ALROSA Capital Markets Day 2021 - March 2, 2021
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ALROSA
Capital Markets Day 2021
March 2, 2021
Disclaimer
The below applies to the presentation (the “Presentation”) following this important notice, and you are therefore advised to read this important notice carefully before reading, accessing or
making any other use of this Presentation.
This Presentation contains statements about future events and expectations that are forward-looking statements. Any statement herein (including, without limitation, a statement regarding our
financial position, strategy, management plans and future objectives) that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties
and other factors which may cause ALROSA’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied
by such forward-looking statements. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made
regarding future performance. The information and opinions contained in this document are provided as at the date hereof (unless indicated otherwise) and are subject to change without
notice. ALROSA assumes no obligation to update, supplement or revise the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors
affecting these statements.
This Presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire any securities in any jurisdiction or
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This Presentation has not been independently verified. No representation or warranty or undertaking, express or implied, is made as to the accuracy, completeness or fairness of the information
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Some figures included in this Presentation have been subject to rounding adjustments.
By reviewing and/or attending this Presentation you acknowledge and agree to be bound by the foregoing.
2
Today’s Speakers
Maria Gordon Sergey Ivanov Alexey Philippovskiy
Non-executive Chief Executive Officer Chief Financial Officer
Independent Director
Table of Content 01. Message from Independent Director p.6 02. Message from CEO (Market update) p.14 03. ALROSA Results (Strategy Execution) p.25 04. 2020 Performance and Outlook p.45 05. Appendix p.53
ALROSA at a Glance
Global market leader with best-in-class assets and returns
Republic of Sakha (Yakutia)
❶ Leader in diamond production
Arkhangelsk Russia
Republic of Sakha
91% of 2020 production
(Yakutia)
2020 diamond production: 30 m ct (28% market share) region
❷ High-quality asset base with the largest reserves2 base
Resources of 1,064 m ct, incl. 628 m ct of reserves
❸ Best-in-class margins and strong cash flow generation
2020 EBITDA margin: 40%
2020 ALROSA production by types of mining
o 51% open-pit mining from 9 mines
❹ Prudent financial policy and strong credit ratings Angola1
o 25% underground mining from 3 mines
2020 Net debt / EBITDA: 0.4x o 24% alluvial mining
Investment grade ratings from all key agencies
Reserves2 base Shareholder Structure
❺ Focus on total return to shareholders 34% Free float
Dividend policy linked to free cash flow ALROSA 628
(for more details see p. 40-42)
33%
Peers (TOP-3) 212 105 Republic 33% Russian
of Yakutia Federation
Source: Company data.
Notes: 1. ALROSA owns 41% of Catoca Ltd in Angola; 2. JORC reserves, 2018.
501
MESSAGE FROM
INDEPENDENT DIRECTOR
Sustainability & Corporate GovernanceALROSA ESG Landscape
Setting a goal for the best sector performance
Environment Social Governance
• Development of new comprehensive • Adopted new H&S Strategy till 2025 • Ranked top-3 Best Environment, Social,
ESG strategy till 2024 with targets set Governance1
(to be approved in March, 2021 by • ALROSA reiterated its status of one of
the leaders in the industry for social • New Board members with M&M experience
the Board)
investments with RUB 10 bn invested • ESG-dedicated Committee under the Board
• Updated Environmental policy in 2020 (5% of revenue) • Management KPIs for H&S
• Environmental programs financed • COVID-19 relief measures with total • Confirmation of RJC Certified Member
according to the budget, no cuts spending of over RUB 1+ bn, incl. Status for responsible business practices
despite the turbulence support of Yakutian public healthcare (successful re-certification in Dec 2020
through third party audit)
• Joining UN Global Compact (planned for
Source: Company data.
Mar’21)
Note: 1. By Institutional Investors ranking / MOEX, 2020
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 7Environment
Creating a clearer and sustainable future
Funds for green initiatives Unique business model ALROSA vs its peers
RUB bn Share of total consumption, 2020 Per revenue
share in total revenue ALROSA
Diamond producers
3% 3% 2% 2% 2%
3% 3% >90% Energy 1.6
Water reused & consumption 2.9
42
36 recycled2
5.6
29 Water 2.0
23 7.7
18 5.2 92% consumption 18.4
12 5.1
6 6.3 Green1
0.17
6.0 electricity GHG
emissions 0.20
2014 2015 2016 2017 2018 2019 2020
• RUB 42 bn spent over 7 years on ongoing • 90%+ of water consumed is reused & • Low CO2 footprint business with 79% edge
projects spanning from land recovery to recycled over M&M median
water protection to biodiversity initiatives • Hydropower and renewables energy • 97% of water recycling rate – highest in the
• Environmental Management System of sources represent 92% of total electricity in industry
ALROSA is certified to ISO 14001 global use • Energy use per one dollar of revenue
standard generated by the company is half of the
M&M peer-group median
Source: Company data and analysis.
Notes: 1. Clean (incl. renewable) electricity and heat consumption; 2. PWC 2016-2018 ESG Benchmarking report (Sept. 2019), Metals & Mining peer group is presented in the PWC report (incl. diamond producers).
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 8Our Communities
Responsible approach and support to local communities
Highest social investments in M&M 1 Breakdown of social expenditures2 Contribution to local communities
RUB bn share in total revenue 2020 RUB bn, 2020
30%
5% 5% 5% 5% Taxes 32
4% 4% 4% Local 5% Healthcare
infrastructure
84 2% Education
74 Wages 29
62 10 RUB 7% Other
13
45
16 4.3 bn
33 Dividends 6
21 12
11 12
56% Procurements 4
Charity
2014 2015 2016 2017 2018 2019 2020
• RUB 84 bn spent over 7 years on corporate • ALROSA is the largest tax payer in Yakutia
programs of:
• We support sport facilities and events, as
o Wellness and recreation well as healthcare and recreation • Company is seeking to help local
communities through multiple activities
o Health • We support future generations of Yakutia apart from investing, i.e. procurement of
o Culture & sports events with contribution of RUB 0.9 bn
variety of services from small & medium-
o Housing • RUB 1.3 bn – maintenance of local sized enterprises
o Charity and Sponsorship Social Program infrastructure in areas where we operate
o Parity Pension Plan
Source: Company data.
