ALROSA Q1 2020 IFRS RESULTS MOSCOW, 5 JUNE 2020 DISCLAIMER For - - PowerPoint PPT Presentation

ALROSA

MOSCOW, 5 JUNE 2020

Q1 2020 IFRS RESULTS

DISCLAIMER

For notes: s:

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

• ther 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
• therwise) 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

• ffer to buy or acquire any securities in any jurisdiction or an inducement to enter into any investment activity. The contents hereof

should not be construed as investment, legal, tax, accounting or other advice, and investors and prospective investors in securities of any issuer mentioned herein are required to make their own independent investigation and appraisal of the business and financial condition of such issuer and the nature of the securities and consult their own advisers as to legal, financial, tax and other related matters. 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 or opinions contained in this Presentation. None of ALROSA nor any of its shareholders, directors, officers or employees, affiliates, advisors, representatives nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection

• therewith. No reliance may be placed for any purpose whatsoever on the information contained in this Presentation or on its

completeness, accuracy or fairness. This Presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Persons in whose possession this Presentation and/or such information may come are required to inform themselves thereof and to observe such restrictions. 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.

3

ALROSA: COVID response

Team

 Pre revent ntiv ive measur ures taken for at-site workers: daily control of the temperature at entrance, provision of masks, etc.  Shift appro roach for unique specia iali lists to reduce risk of possible contamination  WFH mode for most of the administrative staff ahead of

• fficial quarantine been

introduced

Operations

 Crisis is mana nagement nt committee was set up  Output re reductio ion n for 2020, scenarios for 2021-22 assessed  Capex re revised downwards  Cost cutting ing measures (e.g. G&A)

Customers

 Added flexib ibil ility ity to customers  April-June: 100% of purchase volumes can be deferred  Laun unch h of a digital l platfo form rm for large-stone tenders for remote purchase

Communities

 ~RUB 400 m allocated to safety measure ures and medical equipment, incl. face masks, testing systems and ventilators (both for company and local hospitals)  Development of telemedicine networks for the remote areas

DIAMOND MARKET OVERVIEW

4

Diam amond nd jewel elry dema mand nd in Q1’20 20  After strong start in January COVID-19 pandemic led to stores closure in February-March and stock-piling at retail Polisher shers s struc uctural turally re reduc uced ed stocks  Better offtake in H2’19 allowing to bring supply and demand into balance by the year-end  Mid-stream decreases almost to zero rough purchases

• n

lock- downs/travel restrictions Mine ners1 adjuste usted diam amond nds s supply

$ bn

 Major diamond producers adjusted supply to stock-building at mid- stream and price decreases  ~30% of diamond capacity was closed in March-April

7.3% 10.9% 7.1% 4.4% (0.6%)(1.3%) 3.0% 2.6% (6.1%)

Q1'18 1'18 Q2'18 '18 Q3'18 '18 Q4'1 '18 Q1'19 1'19 Q2'19 '19 Q3'19 '19 Q4'1 '19 Q1'2 1'20

3.2 5.7 2.3 3.3

Net imp mports (r (rough diamonds) Net export

• rts

(p (polished diamonds)

Q1 2019 Q1 2020

• 29% YoY
• 41% YoY

4.0 3.3 2.5

Q1 1 2019 19 Q4 2019 19 Q1 1 2020

• 36%

Source: Company data and analysis, GJEPC, Bureau of Economic Analysis. 1. Data based on results of ALROSA and other diamond producers with a market share totaling c. 75% in 12M 2019.

$ bn yoy change, U.S. PCE on jewelry

2020 outp tput ut cut down

38.5 34.2 28-31

2019 2020 (i (initial) 2020 (r (revised)

m ct

 Output cuts at the assets with higher variable costs, and with lower vs average profitability  …thus helping reduce cash outlays and speed up w/c release once demand recovers

• 3-6 m ct

29 26 20 22 ~20

2019 2020

Initial Revised New

MANAGING THROUGH THE DOWNTURN

Source: Company data and analysis.

