alrosa · 11/29/2019 · index includes anglo american, rio tinto, bhp, glencore, vale, gem...

29 November 2019

ALROSA

Investor Presentation

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Table of Content

01. About ALROSA – strategic priorities

02. Market fundamentals

03. Executing to strengthen our business

04. Q3 2019 results

05. Corporate governance

06. Appendix

p.4

p.11

p.28

p.44

p.52

ABOUT ALROSA –STRATEGIC PRIORITIES

01

5

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% 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. Q3 2019 results03. Executing to strengthen

our business02. Market fundamentals

54%30%

4%1%

11%

Focus on Responsible Mining

6

• 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.



86%

14%

Creating a Clearer and Sustainable Environment

7

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.

CO2 emissions down by c.20% from 2016

Already impressive share of clean electricity and heat

consumption of 86%

ESG Ratings:

MSCI ESG: BB (August 2019)

Sustainalytics: 59 (September 2018)

Bloomberg ESG Disclosure: 56.6/100

ISS Quality Score: 3/10 (1 is the best)

ALROSA is a constituent of the FTSE4Good Index Series created

by the global index and data provider FTSE Russell

ALROSA is a certified member of the Responsible Jewellery

Council (RJC) by achieving certification against its Code of

Practices.

In 2019, ALROSA received the Diamond Empowerment Fund

(DEF) award for implementing social projects in the regions

where it operates (Community Stewardship).

ALROSA has the National Corporate Governance Rating at 8

“Advanced Corporate Governance Practices”

Share of clean electricity and heat consumption Other

1,067 1,064858

2016 2017 2018

2018

Latest developments Reduction of CO2 emissions1

ths tonnes

Share of clean (incl. renewable) electricity and heat consumption



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 LTIFRcompared to the diamond industry and other sectors1

Structural changes Procedures



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 Apr-14 Nov-14 May-15 Dec-15 Jun-16 Jan-17 Aug-17 Feb-18 Sep-18 Mar-19 Oct-19

Diversified miners, incl.

other diamond producers

+57.1%

-7.0%

Luxury goods producers

ALROSA+41.9%

Cumulative total USD TSR since ALROSA IPO in October 2013, %



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



MARKET FUNDAMENTALS

02

• Exploration of diamond

resources

• Rough diamond

production and sorting

• Sale of rough diamonds

from producers

• Rough diamond trading

•Cutting and polishing

rough diamonds to

produce polished

diamonds

• Polished diamond

wholesale

• Polished diamond

trading

• Jewelry design and

manufacturing

• Jewelry

Number of players Top-5 = 70% of market ~100 ~10,000 (90% are in India) >10,000Large retailers control

~35% of the market

Entry barriers High Low Medium

Profitability

(average) 22-24% 1-3% 2-4%

3-5% small retailers

9-11% large retailers

Value chain size

in 2018

Diamond Value Chain

12

Source: AWDC Bain report “The Global Diamond Industry 2018” (December 2018).

Rough diamonds Polished diamonds Diamond jewelry

Rough diamonds Polished diamonds Diamond jewelry

$15bn $26bn

~$80bn

Cash payment Sell on credit

Banks provide funding to polishers



SalesJewelry

manufacturingSales

Cutting &

polishingSalesProduction

13

Rough diamond outputRough diamond salesDiamond jewellery sales

m ct$ bn$ bn

(5%) (3%)

(26%)

7%

(4%)

4% 1%

(4%)

2%

(1%)

19%

(2%) (5%)

176

120126

151

141

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019E

(0%)(2%)

(36%)

52%

25%

(5%)

3%9%

(28%)

20%

1% 5%

(25%)

13 13

8

12

1517

12

1415

11-12

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019E

5%

(7%)(5%)

11%13%7% 3% 4%

(3%)

0% 5% 4%

(3%)

61

57

81 ~80

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019E




“Whip Effect” on Demand Suppliers Illustrated

Historical Statistics

“Perfect Storm” Ingredients in 2019

14

Source: Bloomberg, IDEX, Edahn Golan Diamond Research & Data, Company’s estimates.



Retailers: over-optimism in 2018

• Strong 2017/2018 Christmas and growth

rates 2x higher than historical

• Led to excessive inventory buildup when

market turned down from Dec’18

5.3%

10.2%

5.9%

2014 2015 2016 2017 2018 Q1-Q3’19

• Indian banks beefed-up lending,

scarifying borrowers’ “quality”

5

10.513

16.513.5

11 9.7

1999 2005 2010 2014 2015-17 2018 2019E

Financial bubble burst hitting mid-stream

$ bn

• Financial scandals in 2018, interest rates

аfluctuations, weaker currency lead

financial tightening in 2018/19

Retail: Rise of online

• Shopping around online to buy jewelry

becomes a new normal with 25% share

by 2025

~10%

~25%

2013-2016 2018-19 2025

• This trend, along with market

consolidation, is leading to lower

working capital requirements, improved

planning, and new approaches to

marketing

YoY change

Key factors impacting diamond markets

-28%

10.512.3

14.110.6

4.4

13.1

6.4

16.9

5.1

13.09.5 9.4

12.8

7.7

2.32.7 2.6

1.9

2.4

1.6

2.6

1.9 1.7

2.3

J-18 A-18 J-18 O-18 J-19 A-19 J-19 O-19

Net imports (LHS) Net exports (RHS)

Indian Trade Statistics

Lower demand from retailers (demand + on-line factors)

Level of stocks is approaching low levels (uptick in purchasing

of rough registered `prompting a sequential sales growth)

Gross margin (net exports minus net imports) increased by

$0.2 bn, partially compensating for lower credit availability

Source: GJEPC, Company’s analysis.