Notes: 1. Data for ALROSA includes pension plan, sponsorship and other social spending. PwC Sustainability Benchmark Report, 2016–2018, link; 2. Excl. pension plan and sponsorship.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 9Our People
ALROSA payroll:
80%+ of employees work in Yakutia 2.5x higher than Russian average Highest share of women as employees
Av. headcount Located in other regions Thousand RUB per month, 2019 average 2019 av. indicator
Located in Yakutia
38,104 124 31%
36,897 34,532
34,579 32,475
24%
18% 23%
72 19%
47
82%
76%
2016 2017 2018 2019 2020 ALROSA Yakutia Russia ALROSA Diamond Russian gold
2
producers 1 producers
• The decrease in the number of personnel is • ALROSA aims at ensuring competitiveness • 31% of employees are women – one of the
due to structural changes and the in the labor market, retaining and best industry indicators in the world
reorganization of several business units developing qualified personnel, supporting • 20% of women at management level
• Trade Union is working on behalf of career and professional growth of
employees • ALROSA is against any form of
employees and guarantee strict discrimination either by sex, or by race, or
compliance with the Russian labor • ALROSA respects the principle of equal any other form
legislation remuneration for men and women for
work of equal value
Source: Company data, Federal State Statistics Service, Companies filings.
Notes: 1. AngloAmerican, RioTinto, Petra Diamonds, Lucara; 2. Polyus, Polymetal.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 10Health & Safety
Zero tolerance to any injuries & trauma for employees and contractors
LTIFR is on par with global good practice
• Prevention program launched in 2017 to enhance transparency and disclosure
Lost Time Injury Frequency Rate per 200,000 hours
of accidents resulted in a significant drop in “potential” accidents
• Success in the program and awareness delivered impressive results – drop in
fatalities and “serious” accidents
H&S Strategy 2025 approved by the Board 0.23 0.24 0.23
0.45
0.18
0.22
• Management approach: H&S committees at all management levels, KPIs
integrated into the management incentive system
17 18 19 ALROSA '20 M&M Sector Diversified
• H&S culture: update policies and handbooks, proactive communication to the miners
personnel, motivation to identify and document the incidents Prevention program success
• Safety at the assets: employee “refuse to work” option if any danger is Number of accidents
Non-potential
Fatalities
identified
74 Potential
• Digitalisation: tracking facilities for employees & transport to exclude accidents 65
53 56 13%
and increase safety, online monitoring of working & equipment conditions
with sensors and video, E-control of working order issues to exclude
79%
intersection with works of additional risk, i.e. maintenance, repair, etc. 87%
9 3 2 1
Target: zero fatalities 21%
2017 2018 2019 2020 2017 2020
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 11Governance
Acting in best interests of shareholders and focusing on the long-term value creation
Board of Directors strengthened with industry experts
• Board members meet regularly to discuss strategic issues and 15 members
maintain direct dialogue with all stakeholders
INEDs1
• Due to COVID-19 meetings shifted to online V.Rashevsy A.Noskov
o 20 (out of 21) Board meetings were held online in 2020 • Board member at SUEK • Managing director at Polyus Aldan
(coal miner & energy producer) (gold mining company)
o 77% of shareholders voted online on AGM in Jun’20 • CEO of EuroChem
(mineral fertilizer producer)
• ESG agenda on the Board overseen by INEDs
• Sub-committee for ESG: the Strategic Planning Committee
reformatted to Strategy and Sustainability Committee
Nominated by Nominated by Nominated by
• “Best corporate governance practices” – 2nd highest score in
7 – Russian Federation 6 – Yakutia2 2 - Minority
Russia according to Russian Directors Institute
shareholders
• Award winning IR & management team for IR practices
Full commitment to dividend policy despite turbulence
• Top-management availability for investor community
$272 m of dividends paid in 2020 for H2’19 in line with the
Policy. No delays or cancellations
Source: Company data.
Notes: 1. INED – independent director; 2. Incl. 1 representative from local communities of Yakutia.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 12What’s Next?
… never stop improving ourselves
1 2 3 4 5
Roadmap
Board Strategy Governance Initiatives
and KPIs
Dedicated sub-committee New ESG strategy for 2021- The ESG Strategy will Further sustainability • Implementation of OECD
for ESG matters 2024 to be approved in H1’21 define KPIs in all key ESG management system Due Diligence Guidance
at the Board level Strategy will be linked to areas of ALROSA. development: for Responsible Supply
(established in Feb’21) Group’s 2024 Strategy and will For strategy • ESG risk management, Chains of Minerals from
consider UN SDGs, industrial implementation a road • sustainability disclosure Conflict-Affected and
and general global standards, map will be developed and communication, High-Risk Areas
ESG ratings requirements and implemented • regulating documents • Joining the UN Global
Compact in 2021
• Implementation of TCFD
Recommendations
starting 2020
Source: Company data.
