alrosa · this presentation does not constitute or form part of and should not be construed as, an...

ALROSA

MOSCOW, 5 JUNE 2020

Q1 2020 IFRS RESULTS

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 s tatements.

This Presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solici tation 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 financ ial

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

law or regulation or which would require any registration or licensing within such jurisdiction. Persons in whose possession this

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.

3

ALROSA: COVID response

Team

Preventive measures taken for

at-site workers: daily control of

the temperature at entrance,

provision of masks, etc.

Shift approach for unique

specialists to reduce risk of

possible contamination

WFH mode for most of the

administrative staff ahead of

official quarantine been

introduced

Operations

Crisis management committee

was set up

Output reduction for 2020,

scenarios for 2021-22 assessed

Capex revised downwards

Cost cutting measures

(e.g. G&A)

Customers

Added flexibility to customers

April-June: 100% of purchase

volumes can be deferred

Launch of a digital platform for

large-stone tenders for remote

purchase

Communities

~RUB 400 m allocated to safety

measures and medical

equipment, incl. face masks,

testing systems and ventilators

(both for company and local

hospitals)

Development of telemedicine

networks for the remote areas

DIAMOND MARKET OVERVIEW

4

Diamond jewelry demand in Q1’20

After strong start in January

COVID-19 pandemic led to stores

closure in February-March and

stock-piling at retail

Polishers structurally reduced stocks

Better offtake in H2’19 allowing to

bring supply and demand into

balance by the year-end

Mid-stream decreases almost to

zero rough purchases on lock-

downs/travel restrictions

Miners1 adjusted diamonds supply

$ bn

Major diamond producers adjusted

supply to stock-building at mid-

stream and price decreases

~30% of diamond capacity was

closed in March-April

7.3%

10.9%

7.1%

4.4%

(0.6%)(1.3%)

3.0% 2.6%

(6.1%)

Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20

3.2

5.7

2.3

3.3

Net imports

(rough diamonds)

Net exports

(polished diamonds)

Q1 2019 Q1 2020

-29% YoY

-41% YoY

4.0

3.3

2.5

Q1 2019 Q4 2019 Q1 2020

-36%

Source: Company data and analysis, GJEPC, Bureau of Economic Analysis. 1. Data based on results of ALROSA and other diamond producers with a market share totaling c. 75% in 12M 2019.

$ bnyoy change, U.S. PCE on jewelry

2020 output cut down

38.5 34.228-31

2019 2020

(initial)

2020

(revised)

m ct

Output cuts at the assets with higher

variable costs, and with lower vs average

profitability

…thus helping reduce cash outlays and

speed up w/c release once demand

recovers

- 3-6 m ct

29 2620 22 ~20

2019 2020

Initial Revised New

MANAGING THROUGH THE DOWNTURN

Source: Company data and analysis.

5

Responsibility over customers

Mining majors helped industry destock by

the end of 2019 and continued to support

in 2020

E.g. ALROSA decreased minimum allowed

contract allocation level to 50% from

March 2020

… in April - June‘20 up to 100% of

volumes could be deferred

RUB bn

Capex downscaled

A number of small projects were

rescheduled or put on hold

No impact on operational performance

2020 capex outlook was revised

downward from RUB 22 bn by

RUB 1-2 bn

80% 80%

70%

70%

55%

55%

50%

50%

Jan'18 Sep'18 Jul'19 Mar'20 Jun'20

In April-June ‘20 up

to 100% of min

allowed volumes

could be deferred

Min. allowed contract allocation level

10.1 6.3 4.7 5.3

7.96.0 4.3 5.9 7.1

3.2

2.7 2.0

3.7 2.7

2.32.1

2.2 2.4

13.4

9.0

6.7

9.0 10.6

8.36.4

8.2 9.4

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

Gem-quality diamonds Industrial quality diamonds

ALROSA ROUGH DIAMOND SALES

6

1,556

1,034 933 802 969780

585877 868

26

2316

22

18

16

16

11 13

1,582

1,057949

824988

796601

888 881

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

Gem-quality diamonds Industrial quality diamonds


Q1 diamond sales went up by 15% qoq (-11% yoy)

Q1 diamond sales by value were down by 1% qoq (-11% yoy)

