On December 26, 2009 the ALROSA Executive Board held its regular meeting under the chairmanship of the ALROSA President Fyodor Andreev at the head office in Mirny, Republic of Sakha (Yakutia).
The agenda included transferring underground mine construction projects to the category of investment projects and their further funding on the principles of project financing, the distribution and sales concept, the borrowing policy for 2010, reforming ALROSA maintenance activities, and some other issues.
The distribution and sales concept, to be subsequently approved by the Company’s Supervisory Board, provides for an increased proportion (up to 70%) of goods to be distributed under long-term contracts with large players in the market. The analysis of the market downturn in H1 2009 demonstrates the expediency of ensuring equal access to goods for domestic and foreign clients, and achieving unification of long-term contracts for Russian and foreign buyers.
In H1 2009, with no sales in the open market, the Company’s current operations were financed out of borrowed funds, therefore the ALROSA Group consolidated loan liabilities by the end of July reached RUB 160 b (USD 5.1 b). The debt portfolio was characterized by high servicing costs and a prevailing proportion of short-term debt over long-term debt.
From August 2009 the Company started the implementation of measures to alleviate the debt burden and improve the quality of its debt portfolio. As a result of those measures, the current liabilities of ALROSA Group by year end of 2009 will amount to RUB 112 b (USD 3.8 b), with no breaches of any of its financial commitments to its creditors and investors.
Throughout 2010 ALROSA will continue to work to reduce its consolidated debt and interest payable on its loans.
To reduce servicing costs and restructure the Company’s loan portfolio to benefit from the extension of repayment deadlines, the Executive Board proposed to the Supervisory Board to approve issuing ruble-denominated bonds in Q2 2010 to the total amount of RUB 44 b. A possibility of a Eurobond issue in Q4 2010, conditional upon the recovery of the global economy and international market of fixed income instruments, was also considered.
Resulting from the implementation of its plans to optimize its debt portfolio, the ALROSA Group total consolidated debt will decrease by 10% to RUB 103 b (USD 3.5 b), with the costs of servicing reduced and the debt structure changing drastically as the proportion of long-term liabilities will be increased to 77%.
The day before the Executive meeting the ALROSA CEO Fyodor Andreev had attended the working meeting with the participation of the Republic of Sakha President Vyacheslav Shtyrov, held to review the 2009 preliminary financial and economic results of ALROSA Co. Ltd., OJSC ALROSA-Nyurba, OJSC ALROSA-Gas, CJSC Irelyakhneft, OJSC Almazy Anabara, and discuss production targets for 2010.
Also in the course of his visit to Mirny the ALROSA President gave his attention to a range of issues, such as the status of the Company’s African projects, the anti-crisis programme and developments prospects for OJSC Severalmas, the operations of the Almaznaya Osen (Diamond Autumn) retirement benefit scheme, the cost efficiency of underground mine construction, and others.