Notes: UN – United Nations; SDGs – Sustainability Development Goals; TCFD – Task Force on Climate related Disclosures; OECD – The Organisation for Economic Co-operation and Development.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 1302
MESSAGE FROM CEO
Market UpdateEnd Demand
Resilient rebound after COVID-19 shock in the first half of the year
2020 jewelry …showing superior resilience
demonstrated strong recovery in personal luxury End-demand to further expand in 2021
yoy change yoy change, 2020E/2019
25%
15% 17% 17% Leather Personal luxury Apparel Europe 7%
8% 12%
7% Jewelry & Beauty market & Watches
2% 4%
(4%) 14% 13% 16% 14% 12%
India 3%
(7%)
(21%) (12%)
(27%)
-15% APAC 10%
(30%) -19%
(41%) China USA -23%
(51%) N. America
-30% 3%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
USA (~45% of global demand): pandemic In 2020, global jewelry market decreased by Jewellery demand is set to recover across
led to stores temporary closures, retailers 15% YoY, which is lower vs personal luxury all key markets on improved consumer
were utilizing their existing inventories market (-23%) on the back of growth in confidence / bridal segment recovery
China (~30% of global demand): pent-up China and expansion of online sales Global demand is expected to grow by
recovery in demand (bridal), lack of high single-digit numbers against 2020
international travel increases budgets for
luxury items
Source: Bain-Altagamma 2020 Worldwide Luxury Market monitor, Bureau of Economic Analysis, National Bureau of Statistics of China.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 15Midstream
Ticking all the boxes
Margins expanded Deleveraged Destocked
Profitability $ bn, level of outstanding debt Indexed value, level of inventories
+2.5x -2x -$2.5-3 bn
over 5%
14 100
10 76
7-8 63
2%
2010s 2020 2000s 2010s 2020 Av. 2010-18 2019 2020
Polished diamond prices were recovered in Problems related to financial tightening Sharp decrease in trading and
H2’20 on the back of increased demand, were largely resolved by 2020 manufacturing on the back of lockdowns
which led to profitability margin growth of and travel restrictions in H1’20 brought
diamond cutters and polishers In 2020, level of outstanding debt at stocks to the lowest levels in a decade
midstream reached historical lowest levels (following significant destocking in 2019)
following reduced activity in the sector
Source: Company analysis, AWDC Bain report “The Global Diamond Industry 2020-21”.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 16Rational Supply Response in 2020
Q2’20: ~35% of output cut (annualized) Majors cut diamond sales… …prompting faster market recovery in H2’20
m ct $ m, 12M $ m, ALROSA monthly sales
De Beers 3Y Average 2020
501
9,905 ALROSA 522
BIG-2 430
(ALROSA + De Beers) 405
7,382 347 342 336 390
~20% 326 310
2019: 5,398 5,595 386
346 268
245 310
138 m ct 4,044 302
2,793 282 299
~16% 217
153
Other producers 4,507
3,338 40 31 36
2,802 16
2018 2019 2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
• >45 m ct of annualized production were Miners responded with cutting supply to Apr-Jul’20 sales: “price over volume” in
closed in Mar-May’20 on lockdown speed-up restocking, and arrest price action, both ALROSA and De Beers allowed
restrictions and new market conditions pressure clients to defer up to 100% of their
• Junior miners closed ~22 m ct of ALROSA and De Beers cumulative sales purchases to later periods of the year
annualized production, or ~16% of global (~55% of global supply historically) From mid-August polishers started to
capacity
decreased by 1/4 YoY restock following a heavy destocking in
• Closed capacity produced lower quality / Q2’20
cheaper diamonds vs. average mix
Source: Company data and analysis, De Beers.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 17Supply / Demand at Inflection Point
Global Supply / Demand balance outlook Personal luxury is set for 3 years of growth
€ bn
m ct 320
Supply 281 290
260
187-262
217
Demand (conservative scenario)
151
148
2011-18 2019 2020E 2021F 2022F 2023F
130 138
128
120 Net supply decrease in 2019-25E
126 m cts
113
Supply
“COVID-19” 2020 109
response: supply
reduction 21
27
6
Additions Closures Net closures
Source: Company data and analysis, AWDC Bain report “The Global Diamond Industry 2020-21”.
Note: 1. Conservative scenario for rough diamond demand is based on 10% YoY change in 2021-23 and 1% in 2024-25.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 18State of the Diamond Market – Implications for Prices
Rough prices started to recover on improved S/D balance
2020 highlights: Indexed prices, 2020
~25% decrease in rough diamonds supply
~20% decrease in mid-stream stock 100%
-15% decrease in jewelry demand
92%
and what we see for 2021-23
87%
+1-2% CAGR growth in rough diamonds supply
Dec Feb Apr Jun Aug Oct Dec
Up to 10% CAGR increase in personal luxury
demand incl. diamond jewelry
Spread between RapNet price index and Big-2 diamond sales
price increased in 2-3Q’20 and reached its peak in Sep’20
(12p.p.), but started to narrow down since Dec’20 and now
stands at c. 10p.p.
Source: Company analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 19Market Trends
Short / Mid-term Long-term
Retail: rise of Share of online diamond jewelry sales ESG becoming a top priority for all players of
online jewelry 22-25%
the diamond industry
sales ~10%
1-3% Sustainability agenda is set by all stakeholders
2010 2019 2020
Clear
Discount of LGD price
segmentation to natural diamond
Jewelry remains TOP-3 desirable presents (excl.
between natural cash) in both developed and emerging markets
and artificial 2016 2017 2018 Now
products
-15% -20%
-60%
>80%
Localization “Know-your-customer” / Digitalization - from mine to end-customer
of consumption customer centric approach with
targeted marketing
Source: Bain-Altagamma 2020 Worldwide Luxury Market monitor, AWDC Bain report “The Global Diamond Industry 2020-21” .
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 20ALROSA: COVID-19 Response in 2020
Team Communities Customers Operations
Preventive measures: temperature Support to the healthcare system: Commitment to support clients Crisis management committee
checks 2x a day, provision of PPE, RUB 1+ bn allocated to safety Contracts with flexibility added: 2020 output cut by 22%
sanitization, etc. measures and medical o Option to defer 100% of Capex revised downwards
Shift approach for unique equipment, incl. PPE, testing purchases from April
specialists, ensuring physical systems and ventilators Cost cutting measures
distancing o Volumes to be purchased by
Screening: 110K+ COVID-19 tests year end cut by ½ from Aug. Active supply management
WFH mode from March where were made in the regions of
applicable operations Communication with clients on a Balance sheet strengthening and
daily basis (incl. with Head of building up liquidity position
Internal communication program Development of telemedicine sales)
to raise awareness, trainings networks for the remote areas
Sales channels flexibility (digital,
Testing for COVID-19: up to 100% auctions)
of the personnel screened at the
sites where virus was identified
Source: Company data.