$ mn

m ct Q1 ’20:

o sales up by 15% qoq to 9.4 m ct amid demand

recovery in the first half of the quarter.

o sales declined by 11% yoy due to sharp drop in

consumer activity since the end of February on the

back of COVID-19 pandemic

o sales in USD amounted to $881 m (down 1% qoq)

with a 15% qoq sales growth in carats due to

changes in the sales mix (growth in share of small-

size diamonds)

o An 11% yoy reduction in sales in USD came as a result of

lower sales in carats (down 11% yoy)

-11%

-11%

Share

25%

75%

Share

2%

98%

+15%

-1%

12.3 11.715.5 17.0 14.3 15.9

21.7 22.6 21.1

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

INVENTORIES

7

70% 80% 82%

17%13% 12%

13% 6% 6%

14.3 22.6 21.1

Q1 '19 Q4 '19 Q1 '20

Other

Work in progress

Finished goods


1. Diamond inventories at mining and processing divisions.

Q1 ALROSA's diamond inventories were down by 6% qoq

ALROSA's diamond inventories structure

m ct, end of the period

m ct, end of the period Q1 ‘20 diamond inventories were down by 1.5 m ct

(-6% qoq) to 21.1 m ct as strong sales exceeding

seasonally lower production

48% yoy growth in inventories (+6.8 m ct) due to

both decreased sales and increased output

-6%

+48%

-6%

1

PRICE DYNAMICS

8

1% 2% 2%

(2%) (3%) (2%) (3%) (2%) (1%)

11%6%

22%

(23%)(19%)

5% 4%9%

(17%)

154 164

199

153

123 130 135148

123

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

LFL price index change ARP change

Source: Company data and analysis.1. Average realized 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 price1 for gem-diamonds were flat yoy

$/ct Q1 ’20 like-for-like price index (LFL PI) was

-1% qoq

Q1 ’20 average realized prices (ARP) for gem-

quality diamonds declined by 17% qoq (flat

yoy) to $123/ct due to the high base effect of

Q4 ’19, which saw increased demand for large-

size diamonds

3% 3%

(6%)(9%)

21%

(19%)

136

164

133

2017 2018 2019

Average price2

70 65 6331 30 30

44% 46%48%

Q1 '19 Q4 '19 Q1 '20

Revenue EBITDA EBITDA margin

FINANCIAL HIGHLIGHTS

9

Q1 EBITDA margin amounted to 48%

Strong cash flow generation capability

RUB bn

RUB bn

Q1 ‘20:

o Revenue: RUB 63 bn, -3% qoq due to decrease

of average realized prices by 14%, decline of

other revenue and income from grants

o EBITDA: RUB 30 bn, +2% qoq on lower costs, -

4% yoy

o Profitability up by 2 pp qoq (+4 pp yoy) to 48%

o FCF grew to RUB 22 bn (+RUB 5 bn qoq) on

limited capex and lower working capital build up

o Net debt / LTM EBITDA was at 0.7x (flat qoq)

26

1722

Q1 '19 Q4 '19 Q1 '20


56 56

11 0.03(11) (0.1)

Q4 '19

Revenue

Sales

volume

Sales mix Pricing

like-for-like

FX Q1 '20

Revenue

GEM-QUALITY DIAMONDS REVENUE DRIVERS

10

6456

5(7) (4)(2)

Q1 '19

Revenue

Sales

volume

Sales mix Pricing

like-for-like

FX Q1 '20

Revenue


Q1 gem-quality rough diamond revenue bridge (qoq)

Q1 gem-quality rough diamond revenue bridge (yoy)