5

Resp sponsi nsibility over er custo tomers mers

 Mining majors helped industry destock by the end of 2019 and continued to support in 2020  E.g. ALROSA decreased minimum allowed contract allocation level to 50% from March 2020  … in April - June‘20 up to 100% of volumes could be deferred

RUB bn

Capex ex downsc nscale aled

 A number

• f

small projects were rescheduled or put on hold  No impact on operational performance  2020 capex

• utlook

was revised downward from RUB 22 bn by RUB 1-2 bn 80% 80% 70% 70% 55% 55% 50% 50% 50% 50%

Ja Jan'18 Sep Sep'18 Ju Jul'19 Mar'20 Ju Jun'20

In April-June ‘20 up to 100% of min allowed volumes could be deferred

• Min. allowed contract allocation level

10.1 6.3 4.7 5.3 7.9 6.0 4.3 5.9 7.1 3.2 2.7 2.0 3.7 2.7 2.3 2.1 2.2 2.4 13.4 9.0 6.7 9.0 10.6 8.3 6.4 8.2 9.4

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Gem-quality diamonds Industrial quality diamonds

ALROSA ROUGH DIAMOND SALES

6

1,556 1,034 933 802 969 780 585 877 868

26 23 16 22 18 16 16 11 13

1,582 1,057 949 824 988 796 601 888 881

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Gem-quality diamonds Industrial quality diamonds

Source: Company data and analysis.

Q1 diam amond nd sales es went t up by 15 15% % qoq (-11 11% yoy) Q1 diam amond nd sales es by value ue were re down n by 1% qoq (-11 11% yoy)

$ mn m ct

 Q1 ’20 20:

• sales

es up by 15 15% % qoq to 9.4 m m ct ct amid demand recovery in the first half of the quarter.

• sales

es decli clined by 11% yoy due to sharp drop in consumer activity since the end of February on the back of COVID-19 pandemic

• sales

ales in in US USD amo amounted ed to to $881 m (down 1% qoq) with a 15% qoq sales growth in carats due to changes in the sales mix (growth in share of small- size diamonds)

• An

An 11 11% yoy reducti uction in in sa sale les in in US USD came as a result of lower sales in carats (down 11% yoy)

• 11%
• 11%

Share 25% 75% Share 2% 98% +15%

• 1%

12.3 11.7 15.5 17.0 14.3 15.9 21.7 22.6 21.1

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

INVENTORIES

7

70% 80% 82% 17% 13% 12% 13% 6% 6%

14.3 22.6 21.1

Q1 1 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Other Work in progress Finished goods

Source: Company data and analysis.

• 1. Diamond inventories at mining and processing divisions.

Q1 ALROS OSA' A's s diamo amond nd inven ento tori ries es were re down n by 6% qoq ALROS OSA' A's s diamo amond nd inven ento tori ries es struc ructu ture e

m ct, end of the period m ct, end of the period

 Q1 ‘20 20 diam amond nd invent nventori ries es wer ere down by by 1.5 m ct ct (-6% qoq) to to 21 21.1 m ct ct as strong sales exceeding seasonally lower production  48 48% yoy growth th in in invent nventori ries es (+ (+6.8 m ct ct) due to both decreased sales and increased output

• 6%

+48%

• 6%

1

PRICE DYNAMICS

8

1% 2% 2% (2%) (3%) (2%) (3%) (2%) (1%) 11% 6% 22% (23%) (19%) 5% 4% 9% (17%)

154 164 199 153 123 130 135 148 123

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

LFL price index change ARP change

Source: Company data and analysis. 1. Average realized prices (sales revenue divided by sales volumes in carat terms) are also impacted by changes in the product mix throughout the reported period. 2. Average index change of like-for-like diamonds prices (excl. +10.8 carats).

Avera rage e price1 for r gem-diamo amond nds s were e flat at yoy

$/ct

 Q1 ’20 20 like-for-like price ind ndex ex (L (LFL FL PI) was as

• 1% qoq

 Q1 ’20 20 av avera erage rea ealized zed prices es (ARP (ARP) for gem em- qual uality ty diam amond nds dec ecline ned by by 17 17% qoq (f (flat yoy) to to $12 123/ct ct due to the high base effect of Q4 ’19, which saw increased demand for large- size diamonds

3% 3% (6%) (9%) 21% (19%)

136 136 164 133

2017 17 2018 18 2019 19

Average price

70 65 63 31 30 30 44% 46% 48%

Q1 1 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Revenue EBITDA EBITDA margin

FINANCIAL HIGHLIGHTS

9

Q1 EBITD TDA A margin amounte ted to 48% Strong ng cash sh flow gener erati ation n capab ability ty

RUB bn RUB bn

 Q1 ‘20 20:

• Rev

Reven enue ue: RU RUB 63 bn bn, -3% qoq due to decrease

• f average realized prices by 14%, decline of
• ther revenue and income from grants
• EBITDA: RUB 30

30 bn bn, +2% qoq on

• n lower

er costs, sts, - 4% yoy

• Pro

rofitab tability ty up up by by 2 pp pp qoq (+ (+4 pp pp yoy) to to 48 48%

• FC

FCF grew ew to to RU RUB 22 22 bn bn (+RU RUB 5 bn bn qoq) on limited capex and lower working capital build up

• Net debt / LTM EBITDA was at

at 0.7x (flat qoq)

26 17 22

Q1 1 '19 '19 Q4 '19 '19 Q1 1 '2 '20 Source: Company data and analysis.