Indian midstream destocking in 2019Drivers of destocking

15

$ bn



13.1

20.2

7.19.8

17.1

7.3

Net imports

(rough diamonds)

Net exports

(polished diamonds)

Gross margin

10M'18 10M'19

-25% YoY

-$3.3bn

-15% YoY

-$3.1 bn

+3% YoY

+$0.2 bn

127 126102

177

8968

147

93 87

10687 91

849856

780819

883

912

746

878

845

949

818

737769

J-18 A-18 J-18 O-18 J-19 A-19 J-19 O-19

Rough imported (LHS) Polished exported (RHS)

Monthly prices of imported and exported diamonds

$/ct

Monthly volumes of imported and exported diamonds

m ct

Financial Crisis in India

Source: GJEPC, Edahn Golan Diamond Research & Data, CEIC Data* NBFC – non-bank financial corporation.



% of non-performing assets

2% 2% 2% 3% 3%4% 4%

7%

9%

11%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Financial bubble burst hitting mid-streamBad loans problem in banking sector

6,510,5

16.513.5

9.7

2000 2005 2014 2015-17 2019E

$ bn

• Indian banks and NBFCs* beefed-up

lending, scarifying borrowers’ “quality”

• Financial scandals in 2018, interest rates

аfluctuations, weaker currency lead

financial tightening in 2018/19

• Share of non-performing assets at Indian

commercial banks increased to the

highest levels for the last 10 years

-$4 bn75%

61%53%

2002 2008 2013 2017 2019Е

% of revenue

Midstream leverage

• Financing conditions remain tight for

Indian polishers (90% of global polishing)

after fraud in 2018 and stricter financing

from banks (as Indian baking sector is

preparing for Basel III regulations)

(14%)

23%9%

(15%) (17%) (16%) (23%)

7%

42%

2%

282 346 377

319 266

222 171 182

259 264

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

MoM change

Diamond Miners Decreased Supply by ~25%

Source: Company data and analysis.1. Data based on results of ALROSA and De Beers. Industry experts, investment banks.

Rough diamonds sales – 2019 factors analysis

$ bn

ALROSA 2019 total sales

$ m

7.45.6

Av. 9M 2017/18 9M 2019

17

2019 ALROSA and De Beers supply – decreased by 1/4

$ bn

16

12

15 15 15

11-12

2014 2015 2016 2017 2018 2019E

Volume Price/mix

-25%



-25%

+9% YoY

-24%

(2%) (1%) (12%) (9%)

21%

(22%)

175 172 170149 136

164128

2013 2014 2015 2016 2017 2018 9M'19

Price change

6%22%

(23%) (19%)

5% 5%

154 164 199

153 123 130 135

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

Price Dynamics for Gem-quality Diamonds

Q3’19 like-for-like price index (LFL PI) was -3.1% QoQ

9M LFL PI was down ~7.5% due to lower demand from

mid-stream and limited access to affordable financing

for mid-stream in India

Q3’19 ARP for gem-quality diamonds rose 5% QoQ to

$135/ct due to a lower share of small-size diamonds

Q3’19 ARP for GEMs was 32% YoY down due to:

o LFL PI decrease of 9.2% YoY (9M’19: -7.5%)

o Mix effect as in Q3’19 share of small-size stones in

sales dropped from 83% to 76%

Highlights ALROSA price index for like-for-like gem-quality diamonds mix

$/ct

Source: Company data and analysis.1. ARP (Average Realized Prices) 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)

ALROSA ARP1 for gem-quality diamonds

3%

(5%) (8%)

3% 3%

(7.5%)

1.00 1.03 0.970.90 0.93 0.95 0.88

2013 2014 2015 2016 2017 2018 9M'19

Average index change 2

2% 2%

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

1.00 1.02 1.04 1.02 0.99 0.98 0.94

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

Average price index



Angola

Australia

Botswana

Canada

Arkhangelsk Region

Republic of Sakha (Yakutia)

Namibia

South Africa

Russian Federation

19

Consolidated Diamond Supply

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

41%

43%

14% 2% Russia

Africa

Canada

Other

About 60% of global rough diamond output is

attributable to BIG-3

25% ALROSA

24% De Beers

12% Rio Tinto

6% Catoca1

3% Petra Diamonds30% Other

148

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. ALROSA owns 41% stake.



Supply Continues to Tighten Due to depletion of deposits and lack of exploration capex over the last 10-15Y

2018 to 2023 supply forecast – 9 m ct down

20

2019 to 2023 major project capacity changes2

Source: Company data and analysis, brokers’ reports., Kimberley Process statistics.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)

151 148141 144

136 140 139

2017 2018 2019E 2020E 2021E 2022E 2023E

Russia

Botswana

South Africa

Canada

Other1

Congo

AustraliaAngola

m ctm ct

12.8

(21.3)



156

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

21

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).



