Introduction by the President

Dear readers,

We are pleased to present the ALROSA Sustainability Report for 2012, an annual public document that covers the economic, environmental and social aspects of our business. In doing so, we wish to be as open and transparent as possible to all stakeholders, and continue an on-going dialogue with all those who are interested in our company.

Summing up our 2012 performance, I would like to note that not only did the company deliver its projected results but remained on course and committed to the principles of corporate social and environmental responsibility.

We have retained our leadership in rough diamond mining, producing in 2012 34.4 million carats. Moreover, ALROSA showed record-breaking results for the reporting period: the 2012 net profit was the highest in corporate history, reaching RUB 39.657 billion1 or 34.3% higher than in 2011.

In 2012, the Supervisory Board approved ALROSA's long-term production development plan the period up to 2021, the key objectives of which are as follows: continued and efficient development focused on diamond mining as it core business activity; systematic technological overhaul and modernization of primary production; and introduction of innovative technologies. The inclusion of sections on environmental and social investment is further proof of our commitment to balanced sustainable development.

As a major mining company that has a significant impact on the environment, OJSC ALROSA considers environmental responsibility a fundamental principle of its activities. Total environmental expenditures and investments in environmental protection in 2012 increased by 22.4% and amounted to RUB 3,369.8 million.

As early as in 2008 the company pledged to reduce energy costs by introducing energy conservation technologies and adopted a corporate energy conservation programme for 2009-2012. The implementation of the programme has helped significantly reduce fuel consumption per unit of production. As a result, ALROSA was issued an energy passport and joined self-regulatory organizations in the field of energy audit.

Corporate programmes for personnel development and social protection have always been the centrepiece of our corporate social policy. Today ALROSA employs more than 30,000 people. This is the main value of our company. In 2012, we continued to invest in human capital recruitment, training and development, providing employees with health protection and rehabilitation services covering spa treatment and high-quality care at leading medical centres in Russia, as well as housing and participation in non-state and corporate pension schemes.

The company is switching to underground mining of rough diamonds. We operate three underground mines with a total annual output capacity of 6,000,000 tonnes of diamond ore in the long term. In a new environment, we need to improve the system of social protection of personnel who operate in high life and health risk zones. In 2012, together with the Profalmaz Trade Union we decided to change the size of our insurance package in which the mandatory and voluntary insurance portions will increase to RUB 2 million each.

ALROSA will continue to operate on the basis of the principles of sustainable development.

I wish to thank all those who worked with us during this difficult but interesting year for their work, trust and willingness to engage in a constructive dialogue.

Fyodor Andreev
President of ALROSA

Data is presented according to Russian Accounting Standards for 2012.