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Moscow, 4-5 June 2019
ALROSAInvestor PresentationSberbank CIB “Russia: The Inside Track”One-on-One Conference
Disclaimer
For notes:The below applies to the presentation (the “Presentation”) following this important notice, and you are therefore advised to read this
important notice carefully before reading, accessing or making any other use of this Presentation.
This Presentation contains statements about future events and expectations that are forward-looking statements. Any statement
herein (including, without limitation, a statement regarding our financial position, strategy, management plans and future objectives)
that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and
other factors which may cause ALROSA’s actual results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by such forward-looking statements. Past performance should not be
taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future
performance. The information and opinions contained in this document are provided as at the date hereof (unless indicated
otherwise) and are subject to change without notice. ALROSA assumes no obligation to update, supplement or revise the forward-
looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.
This Presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an
offer to buy or acquire any securities in any jurisdiction or an inducement to enter into any investment activity. The contents hereof
should not be construed as investment, legal, tax, accounting or other advice, and investors and prospective investors in securities of
any issuer mentioned herein are required to make their own independent investigation and appraisal of the business and financial
condition of such issuer and the nature of the securities and consult their own advisers as to legal, financial, tax and other related
matters.
This Presentation has not been independently verified. No representation or warranty or undertaking, express or implied, is made as
to the accuracy, completeness or fairness of the information or opinions contained in this Presentation. None of ALROSA nor any of
its shareholders, directors, officers or employees, affiliates, advisors, representatives nor any other person accepts any liability
whatsoever for any loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection
therewith. No reliance may be placed for any purpose whatsoever on the information contained in this Presentation or on its
completeness, accuracy or fairness.
This Presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or
located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to
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Presentation and/or such information may come are required to inform themselves thereof and to observe such restrictions.
Some figures included in this Presentation have been subject to rounding adjustments.
By reviewing and/or attending this Presentation you acknowledge and agree to be bound by the foregoing.
Table of Content
01. About ALROSA – strategic priorities
02. Market fundamentals
03. Executing to strengthen our business
04. Q1 2019 results
05. Corporate governance
06. Appendix
p.4
p.11
p.22
p.38
p.47
ABOUT ALROSASTRATEGIC PRIORITIES
01
Angola
Australia
Botswana
Canada
Arkhangelsk Region
Republic of Sakha (Yakutia)
Namibia
South Africa
Russian Federation
501. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Leading Position on the Market… where about 70% of global rough diamond output is controlled by BIG-3: ALROSA, De Beers and Rio Tinto
The global diamond reserves base is highly concentrated
with the top 10 countries by reserves volume accounting
for over 95% of total reserves.
Core diamond mines of the BIG-3 market leaders
Countries with the largest diamond reserves
45%
35%
8%
7%5% Russia
Africa
Canada
Australia
Other
About 70% of global rough diamond output is
attributable to BIG-3
26% ALROSA
25% De Beers
13% Rio Tinto
5% Catoca1
3% Petra Diamonds28% Other
143
m ct
Sources: Company’s analysis, Kimberley Process statistics, De Beers and Rio Tinto company data, AWDC Bain report “The Global Diamond Industry 2018”.1. At the moment ALROSA owns 32.8% stake.
6
Sources: Source: Companies data, AWDC Bain report “The Global Diamond Industry 2018”.
ALROSA’s assets geography
High Quality Assets
1,064 m ct Total resources,
including reserves
628 m ct Total reservesAngola
ALROSA owns 41%3 of
Catoca Ltd (Angola)
Open-pit mining
from 8 mines in 2018
Underground mining
from 3 mines in 2018
Alluvial mining from
alluvial deposits in 2018
53%
23%
24%
Republic of Sakha
(Yakutia)
Arkhangelsk
RegionRussian Federation
90%
10%
53%
21%
42% 39%
ALROSA Peer 1 Peer 2 Peer 3
2014 2015 2016 2017 2018
• ALROSA develops world’s largest reserves with strong cost/quality
balance allowing to achieve the highest EBITDA margin in the
industry
• Strong diamond yields delivery of 0.91 ct/t in 2018
• Profitability of assets is one of the highest among peers on a sustainable
level
ALROSA sustainably tops the ranks
as one of the most profitable miners
EBITDA margin, %
1
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
54%30%
4%1%
11%
Focus on Responsible Mining
7
• Improving industrial safety with focus on prevention
• Structural reform promoting a culture of safety
• Diagnostic and treatment services aimed to promote disclosure and
reduce illnesses
RUB 6 bn1: Support to Local Communities
• Corporate pension fund
• Indigenous people traditions
• Culture & sports
RUB 5.2 bn1: Capex on Environmental Activities
• Reduce CO2 emissions
• Maintain high share – at least 86% - of clean (incl.
renewables) electricity and heat consumption
Charity expenses
Local infrastructure
Healthcare
Education
Other expenses
Health
& Safety
SocialEnvironment
People of
ALROSA
Source: Company data and analysis.1. Based on 2018 figures, excl. sponsorship and social infrastructure maintenance.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
0.22 0.5
1.6 1.9
6.3
8.7
DPA Power Metals &
Mining
Transportation Utilities /
Construction
Employee Safety is Our Top PriorityStrong Commitment to Promote a Culture of Safety and Reduce the Number of Accidents
8
Source: Company data and analysis.1. Based on S&P Global: “The Diamond Producers Association Final Results Workshop”.2. ALROSA’s LTIFR as of 2018, peers’ LTIFR as of 2016.
HSE committees at all
management levels
Tailored reporting system
to ensure prompt detection
and response to incidents
HSE supervision at each
stage of production chain
Revised HSE Policy
New approach to control
the flow of production
Regular HSE education
and training sessions
Lost Time Injury Frequency Rate per 200,000 hours
One of the lowest LTIFR compared to the diamond industry and other sectors1
Structural changes Procedures
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Superior TSR Compared to Global Peers
9
Source: Bloomberg.Note: Luxury Goods Producers index includes LVMH, Hermes, Richemont, Kering, Swatch, Prada, Tiffany, Tapestry, Burberry, Ralph Lauren, Capri, Moncler and Tod‘s; Diversified Miners, incl. other diamond producers, index includes Anglo American, Rio Tinto, BHP, Glencore, Vale, Gem Diamonds, Petra Diamonds, Lucara Diamond Corp., Firestone Diamonds, Mountain Province Diamonds and Stornoway Diamond Corp. All indices are weighted by market cap on a daily basis.
0%
50%
100%
150%
200%
Oct-13 Mar-14 Aug-14 Jan-15 Jul-15 Dec-15 May-16 Oct-16 Apr-17 Sep-17 Feb-18 Jul-18 Jan-19 Jun-19
Diversified miners, incl.
other diamond
producers
+65.9%
+7.3%
ALROSA
Luxury goods producers+54.4%
Cumulative total USD TSR since ALROSA IPO in October 2013, %
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Developing Efficient Organisation...
Journey Ahead
10
…to Maximise Free Cash
Flow and Shareholder
Returns
…and Taking Advantage of
Strong Market Fundamentals…
Focus on Core Business and
Efficiency
Prudent Capital Allocation
Conservative Financial Policy
Unique Product
Growing Demand
Declining Supply
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
MARKET FUNDAMENTALS
02
Market size 32% 31% 8% 15% 9% 5%
260
1,171
495190 71 50 41 41 23
Personal
luxury
Lux
cars
Hospitality Fine
wines
Fine food Fine art Designer
furniture
Jets &
yachts
Total
2018E
Key Demand Drivers
12
Luxury market valued at c. €1.2 bn is steadily
growing
Jewelry demand comprises 7% of global luxury
market, and 31% of the personal luxury (annual
growth 5%)
Most dynamic growth is concentrated in Asia incl.