31% 29% 15% 11% 9% 5%

281

1,268

550206 76 53 42 34 26

Personal

luxury

Lux

cars

Hospitality Fine

wines

Fine food Designer

furniture

Fine art Jets &

yachts

Total

2018E

Demand Drivers

22

2019E luxury market valued at c. €1.3 trillion

(+8% YoY) is steadily growing

Most dynamic growth is concentrated in Asia incl.

Japan and China

Diamond jewelry consumption is correlated with

USA GDP and disposable income

Highlights

2%5%

9%

30%

11%

0%

Europe Americas Rest of Asia China Japan RoW

Global luxury market breakdown in 2019E

€ bn

Source: Bain-Altagamma 2019 Worldwide Luxury Market Monitor.1. Trends at current exchange rates.

Personal luxury market growth1 by region 2019E

Incl. ~1/3

of diamond jewelry



Market size

Personal luxury market forecast

€ bn

262 281335-375

2018 2019E 2025F

+3-5%

CAGR

+7%

Strong Long Term Demand Outlook ...driven by disposable income growth and middle class expansion

23

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



~320

~80

All jewellery Diamond jewellery

… As Jewelry Demand “Quality” Improves in EMs

24

Source: Euromonitor.

106

64 568.2 6.2

China India USA Japan HK

Total jewelry market (from cheaper items – e.g.

Pandora, Swarowski to luxury e.g. Tiffany) has over

$320 bn capacity

China and India are 2 largest jewelry markets,

though dominated by cheaper goods sales

… Diamond jewelry comprises ¼ of it,

As middle class is expanding in EM – there is a

qualitative change in jewelry spending

… as globally unit price per luxury jewelry item

increased from $2,402 in 2007 to $2,636 in 2012

… but regional breakdown of unit price inflation

indicates to the structural change in Emerging

Markets

Highlights Total jewellery market vs diamond jewellery

$ bn

Average unit price growth 2007 vs. 2012

90%

58%45% 37%

25% 24%

-5%Asia Pacific E.Europe M.East & Africa LatAm Australia N.America W.Europe

TOP-5 all jewelry consumers$ bn



Diamonds are Different from Commodities Mature demand and supply discipline result in low price volatility

25

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.



Demystifying LGDs

26

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

fossil-fueled energy, estimated CO2 emissions associated

with production of 1 ct of LGD are 3.0x greater vs natural

diamond. In 2019 U.S. FTC warned LGD companies about

deceptive marketing. 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:



(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

27

LGD discount to natural diamonds

Price of 1 carat polished diamond: Round, VS clarity, F-H color

5x

Source: Company data and analysis, Paul Zimnisky report “2018: The Year of the Lab-created Diamond”.



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

29

Reserves1 Production ‘18 EBITDA ‘18 EBITDA margin ‘18%m ct m ct $ bn

37

35

8

4

18

2.4

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.

628

212

105

43

40

ALROSA

Peer 1

Peer 2

Peer 3

Peer 4

436Inferred

resources



Key Challenges for the Industry

… and how we address them from a value creation perspective

30

• 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



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…

31

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



2.5 3.7 4.9 5.6 5.5 5.53.4 2.9 1.9

2.8 2.6 3.3

9.0 6.5 7.2 5.2 4.8 4.5

6.2

4.96.0

3.7 3.8 3.6

1.54.1 1.7

4.1 3.8 4.1

3,6 3.9 4.2 4.8 5.1 5.0

0.2 1.8 1.9 1.9 1.8 1.8

5.45.1

3.35.0 5.0 5.0

4.85.1

3.1

4.7 5.0 4.8

2018 2019E 2020E 2021E 2022E 2023E 2024-30E

Production Outlook Supported by New Projects

32

Production outlook m ct


• 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

2020 output revised downward in response to the current market situation

36.738.0

34.3

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 1.1 0.9 0.9 0.9 0.9

Botuobinskaya



33

Focus on Value Accretive CapexCapital-intensive phase is over

Source: Company data and analysis.1. For investments in new mining capacity and operational efficiency projects.

Capex dynamics Key projects

Infrastructure: total 2019-24 capex – RUB 35 bn

Reconstruction of Mirny Airport: total Capex for 2019-’23 ~RUB 10 bn

Gasification of production facilities in Udachny: total Capex for 2019-’23 – RUB 5.4 bn

Sales Division Facilities: total Capex for 2019-’21 – RUB 5.3 bn

Gas processing facility by ALROSA-Gaz: total Capex for 2019-’21 – RUB 2.7 bn

Mining capacity: total 2019-24 capex – RUB 38 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

Investment program with targeted IRR1 of 20%+

RUB bn

9 8 8 8 810 10 9 10

17

1417

10 11 65

2

5

6

5

2

58 11

8

5

3

32

27 28

23

2628

22

1618

2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E

Infrastructure

Mining capacity

Equipment

maintenance



2020 capex expected

to be revised down

Focus on Efficiency Dedicated operating efficiency program launched in 2017

34

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.