Notes: PPE – Personal Protective Equipment; WFH – Working From Home.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 21ALROSA: Managing Through the Downturn
Focus on long-term sustainability of the value chain and financial health
Increased flexibility for customers Output reduced Capex downscaled
Min. allowed contract allocation level m ct RUB bn
Initial (Mar'19) New
Starting Apr’20 -4 m ct
up to 100% of min allowed
80% 80% volumes could be deferred
70%
55% 50%
70% 38.5 29 28
34.2 26 25
55% 50% 30 31.5 20 17
0%
Jan '18 Sep '18 Jul '19 Mar '20 Jul'20 2019 2020 2020 2021 2019 2020 2021E
(actual) (initial) (actual) (outlook)
Mining majors helped industry destock by Output cuts at the assets with higher A number of small projects were
the end of 2019 and continued to support variable costs, and with lower vs average rescheduled or put on hold
in 2020 profitability 2020 capex was down from initial outlook
E.g. ALROSA: from Mar’20 - minimum …thus helping reduce cash outlays and of RUB 26 bn to RUB 17 bn
contracted volumes cut to 50% with further W/C build-up, and speed up W/C release No impact on operational performance
reduction to zero in July once demand recovered
…starting April up to 100% of purchases
could be deferred to buy later in 2020
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 222020 Dashboard
Global output leader with flexible sales Resilient superior profitability Sustaining cost leadership
m ct Production Sales EBITDA, RUB bn EBITDA margin Per unit nominal cost, RUB '000/m3
Production costs (excl. movements), RUB bn
37.9 39.8 38.5 51% 1.42
33.4 45%
30.0 32.1 40% 1.12 1.14 1.14
81 81 89 78
153
107 88
Av. 2016-18 2019 2020 Av. 2016-18 2019 2020 2017 2018 2019 2020
Keeping leverage in the targeted zone Strong FCF generation through the cycle Commitment to maximizing dividends
Net debt / EBITDA RUB bn Capex FCF $m as % of FCF
New div. policy adopted
0.7x 92 100% 100% 100%
80 70%
0.5x 49%
0.4x
48 To be recommended by the
BoD in April and approved
29 by AGM in June 2021
20 17 658 662
480 439
272
2016-18 2019 2020 Av. 2016-18 2019 2020 2015-17 H1'18 H2'18 H1'19 H2'19 2020
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 23Management action plan
Aimed to implement Company strategy in a proper and sustainable way
Sustainability Efficiency
o Sustainability Strategy and KPIs o Organizational Ecosystem development
o Environment o Operational Efficiency Program (including
o Climate and Energy optimization of business processes and
o Employees functions)
o Human Rights o People and Culture (Production System)
o Health & Safety
o Local communities
o Corporate Governance
o Business ethics
Risk management
Innovations
o
Growth opportunities o Innovations is regarded as a supporting tool
in ALROSA development
o Resource base maintenance / expansion o Digitalization of operations
o Customer-centric approach o B2B and B2C digital interfaces
o Marketing initiatives
o 25%+ share of global diamond supply
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 2403 ALROSA RESULTS STRATEGY EXECUTION
Strategy Execution Framework
Pursuing sustainable cost leadership and maximum
productivity Client-centricity remains at the core of
Scaling-up of in-house best practices ALROSA’s business
Building systems to ensure employees; buy-in at all levels Operational Unfolding the potential of online channels
Focus on building the culture of continuous improvement Efficiency & Retaining sales flexibility, while maintaining
to make changes stick Culture turnover efficiency
Developing marketing initiatives
Established transformation governance
covering project management, data Ecosystem / Sales &
architecture, maturity assessment Digitalization Marketing
Demonstrated progress at
organizational redesign to ease
implementation of digital initiatives
Prudent
Equal focus on integrating efficiency Focus on the core diamond business
and efficiency of integration
Capital
Allocation Strict adherence to projects with over 20% IRRs
Conservative financial policy to offset market volatility
FCF is distributed to shareholders through semi-annual dividends
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 261 Focus on Operational Efficiency
Expansion of the program translates into lower costs and higher productivity
Group-wide initiatives up by 70% Production costs decreased on savings Unit costs up as run-of-mine dropped 33%
Number of ongoing initiatives % yoy Savings, RUB bn, 2020 Nominal 2, 000 RUB/m3
as of the end of the period
641 %, in real terms
Other -11% Labor 5.1 1.42
29%
Business- 1.26
379 processes Services 1 1.16 1.12 1.14 1.14
-13% 1.0 26%
267
45% Operational
187 improvements -14% Materials 2.0
23% Energy -5% -6%
-22% Fuel & Energy 3.9 -8% -5-10%
2017 2018 2019 2020 2016 2017 2018 2019 2020 2021E
Optimization program continued to gain Production costs decreased by RUB 11 bn driven Nominal costs in RUB were up by 26% on
traction across the Group by: lower run-of-mine ore volumes as ~70% of
Leading to a 3x+ increase in initiatives from o 22% drop in output, or RUB 7 bn impact costs are fixed
the program start o Efficiency gains, or RUB 2 bn impact 2021 costs are expected to decrease on
Which translates into structural savings and o Lower costs at non-core assets, higher volumes and continued efficiency
critical mass of initiatives leading to qualitative or RUB 2 bn impact improvements
changes in how our business is run
Source: Company data and analysis.
Notes: 1. incl. transport; 2. Include payroll and other employee payments, fuel and energy, materials, external services and transportation, other production costs.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 271 Case Study: Operational Improvement at Aikhal
ALROSA demonstrated material improvement …on the back of expanding load capacity… …resulting in lower number of trucks required
in intensity of trucks usage…
Trucks Utilisation, % Trucks Capacity, % Number of trucks in use
+8 p.p. +8 p.p. -2 trucks …and -3 trucks off
the purchase plan
81% 93% 55
73% 85% 53
2019 2020 2019 2020 2019 2020
Key streams and initiatives at Aikhal in 2020
Project “Perfect Shift” Load Capacity Enhancement
“Pit-stop” maintenance system Widening of trucks beds to expand capacity
Unified dispatch function Decreased number of trucks in operation
Flexible shifts
17 operational efficiency initiatives delivering RUB 0.7 bn savings were introduced in 2020, and from 2021 will be scaled on the Group level
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 281 Large-scale Reform of Maintenance System
… with centralization of all functions into single SAP-integrated service
Project overview Key ongoing initiatives
The group-wide program aims to strengthen preventive planning, Reduction of downtime driven by optimal maintenance processes
reduce downtime and unscheduled repairs, and improve safety of Maximization of technical readiness coefficient
operations Advanced planning and procurement management
New Integrated Service Centres are to be introduced at each
production unit
Expected structural savings from the initiative1
Additional productivity boost to be achieved through the use of
RUB bn
integrated IT systems and application of big-data analysis
Effect of top-7 initiatives: c. RUB 2 bn
1.2
2020 track-record:
0.3
Improved data granularity for better planning 3.2
0.4
Scheduling and planning through SAP RM to reduce waste / increase
efficiencies 1.3
New KPI and internal ratings system
Mines Beneficiation Transport & Other Project
plant Equipment Group-wide total
Source: Company data and analysis.