RUB bn

RUB bn Q1 ‘20 gem-diamond revenue was flat qoq to RUB

56 bn due to :

o (+) 19% increase in sales volumes (in carats)

o (-) weaker product mix

o (-) LFL index change and FX impact were immaterial

12% decrease yoy driven by:

o (-) 10% reduction in sales volumes (in carats)

o (+) normalized product mix

o (-) softer like-for-like prices (av. index change -8% yoy)

o (-) FX rate impact on stronger RUB

14 1215

1914 15 14

1715

34

1915 16

25

17

10

18 18

48

31

30

34

39

3225

35 33

13.4

9.0

6.7

9.0

10.6

8.3

6.4

8.2

9.4

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

Non-production sales costs Production related sales costs Sales, m ct

COSTS DYNAMICS

11


Q1 total cost of sales were down by 7% qoq

RUB bn Q1 ‘20 total costs were down by 7% qoq to RUB

32.8 bn due to:

o Production-related costs were up by 2% qoq (+RUB 0.3

bn) on +15% sales volumes growth partially offset by

fuel & energy and material expenses decrease

(see p. 23)

o Non-production costs were down by 15% (-RUB 2.6 bn)

mostly driven by decrease of social expenses, SG&A

cost cuttings and lower MET (see p. 24)

16% yoy decrease driven by:

o Production-related cost of sales down -26% (-RUB 6.5

bn) mostly due to decrease of sales in carats (see p. 23)

o Non-production costs up by 1% (+RUB 0.1 bn) driven by

increase of SG&A, exploration and other operating

expenses with lower MET expenses (see p. 24)

- Total cost of sales

30 30

6

5(10)

(1) (0.1)

Q4 '19

EBITDA

Sales

volume

Sales mix Pricing

like-for-like

FX Other Q1 '20

EBITDA

PROFITABILITY DRIVERS

12

31 30

52(2)

(5) (2)

Q1 '19

EBITDA

Sales

volume

Sales mix Pricing

like-for-like

FX Other Q1 '20

EBITDA


1. Mainly due to decrease of SG&A, extraction tax and fuel and energy expenses (+RUB 4.2 bn).

2. Mainly due to decrease of extraction tax expenses (+RUB 1.3 bn) and change in ore and sands movement (+RUB 1.5 bn)

Q1 EBITDA bridge (qoq)

Q1 EBITDA bridge (yoy)

RUB bn

RUB bn Q1 ‘20 EBITDA was up by 2% qoq driven by:

o (+) 15% on volumes growth: net impact +RUB 6 bn (revenue

+RUB 11 bn, COGS down: -RUB 5 bn)

o (-) sales mix: -RUB 10 bn

o (-) like-for-like prices: -RUB 1 bn

o (-) FX rate: -RUB 0.1 bn

o (+) other factors (inlc. lower SG&A): net impact -RUB 5 bn

Q1 ‘20 EBITDA was down by 4% yoy driven by:

o (-) 11% reduction in sales volumes (in carats): net impact

-RUB 2 bn (revenue decline: -RUB 7 bn, COGS reduction:

+RUB 5 bn)

o (+) sales mix: +RUB 5 bn

o (-) like-for-like prices: -RUB 5 bn

o (-) FX rate: -RUB 2 bn

o (+) other factors: net impact +RUB 2 bn

1

2

3.34.8

5.9

3.2 2.4 2.81.6 1.7 1.6

1.0

1.6

2.1

3.6

1.21.5

2.53.4

0.8

0.6

0.7

0.8

0.2

0.40.3 0.6

1.9

0.3

4.8

7.2

8.8

7.0

3.94.5 4.6

6.9

2.6

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

Infrastructure

Equipment

maintenance

Mining capacity

CAPEX

13


Q1 capex was down by 62% qoq

Annual capex dynamics

RUB bn

RUB bn Q1 ’20 capex seasonally decreased by 62% qoq to

RUB 2.6 bn mostly due to lower capex in

equipment maintenance (-76% qoq) and

infrastructure (-85% qoq)

32% yoy decrease mainly driven by lower capex in

mining capacity (-34%, -RUB 0.8 bn):

o V.Munskoye deposit (-RUB 0.4 bn)

o Zarya pipe (-RUB 0.4 bn)

2020-2024E capex outlook was revised downward

-62%

2229 26

22 2120 2319 18 17

2020E 2021E 2022E 2023E 2024E

Initial capex outlook

Updated capex outlook

38 36 34 3227 28

20

2013 2014 2015 2016 2017 2018 2019

2.7 2.9

2.1

1.4

2.1 1.9

2015 2016 2017 2018 2019 Q1 '20

DEBT POSITION

14

3,0622,347

1,622 1,5351,895 2,100

2,781

1,374 1,494971 1,286 995

1.7x

0.5x 0.7x0.4x

0.7x 0.7x

2015 2016 2017 2018 2019 Q1 '20

Total Debt Net Debt Net Debt / EBITDA, x

Source: Company data and analysis.1. Including lease obligation (RUB 6.6 bn)2. Based on EBITDA and Net Debt denominated in rubles3. Excluding lease obligation (RUB 6.6 bn) and amortization of discount.4. For RUB-denominated debt based on FX rate as of 1 June 2020.