1.161.12 1.15

1.10

2016 2017 2018 9M '19

143

187

105

53

42

8

2017 2018 2019E

Scaling up initiatives

Number of Initiatives

Delivering tangible results

General and administrative expenses, RUB bn

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

Real terms2

YoY change, %(8%) (5%)

Real terms3

YoY change, %(10%) (2%)

11.6 11.712.4

2016 2017 2018

As % of

revenue4% 4% 4%



Case Study: Operational Turnaround Program at NyurbaNyurba’s success can be replicated and scaled up across other divisions

35

7.7

9.7

2018 2019E

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

Run of mine Diamond production growth

17 19

Overall equipment efficiency

+12%

47%63%

+16 p.p.

Processing

2018 2019E

2.1 2.5

+18%

m ct

Source: Company data and analysis.1. Short interval control. 2. OEE – overall equipment efficiency.

+26%

m m3

%

mt



Case Study: Automotive Transport OptimizationCentralization and usage-based approach provide long-term cost cutting effect

36

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%

1,719 1,388

(19%)

2018 2019E

8,093 5,7691,376

684

9,4696,453

(32%)

Gasoline

Diesel

Number of vehicles

Vehicles utilization factor

Headcount

Fuel

(16%)




14

516

29

7

11

7

8

34

99

2018 Now

78

61

2017

Now

(17)

8.8

7.1

(1.7)

902

804

(98)

Case Study: Working Capital ManagementReduction in rough diamond WIP inventory days

Optimization levers

37

Reduction of diamonds WIP1 cycle

Production Chain of Rough Diamonds

Final sorting

and box

assembly

Preliminary

sorting

Final

RecoveryMine

WIP Cycle

Inventory

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 analyticsand 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.



38

1.8

2.1

2.4

2014 2018 Target

2024E

Employee Training and Development System


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



39

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

Company initiatives



40


Diamond Producers Association

Key initiatives DPA marketing campaigns by regions

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

1060 60

70

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



41

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.



28

496 510

13 8

501

Q4'19 2020E 2021E 2022E 2023E 2024E

Eurobonds Bank Loans

653

3,635

4,288

Q3'19

42

Source: Company data and analysis.1. Including operating lease obligation (RUB 5.0 bn) starting from 2019Y 2. Excluding operating lease obligation (RUB 5.0 bn) and amortization of discount

• Total debt is $1.6bn with the weighted average cost of debt of

5.2%

• In April 2019 ALROSA issued 5-years $500 m Eurobond with a

coupon rate of 4.65% pa

• Investment grade credit rating

• S&P – BBB- (Stable)

• Fitch – BBB- (Stable)

• Moody’s – Baa2 (Stable)

• Conservative long-term financial targets in line with investment

grade criteria

• Target Net Debt / EBITDA range: 0.5-1.0х

• Minimum liquidity reserves of over RUB 35 bn of cash and

committed lines

• Natural FX hedge – financial liabilities are matched with

income streams

• Solid public debt track record with fixed-income investors

$ m

$ m $ m, as of 1 October 2019

Highlights Net Debt evolution to investment grade credit ratings

Liquidity position Debt2 repayment schedule

Cash and

equivalents

(incl. deposits)

Credit Lines

Strong Balance Sheet… with leverage at historic-lows

3,9513,119 2,781

1,374 1,494971 978

1.9x 1.9x 1.7x

0.5x 0.7x0.4x 0.6x

2013 2014 2015 2016 2017 2018 Q3'19

Net Debt Net Debt / Adjusted EBITDA (RUB denominated)



1

43

Dividend Policy Focused on Maximisation of Shareholder Returns

Historical dividend payments1

Dividend payout ratio

$ m

Source: Company data and analysis.1. Dividends paid. Amounts are based on FX rates as of the dividend record dates (2014-H2’18) or as of the end of the period (H1’2019).2. Based on first and second half year ND/EBITDA and FCF.

12M’13 12M’14 12M’15

12M’16619

12M’17480

H2’18

662

H1’18448

H1’19311

190 244

1,1101,281

929

2014 2015 2016 2017 2018 2019

35%

50%

50% 50%

76%

95%

76%

70%

26%

37%

59% 52%

70%

100% 100%

2013 2014 2015 2016 2017 H1'18 H2'18 H1'19

Payment ratio based on IFRS net income

Payment ratio based on FCF

Dividend

Base

0.0x to 0.5x >0.5x to 1.0x 1.0x to 1.5xCondition of

Net Debt/EBITDA2

Payout Ratio

Subject to minimum dividend payout of 50% of IFRS net income

100% 70-100% 50–70%

Frequency Semi-annual

Free Cash Flow

Below 0.0x

> 100%

Dividend policy overview



Q3 2019RESULTS

04

1,556

1,034 933 802 969 780 585

26

2316

2218

1616

1,582

1,057949

824988

796601

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

Industrial quality diamonds Gem-quality diamonds

Sales

45

Q3’19 Sales

Diamond sales decreased 23% QoQ (down 5%

YoY) to 6.4 m carats against the backdrop of

declining demand due to excessive stocking of

rough and polished diamonds by cutters and

retailers, and continued difficulties faced by India’s

cutting business in securing affordable financing.