Note: 1. Based on 2021 prices.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 291
Improving Efficiency of Support Functions
Optimization of sourcing/logistics and centralization of support functions
Sourcing and Logistics Shared Service Centre
Program launch Scale Program launch Scale
2018/19 RUB 124 bn1 2017/18 RUB 1.4 bn2
Key initiatives in 2020-21: Key goals:
Implementation of Warehouse Management System Efficiency and quality improvements / Standardization and
unification / Accelerate transformation initiatives
Launch of the on-line product ordering platform for divisions
implementation, scope, and projects execution
Development of MRP system in supply chain
Cost savings from the initiative
Deliverables in 2020: RUB bn, cumulative
Realized RUB 1.1 bn
Release of RUB 2.2 bn of capital through automation and cost savings from:
development of IT system for supply chain planning • Productivity on scale-up
2.0 • Processes optimization
1.1 • Relocation to more cost
0.4 efficient region
2019 2020 2021E
Source: Company data and analysis.
Notes: 1. 2020 procurement of supplies (incl. materials) volume; 2. Personnel expense total.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 301 Production System: from One-offs to Systemic Change
Elements of PS Successful cases Systemic approach leading to cultural changes
E.g. Nyurba Division project – elements Education /
Group-wide
giving standard
goals cascaded of PS were introduced in 2018-20 toolbox (6S, etc.)
to employees o Visualization
Ideas Factory
o 6S system introduction to motivate
Model and
governance system o Standard Operating Practices bottom-up initiatives
(KPI’s, motivation,
leaders’ role model) Mini- Mirny (pilot)
• Improved operational transformations
performance key instrument for Udachny
Tool-box: standardized Production System
• Documented changes /
tools to improve efficiency, rollout / systemic
knowledge sharing Aikhal
benchmarking changes stick
• “Educational” playground / talent
Nyurba
Infrastructure: development 10,000 team-
Education system, members will be
involved 2021 2022 2023
reskilling, IT platform,
continuous excellence, Ideas Factory
• Members of the transformation
communication, talent
management/agents team cascading knowledge
of change) within the Group / internal tutors
Author Collection Experts’ Reward Execution
Pool Council
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 312 Continuing Digitalization: IT Platform Development
All-encompassing digitalization program at all levels of ALROSA’s operations
Program description Key initiatives Plans for 2021
Digitalization program was launched Advancement of project Consolidation of IT specialists under the
in Dec’19 planning and design processes designated legal entity “ALROSA IT”
Key priorities: Further development of in-house IT
o Productivity enhancement expertise
Optimization of maintenance
(implementation of more
process Completion of IT function centralization
advanced equipment and
improvement of business at the Group level
processes) Digitalization of Health & Continued scaling-up of obtained
o Cost reduction Safety functions knowledge and experience across all
o Safety improvement assets of the Group
o Establishment of digital culture at Further integration of
all levels unmanned technologies and
digital systems
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 322 Case Study: MES Project at Nyurba
Already implemented at Aikhal and Nyurba – to be rolled out across other divisions
Project overview Operating improvements Plans for 2021+
Project timeline CAPEX1 Downtime2, ths hours
Roll-out on MGOK (2021), Unified Dispatch
2019-20 RUB 59 m -28%
Center (2021), UGOK (2022)
Advantages: 105 76 Remaining capex : ~RUB 155 m (3 Sales Enhancement
Balancing the evolving needs of customer base and sales efficiency
Client centricity Sales Channels and Infrastructure Turnover efficiency
Client-centric model crystalized in the “new Online auctions and digital twins Despite the challenges of 2020, ALROSA
normal” environment Project envisages creation of digital twins managed to retain efficiency of the sales
for diamonds of 2CT+ unifying various function
Introducing “Key account managers”
diamond parameters collected facilitating Work-In-Progress turnover
service available 24/7
online sales WIP cycle is 14 days below vs 2018 levels
Accommodating flexible trading conditions No capex requirements (per carat fee) $200+ m released from the WIP cycle
for ALROSA’s long-term clients Number of online biddings organised in decrease vs. 20181
2020: 18 (vs. 5 in 2019)
Enhanced client feedback collection Automation processes
ALROSA Video-Viewer Sorting automation reached 35% in Feb‘21
Continued promotion of ALROSA Alliance
ALROSA introduced new Video-Viewer (vs. 16% in 2018)
brand underpinning the strong supplier-
Service to let customers review the stones Box assembly automation reached 50% in
consumer confidence (c. 80% of total sales
remotely with the help of ALROSA’s experts Feb’21 (vs. nil in 2018)
in 2020 performed with members of
The new service is in high demand, bears
ALROSA Alliance)
no Capex
New Sales Policy concept was adopted Group-wide CRM system
CRM system rolled over across the Group
Source: Company data.
Note: 1. ALROSA, Severalmaz, ALROSA-Nyurba.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 343 Adding New Facets in Customer Service
Key sales features introduced by ALROSA in 2020
ALROSA Tracing ALROSA Provenance Digital Stocks
Diamond tracing assures authenticity and Diamond passports to be issued The service provides for digitalization of
ethical sourcing of the stones automatically for all diamonds polished by ALROSA’s stock of polished diamonds on
Stones with embedded tracing data are ALROSA ensuring internal tracing external online platforms
highly valued by customers Advantages: Project target: 100% of polished diamonds
ALROSA participates in various pilot o Facilitation of sales based on the digitalised and available on online
diamond tracing initiatives availability of passports with tracing data platforms (both internal and external)
Project timeline: Apr-Nov’20 Project launched: 2020
o ALROSA Diamond Passport becomes a
new starting point for external ALROSA’s Diamond Inventories
Diamonds are traced through communication and new industry
the entire production chain initiatives
ALROSA API
Rough diamonds Polished o The service can be easily adapted for
sold online1 produced 3rd-party technology providers (Sarine,
Tracr, GIA, etc.) while keeping the same
2,800+ 200 150 75
appearance of ALROSA Diamond External parties
Polished Passports Passport
planned issued Project timeline: Q2’21
Source: Company data and analysis.