Sound financial profile

$ mn Total debt in Q1 ’20 increased by $0.2 bn to $2.1 bn

Q1 ‘20 liquidity up by 82% yoy to $1.1 bn

Net debt down by $0.3 bn to $1.0 bn (-23% yoy)

Net debt/EBITDA was flat qoq - 0.7x

Recent transactions:

March’20 - 2Y bank loan of $200 m at fixed rate

April-May ’20 - two 2Y bank loans

May’20 - placed local bonds of RUB 25 bn @ 5.75% pa

Weighted average debt maturity

years

21

Liquidity position Debt3 repayment schedule

$ mn $ mn

Cash and

Equivalents

(incl. deposits)

Credit Lines

494 500758

213

533

758

374

9

503358

2020E 2021E 2022E 2023E 2024E 2025E

Eurobonds Bank loans New debt (Apr-May'20)

1,105

3,221

4,326

31.03.2020

4

117.3163.2

25.627.1

0.9(7.7)

Q4 '19

Total Debt

Loan received Loan repaid FX Change of lease

liabilities

Q1 '20

Total Debt

79.6 77.4

0.1 21.1(21.8) (1.6)

(0.1)

Q4 '19

Net Debt

FCF Dividends

received

Net interest FX Other Q1 '20

Net Debt

DEBT ANALYSIS

15


Q1 Net Debt bridge

Q1 Total Debt bridge

RUB bn

RUB bn Q1 ‘19 net debt decreased by 2% qoq to RUB 77.4

bn mostly driven by:

o (-) increased +ve FCF (-RUB 21.8 bn)

o (-) dividends received (-RUB1.6 bn)

o (+) FX rate impact on weaker RUB (+RUB 21.1 bn)

Q1 ‘20 total debt increased by 39% to RUB 163.2 bn

due to:

o (+) 2Y $200 m bank loan received and bank overdraft

of RUB 9.6 bn provided

o (-) bank overdraft of RUB 7.7 bn repaid

o (+) FX rate (+RUB 27.1 bn)

o (+) change of lease liabilities (+RUB 0.9 bn)

0.7x 0.7xNet Debt/

LTM EBITDA

FREE CASH FLOW

16

29.5

30.0

24.5

21.8

0.5

1.4

(0.9)

(6.0)

(2.6)

Q4 '19 EBITDA

Changes in profitability

Q1 '20 EBITDA

Changes in NWC

Income tax

Other

Operating cash flow

Capex

Q1 '20 Free cash flow


Q1 ’20: EBITDA to Free cash flow bridge

RUB bn Q1 ‘20 FCF grew 30% qoq RUB 21.8 bn (RUB 16.8 bn in Q4

‘19) due to:

● (+) Profitability increase by 2% qoq to RUB 30.0 bn

● (-) Working capital build up by RUB 0.9 bn mainly due to:

o -RUB 2.0 bn – seasonal decrease in diamond inventories

o +RUB 4.3 bn – seasonal growth of sands at alluvials

o -RUB 2.0 bn – seasonal decline in materials

o +RUB 1.9 bn – increase in receivables due to FX impact on

weaker RUB and growth in receivables from a number of

suppliers

o -RUB 1.5 bn – increase in payables due to growth in advances

from customers

o +RUB 0.2 bn – other factors

● (-) Income tax payment (-RUB 6.0 bn)

● (+) Other (+RUB 1.4 bn) incl. FX rate impact on weaker RUB

(+RUB 1.1 bn)

● (-) Capex (-RUB 2.6 bn)

50%

50% 50%

76%

95%76% 78%

26%

37%

59% 52%

70%

100% 100% 100%

2014 2015 2016 2017 H1 '18 H2 '18 H1 '19 H2 '19

Payment ratio based on IFRS net income Payment ratio based on FCF

10.8 10.8 15.4

65.738.0

(12M’17)29.8

(H2’18)