Ongoing consolidation in the jewellery sector and

growth in jewellery sales through on-line channels

in the US result in a non-recurrent reduction in

polished diamond stocks across the retail sector as

businesses embrace more efficient stock

management practices, which is in turn impacts

rough diamonds purchases by mid-stream.

Sales were down 24% QoQ to USD 601 m (down

37% YoY)

Highlights Diamond sales in carats

$ m


Diamond sales in U.S. dollars

m ct

10.16.3 4.7 5.3

7.96.0 4.3

3.2

2.72.0

3.72.7

2.32.1

13.4

9.0

6.79.0

10.68.3

6.4

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

Industrial quality diamonds Gem-quality diamonds

Lower supply as mid-stream destocks

21.1 18.2

8.07.0

29.125.3

9M'18 9M'19

3,523

2,334

65

51

3,588

2,386

9M'18 9M'19



5.7 10.117.2

7.5 6.4 10.517.2

1.30 0.84 0.61 1.38 1.23 0.93 0.71

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

Grade, cpt

Output

46

Q3’19

Production grew 24% QoQ (up 15% YoY) primarily

due to seasonal return to production at alluvial

deposits

Av. grade seasonally decreased 24% QoQ to 0.71

cpt

9M’19

The volume of processed ore and gravels grew by

3% to 34.0 m t supported by the ramp-up of

production at the V.Munskoye deposit and

increased productivity an Nyurba Division and

Udachny’s processing plant

Production increased by 12% to 29.7 m ct

Av. diamond grade up 9% to 0.87 cpt

Highlights Ore and sands processing

m ct


Diamond production

m t

5.3 4.1 3.86.5 6.1 5.6 5.2

2.02.1

1.0

3.31.5 2.2 1.6

0.2 2.3 5.8

0.5

0.21.9 5.47.4

8.510.5 10.3

7.89.7

12.1

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

Open pit Underground Alluvials

33.0 34.0

0.80 0.87

9М'18 9М'19

13.116.9

5.15.3

8.27.5

26.429.7

9М'18 9М'19

Q3 2019: increase in diamond production



47

Source: Company data and analysis.1. Q3’19 amounts are based on average FX rates for the period – RUB 64.5936/$.

Resilient financial performance with strong margins and positive free cash flow

Key Financials

1,260

1,514

2017 2018

718

342242 215

395

37 39

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

Q3’19:

Revenue came at $0.7 bn (-20% QoQ) due to a

23% decline in gem-diamond sales in carats.

34% YoY decrease due to decrease in both sales

volumes and like-for-like prices

EBITDA was $0.3 bn (-16% QoQ and -47% YoY)

largely due to top line decrease

EBITDA margin was flat at 46% (-11 p.p. YoY)

Net income was up by 1% QoQ to $ 0.2 bn (-44%

YoY)

FCF amounted to $39 m

Net debt / LTM EBITDA stood at 0.6x

Highlights Superior profitability

$ m

Strong Free Cash Flow Generation

$ bn

1.71.2 1.1 0.9 1.1 0.9 0.7

0.80.7 0.6

0.4 0.5 0.4 0.3

50%57% 57%

44% 44% 44% 46%

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

Revenue EBITDA EBITDA margin

4.7 4.82.2

2.5

46%52%

2017 2018



Revenue Drivers

48


Q3 ‘19 gem-diamond sales were down by 25%

QoQ to RUB 38 bn driven by:

o (-) 28% decrease in sales volumes (in carats)

o (+) normalized product mix

o (-) softer like-for-like prices

(av. index change – -3.1%)

o (+) positive FX rate impact as RUB weakened

39% YoY decrease driven by:

o (-) 8% reduction in sales volumes (in carats)

o (-) weaker product mix

o (-) softer like-for-like prices

(av. index change – -9.2%)

o (-) FX rate impact on stronger RUB

Highlights Q3 2019 gem-quality rough diamond revenue bridge (QoQ)

RUB bn

RUB bn

Q3 2019 gem-quality rough diamond revenue bridge (YoY)



50

38

3 0.1(14) (2)

Q2 '19

Revenue

Sales

volume

Sales mix Pricing

like-for-like

FX Q3 '19

Revenue

61

38

(5)

(14) (4) (1)

Q3 '18

Revenue

Sales

volume

Sales mix Pricing

like-for-like

FX Q3 '19

Revenue

Profitability Drivers

49


Q3 ‘19 EBITDA was down by 16% QoQ driven by:

o (-) 23% decrease in volumes: net impact -RUB 8 bn

(revenue decline: -RUB 14 bn, COGS reduction: +RUB

6 bn)

o (+) sales mix +RUB 3 bn

o (-) like-for-like prices: -RUB 2 bn

o (+) FX rate: +RUB 0.1 bn

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

9M ‘19 EBITDA was down by 40% YoY driven by:

o (-) 13% reduction in carat sales: net impact -RUB 11 bn

(revenue decline: -RUB 32 bn, COGS reduction: +RUB

20 bn)

o (-) sales mix: -RUB 35 bn

o (-) like-for-like prices: -RUB 7 bn

o (+) FX rate: +RUB 9 bn

o (+) other factors: net impact -RUB 6 bn

RUB bn

9M 2019 EBITDA – key drivers (YoY)