Japan and China
Diamond jewelry consumption is correlated with
USA GDP and disposable income
Highlights
3% 5% 6%9%
20%
0%
Europe Americas Japan Rest of Asia China RoW
Global luxury market breakdown in 2018E
€ bn
Source: Bain’s luxury goods worldwide market study (November 2018)1. Trends at constant exchange rates.
Personal luxury market growth1 by region 2018E
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Strong Long Term Demand Outlook ...driven by disposable income growth and middle class expansion
13
CAGR 2016-2030F m people over 2016-2030F By region, CAGR range 2016-2030F
Source: Company data and analysis, Euromonitor, AWDC Bain report “The Global Diamond Industry 2018” (December 2018).
7%
6%
2%
1%
3%
Indi
Chin
US
Eur
RoW
3-7%
2-4%
1-4%
1-4%
1-4%52.1
3.5
2.4
24.6
13.7
Lower point refers to base case scenario;
upper point to optimistic scenario
Middle class growth Diamond jewellery demand growth forecastReal disposable income growth
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Constrained Supply Outlook Depletion of deposits will result in diamond production declines in the coming years
2018 to 2023 supply forecast – 4 m ct down
14
2019 to 2023 major project capacity changes2
Source: Company data and analysis, brokers’ reports.1. Other includes Zimbabwe and Namibia. 2. Not including ALROSA assets. 3. Stands for De Beers Consolidated Mines, includes Venetia and Voorspoed mines.
1,1
1,2
1,8
1,8
2,3
4,6
(0,9)
(2,9)
(3,5)
(14,0)
Ekati (Dominion Diamond)
Luaxe (Catoca)
Chidliak (De Beers)
Star Orion South (Star Diamond)
Debswana (De Beers)
Argyle (Rio Tinto)
Diavik (Rio Tinto)
Gahcho Kue (De Beers)
DBCM3 (De Beers)
Depletion Expansion
Victor (De Beers)
143 141 144 136 140 139
2018 2019E 2020E 2021E 2022E 2023E
Russia
Botswana
South Africa
Canada
Other1
Congo
AustraliaAngola
m ctm ct
12.8
(21.3)
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
174
150
139
120
130
140
150
160
170
180
2018 2019E 2020E 2021E 2022E 2023E
Favorable Supply/Demand Fundamentals… will drive the market into a deficit and support positive diamond price pressure
15
Global Supply / Demand balance outlook
m ct
~30
~100
Base case scenario Optimistic scenario
Accumulated diamond deficit in 2019-2023
20% % of annual
production’1870%
m ct
Source: Company data and analysis, AWDC Bain report “The Global Diamond Industry 2018” (December 2018).
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Diamonds are Different from Commodities Mature demand and supply discipline result in low price volatility
16
Mature and stable consumer-driven demand
concentrated in developed markets
Consolidated production, supporting
supply discipline
63%
40%
31%
27%
22%
20%
15%
11%
Diamonds
Iron Ore
Aluminium
Coking coal
Nickel
Copper
Silver
Gold
Low price volatility compared to
commodities
11%
33%
14%
36%
22%
18%
34%
16%
Low Price volatility 1 High
Developed markets
67%
Top-3 producers market share, 2018Diamond jewellery retail sales, $, 2017
USA
53%
EU
9%
Japan
5%
China
20%
India
6% RoW
7%
Source: Company data and analysis, AME Research, GFMS, Thomson Reuters, Wood Mackenzie, Bloomberg.1. Calculated as ratio of standard deviation of daily prices to 10 year average price.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Demystifying LGDs
17
Source: Company data and analysis, DPA, Trucost (S&P Global) report “The Socioeconomic and Environmental Impact of Large-Sacle Diamond Mining” (May 2019)
Case study: LGD positioning
by a major player
Fixed price
At ~20% of diamond price
for 1 ct stone
Linear pricing
¼ ct stone price is ¼ of 1 ct
stone price
Standard, commodity-like
colour, size and quality
No specifications other than
size and colour
No grading reports or
certification
Myth: Launch of LGD brand by a major natural
diamond producer endorses LGD as a valid
substitute to natural diamonds
Truth: Differentiated market positioning clearly
illustrates the differences between diamonds and
LGD and will serve as a baseline for LGD
perception by customers and industry players
Myth: LGD and diamonds are identical
Truth: LGD has the same physical and chemical
characteristics as diamonds, but they are not
identical, and they are easily detected using
widely available identification equipment
Myth: FTC ruling stated that LGDs and diamonds
are the same
Truth: For LGDs, FTC guides require businesses to
“disclose clearly and conspicuously that the
product is not a mined diamond”. In fact, in all key
markets LGDs have to be identified as manmade
Myth: LGDs is an eco-friendly and ethical
alternative to diamonds
Truth: Most LGDs are produced in China and India
with coal-generated electricity, the estimated CO2
emissions associated with production of 1 carat
LGD are 3.0x greater vs natural diamond. Over
99% of supplied natural diamonds are conflict free;
proceeds from sales support local communities
and employment
LGD myth #1:
LGD myth #2:LGD myth #4:
LGD myth #3:
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
1,0x
5,0x 6,0x
c. 10,0x
1970's 1980's 2000's 2010's
LGD: the Future is History Similar scenario has already realised on the market for lab grown sapphires
18
Indexed price per carat of natural
sapphire¹
Indexed to 1975 natural sapphire price
(in nominal terms)
Expert quotes
“Focus of lab-grown gemstones is cheaper low-end jewellery”
Head of Business Development,Gemstone trading company
“We need to convince people that lab-grown gemstones are not fake stones. We operate on market that is separate from natural gemstones”
President,Leading lab-grown gemstones company
“Rarity is a very important factor for consumers, but lab-grown gemstones completely miss it”
Head of Business Development,Leading gemstone mining company
“Lab-grown gemstones do not affect natural market. Easy to distinguish them as they are of perfect quality: too well cut, no inclusions”
President,Gemstone trading company
Source: Company data and analysis, Bain data and analysis, Preciousgemstones.com.1. Sapphire of the highest grade: clarity – LI, colour – 2.5/75 (blue), rough. 2. Price per 1 ct stones of comparable quality (fine-quality).
Gem quality lab grown sapphires first
appeared in 1970s and started commercial
production in 1990s
Market share of lab grown sapphires
stabilised in 2000’s at 15% production share
End-users clearly marked the difference
which is reflected in price-tag for 1 carat
Synthetic production development does not
adversely affect the market for natural stones Natural Lab grown
~$1,500
~$180
Price per carat discount
(2017)2
$/ct
~80-90%
Lab grown stones
production share (2017)
Natural
85%
Lab
grown
15%
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Synthetic Stones: Key Marketing Messages
19
Key marketing messages of lab-grown coloured gemstones
(incl. sapphires) producers in 1960-2000s
Source: Company data and analysis.Note: Coloured gem stones messages are based on vintage ads of Chatham Created Gems and Diamonds; Lab-grown messages are based on the message mentions on the websites of Diamond foundry, Chatham Created Gems and Diamonds, Lightbox, NDT, Scio Diamonds and IIA Technologies.