Note: 1. Data as of Jan’20.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 353 Marketing Strategic Initiatives
Generic marketing Digital Polished diamonds marketing
• Participation in Natural Diamond • Branding initiatives: piloting in • Promotion of Fancy coloured
Council (NDC) to maintain and collaboration with major US & China diamonds (True Colours program)
enhance consumer demand for retailers • Promotion of large and exceptional
natural diamonds • Trade initiatives to support fluorescent quality diamonds
• Image programs aimed to promote diamonds category • B2B marketing on key markets (NY
ESG efforts of the industry, incl. • Diamonds with provenance program and HK offices support)
ALROSA
• New sales channels and markets
• Promotion of regulatory separation (online, new geographies, etc.)
between natural and lab-grown
diamond markets
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 364 Capital Allocation – Maximising Shareholder Returns
Focus on Core Business Focused on Conservative Financial Policy
Value-accretive Projects
Organic Growth Investment Program Commitment to
with 20%+ IRR1 Balanced Debt Profile
Operational Efficiency
Divestiture of Strong
Non-core Assets Liquidity Position
Operating cash flow after capex is returned to shareholders
Source: Company data.
Note: 1. For investments in new mining capacity and operational efficiency projects.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 374 Investments
2021-24E capex was revised Key projects
RUB bn Infrastructure: total 2021-24 capex – RUB 32 bn
Infrastructure
Mining capacity Reconstruction of Mirny Airport (RUB 9 bn)
Gasification of Udachny Division (RUB 4 bn)
Initial outlook Equipment maintenance
Gas processing plant (RUB 4 bn)
was RUB 26 bn,
26
some projects
were postponed
25 Mining capacity: total 2021-24 capex – RUB 26 bn
22
20 21 Completion of Udachny underground mine construction (RUB 8 bn)
Completion of V. Munskoye diamond deposit development (RUB 1.5 bn)
17 9 13
7 3
4 Development of Maiskaya pipe (RUB 3 bn)
5 8 Equipment maintenance: total 2021-24 capex – RUB 35 bn
8 6
8 5 Other projects
5
Mir: construction of the new mine Africa
9 9 10 Status: deep geo-exploration stage; decision could Catoca (Angola): 41% owned by
8 7 8
be taken in the end of 2021 ALROSA; self-financed – no co-
Capex: in case of positive decision ~$1.2 bn for 6-7 financing of investments
2019 2020 2021E 2022E 2023E 2024E
years starting 2025 at earliest; incremental capex by Zimbabwe: exploration works
2025 (feasibility studies) with capex of ~$5 m pa; no
Investment program with a targeted IRR1 of 20%+ Conditions for positive investment decision: commitment for any projects yet
confirmation grade of the reserves, market
conditions, economic efficiency, H&S
Source: Company data.
Note: 1. For investments in new mining capacity and operational efficiency projects.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 384 Strong Balance Sheet
Sound financial profile
• Total debt is $2.3 bn with an average cost of 3.7% pa $m
1
• Net debt/EBITDA decreased from 1.25x in Q3’20 to 0.4x Total Debt Net Debt Net Debt / EBITDA, x
1.7x
• Liquidity position: $1.8 bn
• Proactive steps to decrease leverage in Q4’20: 0.5x 0.7x
0.4x
0.7x
0.4x
o $275 m bank loans fully prepaid from own funds
o $494 m 10Y Eurobond @7.75% pa fully repaid in Nov’20 3,062 2,781
2,347 2,272
• Investment grade status confirmed 1,374 1,622 1,494 1,535
971
1,895
1,286
423
• Maturity extended to 3.2 yrs (from 2.1 yrs in 2019)
2015 2016 2017 2018 2019 2020
Maturity extended Cost of debt decreased Liquidity position Debt2 repayment schedule
Years $m 5,27 $ m, as of 31 Dec’20
2 3
Eurobonds Bank loans RUB bonds
Credit Lines 563
3,422 504 500
3.2
6.5% 300 295
Cash and
1.8 Equivalents
1,849 500 500
3.7% (incl. deposits) 200 10 0
2017-18 2020 2017-18 2020 31.12.2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E
Source: Company data and analysis.
Notes: 1. Including lease obligation (the equivalent of USD 67 m); 2. Excluding lease obligation (the equivalent of USD 67 m) and amortization of discount; 3. Based on FX rate as of 31 Dec 2020.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 394 Proposals to Financial and Dividend Policies
2020 case: net cash change during the crisis Proposed changes
Cash inflow minus outflow
1 Financial policy
40 • Minimum cash position should be increased from RUB 25 bn to RUB 50 bn
Market downturn to enhance sustainability of operations
30
• New expanded liquidity buffer will allow the Company during crises:
o To maintain operational resilience and optimal utilization rates
20
o To ensure stability of funding of business development initiatives incl. marketing
focusing on the long term goals
10 o To have sufficient cash fire-power to restore market balance without resorting to
external emergency help
0 • Targeted net leverage remains unchanged at 0.5-1.0x range
-10
2 Dividend policy
-20 • Key parameters remain unchanged: FCF based, semi-annual, based on
net leverage
-30 • Simplified range of net leverage, when defining dividend payout will
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec allow the Company:
o To improve targeting of net leverage
o To ensure stability of cash returns to shareholders
o To improve flexibility in managing debt portfolio
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 404 Simplified Dividend Policy
Current Dividend Policy Proposed Dividend Policy
Dividend Base: FCF (Operating CF-CapEx) Frequency: Semi-annual Dividend Base: FCF (Operating CF-CapEx) Frequency: Semi-annual
if if
Net Debt/ < 0.0x 0.0-0.5x 0.5-1.0x 1.0-1.5x Net Debt/ < 0.0x 0.0-1.0x 1.0-1.5x
EBITDA1 EBITDA1
FCF Payout FCF Payout
Ratio > 100% 100% 70-100% 50–70% Ratio > 100% 70-100% 50–70%
Minimum 50% of IFRS Annual Net Income Minimum 50% of IFRS Annual Net Income
Payment if Net Debt/EBITDA not exceeding 1.5x Payment if Net Debt/EBITDA not exceeding 1.5x
Source: Company data.
