2012 Economic Objectives and Results 

Economic efficiency is a business platform for sustainable development not only for an organization but also for the environment in which it operates.

The main long-term objectives of economic policy of ALROSA are:

  • to ensure the efficiency of the company by focusing on its core business, i.e. mining and sale of diamond products; to improve the competitiveness of the company among the key players on the world diamond market;
  • to increase the market capitalization of the company and its investment attractiveness.

To achieve these goals, we are developing our economic suitability policy in several key areas.

One of the main economic objectives of ALROSA is to improve labour productivity by increasing production capacity, first of all, as a result of the transfer to underground diamond mining.

Mastering of underground mining including deployment of innovative technologies and modernization of production allows us to set ambitious goals to preserve our position as a leading producer of rough diamonds, by volume.

Key Directions of ALROSA's Core Business Policy 

Direction

Objective

2012 Results

Mining and processing operations

One of the key objectives facing the company in 2012 was to produce 34,352.0 carats of diamonds. 

In the reporting period, all mining units of the company operated in accordance with the production programme, producing 100.6% of mined rock against planned indicators or 38,839.8 m3 against the planned volume of 38,607.0 m3, thus showing 9.4% yoy growth.

Underground mines produced 1,512.0 tonnes of ore.

In the reporting period, ALROSA units mined 34,420.3 carats of rough diamonds, of which 68.3% were mined at the Mir, Udachny and Aikhal Mining and Processing Divisions of ALROSA and 31.7%, by subsidiaries. These volumes of production have returned ALROSA to leading positions in rough diamond mining in the world, by volume. 

Exploration & prospecting

The policy of the company in the field of geological exploration is shaped by the understanding that the company can neither preserve its leadership in rough diamond mining nor advance the Russian diamond mining industry in general without adequate replacement of the mineral resource base. ALROSA is increasing the financing of geological exploration work within the framework of the ALROSA Programme of Geological Exploration of the Subsoil and Replacement of the Mineral Resource Base in Western Yakutia.

The results of geological exploration added a total of 35.8 million carats to our booked reserves largely due to the exploration of alluvial deposits of the Ebelyakh and Gusiny Ruchey rivers and the appraisal of the Khara-Mas alluvial deposit.

The financing of geological exploration and prospecting increased by 24.6% yoy due to the increased scope of exploration and prospecting work at new and existing deposits. 

Manufacturing of polished diamonds

The company intends to develop its polished diamonds business, increasing manufacturing volumes and improving the cutting and polishing quality of diamond products. 

The production of polished diamonds by value in 2012 corresponds to planned indicators and shows a 2.6% increase against the previous reporting period. 

Key Directions of ALROSA's Financial Management Policy1

Key objectives of the financial policy of ALROSA are long-term growth of the market capitalization and a continued balance between maximization of the financial results and financial stability of the company.

Direction

Objective

2012 Results

Sales and marketing of rough and polished diamonds

The company receives most of its revenues from selling rough and polished diamonds. We continue our sales and marketing policy in a highly competitive rough diamonds market, with the emphasis on long-term trading contracts and a geographic diversification of the sales network. The company plans to increase the share of sales under long-term contracts to 74-75% in the next three-year period. 

In the reporting period, the company was able to reach the targeted sales indicators for core products, having sold rough and polished diamonds to the amount of USD 4.6 billion, a record amount in the entire history of the Russian diamond mining industry.

In the last three years, the share of ALROSA sales under long-term contracts accounted for some 64% of the turnover. In 2012, The Supervisory Board approved the ALROSA Framework Sales and Marketing Policy, which retained the preferred orientation toward long-term contracts with customers.

Investments

The investment activity of the company is aimed at meeting several strategic objectives:

  • long-term growth of market capitalization;
  • timely implementation of investment projects, i.e. construction and commissioning operations of the Mir, Aikhal and Udachny underground mines and technical retooling and modernization of facilities; and
  • implementation of projects and measures, which are set forth in the ALROSA Programme of Innovation Development and Technological Modernization for 2011-2018. 

 

Eighty-three percent of all funds invested in fixed assets in 2012 were spent on the construction of the ALROSA underground mines. The investments in technical retooling and modernization amounted to RUB 3,550.3 million and exceeded the 2011 level by 34%. 

Debt management

Our key objective in this area is to reduce the debt burden and form a credit portfolio that would be optimum in terms of size and structure. 

Total long-term and current liabilities increased in 2012 by 31% as compared with 2011 and amounted to RUB 166,860 million.2

The growth of liabilities is due to the raising of additional financing to buy out gas assets.

 


1 ALROSA IFRS Consolidated Financial Statement for 2012 is available at www.alrosa.ru.
2 According to the ALROSA Consolidated Financial Statements for 2012.