Q3 2019 EBITDA – key drivers (QoQ)

RUB bn

Highlights



25 21

3 0.12

(8)(2)

Q2 '19

EBITDA

Sales

volume

Sales mix Pricing

like-for-like

FX Other Q3 '19

EBITDA

12978

9

(11)

(35) (7) (6)

9M '18

EBITDA

Sales

volume

Sales mix Pricing

like-for-like

FX Other 9M '19

EBITDA

Free Cash Flow and Total Debt Analysis

50

Source: Company data and analysis.1. Including finance lease liabilities.2. Mainly includes income from grants, operating lease obligation change etc.

RUB bn RUB bn

0.3x

63.0

35.4

29.8

(0.1)

1.3

(0.8)

(2.5)

Q3'19 Net Debt

Other

FX

Net intetest

Dividends paid

FCF

Q2'19 Net Debt

ND / LTM EBITDA

0.6x

2

EBITDA to Free Cash Flow bridge Q3 2019 Net debt1 bridge



25.1

21.1

7.1

2.5

0.2

(4.1)

(11.9)

(5.7)

(4.6)

Q2 EBITDA

Change in profitability

Q3 EBITDA

Changes in NWC

Income tax

Other

Operating cash flow

Capex

Free cash flow

Outlook

51

Market outlook ALROSA performance

Diamond jewelry sales in 2019, following a several

consecutive years of growth, are expected to stabilize at

around 2017 levels (down from all-time record high of

2018)

Market started to gradually restore supply and demand

balance in H2’19 – supply of rough diamonds was quickly

adjusted, while polished stocks at mid-stream are expected

to decrease as season approaches

Long-term fundamentals for the jewelry demand growth

remain strong in both Developed and Emerging markets

2019 capex outlook revised down from RUB 28 to 23 bn with

no effect on operational performance

2019 production outlook is expected at ~38.5 m ct driven by

efficiency gains

2020 production is expected to decrease to 34.3 m ct

2019 sales are expected to come lower than planned to 32-

33 m ct due to market conditions. ALROSA’s “price over

volume” strategy offers more flexibility and accuracy when it

comes to defining sales, hence holding back pressure on the

market



CORPORATE GOVERNANCE

05




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

54

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



Board Agenda for 2019-2020

55

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



APPENDIX

06

ALROSA: Key Highlights

● Revenue is set to stabilize on stable sales volumes

● Company demonstrates stable – above 45% margins – well

supported by cost control / high utilization rates at the mines

● Capex to trend down as growth projects are up and running

57

37.1 38.4 30.2 40.0 41.2 38.1

174 172 170149

136164

2013 2014 2015 2016 2017 2018

Av. selling price for gem-quality diamonds, $/ct

5.3 5.43.7 4.6 4.6 4.8

2.2 2.4 1.9 2.5 2.1 2.4

42% 45%52% 53%

46% 51%

2013 2014 2015 2016 2017 2018

Revenue EBITDA

1.20.9

0.6 0.5 0.5 0.40.5

1.10.7

1.61.3

1.5

2013 2014 2015 2016 2017 2018

CAPEX FCF

Rough diamond sales

Revenue, EBITDA and EBITDA margin

$ bn

ALROSA’ capital intensity is decreasing

$ bn

m ct

Source: Company data

Information On Assets

58

Type

of mining

Cash costs, $/ct Price, $/ct Spread, $/ct Grade, ct/t Diamond production, ‘000 ct Expected

LOM

JORC reserves

(1 July 2018), ‘000 ct2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2019E 2020F

Aikhal Division 13,011 11,850 9,622 175,561

Jubilee pipe open-pit 18 191 141 137 123 118 1.33 1.14 10,160 9,063 6,520 2034 104,937

Aikhal underground mine underground 25 25 47 48 22 23 5.83 4.86 2,480 2,429 2,731 2044 66,346

Komsomolskaya pipe open-pit 174 992 239 234 65 135 0.36 0.37 370 358 371 2019 809

Zaria pipe open-pit - - - - - - - - - - 2030 3,469

Mirny Division 7,231 4,195 3,908 57,779

International underground mine underground 29 343 210 165 181 132 6.89 6.20 3,699 3,448 2,887 2045 49,566

Mir underground mine underground 38 504 130 113 92 63 3.71 2.86 2,772 30 - -

Alluvial and technogenic deposits alluvial 59 965 205 167 147 71 0.19 0.16 760 718 1,021 2035 8,213

Udachny Division 3,821 3,929 6,438 164,462

Udachnaya pipe open-pit 37 - 90 - 53 - 0.63 - 1,046 - - -

Udachny underground mine underground 73 606 103 99 30 38 1.87 1.32 1,615 2,530 3,697 2064 128,475

Zarnitsa pipe open-pit 100 937 165 154 65 62 0.28 0.26 786 952 841 2035 5,350

Verkhne-Munskoe deposit open-pit 68 1088 65 149 -3 41 1.07 0.57 80 207 1,772 2041 30,391