Key marketing messages of LGD producers today
Key marketing messages of lab grown sapphires producers are similar to the ones used now by LGD producers
Key messages are similar, though now lab-grown diamond producers additionally explore
“environmentally-” and “socially-friendly” trend
High quality
Affordable
IdenticalReal
Value Created in AmericaAvailable
Above-groundOwn design
IdenticalAffordable
Guaranteed origin
Created in America
Best of millenials Conflict-free
Eco-friendly
Value
Flexible
Pure
Good investment
Own design
Innovative
Unique
RealDynamic
Rare High quality
Unique InnovativeEthical
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Price per
carat ($)
Diamonds and Their Synthetic Substitutes Have Different Price Drivers and Value to Consumers
20
LGD is not the first synthetic alternative to diamonds
Industrial product
Can be produced
in any volume
Highly fragmented
supply, low entry barriers
Product of nature
Rare, unique and
inherently valuable
Highly consolidated
supply, high entry barriers
Price drivers:
Cost
Price drivers:
Rarity
Symbolism
Supply discipline
Natural diamonds
VS
LGD
Moissanite
White Zircon Cubic Zirconia
LGD
Price per
carat ($)$400
$75-100 $20-40
$800
Source: Company data and analysis.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
(16)% (18)%
(42)%
~(60)%
(81)%
LGD price discount to natural Lightbox discount to natural
2016 2017 Now2018
Expanding LGD Discount Illustrates DifferentMarket Perception of LGD vs. Diamonds
21
LGD discount to natural diamonds
Price of 1 carat polished diamond: Round, VS clarity, F-H colour
5x
Source: Company data and analysis, Paul Zimnisky report “2018: The Year of the Lab-created Diamond”.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
EXECUTING TO STRENGTHEN
OUR BUSINESS
03
52%
20%
32%
37%
43%
ALROSA: the Story of the Industry Leader in 4 ChartsThe largest and most profitable player in the industry
23
Reserves1 Production ‘18 EBITDA ‘18 EBITDA margin ‘18%m ct m ct $ bn
37
35
8
4
18
2.52
1,2
0,2
0,2
0,3
Source: Company data and analysis, Diamond producers’ data.Note: Diamond producers include De Beers, Rio Tinto, Dominion Diamonds, Petra Diamonds. 1. Reserves are as per latest available data. 2. ALROSA’s financial metrics are converted at 2018 average USDRUB rate of 62.54.
628
212
105
43
40
ALROSA
Peer 1
Peer 2
Peer 3
Peer 4
436Inferred
resources
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Key Challenges for the Industry
… and how we address them from a value creation perspective
24
• Increasing our marketing efforts to promote
the unique appeal of our product
• Operational efficiency program and culture
• Focus on core business
• Prudent investment program
• Focus on shareholder returns
• Investment in exploration and production development to
maintain reserves base and production
Lack of new deposits, limited
exploration success1
Grade deterioration, cost inflation2Ever increasing competition from
other luxury goods3Rising scrutiny over capital
allocation discipline4
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
500
750
1 000
1 250
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Superior Exploration Capabilities
Unique full-cycle exploration operations…
25
Field geological exploration
Technological center
(incl. drilling) Scientific research
and analytics
… Backed up by advanced technologies
Complex AerogeophysicalFootage-5
Georadar footage
Radio WaveGeointroscopy
High resolution seismic survey in 3D / 2D
Track record of resource replacement2
Source: Company data and analysis.1. For the period from 2009 to 2018. 2. Based on resources in accordance with the Russian classification.
• Discovered resources: 395 m ct
• Average finding costs of $3.1 per ct1
+395 m ct
With exploration works
m ct
… result in solid track record of resource replenishment at low finding costs
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
2,5 3,7 4,6 5,6 5,5 5,53,4 2,9 2,8
2,8 2,6 3,3
9,0 6,5 5,4 5,2 4,8 4,5
6,2
4,9 6,0 3,7 3,8 3,6
1,54,1 3,7
4,1 3,8 4,1
3,6 3,9 4,24,8 5,1 5,0
0,2 1,8 2,0 1,9 1,8 1,8
5,45,1 5,1 5,0 5,0 5,0
4,85,1 4,9 4,7 5,0 4,8
2018 2019E 2020E 2021E 2022E 2023E 2024-30E
Stable Production Outlook
26
Production outlook m ct
Source: Company data and analysis.
• Development of new projects/debottlenecking:
- V. Munskoye deposit: +c.2.0 m ct – full ramp-up by ‘20
- Udachny underground mine: +c.3.0 m ct – full ramp-
up by ‘21
- Severalmaz: +c.1.4 m ct (debottlenecking) from ‘21-22
- Nyurba division: +c.2 m ct (debottlenecking) in ‘19-20
• Decline in diamond output:
- Jubilee: -1.5 m ct from ’19 (due to production at
kimberlites with a lower grade)
- International underground mine: decrease in ’18-’22
due to mining and geological conditions
Key drivers
…supported by development of new projects and debottlenecking
36.738.0 38.7 37.7 37.4 37.6 37-38
Average Grade,
carats per tonne
Almazy Anabara
Verkhne-Munskoye
Severalmaz
Nyurbinskaya
Jubilee
International
Udachny
Other
0.9 0.9 0.9 0.9 0.9 0.9 0.9
Botuobinskaya
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
27
Focus on Value Accretive Capex
Capex dynamics Key projects
Mining capacity
Total 2019-24 Capex – RUB 40 bn
Completion of Udachny underground mine construction
Completion of Verkhne-Munskoye diamond deposit development
Construction of Maiskaya pipe
Construction of Zaria pipe
Equipment maintenance
Total 2019-24 Capex – RUB 55 bn
Infrastructure
Total 2019-24 Capex – RUB 40 bn
Reconstruction of Mirny Airport: total Capex – ~RUB 10 bn to be invested in 2018-22
Gasification of production facilities in Udachny: total Capex – RUB 4.6 bn to be invested in
2019-23
Organization of production site for the needs of USO: total Capex – RUB 5.3 bn to be
invested in 2019-20
Construction of gas processing facility by “ALROSA-Gaz” (JSC): total Capex – RUB 2.7 bn to
be invested in 2018-21
Capex:
Investment program with target IRR1 of 20%+
RUB bn
9 8 8 9 810 10 9 10
17
1417
1111 6
52
5
6
5
2
98 11
5
4
3
32
27 28 2926
28
20
15
18
2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E
Infrastructure
Mining
capacity
Equipment
maintenance
Source: Company data and analysis.1. For investments in new mining capacity and operational efficiency projects.
Capital-intensive phase is over
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
143
187
105
53
42
8
2017 2018 2019E
Focus on Efficiency Dedicated operating efficiency program launched in 2017
28
Scaling up initiatives
Number of Initiatives
Delivering tangible results
General and administrative expenses, RUB bn
Source: Company data and analysis.1. Include payroll and other employee payments, fuel and energy, materials, external services and transportation, other production costs.
2. Labour costs, services and transportation are adjusted based on CPI. Material costs, fuel and energy are adjusted based on respective price indexes.