56 56 11 0.03 (11) (0.1)

Q4 '19 Revenue Sa Sales volume Sa Sales mix Pr Pricing like-for-like FX FX Q1 '20 Revenue

GEM-QUALITY DIAMONDS REVENUE DRIVERS

10

64 56 5 (7) (4) (2)

Q1 '19 Revenue Sa Sales vo volume me Sa Sales mix Pr Pricing like-for-

• r-like

FX FX Q1 '20 Revenue

Source: Company data and analysis.

Q1 gem-qual uality ro roug ugh h diamo amond nd re reven enue ue bridge (qoq) Q1 gem-qual uality ro roug ugh h diamo amond nd re reven enue ue bridge (yoy)

RUB bn RUB bn

 Q1 ‘20 20 gem em-diamo mond reven evenue ue was as flat at qoq to to RU RUB 56 56 bn bn due to to :

• (+) 19% increase in sales volumes (in carats)
• (-) weaker product mix
• (-) LFL index change and FX impact were immaterial

 12 12% decrease ase yoy driven by by:

• (-) 10% reduction in sales volumes (in carats)
• (+) normalized product mix
• (-) softer like-for-like prices (av. index change -8% yoy)
• (-) FX rate impact on stronger RUB

14 12 15 19 14 15 14 17 15 34 19 15 16 25 17 10 18 18 48 48 31 31 30 30 34 34 39 39 32 32 25 25 35 35 33 33 13.4 .4 9.0 6.7 9.0 10.6 8.3 6.4 8.2 9.4

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Non-production sales costs Production related sales costs Sales, m ct

COSTS DYNAMICS

11

Source: Company data and analysis.

Q1 total tal cost st of sales es were re down n by 7% % qoq

RUB bn

 Q1 ‘20 20 to total al costs sts wer ere down by by 7% qoq to RUB 32.8 bn due to:

• Production-related costs were up by 2% qoq (+RUB 0.3

bn) on +15% sales volumes growth partially offset by fuel & energy and material expenses decrease (see p. 23)

• Non-production costs were down by 15% (-RUB 2.6 bn)

mostly driven by decrease of social expenses, SG&A cost cuttings and lower MET (see p. 24)

 16% yoy decrease ease driven by:

• Production-related cost of sales down -26% (-RUB 6.5

bn) mostly due to decrease of sales in carats (see p. 23)

• Non-production costs up by 1% (+RUB 0.1 bn) driven by

increase of SG&A, exploration and other operating expenses with lower MET expenses (see p. 24)

• T
• tal cost of sales

30 30 6 5 (10) (1) (0.1)

Q4 '19 '19 EB EBITDA Sa Sales vo volume Sa Sales mix Pricing like-for-like FX FX Ot Other Q1 1 '2 '20 EB EBITDA

PROFITABILITY DRIVERS

12

31 30 5 2 (2) (5) (2)

Q1 1 '19 '19 EB EBITDA Sa Sales vo volume Sa Sales mix Pricing like-for-like FX FX Ot Other Q1 1 '2 '20 EB EBITDA Source: Company data and analysis. 1. Mainly due to decrease of SG&A, extraction tax and fuel and energy expenses (+RUB 4.2 bn). 2. Mainly due to decrease of extraction tax expenses (+RUB 1.3 bn) and change in ore and sands movement (+RUB 1.5 bn)

Q1 EBITDA A bridge (qoq) Q1 EBITDA A bridge (yoy)

RUB bn RUB bn

 Q1 ‘20 20 EBITDA was up up by by 2% qoq driven en by by:

• (+) 15% on volumes growth: net impact +RUB 6 bn (revenue

+RUB 11 bn, COGS down: -RUB 5 bn)

• (-) sales mix: -RUB 10 bn
• (-) like-for-like prices: -RUB 1 bn
• (-) FX rate: -RUB 0.1 bn
• (+) other factors (inlc. lower SG&A): net impact -RUB 5 bn

 Q1 ‘20 20 EBITDA was down by by 4% yoy driven en by by:

• (-) 11% reduction in sales volumes (in carats): net impact
• RUB 2 bn (revenue decline: -RUB 7 bn, COGS reduction:

+RUB 5 bn)

• (+) sales mix: +RUB 5 bn
• (-) like-for-like prices: -RUB 5 bn
• (-) FX rate: -RUB 2 bn
• (+) other factors: net impact +RUB 2 bn

3.3 4.8 5.9 3.2 2.4 2.8 1.6 1.7 1.6 1.0 1.6 2.1 3.6 1.2 1.5 2.5 3.4 0.8 0.6 0.7 0.8 0.2 0.4 0.3 0.6 1.9 0.3

4.8 7.2 8.8 7.0 3.9 4.5 4.6 6.9 2.6

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Infrastructure Equipment maintenance Mining capacity

CAPEX

13

Source: Company data and analysis.

Q1 capex ex was down n by 62% qoq Annual ual capex dynami namics s

RUB bn RUB bn

 Q1 ’20 20 capex ex seaso seasona nally dec ecrease eased by by 62 62% qoq to to RU RUB 2.6 bn bn mostly due to lower capex in equipment maintenance (-76% qoq) and infrastructure (-85% qoq)  32 32% yoy decrease mainly driven by lower capex in mining capacity (-34%, -RUB 0.8 bn):

• V

.Munskoye deposit (-RUB 0.4 bn)

• Zarya pipe (-RUB 0.4 bn)

 2020-2024E capex ex outl tlook was revised downward

• 62%

22 29 26 22 21 20 23 19 18 17 2020E 2021E 2022E 2023E 2024E Initial capex outlook Updated capex outlook 38 36 34 32 27 28 20 2013 2014 2015 2016 2017 2018 2019

2.7 2.9 2.1 1.4 2.1 1.9

2015 15 2016 16 2017 17 2018 18 2019 19 Q1 1 '2 '20

DEBT POSITION

14

1.7x 0.5x 0.7x 0.4x 0.7x 0.7x

2015 15 2016 16 2017 17 2018 18 2019 19 Q1 1 '2 '20

Total Debt Net Debt Net Debt / EBITDA, x

Source: Company data and analysis. 1. Including lease obligation (RUB 6.6 bn) 2. Based on EBITDA and Net Debt denominated in rubles 3. Excluding lease obligation (RUB 6.6 bn) and amortization of discount. 4. For RUB-denominated debt based on FX rate as of 1 June 2020.

Sound nd financ ancial al profile

$ mn

 Total debt in Q1 ’20 increased by $0.2 bn to $2.1 bn bn  Q1 ‘20 20 liquid idity ity up by 82% yoy to $1.1 bn bn  Net debt down by $0.3 bn to $1.0 bn bn (-23% yoy)  Net debt/EBITDA was flat qoq - 0.7x  Recent transactio ions ns:

 March’20 - 2Y bank loan of $200 m at fixed rate  April-May ’20 - two 2Y bank loans  May’20 - placed local bonds of RUB 25 bn @ 5.75% pa

Weighte hted averag erage e debt maturi turity ty

years

Liqui uidity ty posi siti tion n Debt3 re repayment ment sched edul ule

$ mn $ mn

Cash and Equivalents (incl. deposits) Credit Lines

494 500 758 213

533 758 374 9 503 358

2020E 2021E 1E 2022E 2023E 2024E 2025E Eurobonds Bank loans New debt (Apr-May'20)

1,105 3,221 4,326

31. 1.03.2020

117.3 163.2 25.6 27.1 0.9 (7.7)

Q4 '19 '19 Total Debt Loan receive ved Loan repaid FX FX Ch Change of lease liabilities Q1 1 '2 '20 Total Debt

79.6 77.4 0.1 21.1 (21.8) (1.6) (0.1)

Q4 '19 '19 Net Debt FCF CF Divi vidends receive ved Net interest FX FX Ot Other Q1 1 '2 '20 Net Debt

DEBT ANALYSIS

15

Source: Company data and analysis.

