Alrosa · RUS:ALRS
Alrosa — Investor Presentation (July 2018)
26 slides from Alrosa's investor presentation, July 2018
Slide 1: ALROSA July 2018
A ALROSA July 2018
Slide 2: Disclaimer
Disclaimer The information contained herein has been prepared for the use in this Presentation (the “Presentation”) and has not been independently verified. Such information is confidential and is being provided to you solely for your information and may not be reproduced, retransmitted, further dis
Slide 3: ALROSA is a global leader in rough diamond output
ALROSA is a global leader in rough diamond output with the largest reserve base globally and superior financial profile Financial results summary • ~30% of rough diamond production globally 140 RUB bn Q1 2017 Margin • Largest reserves sufficient to support production for 120 Q4 2017 ~30 years 100 Q1
Slide 4: Global diamond jewelry market
Global diamond jewelry market World diamond jewelry sales grew by 4% annually Diamond jewelry market, $ bn +4% CAGR • World diamond jewelry sales increase by 4% annually 100 81 83 78 79 79 since 2010 69 76 62 • In 2017, global diamond jewelry sales grew by 5% yoy 50 N. America, across all regions ex
Slide 5: Global rough diamond market
Global rough diamond market • Rough diamond sales follow trend of demand for diamond jewelry and are Rough diamond sales grew by 2% (CAGR) influenced by midstream inventories $ bn • Midstream inventories returned to normal levels +2% CAGR • In Q2 gem-quality rough diamonds price were up driven by be
Slide 6: Supply of diamonds is constrained by lack of new discoveries
Supply of diamonds is constrained by lack and complexity of new diamond discoveries and significant time required to ramp-up production World diamond production m ct Argyle Diavik 150 Mir 150 Renard 125 Grib 115 Gahcho Kue 0 80 2014 2017F 2020F 2023F 2027F 2030F Source: diamond mining companies’ for
Slide 7: Assets concentrated in Russian Far East, over half open pits
ALROSA’s assets concentrated in Russian Far East (93%), over ½ of mining are open pits Geography of production assets Share of division in 2017 diamond production In expansion mode 33% Aikhal Division 13.0 Aikhal UG mine m ct Jubilee pipe Komsomolskaya pipe 7% 93% Nyurba Division 19% 7.7 Nyurbinskay
Slide 8: Production and capex outlook
Production and capex outlook ALROSA’s diamond production to stabilize at 37-38 m carats m ct Total 36.9 36.2 38.3 37.4 39.6 36.6 ~37.5 – 37.7 0.1 0.4 1.6 0.6 Verkhne-Munskoye 0.1 2.0 0.2 1.8 1.3 2.6 1.6 2.2 3.9 5.7 Udachny UG mine 3.3 9.0 9.4 3.8 10.2 Severalmaz 9.1 9.2 8.2 5.9 2.2 Jubilee pipe 2.2
Slide 9: Sales driven by gem-quality diamonds sold in parcels
ALROSA’s sales are driven by gem-quality diamonds sold in parcels based on gemological characteristics Share of gem-quality diamonds in... 8,013 classification positions volume value 26 sizes Gem-quality diamonds ~70% 16 shapes (˃1.5 mm) ~98% 5 clarity categories Non-gem quality 34 colours diamonds
Slide 10: Diverse distribution platform based on long-term agreements
ALROSA has a diverse distribution platform based on long-term agreements with its clients Currently ALROSA has 65 clients under long-term contracts, which accounted for 77% in 2017 rough diamond sales rough diamond sales channel breakdown 77% Long-term contracts 7% Spot sales 16% Tenders ALROSA sell
Slide 11: EBITDA margin in the 50s, FCF positive, cost control
ALROSA’s EBITDA margin is at 50’s, FCF is positive, management is committed to control costs Financial results summary Expenses RUB m, unless otherwise stated RUB m, unless otherwise stated non-production related items Y-o-Y Y-o-Y 2017 2016 FX 2017 2016 change change Production, mln cts 39.6 37.4 6%
Slide 12: Operational excellence program added RUB 6.5 bn of gains in 2017
Operational excellence program added RUB 6.5 bn of gains in 2017 Operational excellence program is rolled across all functions and divisions: Mining Ore beneficiation Transport Production development Energy use Administrative costs Organizational structure Maintenance Automation Efficiencies achieve
Slide 13: Underground mining efficiency fostered by block caving
Economic efficiency of underground mining is fostered by block caving mining method Traditional cut-and-fill mining Block caving method Mir underground International Aikhal underground Udachny underground mine mine underground mine mine Production level Backfilled production level Next production le