3. Calculated based on CPI, excl. impairment of receivables.
Key initiatives
Optimisation of ore beneficiation and
separation processes
Restructuring of construction and
geological exploration units
Implementation of centralised
management and usage-based
approach for transportation
Labour productivity increase
G&A optimisation
Other
Operating improvements
G&A
Energy efficiency
208
Nominal Unit Costs 1, k RUB/m3
1.121.151.16
Real terms2
YoY change, %(8%) (5%) (2%)
2016 2017 2018 LT Target
(Real)
Real terms3
YoY change, %(10%) (2%)
11.6 11.712.4
2016 2017 2018
As % of
revenue4% 4% 4%
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Case Study: Operational Turnaround Program at NyurbaNyurba’s success can be replicated and scaled up across other divisions
Key streams and initiatives
Improving mine fleet dispatching
processes by SIC1 procedures
implementation
Optimizing OEE2 by reducing
non-value added operations
Optimizing maintenance and repairs
operations will lead to improved
equipment availability and
… improved plant availability
Increasing hourly throughput by
optimizing ore blending processes
29
Run of mine Diamond production growth
1719
Overall equipment efficiency
+10%
51%63%
+12 p.p.
Processing
2018 2019E
2.1 2.4
+14%
m ct
Source: Company data and analysis.1. Short interval control. 2. OEE – overall equipment efficiency.
+26%
7,7
9,19,7
2018 2019E 2020E
m m3
%
mt
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Case study: Automotive Transport OptimizationCentralization and usage-based approach provide long-term cost cutting effect
30
Key streams and initiatives
Number of vehicles went down
following implementation of new
processes and tools: usage-based
approach to vehicles request and
utilization, route optimization and
reduction of fleet renewal
program
Revision of organizational
structure and headcount
optimization
Shift to natural gas from gasoline
and diesel leads to decreased fuel
cost decline and reduced
emissions
Cumulative effect in cost cutting
3 923
3 280
RUB mn, expenses related to transportation
Cost saving:
RUB 643mn
2018 2019E
Units
1 240791
(36%)
m tn
FTE
%
3859
+55%
1 715 1 389
(19%)
2018 2019E
8,093 5,7691,376
684
9,4696,453
(32%)
Gasoline
Diesel
Number of vehicles
Vehicles utilization factor
Headcount
Fuel
(16%)
Source: Company data and analysis.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
78
64
2017
2018
(14)
8,8
7,1
(1.7)
902
804
(98)
Case Study: Working Capital ManagementReduction in rough diamond WIP inventory days
Optimization levers
31
Reduction of diamonds WIP1 cycle
Production Chain of Rough Diamonds
Final sorting
and box
assembly
Preliminary
sorting
Final
RecoveryMine
WIP Cycle
Inventory
7
6
7
14 34
initiatives
Decrease in average
WIP Cycle
Number of days $ mnm ct
… leading to lower rough diamond
WIP inventory by Volume
… and by Value2
Key enablers
Team and capability development
Productivity monitoring and benchmarking
New productivity based motivation system
IT systems upgrade
Downtime reduction
Workflow optimisation
New analytics and modelling
Process automation
Source: Company data and analysis.1. Rough diamonds before sorting is completed. Does not include +10.8 ct and industrial grade diamonds.2. Based on prices of diamonds set by reference to price lists approved by the Ministry of Finance of the Russian Federation.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
32
1.8
2.1
2.4
2014 2018 Target
2024E
Employee Training and Development System
Source: Company data and analysis.
k m3 of run-of-mine ore per employee
Key initiatives and programmes Labour productivity growth
… to further improve long term competitiveness and productivity
+17%
+12%
Revision and simplification of remuneration system
to increase transparency and link it to performance
Launch of share-based incentive program to retain
top management and align their interests with
shareholders
Implementation of a multi-stage competency
assessment system for the selection and
professional development of the talent pool
members
Development of in-house corporate educational
system covering various grades and business
divisions
Implementation of internal coaching and mentoring
programmes
Development
of talent pool
Improvement
of remuneration
system
Establishment
of Corporate
University
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
33
Source: Company data.
Marketing Strategic Initiatives and Ongoing Digitalization
Industry initiative
• Participation in pilot projects involving M2M
and Tracr tracing platforms
• Implementation of digital twin technology
providing detailed information about each
stone
• Development of digital platform for online
sales
Ongoing digitalization in ALROSA
Generic
(category)
marketing
• Participation in DPA to promote the integrity
and reputation of natural diamonds
• Differentiation of natural diamonds and
LGDs markets driven by rarity, uniqueness
and inherent value of natural diamonds
Promotion of
different
assortment
categories
• Active promotion of fluorescent diamonds to
stimulate demand in B2C segment
• Marketing initiatives to improve broader
sentiment towards fluorescent diamonds
Marketing of
diamond
collections
• Promotion of large, exceptional quality
diamonds
• Promotion of fancy coloured diamonds
Introduction
of digital
marketing
Adoption of
best practices
in operational
digitalization
Digital
Mine
Virtual
Reality
Unmanned
Technologies
Drill-and-blast
Automation
Big Data Driven
Predictive Maintenance
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Company initiatives
34
Source: Company data.
Diamond Producers Association
Key initiatives DPA marketing campaigns by regions
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
6%
20%
21%
53%
N. America (USA from 2016)
India (from 2017)
Asia Pacific ex. Japan (China from 2018)
RoW
% represents share of a region in global jewelry consumption
Marketing budget of the industry association growth
$ m
10
60 6070
2016 2017 2018 2019E
Diamond Producers Association (DPA) formed by 7 major diamond
producers in 2015 supports the development of the diamond sector
through promotion of reputation of diamonds
Marketing campaigns with a tagline “Real is Rare. Real is a Diamond”
launched in the US (2016) and in India (2017)
DPA’s activities include:
paid advertisement on TV, internet, cinema, social networks
promotion in social media by social influencers
participation in industry events
work with industry and non-industry organizations
market surveys and research
In 2018 DPA’s activities expanded into China (while continued in the US
and India)
New marketing campaign addressed to women who purchase
diamonds for themselves is called “From Me, To Me”, launched in mid-
September 2018
35
Capital Allocation – Key Principles and Policy Overview
Operating
Efficiency
Organic Growth
Focus on Core
Business
Conservative
Financial Policy
Strong Liquidity Position
Commitment to
Balanced Debt Profile
Maximising Shareholder Returns
Prudent Capital
Allocation
Investment Program
with 20%+ IRR1
FCF-linked
Dividend Policy
Divestiture of
Non-core Assets
1. For investments in new mining capacity and operational efficiency projects.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Baa2
(Stable)
BBB-
(Stable)
BBB-
(Stable)
36
Source: Company data and analysis.