Q1 Net t Debt t bridge Q1 Total tal Debt t bridge

RUB bn RUB bn

 Q1 ‘19 19 net net deb ebt de decrease eased by by 2% qoq to to RU RUB 77 77.4 bn bn mostly driven by:

• (-) increased +ve FCF (-RUB 21.8 bn)
• (-) dividends received (-RUB1.6 bn)
• (+) FX rate impact on weaker RUB (+RUB 21.1 bn)

 Q1 ‘20 20 tota tal debt inc ncrease eased by by 39 39% to to RU RUB 16 163.2 bn bn due to:

• (+) 2Y $200 m bank loan received and bank overdraft
• f RUB 9.6 bn provided
• (-) bank overdraft of RUB 7.7 bn repaid
• (+) FX rate (+RUB 27.1 bn)
• (+) change of lease liabilities (+RUB 0.9 bn)

0. 0.7x 0.7x

Net Debt/ LTM EBITDA

FREE CASH FLOW

16

29.5 30.0 24.5 21.8 0.5 1.4 (0.9) (6.0) (2.6) Q4 ' '19 9 EBITDA DA Ch Changes i in p profita itabil ility ity Q1 ' '20 20 EBITDA DA Ch Changes i in NWC NWC Income ta tax Ot Othe her Operating rating c cash flo h flow Ca Capex Q1 ' '20 20 F Fre ree c cash fl flow

Source: Company data and analysis.

Q1 ’20: EBITDA to Free cash flow bridge

RUB bn

 Q1 ‘20 20 FCF FCF grew 30 30% qoq RUB 21 21.8 bn bn (RUB 16.8 bn in Q4 ‘19) due to:

• (+) Profitability increase by 2% qoq to RUB 30.0 bn
• (-) Working capital build up by RUB 0.9 bn mainly due to:
• -RUB 2.0 bn – seasonal decrease in diamond inventories
• +RUB 4.3 bn – seasonal growth of sands at alluvials
• -RUB 2.0 bn – seasonal decline in materials
• +RUB 1.9 bn – increase in receivables due to FX impact on

weaker RUB and growth in receivables from a number of suppliers

• -RUB 1.5 bn – increase in payables due to growth in advances

from customers

• +RUB 0.2 bn – other factors
• (-) Income tax payment (-RUB 6.0 bn)
• (+) Other (+RUB 1.4 bn) incl. FX rate impact on weaker RUB

(+RUB 1.1 bn)

• (-) Capex (-RUB 2.6 bn)

50% 50% 50% 76% 95% 76% 78% 26% 37% 59% 52% 70% 100% 100% 100%

2014 14 2015 15 2016 16 2017 17 H1 1 '18 18 H2 '18 '18 H1 1 '19 19 H2 '19 '19 Payment ratio based on IFRS net income Payment ratio based on FCF

10.8 10.8 15.4 65.7 38.0 (12M’17) 29.8 (H2’18) 42.7 (H1’18) 27.7 H1’19

2014 14 2015 15 2016 16 2017 17 2018 18 2019 19

DIVIDENDS

17

10.8 15.4 65.8 38.6 43.7 (H1'18) 28.3 (H1'19) 30.3 (H2'18) 19.4 (H2'19)

2014 14 2015 15 2016 16 2017 17 2018 18 2019 19 Source: Company data and analysis. 1. Dividends paid less than dividends accrued due to exclusion of dividends for treasury shares. 2. H2 ‘19 dividends to be approved by AGM (scheduled on 24 June 2020)

Dividend nd accrual ruals Dividend nd payments ments1

RUB bn RUB bn

 Dividend policy adopted in 2018: FCF-linked with the payout ratios depending on the level of Net debt/LTM EBITDA ratio  Board recommended H2 ’19 dividends RUB 19.4 bn (RUB 2.63/sh), or 100% H2’19 FCF.  AGM scheduled for 24 June Dividend nd payout ut rati tios

74.0 80.7 57.5 47.7

OUTLOOK

Market et outlook

 Long ng-te term fun undam amen enta tals of

• f th

the industr stry remai emain str trong ng – diamond jewelry remains the product of choice for “special moments in life”, and being culturally accepted in new geographies  Grad adual ual diamo amond demand mand re recover ery on

• n the marke

rket after er lifti ting ng of

• f lockdowns

ns aro roun und the world rld (based on China’s track record)  Supply of

• f the ro

roug ugh diam amond nds cont ntinu nues es to to decrease ease as deposits deplete and a number of mines are under lockdowns

Compan any performan ance ce

 2020 produc ucti tion is expected to decrease to 28-31 m ct (see p. 19)  2020 sales es volumes will depend on real market demand. Sales strategy remains intact – “price over volume”  2020 capex ex outlook was revised downward to RUB 20 bn (down RUB 1-2 bn) with no effect on operational performance  Acti tive cost st cutt tting pro rogra ram being ng ro rolled out:

• Suspension of Aikhal underground mine – May 15 to Sept 30, 2020; Zarya pipe – May 15 to Dec 31, 2020; V

. Munskoye – June 1 to Oct 1, 2020; Zarnitsa pipe – May 1 to Dec 31, 2020, reduced production at Severalmaz from Q2’20

• SG&A savings for payroll – cut by 20% from April
• Ongoing savings from operational efficiency programs to support profitability

Source: Company data and analysis.