Alluvial deposits alluvial 92 857 90 83 -3 -2 0.26 0.26 294 240 128 246

Nyurba Division 7,713 7,719 9,059 125,510

Nyurbinskaya pipe open-pit

44 44 87 98 43 54

4.80 4.49 4,774 4,057 3,784 2035 29,447

Botuobinskaya pipe open-pit 6.12 4.54 1,211 1,379 4,126 2035 76,254

Alluvial deposits alluvial 1.97 2.53 1,728 2,283 1,150 2035 19,809

Severalmaz 2,642 3,636 3,900 73,890

Arkhangelskaya pipe open-pit31 20

947 53 16 34

0.70 1.04 1,283 1,530 1,745 2031 47,433

Karpinskogo-1,2 pipes open-pit 0.95 1.06 1,359 2,106 2,155 2028 26,458

Almazy Anabara alluvial 38 30 63 78 26 48 0.40 0.40 5,197 5,420 5,091 23,533

ALROSA 37 36 113 108 77 72 1.01 0.91 39,614 36,749 38,017 34,300 620,735

underground 37 39 134 111 97 72 4.11 2.83 10,566 8,437 9,315

open-pit 34 32 114 113 80 81 1.19 1.12 21,069 19,651 21,313

alluvials 43 41 83 91 40 50 0.42 0.43 7,979 8,661 7,389

1. Increase by 7% due to diamond production decrease by 11% driven by processing lower-grade ore (down 14%). 2. Decrease by 43% due to price factor and decrease of pipe share in Processing plant №8 costs. 3. Increase by 18% due to diamond production decrease by 7% driven by processing lower-grade ore (down 10%). 4. Increase due to the closure of the Mir underground mine. In 2018 remaining ores inventory were processed. 5. Increase by 66% due to increase of general expenses, increase of ore processing by 10% and diamond production decrease by 6% driven by processing lower-grade ore (down 14%). 6. Decrease due to a scheduled ramp-up to design capacity. 7. Decrease due to stronger USD, cash costs per carat in RUB not changed. 8. Increase by 60% due to processing lower-grade ore (down 47%). 9. Decrease by 36% due to due to diamond production increase by 38% driven by processing higher-grade ore (up 30%).

59

Key Investment Projects

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

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 2024

Ramp-up 2021 2020 2021 2027 2025

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 22.3 8.4 5.6 2.3

Invested share 86% 82% 94% 4% 0%

Resource base3, m ct 207.6 40.4 7.1 12.7 4.7

1 2 3 4 5

YakutskMirny

Aikhal

Udachny

Nyurba

1

2

3

4

5

Yakutia

60

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

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

YakutskMirniy

Aikhal1

2

Yakutia

61

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 sales 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 7.87.0 7.5

6.7

2016 2017 2018E

Production Sales

62

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


0

1

2

3

4

0

5

10

15

20

2015 2016 2017 2018 2019

Net imports (LHS) Net exports (RHS)

400

600

800

1000

1200

1400

0

50

100

150

200

2015 2016 2017 2018 2019

Rough imported (LHS) Polished exported (RHS)

Source: GJEPC, Company’s analysis.

Monthly volumes of rough imported and polished exported diamonds

63

m ct

Monthly prices of rough imported and polished exported diamonds

$/ct

Indian Trade Statistics Monthly volumes and prices of imported rough and exported polished diamonds

163 187 177 176 188 189 181154

187 208 232175 179 175 188 206 208 203 192 177

215 228

177131 121 139 124 124 130 128 129

186 188141 151 151 142 131

225

126 152 146 162218

1,620 1,697 1,669 1,762 1,828 1,945 1,818 1,499

1,653 1,994 2,065

1,631 1,631 1,759 1,742 1,757 2,038

1,738 1,896

1,522 1,820

2,025

USA (RHS) China (RHS) Total (LHS)

Destocking Decelerates

64

Source: Bureau of Economic Analysis, Federation of the Swiss Watch Industry FH, GJEPC

64

(43%)

(20%) (21%)

(9%)

(37%) (40%) (36%)

(5%) (3%)

(19%)(15%)

(1%) (4%)

(17%)

(16%) (19%) (19%)

(26%)(17%) (19%)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Net imports of rough stones

Net exports of polished diamonds

End-market consumers: luxury & jewelry demand

to returns to historical growth rates

Retailers: Inventory of unsold diamond jewelry is

winding down YTD

Mid-stream: rough inventories trend down (rise in

financing costs in India, FX volatility, tighter banking

regulation as India is joining Basel III in 2020 –

financing down from $10 bn to $8 bn);

o Polished stocks are being sold at discount to raise

cash;

o Seasonally quiet period in June-August

Miners: from Jan’19 quickly shifted to “price over

volume” sales strategy reducing supply to keep

like-for-like prices stable (-7,5% YTD decrease vs

+3% YoY in 2018)

Highlights End-demand: Swiss watch exports as a “canary in the mine”

CHF m

Net imports of rough stones and net exports of polished diamonds in/from India

YoY change, 2019/2018 (USD)