2,623
1,048
3,671
31-Mar-2019
• Maintain conservative debt profile in line with investment grade
criteria
• Target Net Debt / EBITDA range: 0.5-1.0х
• Liquidity reserves of >RUB 35 bn (committed credit lines and cash)
• Natural FX hedge – financial liabilities are matched with income streams
• Solid public debt track record with fixed-income investors
$ m
$ m $ m
Investment grade credit rating Net Debt evolution to investment grade credit ratings
Conservative long-term financial targets Liquidity position Debt repayment schedule
3,9513,119 2,781
1,374 1,494971
522
1.9x 1.9x 1.7x
0.5x 0.7x0.4x 0.2x
2013 2014 2015 2016 2017 2018 Q1'19
Net Debt Net Debt / Adjusted EBITDA (RUB denominated)
Cash and
cash equivalents
(incl. deposits)
Uncommitted
Credit Lines
Strong Balance Sheet… with leverage at historic-lows
647896
10 11 6
2019E 2020E 2021E 2022E 2023E
Eurobonds Bank Loans
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
311190 244
1,110
1,281
0.04
0.030.03
0.15
0.17
0,00
0,02
0,04
0,06
0,08
0,10
0,12
0,14
0,16
0,18
0
200
400
600
800
1 000
1 200
1 400
2014 2015 2016 2017 2018
37
Dividend Policy Focused on Maximisation of Shareholder Returns
Historical dividend payments 1 Dividend policy overview
Dividend
Base
Net debt /
EBITDA < 0.0x
0.0x < Net Debt /
EBITDA < 1.0x
1.0x < Net Debt /
EBITDA < 1.5xConditions
Payout Ratio
Subject to minimum dividend payout of 50% of IFRS net income
100+% 70–100% 50–70%
Frequency Semi-annual
FCF
$ mn
$ per share
Source: Company data and analysis.1. Based on FX rate as of the dividend record date. Dividends paid , based on FY2018 IFES numbers
H1’18
12M’17
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Q1 2019RESULTS
04
1,556
1,034 933 802 969
26
2316
2218
1,582
1,057949
824988
Q1'18 Q2'18 Q3'18 Q4'18 Q1'18
Industrial quality diamonds Gem-quality diamonds
Sales
39
Q1 2019 Sales
Diamond sales increased by 1.6 m carats (18% q-
o-q) to 10.6 m carats due to increased small-size
diamond sales driven by seasonal restocking by
dealers and retailers
Sales were up 20% q-o-q to USD 988 m (down
37% y-o-y) due to a larger share in small-size
diamonds
12M 2018 Sales
Diamond sales were 38.1 m carats (down 8% y-o-
y), while
… diamond sales in value terms rose by 6% to
USD 4.4 bn on the back of stronger prices and
improved mix of gem-quality diamonds
Highlights Diamond sales in carats
$ m
Source: Company data and analysis.
Diamond sales in U.S. dollars
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
m ct
10.16.3 4.7 5.3
7.9
3.2
2.72.0
3.72.7
13.4
9.0
6.79.0
10.6
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19
Industrial quality diamonds Gem-quality diamonds
Increase in diamond sales
30.1 26.4
11.111.7
41.238.1
12M'17 12M'18
4,085 4,325
8587
4,170 4,412
12M'17 12M'18
5.710.1
17.2
7.5 7.8
1.30 0.84 0.611.38 1.23
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19
Grade, cpt
Output
40
Q1 2019
Production was down 24% q-o-q to 7.8 m ct
mostly due to a decrease in output at the
International and Aikhal UG mines and the Jubilee
pipe
Av. grade went down by 11% q-o-q to 1.23 cpt
12M 2018
The volume of processed ore and gravels grew by
3% to 40.5 m t mainly due to increased gravel
processing at Almazy Anabara alluvial deposits (up
8%) and Mirny Division (up 10%)
Production declined by 7% to 36.7 m ct due to the
shutdown of the Mir UG mine and the completion
of open-pit mining at the Udachnaya pipe
Av. diamond grade was 0.91 cpt
Highlights Ore and sands processing
m ct
Source: Company data and analysis.
Diamond production
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
m t
5.3 4.1 3.86.5 6.1
2.02.1
1.0
3.31.50.2 2.3 5.8
0.5
0.27.4
8.5
10.5 10.3
7.8
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19
Open pit Underground Alluvials
39.1 40.5
1.01 0.91
12М'17 12М'18
21.1 19.7
10.68.4
8.08.7
39.636.7
12М'17 12М'18
Q1 2019: increase in diamond production
1,260
1,514
2017 2018
718
342242 215
395
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19
41
Q1 2019:
Revenue came in at $1.1 bn (up 17% qoq) due to
increase of diamond sales in carats. 36% yoy
decrease was driven by reduction of diamond sales
in carats and a weaker sales mix
EBITDA was up 18% qoq to $0.5 bn on increased
diamond sales and cost control. 43% yoy decrease
was driven by revenue decline
EBITDA margin stood at 44% (down 6 p.p. yoy)
Net income stood at $0.4 bn (up 3.0x qoq, down
37% yoy)
FCF increased by 84% qoq to $0.4 bn (down 53%
yoy)
Net debt / EBITDA stood at 0.2x
Highlights Superior profitability
$ m
Source: Company data and analysis.
Strong Free Cash Flow generation
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
$ bn
Resilient financial performance with strong margins and positive free cash flow
Key Financials
1.71.2 1.1 0.9 1.1
0.80.7 0.6
0.4 0.5
50%57% 57%
44% 44%
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19
Revenue EBITDA EBITDA margin
4.7 4.82.2
2.5
46%52%
2017 2018
6%22%
(23%) (19%)
154 164 199
153 123
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19
Price Dynamics
42
In Q1 ‘19 average price index decreased by 3.1%
mainly due to oversupply in the diamond market,
weaker Indian rupee and limited access to
affordable financing for mid-stream in India
Q1 ’19 average selling prices of gem-quality
diamonds decreased by 19% qoq (down 20% yoy)
to $123/ct due to a larger share of small-size
diamonds and lower prices mostly for medium-size
diamonds
In 2018 average price index gained 2.9% (following
a 3.4% gain in 2017)
Due to better sales mix, 12M ’18 average selling
prices1 grew by 21% and reached $164/ct
Highlights Price index for gem-quality diamonds
$/ct
Source: Company data and analysis.1. Average selling prices (sales revenue divided by sales volumes in carat terms) are also impacted by changes in the product mix throughout the reported period.2. Average index change of like-for-like diamonds prices (excl. +10.8 carats)
Average selling price1 for gem-quality diamonds
(2%) (1%) (12%) (9%)
21%
175 172 170 149 136
164
2013 2014 2015 2016 2017 2018
Price change
3%
(5%) (8%)
3% 3%
1.00 1.03 0.970.90 0.93 0.95
2013 2014 2015 2016 2017 2018
Average index change2
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
2% 2%
(2%) (3%)
1.00 1.02 1.04 1.02 0.99
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19
Average price index
53 64
26(13) (2) (0.5)
Q4'18
Revenue
Volume Sales
mix
Pricing
like-for-like
FX Q1'19
Revenue
Sales Update
43
Q1‘19 gem-quality diamond sales were up by 20%
qoq to RUB 64 bn driven by:
(+) 18% increase in sales volumes (in carats)
(-) weaker product mix
(-) softer LFL prices (av. index change – -3%)
(-) FX rate impact on stronger RUB
2018 revenue grew by 8% driven by stronger gem-
quality diamond sales
Highlights Q1 2019 gem-quality rough diamond revenue bridge
RUB bn
RUB bn
Source: Company data and analysis.1. Prices of diamonds are set by reference to price lists approved by the Ministry of Finance of the Russian Federation.
2017-2018 gem-quality rough diamond revenue bridge
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
238267
(30)
40
4 14
2017
Revenue
Volume Sales
mix
Pricing
like-for-like
FX 2018
Revenue
Profitability Analysis
44
Q1‘19 EBITDA was up by 16% qoq driven by:
(+) 18% increase in cts sales: impact RUB 26 bn
(-) sales mix: impact RUB 13 bn
(-) like-for-like prices: impact RUB 2 bn
(-) FX rate impact RUB 0.4 bn
(-) other factors: total impact RUB 6 bn
Q1 ‘19 EBITDA was down by 34% yoy driven by:
(-) 21% reduction in cts sales: impact RUB 21 bn
(-) sales mix: impact RUB 10 bn
(-) like-for-like prices: impact RUB 4 bn
(+) FX rate impact RUB 8 bn
(+) other factors: total impact RUB 10 bn
Source: Company data and analysis.