42.7

(H1’18) 27.7

H1’19

2014 2015 2016 2017 2018 2019

DIVIDENDS

17

10.8 15.4

65.8

38.643.7

(H1'18) 28.3

(H1'19)

30.3

(H2'18)19.4

(H2'19)

2014 2015 2016 2017 2018 2019

Source: Company data and analysis.1. Dividends paid less than dividends accrued due to exclusion of dividends for treasury shares.2. H2 ‘19 dividends to be approved by AGM (scheduled on 24 June 2020)

Dividend accruals

Dividend payments1

RUB bn

RUB bn Dividend policy adopted in 2018: FCF-linked with the

payout ratios depending on the level of Net debt/LTM

EBITDA ratio

Board recommended H2 ’19 dividends RUB 19.4 bn (RUB

2.63/sh), or 100% H2’19 FCF.

AGM scheduled for 24 June

Dividend payout ratios

74.0

80.7

57.5

47.7

2

2

OUTLOOK

Market outlook

Long-term fundamentals of the industry remain strong – diamond jewelry remains the product of choice for “special moments in

life”, and being culturally accepted in new geographies

Gradual diamond demand recovery on the market after lifting of lockdowns around the world (based on China’s track record)

Supply of the rough diamonds continues to decrease as deposits deplete and a number of mines are under lockdowns

Company performance

2020 production is expected to decrease to 28-31 m ct (see p. 19)

2020 sales volumes will depend on real market demand. Sales strategy remains intact – “price over volume”

2020 capex outlook was revised downward to RUB 20 bn (down RUB 1-2 bn) with no effect on operational performance

Active cost cutting program being rolled out:

o Suspension of Aikhal underground mine – May 15 to Sept 30, 2020; Zarya pipe – May 15 to Dec 31, 2020; V. Munskoye – June 1 to Oct 1, 2020;

Zarnitsa pipe – May 1 to Dec 31, 2020, reduced production at Severalmaz from Q2’20

o SG&A savings for payroll – cut by 20% from April

o Ongoing savings from operational efficiency programs to support profitability


18

2020 PRODUCTION OUTLOOK

19

0.27

2.0 1.9

4.2

0.26

1.61.1

2.53.0

Zaria Aikhal V.Munskoe Severalmaz Total reduction

Initial outlook Updated outlook

Source: Company data and analysis.1. Other includes marginal production at Komsomolskaya and Zaria pipes of Aikhal Division, Zarnitsa pipe and alluvials of Udachny Division.

2020 output reduction by deposits

m ct

Management response to the downturn:

• 2020 “COVID crisis”:

o ‘20 output was revised from 34.2 m ct to 28-31 m ct,

which is expected to:

- Costs down by RUB 6 bn to translate into FCF

increase

- Unit cost (RUB/ct) up by ~5%

o Scenarios for ‘21-22 output cuts are being studied

Production outlook

m ct

Almazy Anabara

V.MunskoyeUdachny

Severalmaz

Nyurbinskaya

Jubilee

Aikhal

Mirny Division

Other1

Botuobinskaya

Aikhal Division

Udachny Division

Nyurba Division

International

Alluvials

Arkhangelskaya

Karpinskogo-1

Alluvials5.4 5.2

3.6 4.2

1.5

5.5 6.2

4.7 2.5

3.1 0.2

1.5

4.2

3.0 2.4

2.6 28-31

9.1

7.2

1.5

1.4 36.7

38.5

34.2

Potential to

produce up to

37-38 m ct

2018 2019 2020E 2021-30E

APPENDIX

17.9 20.116.1 17.0

19.7 21.618.0 18.5

16.2

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

ALROSA PRODUCTION (1/2)

21

5.7 10.1

17.2 7.5 6.4

10.517.2

7.2 5.9

1.30 0.84 0.61

1.38 1.23 0.93 0.711.22 1.36

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

Grade, ct/t

Source: Company data and analysis.1. ROM – run of mine

Q1 run-of-mine ore was down by 12% qoq

Ore and sands processing went down 18% qoq

m t

m m3 Q1 ‘20 ROM1 ore down by 12% qoq (-18% yoy) to

16.2 m m3, largely due to decision to suspend project of pit

deepening at the Arkhangelskaya pipe (Severalmaz) in

2020

Q1 ‘20 processed feedstock seasonally down by 18% qoq

(-7% yoy)

