ALROSA May Consolidate Largest Subsidiary in Yakutia

Mining and Exploration
18/04/2017 09:44

Russian diamond miner ALROSA might consolidate ALROSA-Nyurba - ALROSA's biggest subsidiary - after closing a deal to buy 10% of shares from Yakutia, said the head of the Sakha Republic (Yakutia), Yegor Borisov, in a conversation with regional media. "ALROSA might make a decision to consolidate assets with the aim of optimization. The company would become stronger as a result of this and we support it in this. ALROSA-Nyurba could simply be liquidated," Borisov said. "There are now several dozen people working at ALROSA-Nyurba, they're not doing any production, they haven't mined a single carat. Paper, an office and a license is all they have," he said. There were reports earlier that this stake might be serving as collateral on loans to Yakutia's housing and public utility enterprises and Yakutia Airlines. Yakutia is traditionally conservative in its decisions on privatizing stakes in diamond miners, so the issue has drawn a great deal of public interest.

If it buys 10% of ALROSA-Nyurba from Yakutia, ALROSA will increase its stake in the company to 97.47%, and under the law would make a mandatory buyout offer to ALROSA-Nyurba's minority shareholders. Borisov said Yakutia expects to sell its stake in ALROSA-Nyurba by the fall of this year. "We plan to sell [the shares] closer to the annual meeting, by the fall, when the shares might go up in price on the results of the company's activities for the year," he said. The sale of the stake is "advantageous for the republic in terms of economics and finance," he said. "We must understand that the shares are declining in price, that we could lose this company altogether. The risks in regard to ALROSA-Nyurba are very high," Borisov said. The current price of 10% of ALROSA-Nyurba shares on the Moscow Exchange is 12.8 billion rubles ($230 milion). The share price has fallen by 20% since the end of last November, when reports emerged about the possibility of transactions with Yakutia's stake in ALROSA-Nyurba. The parent company's share price has fallen by 5% in this time.

ALROSA-Nyurba holds the license to the Nakynskoye kimberlite field, which includes two kimberlite pipes, Nyurbinskaya and Botuobinskaya, as well as alluvial deposits being developed by ALROSA's Nyurba mining and processing complex. The Nyurba operation accounted for 18% of the ALROSA Group's production in 2016.