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
27 31
26(13)
(2) (0.4)(6)
Q4'18
EBITDA
Sales
volume
Sales
mix
Pricing
like-for-like
FX Other Q1'19
EBITDA
RUB bn
Q1 2019 EBITDA – key drivers (yoy)
Q1 2019 EBITDA – key drivers (qoq)
RUB bn
Highlights
4831
8
10(21)
(10) (4)
Q1'18
EBITDA
Sales
volume
Sales
mix
Pricing
like-for-like
FX Other Q1'19
EBITDA
Free Cash Flow and Total Debt Analysis
45
Q1 2019 EBITDA to Free Cash Flow bridge
RUB bn
Source: Company data and analysis.1. Mainly includes changes in FX, finance income/expense, income from grands, insurance reimbursement etc.
Q1 2019 Total debt bridge
RUB bn
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
0.4x
33.8
67.5
67.8
(6.2)
(1.6)
28.6
(25.9)
39.2
101.6
106.7
Total debt
Q1'19
Other
Sale
of assets
Liquidity
changes
FCF
Total Debt
4Q'18
Net debt Cash and cash equivalents (incl. deposits)
ND / EBITDA
0.2x
1
31.4
3.6
(5.1)
(0.2)
29.7
(3.9)
25.9
EBITDA
Changes
in NWC
Income tax
Other
Operating
cash flow
Capex
Free cash flow
Outlook
46
Market outlook ALROSA operating performance
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Underlying demand for diamond jewellery demonstrates
positive dynamics while escalation of trade tensions could
weigh negatively on the growth rates
Overall diamond stocks are expected to remain flat at mid-
stream, as Indian mid-streamers continue to face difficulties
with access to affordable financing
Global diamonds supply continues to decrease
Production outlook for 2019 remains unchanged at 38 m ct
(+1.3 m ct yoy) on continued ramp-up of Verkhne-
Munskoye and Severalmaz
Grades are expected to stabilize at 0.9 ct/t
Production mix and sales mix are expected to normalize
following sale of higher grade stocks in the first half of 2018
CORPORATE GOVERNANCE
05
4801. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Source: Company data.
Increased share of INEDs in the Board of Directors
Number of Members
2
4
13
11
2014
Now
Independent Nominees of RF and Yakutia
6 – Russian Federation
4 – Republic of Yakutia
1 – Local Communities of Yakutia
INEDs represent 100% in Audit and 75% in RemCo committees
Number of Members
Strategy with
3 INEDs
out of 13
RemCo
Committee –
3 INEDs out of 4
Audit – 3 INEDs out of 3
Chaired by INEDs
Corporate Governance and Shareholder Support
• Regular and transparent disclosure and commitment to best in class
corporate governance practices
• New initiatives are under way:
‒ Corporate Strategy till 2024
‒ HR Strategy with the overhaul of the organization structure and
motivation schemes (stock option program is one of the initiatives)
‒ Introduction of a long-term incentive plan linked to total shareholder
return (TSR) targets to align management and shareholder interests
and provide incentives for sustainable long-term development
‒ Approval of new HSE policy, aimed to promote a culture of safety
Commitment to improving standards of corporate governance
1
Current Board has Supported Initiatives to Improve Alignment of Shareholder Interests
49
HSE strategy
Approval of new HSE policy, aimed to promote a
culture of safety.
New management team
New senior management team with tenured
professionals committed to increase shareholders
return and modernise ALROSA’s corporate
structure and operations.
New clear financial and dividend policy
Financial policy to ensure an appropriate balance
between capital structure and liquidity at hand.
New clearly articulated semi-annual dividend
policy based on FCF and target leverage.
Transparency and disclosure
Commitment to regular and transparent disclosure
of operational and financial results and publishing
of social and environmental report.
Long-term incentive plan
Introduction of a long-term incentive plan linked to
a set of financial, operational and total shareholder
return (TSR) targets to align management and
shareholder interests
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
Board Agenda for 2019-2020
50
Highlight long-term strategic issues in marketing
Active engagement with all stakeholders
Emphasis on developing risk management culture within the company
Reform of HR and pay structure
Focus on continuous business transformation to ensure long-term
competitiveness and sustainable production1
2
3
4
5
01. Strategic priorities 05. Corporate governance04. Q1 2019 results03. Executing to strengthen
our business02. Market fundamentals
APPENDIX
06
52
Key Investment Projects
Udachny
UG mine
VM1
deposit
Zaria
pipe
Maiskaya
pipe
VG2
deposit
Type of mining Underground Open-pit Open-pit Open-pit Alluvials
Production start 2014 2018 2020 2025 2022
Ramp-up 2021 2020 2021 2027 2022
Target ore output pa, m t 4.0 3.0 1.2 0.3 1.1
Target production pa, m ct 5.6 1.8 0.4 1.2 0.4
Total CAPEX, RUB bn 63.9 25.0 8.4 5.6 2.3
Invested share 85% 69% 77% 1% 0%
Resource base3, m ct 207.6 40.4 7.1 12.7 4.7
Source: Company data1. Verkhne-Munskoye deposit2. Vodorazdelnye Galechniki deposit3. Diamond mineral resources in accordance with the JORC Code as at 1 July 2018
Yakutsk
Mirny
Udachny
Aikhal
1 2 3 4 5
1
2
3
4
Nyurba5
Yakutia
53
Projects Under Consideration
Jubilee UG mine Mir UG mine
Type of mining Underground Underground
Ramp-up (preliminarily) 2032 2031-32
Target ore output pa, m t 1.8 1.3
Target production pa, m ct 2.3 3.8
Total CAPEX, RUB bn ~72 ~73
Invested, % 0% 0%
Reserve base1, m ct ~43.2 ~68.6
Project IRR Up to 20% 18.3%
Source: Company data1. Subject to further exploration
Yakutsk
Mirny
Aikhal
1 2
1
2
Decision on the mines construction will be taken after the feasibility studies will be completed, all numbers are indicative and based on preliminary estimate
Yakutia
54
1. Long-term agreements which provide stable sales and predictable prices
during volatility on diamond market (strategy generates ~70% of
ALROSA's rough diamond sales)
2. Largest jewellery chain stores:
3. Competitive sales via auction and tenders
4. Spot sales pursuant to one-off contract arrangers
5. Sales through Russian government entities – Almaziuvelirexport and
Gokhran of Russia
ALROSA’s geography of sales1 based on clients legal residences
number of long-term clients as of January 2019
47%
15%
10%
12%
10%
4% 2%Belgium
India
Israel
Russia
UAE
China
Other4
7
1
9
18
4
24
ALROSA’s rough diamond sales channel breakdown
18%
64% 71% ~70%
72%
17%12% 10-20%
10%19% 17% 10-20%
2006-2008 2012-2014 2015-2016 Long-term
Tenders
Spot sales
Long-term contracts
Sales Structure and ChannelsMultichannel distribution with growing focus on long-term contracts
Overview of sales channels
Source: Company data and analysis
88% of ALROSA’s diamond sales
accounted for exports1
98% / 70% of ALROSA’s diamond sales / volume
generated by sales of
gem-quality rough
7.3 7.5 7.37.0 7.56.7
2016 2017 2018E
Production Sales
55
Expansion to AfricaPromising region with high exploration potential
Production and sales, m ct
255 300
350+
2016 2017 2018E
Axis
Tit
le
Improved financial performance at Catoca Development of Luele pipe
Luale kimberlite pipe is the largest diamond discovery over the past 60
years
The project is operated by Luaxe consortium
Exploration activities
Kimang JV (Angola):
‒ 50/50% JV between ALROSA and Endiama
‒ Exploration activities in Quango area, the North of Central Angola
‒ Awaiting exploration license approval for Chisombo area
Zimbabwe:
‒ Strategic partnership with the government of Zimbabwe
‒ Selection of potential targets for exploration study
The pipe development plan to be approved by the end of 2019
Resource base: 350 m ct
Expected average grade: 0.95 ct/t
EBITDA, $ mn
Catoca in numbers:
‒ Total reserves ~ 120 m ct // 2 processing plants with 13 m t pa // 0.61 ct/t
Recent corporate governance improvements:
‒ Supervisory & Fiscal committees authorized to review and approve contracts
‒ Appointment of executive directors to be approved by Supervisory committee
‒ Rotation between ALROSA and Endiama in appointing CEO and CFO
Change in sales practices:
‒ New approach to sale channels diversification following reform in Angola’s
diamond industry has already resulted in double-digit growth of diamond prices
$84/ct $89/ct $110/ct
Source: Company data and analysis.