Note: 1. Based on first and second half year ND/EBITDA and FCF.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 414 Dividends’ Payment
Dividend payout ratio Excessive cash is distributed as dividends 1
Based on accrued dividends for the period $m
1,281
% of IFRS net income % of FCF
1,110
100% 100% 100% 919
662
H1 ’18
76% 95% 439
70%
59% H1 ’19
50% 76% 78%
52% 12M ’16
70%
311 272
26% 50% 50% 244 619
190 12M ’17 480
35% 37% H2 ’18
12M ’13 H2 ’19
12M ’14 12M ’15
2013 2014 2015 2016 2017 H1 '18 H2 '18 H1 '19 H2 '19 2014 2015 2016 2017 2018 2019 2020
Source: Company data and analysis.
Notes: 1. Dividends paid. Amounts are based on FX rates as of the dividend record dates. Dividends are paid in Rubles meaning the USD amount is subject to change due to FX changes. For information purposes
only.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 42Delivering Superior Shareholder Returns
Cumulative total USD TSR since ALROSA IPO (October 2013)
96.8% ALROSA
73.7% Luxury Goods
1
62.5% MSCI Emerging Markets
1.0% Diversified Miners, incl.
100 other Diamond Producers 2
(2.0)% MOEX Russia Index
(15.7)% MSCI Russia
Oct-13 Jan-15 Apr-16 Jun-17 Sep-18 Nov-19 Feb-21
Source: Bloomberg, Company analysis.
Notes: 1. Luxury goods include average performance of the following companies: LVMH Moet Hennessy; Hermes; Cie Financiere Richemont; Kering; Swatch; Prada; Tiffany & Co; Tapestry; Burberry; Ralph Lauren; Capri; Moncler; Tod's;
ALROSA; 2. Diversified miners include average performance of the following companies: Anglo American; Rio Tinto; BHP; Glencore; Vale; Gem Diamonds; Petra Diamonds; Lucara Diamond; Firestone Diamonds; Mountain Province
Diamonds; Stornoway Diamond.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 43Strategic Priorities Remain Unchanged
Developing efficient organisation... …taking advantage of strong market fundamentals
Growing demand
Balanced and Disciplined
Financial policy supply
Prudent Maximisation of
Capital allocation Free Cash Flow
and
Focus on Shareholder returns
core business
and Efficiency
Unique
product
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 4404
2020 PERFORMANCE
AND OUTLOOKRough Diamond Sales
• Q4’20 diamond sales increased by 3.4x qoq Q4’20 diamond sales grew by 3.4x qoq
reaching 17 m ct, incl. 12.2 m ct of gem-quality m ct Gem-quality diamonds Industrial quality diamonds
diamonds, due to continued recovery of end- 2.1x 38.1
33.4 32.1
demand in key markets (US and China) from mid- 17.0
11.6
’20, translated into a strong diamonds demand for 10.6 4.8 9.3 8.3
8.3 8.2 9.4
rough by year-end 2.7 6.4 2.4 5.0
2.3 2.2 12.2 26.4 24.1 23.8
2.1
7.9 7.1 0.6
• Proceeds from rough diamond sales in Q4 were
6.0 4.3 5.9 4.1
Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2018 2019 2020
$1,144 m (+2.1x QoQ and +29% YoY)
Q4’20 rough diamond sales in USD grew by 2.1x qoq
$ mn
Gem-quality diamonds Industrial quality diamonds
+29% 4,412
1,144 3,273
988 888 2,652
796 881 31
18
16 601 11 13 553 4,325
16 5 1,113 3,211
969 877 868 2,601
780 74
585 548
Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2018 2019 2020
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 46Key Financials
Improved financials on the back of sales recovery
• Q4‘20: RUB bn
Revenue EBITDA Net profit EBITDA margin
o Revenue: RUB 98.6 bn, up by 2x QoQ on the back
of strong demand recovery toward year-end 52%
46% 45%
40%
o EBITDA: RUB 31.8 bn (+24% QoQ, +8% YoY) 32%
o Profitability amounted to 32% (-20 p.p.)
238 221
o Net income RUB 21.3 bn (+2.8x QoQ, +83% YoY) 99
65 21 32
o FCF grew to RUB 65.2 bn (+2.9x QoQ, +3.9x YoY) 12 50 8 107 88
30 26 32 63
o Net debt / 12M EBITDA was at 0.4x (Q3’20: 1.25x) Q4'19 Q3'20 Q4'20 12M'19 12M'20
• 12M‘20: Free Cash Flow grew 3x QoQ on W/C release
RUB bn
o Revenue: RUB 221.5 bn (-7%) H2’20 FCF: RUB 87.8 bn
o EBITDA: RUB 87.6 bn (-18%)
o Profitability: 40% (-5 p.p.)