Q1 ‘20 average diamond grade saw an increase of 11% qoq

to 1.36 cpt due to seasonal suspension of production at the

Mirny Division's lower-grade alluvial deposits. A 10% yoy

growth was mostly driven by an increased share of high-

grade ore processing at the underground mines of Aikhal

and International, along with a rise in the average diamond

grade at the Jubilee pipe

-12%

-18%

5.34.1 3.8

6.5 6.1 5.6 5.2 6.0 5.9

2.02.1

1.0

3.3

1.5 2.21.6

2.6 2.00.2 2.3 5.8

0.5

0.21.9

5.40.3

0.17.4

8.5

10.5 10.3

7.8

9.7

12.1

8.8 8.0

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

Open pit Underground Alluvials

ALROSA PRODUCTION (2/2)

22


Diamond production was down by 9% qoq

m ct Q1 ’20 diamond output decreased by 9% qoq to

8.0 m ct, mainly following lower production at the

Aikhal underground mine (-0.6 m ct) and the

Botuobinskaya pipe (-0.5 m ct)

…a 2% growth yoy was due to increased production

at the Aikhal and Udachnaya underground mines

(+0.3 m ct)

Share

2%

25%

74%

-9%

+2%

(1.5) (3.2) (4.3)

6.4

(2.7)

1.1

12.2 12.4 12.3

4.05.9 4.2

2.6

4.02.6

2.0

1.1

1.10.2

0.40.3

24.717.9

18.2

Other production costs

Services and transportation

Materials costs

Fuel and energy

Labor costs

Movement of diamonds

Movement of ore and sands

PRODUCTION COSTS DYNAMICS AND BREAKDOWN

23

21.518.2

1.1

(4.3)

Q1 '20

Production costs

Movement in inventory

of ore and sands

Movement in inventory

of diamonds

Q1 '20

Production costs of sales

Direct production related costs of sales up

Production cost adjusted for inventory movements

RUB bn

RUB bn Q1 ‘20 production related costs of sales were up by 2% qoq to

RUB 18.2 bn driven by:

o (+) movement in inventory on decrease in diamonds stock due to

sales exceeding output (+RUB 3.7 bn)

o (-) movement in inventory on increase in ores & sands stock as its

output exceeded processing volumes (-RUB 1.1 bn)

o (-) fuel & energy -28% on volumes decrease (-RUB 1.7 bn)

o (-) materials -36% due to seasonality and unscheduled repairs

work in Q4 ’20 (-RUB 1.4 bn)

o (+) services & transport costs +91% (+RUB 1.0 bn)

Q1 ‘20 production related costs of sales were down by 26% yoy

driven by:

o (-) decrease of negative movement in diamonds stock driven by

less excess of sales over production on the back of 11% sales

decline with 2% production increase (-RUB 5.3 bn)

o (-) increase of positive movement in ores & sands stock (-RUB 1.5

bn)

Q1 ‘19 Q4 ‘19 Q1 ‘20

XX - total direct production costs of sales

NON-PRODUCTION COSTS DYNAMICS AND BREAKDOWN

24

1.0(0.8)

1.8

6.1

6.0

4.8

3.1 4.7 3.4

2.12.2

2.5

0.8

3.8

0.81.2

1.3

1.2

14.4

17.1

14.5

Q1 '19 Q4 '19 Q1 '20

Other taxes and payments

Social expenses

Exploration expenses

SG&A

Extraction tax and royalty

Other non-production costs


1. Mainly includes cost of diamonds for resale and other non-production costs

Non-production costs were down by 15% qoq

RUB bn Q1 ‘20 non-production costs were down by 15% qoq to RUB 14.5 bn

mostly due to:o (-) social expenses down by 4.9x on lower charity expenses &

maintenance of local infrastructure (-RUB 3.0 bn) due to high base effect

in Q4 ’20: one-off expenses on disposal of farming unit & contribution to

“Yakutia’s Fund of Future Generations”.

