ALROSA Q3 AND 9M 2018 IFRS FINANCIAL RESULTS 8 November 2018 Photo: Nyurbinskaya pipe, Yakutia
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MARKET OVERVIEW Decrease in global diamond output, 9M 2018 • In Q3 and 9M 2018, output decreased by 4% and 3% y-o-y respectively, m carats mostly driven by ALROSA, elsewhere output remained flat 111 108 • Q3 midstream inventories dropped to a multi-year lows mainly on Other destocking of small stones ALROSA 81 • 9M global diamond sales in USD increased 4% on demand recovery and 81 41 40 39 37 35 stronger prices 33 33 31 30 28 27 27 24 26 30 27 10 10 10 11 9 7 9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 9M 9M 2017 2017 2017 2017 2018 2018 2018 2017 2018 Note: ALROSA, De Beers, Catoca, Petra Diamonds, Mountain Province, Stornoway Diamond Major producers’ diamond sales were 4% up on demand recovery Low inventories of rough & polished diamonds at midstream $ bn $ bn 9.0 +4% 8.6 8.2 42.6 42.7 41.8 41.5 41.3 41.0 40.3 40.1 39.5 9М 9М 9М Q4 Q4 Q4 Q2 Q3 Q4 Q1 Q2 Q3 2016 2017 2018 2014 2015 2016 2017 2017 2017 2018 2018 2018 Note: ALROSA, De Beers, Rio Tinto, Catoca, Petra Diamonds, Dominion Diamond (Diavik), Stornoway Diamond Note: data based on results of ALROSA and other diamond producers with a market share totalling c. 74% in 2015-2017 Source: Company data 3
PRODUCTION Ore and sands processing • In Q3 2018, the volume of processed ore and gravels grew by 70% q-o-q m tonnes (up 10% y-o-y) to 17.2 m tonnes, due to a seasonal return to production Grade, ct/t at alluvial deposits (up 7.9 m tonnes) 1.46 1.39 1.30 1.03 0.93 0.84 0.80 0.65 0.61 • Average grade was down by 28% q-o-q (down 7% y-o-y) to 0.61 carat per tonne due to a seasonal return to production at alluvial deposits. • A yoy decline was due to lack of Mir mine volumes, and growth in output 33.0 31.9 17.2 15.7 at lower grade mines (e.g. Nyurbinskaya pipe). 10.1 10.1 7.3 6.1 5.7 • Diamond production was up 23% q-o-q (2% y-o-y) to 10.5 m carats due Q1 Q2 Q3 Q4 Q1 Q2 Q3 9М 9М to seasonal growth of production at alluvial deposits by 3.5 m carats. On 2017 2017 2017 2017 2018 2018 2018 2017 2018 top of that, the Nyurba Division’s deposits increased ore processing, and Diamond production recently launched Udachny underground mine and Severalmaz gradually m carats ramped up their production to design capacity 29.5 Alluvial 26.4 Share Underground 7.6 31% 8.2 Open-pit 7.5 5.1 19% 10.4 10.5 10.3 10.1 Share 8.9 8.5 7.4 1.9 3.1 5,8 55% 5.4 2,3 2.9 14.5 3.3 13.1 50% 2.0 2.1 9% 6.6 5.8 5.2 5.3 4.1 3.5 3.8 36% Q1 Q2 Q3 Q4 Q1 Q2 Q3 9М 9М 2017 2017 2017 2017 2018 2018 2018 2017 2018 Source: Company data 4
ALROSA SALES Diamond sales Q3 2018 m carats • Q3 diamond sales down by 2.3 m cts (26% q-o-q) to 6.7 m cts mainly due 31.8 Industrial quality diamonds 29.1 to a drop in sales of small-size diamonds. This factor was behind a 11% y- Gem-quality diamonds 7.8 o-y sales decrease 8.0 9M 2018 14.1 13.4 10.2 9.4 9.0 3.0 23.9 7.5 3.2 • 9M sales in carats were down by 9%, while 6.7 21.1 2.2 3.3 2.7 2.7 11.0 2.0 10.1 8.0 6.2 6.3 4.9 • … sales in value terms rose by 9% to $3.6 bn on the back of stronger 4.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 9M 9M prices and improved mix of gem-quality diamonds as sales of +10.2 and 2017 2017 2017 2017 2018 2018 2018 2017 2018 +2 carats stones grew Increase in diamond sales by value, 9M 2018 $ m 3,588 Industrial quality diamonds 3,289 65 Gem-quality diamonds 63 1,582 1,309 3,523 1,132 3,226 26 1,057 949 881 20 848 18 23 16 21 25 1,556 1,289 1,114 1,034 933 859 823 Q1 Q2 Q3 Q4 Q1 Q2 Q3 9M 9M 2017 2017 2017 2017 2018 2018 2018 2017 2018 Source: Company data 5
INVENTORIES AND PRICES ALROSA's diamond inventories were seasonally up • By the end of Q3 2018, inventories were up 42% q-o-q (down 11% y-o-y) m carats to 15.5 m cts, driven by a seasonal increase in production at alluvial deposits and decline in small-size diamond sales in Q3 2018 18.2 17.5 15.5 14.3 • Q3 average selling price for gem-quality grew by 22% q-o-q to $199/ct, 12.3 11.0 driven by index price growth and better product mix (sales of stones of +10.8 and +2 cts size grew) • The price index was up 5.2% (on a like-for-like basis) year-to-date on demand recovery and lower stocks at the customers. Q2 Q3 Q4 Q1 Q2 Q3 2017 2017 2017 2018 2018 2018 ALROSA's gem-quality diamond prices and price indices $/carat Average selling price for gem-quality diamonds, $/ct Price index for gem-quality diamonds 199 192 192 169 165 164 0.99 143 139 126 1.00 0.93 0.99 0.91 0.96 0.94 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 Source: Company data 6
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