Alrosa · RUS:ALRS
Alrosa — Investor Presentation (April 2018)
26 slides from Alrosa's investor presentation, April 2018
Slide 1: Investor presentation April 2018
Investor presentation April 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 production
ALROSA is a global leader in rough diamond production with the largest reserve base globally and strong financial profile • ~30% of rough diamond production globally • Largest reserves sufficient to support production for ~30 years • Competitive position on the global cost curve • Sustainably high p
Slide 4: Rough diamond production is dominated by few mining companies
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 5: Diamond market grew 2-4% driven by demand for diamond jewelry
Diamond market grew 2-4% over recent years driven by demand for diamond jewelry World diamond jewelry sales grew 4% annually since 2010 Rough diamond sales follow trend of demand for diamond diamond jewelry market, $ bn jewelry and are influenced by midstream inventories sales of rough diamonds, $ b
Slide 6: Demand for diamond jewelry expected to grow 1-4% annually
Demand for diamond jewelry is expected to grow 1-4% annually driven by consumption in the US, India and China. Demand for natural diamonds is supported by DPA activities US, India and China are expected to remain the key World diamond jewelry demand CAGR 2016-2030F markets of diamond jewelry consump
Slide 7: 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 seems to have passed its peak in 2017 mln ct 150 Mir Argyle Diavik 150 Renard 125 Grib 115 Gahcho Kue 0 80 2014 2017F 2020F 2023F 2027F 203
Slide 8: Diamond production mainly located in Far East region of Russia
ALROSA’s diamond production is mainly located in Far East region of Russia and is diversified between different mines and deposits Geography of production assets 33% Aikhal Division 13.0 Aikhal pipe mln ct Jubilee pipe Komsomolskaya pipe 19% Nyurba Division 7% 93% 7.7 Nyurbinskaya pipe mln ct Botuob
Slide 9: Medium-term production target is 37-38 mln carats annually
ALROSA’s medium-term production target is 37-38 mln carats annually grading in a range of 0.9-1.0 carat per ton, CAPEX is expected to decrease down to RUB 26-28 bn due to completion of major expansion projects ALROSA’s diamond production mln ct 39.6 38.3 38.2 38.2 36.9 37.4 1.6 36.6 36.2 1.8 1.8 Ver
Slide 10: Management team is fully committed to deliver on 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 11: 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 12: 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 13: EBITDA margin at 50's, FCF positive, committed to control costs
ALROSA’s EBITDA margin is at 50’s, FCF is positive, management is committed to control costs Financial results summary Expenses RUB mln, unless otherwise stated RUB mln, 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.
Slide 14: Operational excellence program resulted in RUB 6.5 bn of efficiencies
ALROSA runs operational excellence program which has already resulted in RUB 6.5 bn of efficiencies in 2017 Operational excellence program includes dozens of initiatives Mining Ore beneficiation Transport Administrative costs Organizational structure Maintenance Production development Energy use Aut
Slide 15: Economic efficiency of underground mining 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 16: Cost of underground production 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 17: More than twofold debt reduction since 2016
More than twofold debt reduction since 2016 resulted from early repayment of bank loans Loans and borrowings Loans and borrowings breakdown $ mln As of 20 March 2018 Total debt/ 2.0x 2.1х 1.9x 0.8x 0.7х EBITDA 2% Bank loans 98% Borrowings (including Eurobonds) 4,217 3,496 3,057 2,344 1,621 98% US do
Slide 18: 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 19: Appendix
Appendix • Production forecast • Environmental and social responsibility • Supervisory Board overview • Resources inclusive of reserves according to JORC Code 19
Slide 20: 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 21: 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 22: Supervisory Board overview (1/2)
Supervisory Board overview (1/2) 1 2 3 4 Anton Siluanov Yegor Borisov Alexander Galushka Sergey Barsukov Finance Minister of the Head of the Republic of Minister for the Development Deputy CEO of ALROSA Russian Federation Sakha (Yakutia) of the Russian Far East Chairman of the Board of First Deputy
Slide 23: Supervisory Board overview (2/2)
Supervisory Board overview (2/2) 9 10 11 12 Kirill Dmitriev Sergey Ivanov Dmitry Konov Valentina Lemesheva CEO of Russian Direct Chief Executive Officer of Member of the Board of Independent director of the Investment Fund ALROSA Directors, Chairman of the Supervisory Board, Management Board ALROSA
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