o (-) SG&A expenses -27% (-RUB 1.3 bn) due to decrease of consulting

and IT services

o (-) MET down by 20% (-RUB 1.2 bn) mostly driven by lower extracted

volumes

o (+) other non-production costs up by RUB 2.6 bn due to decrease of

other operating income and increase of other operating expense

Q1 ‘20 non-production costs were up by 1% yoy mostly due to:o (+) other non-production costs up by RUB 0.8 bn due to higher of other

operating expenses

o (+) SG&A expenses up by 11% (+RUB 0.3 bn)

o (+) exploration expenses up by 18% (+RUB 0.4 bn) due to start of

exploration and appraisal activities on new projects (Mir, Udachnaya,

Zarya pipes and others)

o (-) MET down by 22% (-RUB 1.3 bn) on lower volumes and change of

price list

1

Udachny

UG mine

VM1

deposit

Maiskaya

pipe

VG2

deposit

Type of mining Underground Open-pit Open-pit Alluvials

Production start 2014 2018 2025 2024

Ramp-up 2021 2019 2027 2025

Target ore output pa, m t 4.0 3.0 0.3 1.1

Target production pa, m ct 5.6 1.8 1.2 0.4

Total CAPEX, RUB bn 63.9 20.0 5.6 2.3

Invested share 87% 92% 6% 0%

Resource base3, m ct 207.6 40.4 12.7 4.7

KEY INVESTMENTS PROJECTS

Source: Company data1. Verkhne-Munskoye deposit2. Vodorazdelnye Galechniki deposit3. Diamond mineral resources in accordance with the JORC Code as at 1 July 2018 25

1 2 3 4

YakutskMirny

Udachny

Nyurba

1

2

3

4

Yakutia

DIAMOND PRODUCTION BY ASSETS

26

1.3 1.2

0.8 0.7

1.11.0

3.23.0

2.4

2.1

8.8

8.0

Q4 2019 Q1 2020

Nyurba Division

Aikhal Division

Severalmaz

Mirny Division

Udachny Division


Diamond output

m ct Q1 ‘20 diamond production decreased by 9% qoq

mainly due to lower production at the Aikhal

underground mine and the Botuobinskaya pipe

Key drivers:

o Nyurba Division – down by 13% due to lower

production at the Botuobinskaya pipe partially offset by

increased production at the Nyurbinskaya pipe

o Aikhal Division – down by 5% due to production

decline at the Aikhal underground mine partially offset

by higher production at the Jubilee pipe

(5%)

(18%)

(7%)

-9%

(7%)

(13%)

FX RATE

27

93%

15%26%

75%

96%

7%

85%74%

25%

4%

Revenue Cost of sales Capex Cash and cash

equivalents

(incl. bank deposits)

Total

debt

RUB

USD

Source: Company data and analysis.1. Excluding lease obligation (RUB 6.6 bn)

Financial metrics breakdown by currency

% of metric's total, Q1 ‘2020 ALROSA is an exporter with more than 90% of

revenue denominated in USD

Major portion of costs and capex is denominated in

RUB, 96% of the Company’s debt portfolio1 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:

o revenue – +/-1.39%

o cost of sales – +/-0.23%

o EBITDA – +/-2.69%

o capex – +/-0.38%

1

OPERATING CASH FLOW AND CAPEX

46 41

28

21 25

16 21

14

30 26

7 2

73

24

17 17

24 22 22

(5)

(7)

(9)(7)

(4)

(5) (5)

(7)(3)

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

OCF CAPEX FCF21

Operating cash flow and capex dynamics

RUB bn


1. OCF – operating cash flow

2. FCF – free cash flow is defined as OCF net of capex in the core business

28

THANK YOU!

SERGEY TAKHIEVHEAD OF CORPORATE FINANCEM: +7 985 760 55 74E: [email protected]

RUSSIA, 115184MOSCOW24 OZERKOVSKAYA EMB.

DMITRY BYALOSHITSKIYCORPORATE FINANCEM: +7 915 113 32 04E: [email protected]

alrosa · this presentation does not constitute or form part of and should not be construed as, an...

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