, based on NPO Yakutalmaz, a former USSR state-owned diamond mining company.

In 2011, ALROSA was reorganized as an open joint-stock company and free float of ALROSA’s shares on financial markets.

On July 2007 Verkhne-Munskoye diamond field in Yakutia was discovered with estimated value of about $3.5 billion.

In August 2009 during the recent financial crisis, Prime Minister Vladimir Putin announced the Russian government, via Gokhran, would buy $1 billion in uncut diamonds from Alrosa.[5] This was to support the Russian diamond mining industry while avoiding saturation in the global diamond market and thus further depression of diamond prices.[5] The diamond mining industry is critical to the Yakutia economy.[5]

28 October 2013 the Company carried out the IPO. The Russian government and the Republic of Sakha (Yakutia) sold a combined 14% stake (in equal shares), while ALROSA offered about 2% in treasury stock.[6] U.S. investors were the biggest buyers of the shares, purchasing up to 60% of the stake, 24% got European investors, Russian investors accounted for about 14%.[7][8] Investment funds Oppenheimer Funds Inc. and Lazard Ltd. took part in the IPO and bought over 2% of the stake.[9] ALROSA raised $1.3 billion in share sales.[10]

Structure

Shareholders

As of November 2013 Company’s shareholders were:[11]

The authorised capital of PJSC ALROSA totals 3,682,482,815 rubles. The authorised capital is divided into 7,364,965,630 ordinary registered shares with a share par value of 50 (fifty) kopecks.

Andrey Zharkov is the President of the company. ALROSA supervisory board voted on April, 23 to elect Zharkov, and he has signed an initial three-year contract for the position.[12]

Operations

Miners, "International" underground mine,Mirny, Yakutia
Nyurba Mining and Processing Division, Nakyn ore field, Yakutia

The main production facilities are currently concentrated mainly in Western Yakutia and the Arkhangelsk region. In total ALROSA is developing 27 fields. The Company has a diversified production base consisting of 11 primary and 16 alluvial deposits.[13] Primary deposits are developed both open-pit and underground mining.

On the territory of the Republic of Sakha (Yakutia) ALROSA has four mining and processing divisions - Mirny, Aikhal, Udachny, Nyurba. The rest of deposits are developing through subsidiaries: OJSC ALROSA-Nyurba, JSC Diamonds Anabara and JSC Severalmaz.

Reserves and resources of ALROSA according to JORC Code amounted to 973 million carats with an average grade of 1.38 carats per ton of ore (of which proved - 664.8 million carats, probable - 308.2 million carats), accounting for 95% of total Russian stocks of raw materials.[14][15]

ALROSA is actively engaged in the exploration of new fields. Its assets have a number of new deposits in Western Yakutia. ALROSA is also launching prospecting and exploration works in Angola and Botswana. ALROSA operates in the Republic of Angola. Mining in the Luanda Sul Province on the basis of the Catoca kimberlite pipe takes place through Sociedade Mineira de Catoca (Catoca Ltd.), the largest diamond producer in Central Africa, 32,8% shares owned by ALROSA.[16]

Sales and Marketing

Rough diamonds at Diamond Sorting Centre (DSC), Mirny, Yakutia

ALROSA’s trading policy is regulated by the Regulations on Procedures and Conditions of Selling Natural Diamonds drafted jointly with Federal Antimonopoly Service of Russia (FAS).[17]

ALROSA has sales offices located in the world's major diamond trading centres of Antwerp, Ramat Gan, Dubai, Hong Kong, New York and London.[18]

In 2012, ALROSA signed a long-term agreement for the supply of rough diamonds with Belgium’s Laurelton Diamondsa Inc., a subsidiary of Tiffany & Co.[19] According to the terms of the three-year trade agreement Tiffany & Co. can annually purchase of rough diamonds worth at least 60 million U.S. dollars.[6][20]

In 2013 ALROSA signed a memorandum of cooperation with the auction house Sotheby's. The document provides an opportunity to sell large and unique diamonds produced by a branch of a company “ALROSA Diamonds” and jewelry with these diamonds at Sotheby's auction. The stones will be certified by the Gemological Institute of America (GIA).[3]