56
Focus on Core Business with “Back to Basics” Approach
5,341652
271
463
17
30,300
3,200
2013 2014 2015 2016 2017 2018 Q1'19
47
3934 32 31 29 27
2013 2014 2015 2016 2017 2018 Q1'19
Program to divest non-core assets started in 2013 includes assets
in real estate, energy (gas) farming, insurance, etc.
The program is planned to be completed by 2020
Number of non-core entities was down by 40% from 2013
Q1 2019 proceeds from divestments were RUB 3.2 bn:
disposal of non-core assets for RUB 1.6 bn (the most significant
transaction – sale of 100% stake in JSC Golubaya Volna Resort
for RUB 1.2 bn
disposal of property by LLC Innovation Centre Bourevestnik for
RUB 1.6 bn
Total proceeds from divestments were RUB 37 bn in 2013-2018:
80% of total proceeds came from the sale of gas assets in
Q1 2018 to NOVATEK
Another significant divestment was sale by ALROSA of 51%
stake in Timir, iron ore producer, to EVRAZ in 2013 for total
consideration of RUB 4.95 bn
RUB m
Proceeds from sale of non-core assets
Number of ALROSA’s subsidiaries
1
Source: Company data1. Excluding ALROSA Finance BV, ALROSA Finance SA, Wargan Holdings Limited (finance entities) and ALROSA Overseas SA (holding company)
86%
14%
Creating a clearer and sustainable environment
57
Source: Company data and analysis.
1. Include PJSC ALROSA’s diamond production assets and the Heat and power supply company, which was removed from PJSC “ALROSA” structure starting from 01.01.2017 and became its subsidiary PTWS LLC.
Over the past two years, ALROSA has reduced CO2
emissions by c.20%
Already impressive share of clean electricity and heat
consumption of 86%
Efficient disclosure is acknowledged by ESG ratings:
‒ 3rd place (out of 33) in the “First rating of environmental
performance of mining companies in Russia”
‒ Rated among top-10 Russian companies with
transparent corporate reporting according to
Transparency International-Russia research
Share of clean electricity and heat consumption Other
1 067 1 064
858
2016 2017 2018
2018
Latest developments Reduction of CO2 emissions1
ths tonnes
Share of clean (incl. renewable) electricity and heat consumption
58
Profit Curve of Existing Diamond Mines
Tier-2 performing mines (2nd quartile, 25-50%)
Tier-4 performing mines (4th quartile, 75-100%)
(Price per ct - Cash Cost per ct), $
(Price per ct - Cash Cost per ct), $ (Price per ct - Cash Cost per ct), $
Source: Company data and analysis.Note: Assessment of 2017 production.
(Price per ct - Cash Cost per ct), $
Tier-1 performing mines (1st quartile, 0-25%)
Tier-3 performing mines (3rd quartile, 50-75%)
Margin per carat by mines
FX Rate
59
Source: Company data and analysis.
Financial metrics breakdown by currency
% of metric's total ALROSA is an exporter with 95% of revenue denominated in USD
Major portion (74%) of costs and capex is denominated in RUB
95% of the Company’s debt portfolio is denominated in USD to
create a natural hedge against FX risks
ALROSA's financial sensitivity analysis shows that a change in the
USD exchange rate by +/- 1 RUB/USD leads to the following
change in metrics:
‒ revenue – +/-1.42%
‒ cost of sales – +/-0.23%
‒ EBITDA – +/-2.91%
‒ capex – +/-0.39%
RUB
USD
95%
15%26%
59%
95%
5%
85%74%
41%
5%
Revenue Cost of sales Capex Cash and cash
equivalents
(incl. bank
deposits)
Total
debt
60
Alexey Kovalenko
Director, Mirny mining and processing division• Joined the Company in 1996• Over 20 years of industry experience
Roman Deniskin
Director, Udachny mining and processing division• Joined the Company in 2019• Over 15 years of industry experience
Evgeniy Denisov
Director, Aikhal mining and processing division• Joined the Company in 2005• Over 15 years of industry experience
Anatoliy Platonov
Director, Nyurba mining and processing division• Joined the Company in 1992• Over 25 years of industry experience
Pavel Marinychev
CEO Almazy Anabara• Joined the Company in 2016• First deputy Prime Minister of the Republic of Sakha (Yakutia) (2014‒2016)• Deputy Prime Minister of the Republic of Sakha (Yakutia) (2010‒2014)
Andrey Pismenny
CEO Severalmaz• Joined the Company in 1997• Over 20 years of industry experience• Chief engineer of ALROSA in 2010‒2015
CEO
CO
OC
FO
Sale
s
Sergey Ivanov
Chief Executive Officer
• Joined the Company in 2017• Senior Vice President at Sberbank of Russia (2016‒2017)• Chairman of the Management Board of SOGAZ (2011‒2016)• Top management positions at Gazprombank (2005‒2011)
Alexey Philippovskiy
Deputy CEO – Chief Financial Officer
• Joined the Company in 2017• CFO of Siberian Generating Company (2015–2017)• Head of Finance and Economics and then CFO of Sibur (2004–2013)• Consultant at McKinsey & Co. (2001–2004)
Management TeamCommitted to deliver on ALROSA’s development plans
Mir
ny
Div
isio
n
Ud
ach
ny
Div
isio
n
Aik
hal
Div
isio
n
Nyu
rba
Div
isio
n
Alm
azy
An
ab
ara
Severa
lmaz
Executive team Operational team
Igor Sobolev
First Deputy CEO – Chief Operating Officer
• Joined the Company in 2007• Head of Capital construction division, mining & metallurgical
directorate at Norilsk Nickel (2000‒2007)
Yuri OkoyomovDeputy CEO for Sales
• Joined the Company in 1993• Vice President of ALROSA for marketing and sales since
August 2009
Source: Company data.