Slide 14: Underground cost per carat close to open-pit mining
Cost of underground production per carat is close to open-pit mining due to higher grade at underground mines Range of average mined diamond grade 6.89 ct/t 5.83 • Underground mining cost of production per ton of ore is ALROSA total higher than open-pit mining cost of production 1.01 • Due to the fa
Slide 15: In March 2018 ALROSA repaid $600 m of bank loans
In March 2018 ALROSA repaid $600 m of bank loans from gas assets disposal proceeds Debt position Debt breakdown $m Total debt/ 2.0x 2.1х 1.9x 0.8x 0.7х 0.4х EBITDA 2% Bank loans 98% Borrowings (incl. Eurobonds) 4,217 3,496 3,057 98% US dollar-denominated debt 2% RUB-denominated debt 2,344 1,621 1,02
Slide 16: Dividend policy: not less than 35% of net profit
ALROSA’s dividend policy is to distribute not less than 35% of net profit as dividends, over last years payout ratio was 50% of net profit driven by robust free cash flow Operating cash flow, capital expenditures, free cash flow, net profit attributable to shareholders and dividends RUB bn RUB per s
Slide 17: Appendix
Appendix • Production forecast • Diamond pipeline structure • Environmental and social responsibility • Management team overview • Supervisory Board overview • Resources inclusive of reserves according to JORC Code 17
Slide 18: ALROSA's production forecast
ALROSA’s production forecast Price Cash costs Type of mining Grade, ct/t Diamond production forecast, ‘000 ct per carat, $ per carat, $ 2017 2017 2018F 2019F 2020F Aikhal Division Jubilee pipe open-pit 1.33 141 26 10,160 8,207 5,885 5,410 Aikhal underground mine underground 5.83 47 28 2,480 2,723 2,
Slide 19: Diamond pipeline structure and major producers
Rough diamond production is dominated by few mining companies with the highest margins across diamond pipeline, where ALROSA benefits from leading market share of 28% Diamond pipeline structure Sales of rough Rough diamond Cutting & polishing Diamond jewelry Retail sales of diamonds from production
Slide 20: Low environmental impact acknowledged by ESG ratings
ALROSA’s low environmental impact, as well as efficient information disclosure are acknowledged by ESG ratings 3rd place (out of 33) in the “First rating of environmental performance of mining companies in Russia” (held by the WWF and the Ministry of Natural Resources and Environment of Russian Fede
Slide 21: Management team committed to ALROSA's development plans
Management team is fully committed to deliver on ALROSA’s development plans Executive Team Operational Team Mirny division Alexey Kovalenko Sergey Ivanov Director, Mirny mining and processing division Chief Executive Officer • Joined the Company in 1996 • CEO Joined the Company in 2017 • Over 20 yea
Slide 22: Supervisory Board overview (1/2)
Supervisory Board overview (1/2) 1 2 3 4 Anton Siluanov Yegor Borisov Nikolay Alexandrov Evgeny Chekin First Deputy Chairman of the State Counsellor of the First Deputy Head of Chairman of the Government of Government of the Russian Republic of Sakha (Yakutia) Suntarsky Ulus Municipal the Republic o
Slide 23: Supervisory Board overview (2/2)
Supervisory Board overview (2/2) 9 10 11 12 Evgenia Grigorieva Sergey Ivanov Dmitry Konov Valentina Lemesheva Minister of Property and Land Chief Executive Officer of Member of the Board of Independent director of the Relations of the Republic of ALROSA Directors, Chairman of the Supervisory Board,
Slide 24: Resources inclusive of reserves according to JORC Code (1/2)
Resources inclusive of reserves according to JORC Code as of July 1, 2016 (1/2) 24 Tonnage Resource grade Contained diamonds Deposit Resource category ('000 t) (cpt) ('000 cts) Udachny division Measured 13,646 1.16 15,812 Udachnaya Pipe Indicated 83,524 1.53 127,801 Inferred 53,991 1.28 68,978 Zarni
Slide 25: Resources inclusive of reserves according to JORC Code (2/2)
Resources inclusive of reserves according to JORC Code as of July 1, 2016 (2/2) 25 Tonnage Resource grade Contained diamonds Deposit Resource category ('000 t) (cpt) ('000 cts) Nyurba division Measured 1,432 4.12 5,905 Nyurbinskaya Pipe Indicated 7,095 4.32 30,623 Inferred 1,217 5.56 6,767 Measured
Slide 26: Thank you!
Thank you! 24 Ozerkovskaya emb. Tel. +7 495 745 58 72 Moscow 115184 [email protected] Russia 26