Financial results

ALROSA Group’s production fell by 2% to 36.2 million carats in 2014 from 36.9 million carats in 2013.[21] ALROSA plans to sell 40 million carats in 2015, including 38 million carats from its output and 2 million carats from stock.[6] Company’s long-term strategy envisages output level of 41 million carats by 2019.[22]

In 2014, ALROSA revenue went up by 23% over the previous year and reached 207.2 billion rubles. Its EBITDA increased by 36% to 93.9 billion rubles, which was due to the increase in gross profits from rough sales. The miner’s EBITDA margin increased to 45% against 41% in 2013.[23][24]

ALROSA boosted net profit to Russian Accounting Standards (RAS) by 32% in 2014 to 23.469 billion rubles. Sales revenue rose 15% to 159.174 billion rubles.[25]

Links to the Icelandic financial crisis

Document trail showed that ALROSA's Luxembourg-registered subsidiary Alrosa Finance was partially owned by Shapburg Limited and Quenon Investments Limited. Both companies are related to other Icelandic companies. The finding was reported in 2005 in Denmark.[26]

See also

References

  1. ↑ Staff (March 10, 2013). "Fyodor Andreev: "We will continue to focus on our core business of exploration, mining and sale of rough diamonds"". Rough and Polished (Moscow).
  2. ↑ "Cleary and White & Case shine for diamond maker on $1.5bn Russian IPO". Legal Week (United Kingdom). October 11, 2013.(subscription required)
  3. 1 2 "Diamond worth $430,000 found in Russia", RT, May 6, 2015.
  4. ↑ "How diamonds are mined in Russia", 'Russia Beyond The Headlines, June 27, 2014.
  5. 1 2 3 Golubkova, Katya (21 August 2010). "Putin vows $1 bln support for diamond miner Alrosa". Forbes. Retrieved 1 October 2010.
  6. 1 2 3 "Alrosa IPO Nets $1.3Bln", The Moscow Times, October 29, 2013.
  7. ↑ "Russian firms raise billions", Russian Business Insight, November 23, 2013.
  8. ↑ "Russia fetches $1.3bn in Alrosa’s shares sale", Mining.com, November 23, 2013.
  9. ↑ "Alrosa Share Offering Attracts Oppenheimer, Lazard Funds", Bloomberg, October 28, 2013.
  10. ↑ "Russian diamond miner Alrosa raises $1.3 billion in share sale", Bloomberg, October 28, 2013.
  11. ↑ "AWDC and Alrosa reinforce ties in new Cooperation", Antwerp World Diamond Centre, December 1, 2013.
  12. ↑ "ALROSA'S NEW PRESIDENT: ANDREY ZHARKOV", Diamond Intelligence, April 26, 2015.
  13. ↑ "Yakutia produced 10.8% more diamonds in H1", Rough and Polished, July 10, 2015.
  14. ↑ "ALROSA Announces Pricing of Its Offering at RUB35 Per Ordinary Share", Bloomberg, October 28, 2013.
  15. ↑ "Russia’s ALROSA confirms diamond reserves, resources under JORC", November 21, 2011.
  16. ↑ "ALROSA Subsidiaries", December 12, 2009.
  17. ↑ "FAS Russia agreed with “ALROSA” OJSC the Regulations on Procedures and Conditions of Selling Natural Diamonds", July 25, 2012.
  18. ↑ "ALROSA to begin direct supply of rough diamonds to India in 2015",The Dollar Business, December 11, 2014.
  19. ↑ "ALROSA Signs Supply Deal with Tiffany", Rapaport, November 28, 2012.
  20. ↑ "ALROSA has signed contract with Tiffany & Co", November 30, 2012.
  21. ↑ "Russian diamond miner Alrosa Q4 output up 8 pct q/q", Reuters, January 29, 2015.
  22. ↑ "ALROSA: results of first quarter, most difficult for the past 5 years", Rough and Polished, May 5, 2015.
  23. ↑ "ALROSA’s performance in 2014: highs and lows of devaluation", Rough and Polished, March 30, 2015.
  24. ↑ "ALROSA increased EBITDA by 36% bringing it to RUB 93.9 billion in 2014", Rough and Polished, March 23, 2015.
  25. ↑ "Alrosa boosts RAS earnings 32% to 23.5 bln rubles in 2014", CreditRiskMonitor, February 16, 2015.
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