1.0x

5.0x 6.0x

c. 10.0x

1970's 1980's 2000's 2010's

Case Study: LGD – the Future is History Similar scenario has already realised on the market for lab grown sapphires

65

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%

Synthetic Stones: Key Marketing Messages

66

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

…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

Price per

carat ($)

Diamonds and Their Synthetic Substitutes

67

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


Have different price drivers and value to consumers

68

Source: Company data1. Excluding ALROSA Finance SA, Wargan Holdings Limited (finance entities) and ALROSA Overseas SA (holding company)

M&A: Focus on Organic Growth

5,341652

271

463

17

30,300

3,200

2013 2014 2015 2016 2017 2018 9M'19

47

3934 32 31 29 29

2013 2014 2015 2016 2017 2018 Q3'19

Growth is coming from organic growth of existing portfolio (see

capex slide)

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

9M’ 19 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

As at the end of the period

69

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

70


Financial metrics breakdown by currency (Q3’19)

% of metric's total

91%

18% 26%

63%

96%

9%

82% 74%

37%

4%

Revenue Cost of sales Capex Cash and cash

equivalents

(incl. bank deposits)

Total

debt

RUB

USD

ALROSA is an exporter with 91% of revenue denominated

in USD

Major portion (74%) of costs and capex is denominated in

RUB, 96% 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:

o revenue – +/-1.39%

o cost of sales – +/-0.28%

o EBITDA – +/-2.80%

o capex – +/-0.39%

71

Management TeamCommitted to deliver on ALROSA’s development plans


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)

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)

Evgeny AgureevDeputy CEO for Sales

• Joined the Company in 2017• Top management positions at Sberbank (2009-2017)

72

Anton Siluanov

First Deputy Chairman of the Government

of the Russian Federation

Aysen Nikolaev

Head of the Republic of Sakha (Yakutia)

Andrey Donets

First Deputy CEO of the Far East Investment

and Expert Agency

Vladimir Solodov

Chairman of the Government of the


Nominated by: the Russian Federation Nominated by: the Republic of Sakha (Yakutia) Nominated by: the Russian Federation 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)


• 2012-2013 – CEO of OJSC Amur land planning and

surveying enterprise

• 2014-2015 – Deputy Mayor of Blagoveshchensk

• 2015-2018 – Deputy Chairman of the Government of

the Amur Region

• Since 2019 – First Deputy CEO of the Far East

Investment and Export Agency


• 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


Supervisory Board Overview


Andrey Karkhu

Advisor to Head of the Municipal Entity of

the Republic of Sakha (Yakutia) Anabar

National (Dolgan-Evenki) Ulus (District)

Kirill Dmitriev

CEO of Russian Direct Investment Fund

Oleg Fedorov

Independent director

of the Supervisory Board, ALROSA

Maria Gordon



Nominated by: Municipal Districts of the Republic of Sakha

(Yakutia)

Nominated by: the Russian Federation Nominated by: minority shareholders

as an independent director

Nominated by: minority shareholders



• 1994-2014 – Chief Engineer of OJSC Almazy Anabara

• 2014-2017 – Chief Engineer of OJSC Nizhne-Lenskoe

• Since 2017 – Chief Engineer of Arctic Capital LLC

• Since 2019 – Advisor to Head of the Municipal Entity

of the Republic of Sakha (Yakutia) Anabar National

(Dolgan-Evenki) Ulus (District)


• 2007-2011 – Development Director, President of Icon

Private Equity Limited Representative Office

• Since 2011 – CEO of Russian Direct Investment Fund


• 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


• 1998-2010 – Goldman Sachs, investment activity

• 2010-2014 – PIMCO, investment activity


Board of ALROSA

21

6

3

7 8

4

5

73

Supervisory Board Overview


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

Sergey Donskoy

Member of the Supervisory Board, ALROSA

Nominated by: the Republic of Sakha (Yakutia) Nominated by: the Russian Federation Nominated by: the Russian Federation


• 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)


• 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


• 2008-2011 – Deputy Minister of Natural Resources and

Environment of the Russian Federation

• 2011-2012 – CEO of JSC Rusgeology

• 2012-2018 – Minister of Natural Resources and

Environment of the Russian Federation

• Since 2018 – Advisor to CEO, Irkutsk Oil Company LLC

• Since 2018 – Member of the Board of Directors of JSC

INK Capital

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



Nominated by: the Republic of Sakha (Yakutia) Nominated by: the Russian Federation Nominated by: the Russian Federation


Nominated by: the Republic of Sakha (Yakutia)



• 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)


• 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


• 2011-2016 – CEO of SIBUR

• Since 2007 – Member of the Board of Directors, Chairman

of the Management Board (since 2009) at SIBUR Holding


• 2003-2007 – Ministry of Property Relations of the


• 2007-2015 – Permanent Representative of the

Republic of Sakha (Yakutia) in St. Petersburg


Board of ALROSA

109 11

1413

12

15

Glossary

74

Term Definition

ARP Average realized price (sales revenue divided by sales volumes in carat terms)

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!

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 · 11/29/2019 · index includes anglo american, rio tinto, bhp, glencore, vale, gem...

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