61
Supervisory Board Overview
Source: Company data.
Anton Siluanov
First Deputy Chairman of the Government
of the Russian Federation
Aysen Nikolaev
Head of the Republic of Sakha (Yakutia)
Nikolay Alexandrov
First Deputy Head of Suntarsky Ulus
Municipal District of the Republic of Sakha
(Yakutia)
Vladimir Solodov
Chairman of the Government of the
Republic of Sakha (Yakutia)
Nominated by: the Russian Federation Nominated by: the Republic of Sakha (Yakutia) Nominated by: Municipal Districts of the Republic of Sakha
(Yakutia)
Nominated by: the Republic of Sakha (Yakutia)
Previously held positions include:
• 2005-2011 – Deputy Minister of Finance of the Russian
Federation
• Since 2011 – Minister of Finance of the Russian
Federation
• Since 2018 – First Deputy Chairman of the Government
of the Russian Federation
Previously held positions include:
• 2012-2018 – Head of the urban district ”City of
Yakutsk”
• Since 2018 – Head of the Republic of Sakha (Yakutia)
Previously held positions include:
• 2009-2015 – Specialist, Senior Specialist, Leading
Specialist, Head of water transport Department of
Ministry of Transport and Road Infrastructure of the
Republic of Sakha (Yakutia)
• 2015-2016 – General Director of the state-run
enterprise of the Republic of Sakha (Yakutia) “Arctic
Transportation Company”
• Since 2017 – First Deputy Head of Suntarsky Ulus
Municipal District of the Republic of Sakha (Yakutia)
Previously held positions include:
• 2013-2015 – Head of department in Agency of
Strategic Initiatives
• 2015-2018 – Deputy Plenipotentiary Representative of
the President of the Russian Federation in the Far
Eastern Federal District
• Since 2018 – Chairman of the Government of the
Republic of Sakha (Yakutia)
Alexey Chekunkov
CEO of Far East and Baikal Region
Development Fund
Kirill Dmitriev
CEO of Russian Direct Investment Fund
Oleg Fedorov
Independent director of the Supervisory
Board, ALROSA
Maria Gordon
Independent director of the Supervisory
Board, ALROSA
Nominated by: the Russian Federation Nominated by: the Russian Federation Nominated by: minority shareholders as an independent
director
Nominated by: minority shareholders as an independent
director
Previously held positions include:
• 2009-2011 – Head of New Nations Capital Investment
Company
• 2011-2013 – Director, member of the board, member
of investment committee of the Russian Direct
Investment Fund
• Since 2014 – General Director of the Far East
Development Fund
Previously held positions include:
• 2007-2011 – Development Director, President of Icon
Private Equity Limited Representative Office
• Since 2011 – CEO of Russian Direct Investment Fund
Previously held positions include:
• 2009-2012 – Head, Department of Investment and
Banking, VTB Capital
• 2012-2014 – Adviser to the Head of the Federal
Agency for State Property Management
• Since 2013 – Independent director of the Supervisory
Board of ALROSA
Previously held positions include:
• 1998-2010 – Goldman Sachs, investment activity
• 2010-2014 – PIMCO, investment activity
• Since 2015 – Independent director of the Supervisory
Board of ALROSA
21
6
3
5 7 8
4
62
Supervisory Board Overview
Source: Company data.
Sergey Mestnikov
CEO of Trust Fund for Future Generations
of the Republic of Sakha (Yakutia)
Alexey Moiseev
Deputy Minister of Finance of the Russian
Federation
Ilya Yelizarov
Assistant Head of the Federal Agency for
State Property Management
(Rosimushchestvo)
Nominated by: the Republic of Sakha (Yakutia) Nominated by: the Russian Federation Nominated by: the Russian Federation
Previously held positions include:
• 2010-2012 – Deputy Head, Head, Secretariat of Chairman
of the Government of the Republic of Sakha (Yakutia)
• 2012-2016 – First Deputy Minister of Property and Land
Relations of the Republic of Sakha (Yakutia)
• Since 2016 – CEO of Trust Fund for Future Generations of
the Republic of Sakha (Yakutia)
Previously held positions include:
• 2001-2010 – Senior Economist, Deputy Head of
Analytical Department of Renaissance Capital -
Financial Consultant
• 2010-2012 – Deputy Head of Department, Head of
Division at VTB Capital
• Since 2012 – Deputy Minister of Finance of the Russian
Federation
Previously held positions include:
• 2010-2012 – Referent of the Department of the
Presidential Experts' Directorate, Assistant Head of
Presidential Administration
• 2012-2015 – Assistant Chairman of the Government of
the Russian Federation
• Since 2017 – Assistant Head of the Federal Agency for
State Property Management (Rosimushchestvo)
Evgenia Grigorieva
Minister of Property and Land Relations of
the Republic of Sakha (Yakutia)
Sergey Ivanov
Chief Executive Officer of ALROSA
Dmitry Konov
Member of the Board of Directors,
Chairman of the Management Board
at SIBUR Holding
Galina Makarova
Independent director of the Supervisory
Board, ALROSA
Nominated by: the Republic of Sakha (Yakutia) Nominated by: the Russian Federation Nominated by: the Russian Federation as an independent
director
Nominated by: the Republic of Sakha (Yakutia) as an
independent director
Previously held positions include:
• 2007-2011 – First Deputy Minister of Property
Relations of the Republic of Sakha (Yakutia)
• Since 2011 – Minister of Property and Land Relations
of the Republic of Sakha (Yakutia)
Previously held positions include:
• 2011-2016 – Chairman of the Management Board of
AO SOGAZ
• 2016-2017 – Senior Vice President, Head of Wealth
Management at Sberbank of Russia
• Since 2017 – CEO of ALROSA
Previously held positions include:
• 2011-2016 – CEO of SIBUR
• Since 2007 – Member of the Board of Directors, Chairman
of the Management Board (since 2009) at SIBUR Holding
Previously held positions include:
• 2003-2007 – Ministry of Property Relations of the
Republic of Sakha (Yakutia)
• 2007-2015 – Permanent Representative of the
Republic of Sakha (Yakutia) in St. Petersburg
• Since 2018 – Independent director of the Supervisory
Board of ALROSA
109 11
1413 15
12
Glossary
63
Term Definition
ct Carat : one of the four main diamond characteristics, the others being colour, cut and clarity; 1 carat=200 mg
m ct Million carats
CVD Chemical vapour deposition: a high-temperature, but normal-pressure process to grow lab-grown diamonds
DPA Diamonds Producers Association
FTC Federal Trade Commission
Gem-quality diamonds Diamonds used for jewellery manufacturing
HPHT High-pressure, high-temperature; a process using large presses to grow lab-grown diamonds
INED Independent Director
Lab-grown diamonds (LGD) Diamonds produced in laboratories using HPHT or CVD methods; also known as synthetic diamonds
m3 Cubic meter
Average price index Average index change of like-for-like diamonds prices (excl. +10.8 carats)
Reserves Resources known to be economically feasible for extraction
Resources Valuable deposits that could potentially be economically extracted at a later point
RoW Rest of the world
tn Tonnes
mmt Million tonnes
p.p. Percentage points
THANK YOU!
M: +7 985 760 55 74E: ST@ALROSA.RU
HEAD OF CORPORATE FINANCESERGEY TAKHIEV
MOSCOW, RUSSIA 11518424 OZERKOVSKAYA EMB.
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