o Net income: RUB 32.2 bn (-49%) 79
65
48
o FCF: RUB 79.5 bn (+67%)
17 23
Q4'19 Q3'20 Q4'20 12M'19 12M'20
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 47Profitability Analysis
Q3’20 to Q4’20 EBITDA bridge
• Q4‘20 EBITDA: RUB 32 bn, up by 24% QoQ driven by: RUB bn
(+) increase of revenue: +RUB 49 bn due to rebounded sales
volumes
49 (41)
(-) increase of cost of goods sold: -RUB 41 bn due to increase
0.03
of sales volumes
(-) increase of SG&A expenses: -RUB 3 bn due to change of (3)
26 32
re-valuation of management option program
Q3'20 Revenue COGS SG&A Other operating Q4'20
EBITDA profit (loss) EBITDA
• 12M’20 EBITDA: RUB 88 bn, down by 18% mainly due to:
(-) revenue decline: -RUB 17 bn due to lower LFL prices (-10%) 2019 to 2020 EBITDA bridge
and changes in sales mix RUB bn
(+) decrease of cost of goods sold: +RUB 1 bn due to lower
sales volumes (17) 1
(-) increase of SG&A expenses: -RUB 3 bn due to change of (3)
re-valuation of management option program (0.5)
107
88
12M'19 Revenue COGS SG&A Other operating 12M'20
EBITDA profit (loss) EBITDA
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 48Free Cash Flow
Q4‘20 FCF increased to RUB 65.2 bn from RUB 22.6 bn in Q3‘20 due to: EBITDA to Free Cash Flow bridge
(+) Profitability growth by RUB 6.1 bn QoQ on recovered sales
RUB bn
(+) W/C release of RUB 41.2 bn with the key drivers: Q4’20 12M’20
+RUB 29.2 bn – decrease of diamond inventories EBITDA
25.7 107.1
+RUB 3.2 bn – seasonal decrease of materials for the previous period
+RUB 6.5 bn – AP up due to increase of advances from customers as part Changes in profitability 6.1 (19.4)
of 2020 contracted volumes to be dispatched in 2021
(-) Income tax payment (-RUB 2.3 bn) EBITDA 31.8 87.6
(-) Other (-RUB 1.1 bn)
Changes in NWC 41.2 2 20.0
(-) Capex (-RUB 4.4 bn)
12M’20 FCF increased by 67% to RUB 79 bn (RUB 48 bn in 12M’19) due to: Income tax (2.3) (11.2)
(+) W/C release of RUB 20.0 bn with key drivers:
Other (1.1) 0.03
+RUB 7.2 bn – decrease of diamond inventories
+RUB 14.3 bn – AP up due to increase of advances from customers as part Operating cash flow 69.6 96.5
of 2020 contracted volumes will be shipped in 2021
(-) Capex (-RUB 17.0 bn) Capex (4.4) (17.0)
(1
(-) Profitability decrease by RUB 19.4 bn on mix changes and price index
Free cash flow 65.2 79.5
(-) Income tax payment (-RUB 11.2 bn)
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 49Rough Diamond Inventories
Q4 ALROSA's diamond inventories decreased by 32% QoQ
• Q4‘20 diamond inventories were down by 32% QoQ m ct, end of the period
(-9.9 m ct) to 20.7 m ct as sales volumes (17.0 m ct) -8%
exceeded production (7.1 m ct) due to stronger demand
and lower output
• 8% yoy decline in inventories (-1.9 m ct) due to production
cuts in order to reduce costs in response to the 26.3
30.6
deteriorating market environment caused by COVID-19 21.7 22.6 21.1 20.7
15.5 17.0 14.3 15.9
12.3 11.7
• Q4’20 ores & sands stocks were up 4% qoq to 26.9 m t as
mining activities exceeded processing Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20
ALROSA's diamond inventories structure
m ct, end of the period
30.6
-32%
22.6
13.2 20.7
14.3 12.7 Finished goods
17.4
Work in progress
8.3 8.0
Q4'19 Q3'20 Q4'20
Source: Company data and analysis.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 50Production Outlook
Production in 2021 revised upwards 2020 to 2021 output change by deposits
m ct m ct Av. price1, $/ct
V.Munskoye deposit 2.0 107
Mid-term target of
38.5 +1.5 m ct Aikhal UG mine 1.5 45
37-38 m cts
Almazy Anabara 5.2 Botuobinskaya pipe 1.0 94
31.5
Severalmaz 30.0 42
4.2 1.3 Severalmaz 0.8
Nyurba Division 3.5 3.6
Udachny UG mine 0.8 71
2.8
10.3
8.1
International UG mine 0.2 172
8.3
Udachny Division 116
5.7 Jubilee pipe (0.9)
7.4
5.0 Nyurbinskaya pipe +
Mirny Division 3.0 (1.2) 82
2.4 2.4 alluvials of Nyurba GOK
Aikhal Division
Almazy Anabara (2.2) 64
10.1 8.1 8.6
Other (net change) (0.5)
2019 2020 2021E Mid-term target
Source: Company data and analysis.
Note: 1. Av. production price in 2020, based on market adjusted price list.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 51Summary
Market outlook ALROSA performance
Resilient consumer demand – diamond jewelry remains the product 2021 outlook:
of choice for “special moments in life”, and is being culturally
o Production is expected to recover up to ~31.5 m ct
accepted in new geographies.
o Sales volumes will depend on real market demand, and
Consumer profile is getting younger with Millennials and GenZ availability of the diamonds inventory
driving incremental demand
o Pricing environment looks positive on resilient demand and
Recovery growth in end-demand for diamonds as key economies limited inventory in the diamond pipeline
are back to “normal” life o Capex is estimated at RUB 25 bn, a catch up from downscaled
RUB 17 bn in 2020
Mid-stream inventories are set to remain range-bound as in 2019-
2020 cutters and polishers de-stocked and de-levered Active cost cutting program being consistently pursued:
o Active production management
Structural decrease in diamonds supply with depletions outpacing
new capacity launches o Ongoing savings from operational efficiency programs and
optimization initiatives
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 5205 APPENDIX
New Initiative: Transformation Office
Systematic approach to changes across the vertical
Key decision making
Project Management Board Control of interim and final project’s results
ALROSA senior management (incl. CEO & CFO) External consultant Risk control
Budgeting
Operating Committee Operational decision markers
ALROSA top / medium level management External consultants Close oversight of projects
Coordination with adjacent functions within
ALROSA
Transformation office
Head of Transformation Office
Operating planning and control of project
implementation
Quality control of deliverables for each
Mining Enrichment Planning HR … Purchases H&S Security Maintenance
working group
Function Function Risk management on working group level,
head head
Designated working group for each function responsibility of efficient escalations
ALROSA ALROSA
team team Efficient coordination between the teams and functions Internal coordination
Involvement of external consultants to ensure “outside-in” view across all stages
External External
consultant consultant
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 54Targeted Production System – Vision for 2023
Engineering
Centre Remote control centre and
dispatch function
• Medium-term planning for all
production assets, including
geotechnical and geological • Centralised dispatch function to become all-
support of mining operations encompassing and cover all types of
production processes
Engineering Control Shared Services /
Centre Centre Planning
Operational
planning groups
Shared Services
Detailed planning for each asset on a
•
consistent basis with varying intervals
Centre and Planning
(monthly, each 10 days, daily) Function
• Long-term planning and
Integrated digital project development
platform • Routine processes
centralised at SSC
• End-to-end data management system
• Digital management of production process
Production asset Enrichment plant
Repair planning and
management system
• Oversight and continuous improvement of
production process
Source: Company data.
Message from INED Message from CEO ALROSA results 2020 Performance & Outlook Appendix 55You can also read
