ALROSA

ALROSA strategic priorities Focusing on the diamond business. ALROSA will pursue a single product strategy with a focus on rough diamond exploration and production as the most attractive and high-margin segment of the diamond industry and will dispose of a number of non-core assets. In keeping with this strategy, the Group will maintain its leadership in rough diamond production. Since 2009, ALROSA has been a recognized industry leader in terms of rough diamond production. A stable growth in production from 34 mln ct. in 2012 to 41 mln ct. in 2019 will allow the Group to maintain its leadership. The Group plans to dispose of a number of non-core assets that have low or negative margins and are not crucial for supporting the Group’s core operations. The proceeds from the disposal of non-core businesses will be used to reduce debt and invest in the Group’s core operations. Maintain and expand the Group’s resource and reserve base through targeted exploration of high potential regions in Russia and Africa. The Group will continue to invest in exploration to maintain and expand its resource and reserve base, with a focus on Russia and Africa, the two regions of the world the Group believes have the highest potential for the discovery of commercially viable diamond deposits. The Republic of Sakha (Yakutia) will remain the Group’s primary production area, while the North-Western regions of Russia and African countries will provide a base for future growth. At the same time, the Group will improve the efficiency of its exploration activities by implementing a disciplined approach that requires projects to demonstrate a compelling case for profitable returns at key project stages before further funding is provided. Enhance operational efficiency through innovation and continuous improvement. To enhance its operational efficiency and better position the Group to maintain profitability in periods of stable or declining rough diamond prices, the Group is actively pursuing opportunities to improve its cost structure at all stages of the production chain and to increase production over the medium-term through the use of new technologies to improve diamond recovery ratios, develop low-grade and remote deposits, and conduct underground mining at deeper levels. The Group also intends to work on the improvement of logistics, sorting, and classification practices and to pursue enhanced liquidity management by reducing the Group’s inventory turnover rate to optional levels. Become the recognized leader of the rough diamond industry with a first class reputation among its customers. The Group aims to assume a broader leadership role in the rough diamond industry by playing an active role in international organizations and strengthening the Group’s role in the Kimberly process. The Group will also continue to expand its base of loyal and reliable customers by securing reliable diamond offtake through long-term contracts. To achieve this, the Group will continue to build its reputation as a customer-focused business partner by improving sorting and box formation practices, offering improved assortments, pursuing transparent pricing policies and improving customer service. At the same time, the Group will continue to promote efforts to liberalize and improve the regulatory environment for diamond sales, including through new regulatory diamond classifications. Pursue a new model of social responsibility in Yakutia centered on providing vital services in remote locations. The Group will continue its tradition of social responsibility in the regions where it operates, by paying taxes and charges, creating jobs, training employees and maintaining high health safety and environmental standards. At the same time, the Group will pursue and promote a new model of social responsibility in Yakutia under which the government of Yakutia is responsible for providing and funding social infrastructure and services, while the Group focuses on diamond production. Under this new model, the Group will help the Government meet its obligations to provide social infrastructure and services by paying taxes and dividends, but will focus its own social services activities to basic services in remote areas.