18

2020 PRODUCTION OUTLOOK

19

0.27 2.0 1.9 4.2 0.26 1.6 1.1 2.5 3.0

Zaria Aikhal V.M .Munskoe

• e

Sev Severalma maz Tot

• tal redu

duction

• n

Initial outlook Updated outlook

Source: Company data and analysis.

• 1. Other includes marginal production at Komsomolskaya and Zaria pipes of Aikhal Division, Zarnitsa pipe and alluvials of Udachny Division.

2020 outp tput ut re reduc ucti tion n by deposi sits ts

m ct

 Management nt re respons nse to to the downturn urn:

• 2020 “COVID crisis”:
• ‘20 output was revised from 34.2 m ct to 28-31 m ct,

which is expected to:

• Costs down by RUB 6 bn to translate into FCF

increase

• Unit cost (RUB/ct) up by ~5%
• Scenarios for ‘21-22 output cuts are being studied

Pro roduc uction n outl tlook

m ct

Almazy Anabara

Severalmaz

Nyurbinskaya ya Jubilee Aikhal

Mirny Division Other1

Botuobinskaya

Aikhal Division Udachny Division Nyurba Division

International Alluvi vials

Arkhangelskaya Karpinskogo-1

Alluvi vials 5.4 5.2 3.6 4.2 1.5 5.5 6.2 4.7 2.5 3.1 0.2 1.5 4.2 3.0 2.4 2.6

28-31

9.1 7.2 1.5 1.4

36.7 38.5 34.2 Potent ntia ial l to pro roduce uce up to 37 37-38 38 m m ct ct

2018 2019 2020E 2021-3

• 30E

APPENDIX

17.9 20.1 16.1 17.0 19.7 21.6 18.0 18.5 16.2

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

ALROSA PRODUCTION (1/2)

21

5.7 10.1 17.2 7.5 6.4 10.5 17.2 7.2 5.9 1.30 0.84 0.61 1.38 1.23 0.93 0.71 1.22 1.36

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Grade, ct/t

Source: Company data and analysis. 1. ROM – run of mine

Q1 run-of

• f-mine

ne ore re was down n by 12% qoq Ore re and sand nds s processi essing ng went t down n 18% qoq

m t m m3

 Q1 ‘20 20 ROM OM1 ore re down wn by by 12 12% qoq (-18 18% yoy) to to 16 16.2 m m3, largely due to decision to suspend project of pit deepening at the Arkhangelskaya pipe (Severalmaz) in 2020  Q1 ‘20 20 processed fe feedstock seasona nall lly down by by 18 18% qoq (-7% yoy)  Q1 ‘20 20 avera rage dia iamond nd gra rade saw an an inc ncre rease of

• f 11

11% qoq to to 1.36 36 cpt due to seasonal suspension of production at the Mirny Division's lower-grade alluvial deposits. A 10 10% yoy growth was mostly driven by an increased share of high- grade ore processing at the underground mines of Aikhal and International, along with a rise in the average diamond grade at the Jubilee pipe

• 12%
• 18%

5.3 4.1 3.8 6.5 6.1 5.6 5.2 6.0 5.9 2.0 2.1 1.0 3.3 1.5 2.2 1.6 2.6 2.0

0.2

2.3 5.8

0.5 0.2

1.9 5.4

0.3 0.1

7.4 8.5 10.5 10.3 7.8 9.7 12.1 8.8 8.0

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

Open pit Underground Alluvials

ALROSA PRODUCTION (2/2)

22

Source: Company data and analysis.

Diamo amond nd pro roduc uction was down n by 9% qoq

m ct

 Q1 ’20 20 diam amond nd out utput ut dec ecrease eased by by 9% qoq to to 8.0 m ct ct, mainly following lower production at the Aikhal underground mine (-0.6 m ct) and the Botuobinskaya pipe (-0.5 m ct)  …a 2% growth th yoy was due to increased production at the Aikhal and Udachnaya underground mines (+0.3 m ct)

Share 2% 25% 74%

• 9%

+2%

24.7 17. 7.9 18.2 Other production costs Services and transportation Materials costs Fuel and energy Labor costs Movement of diamonds Movement of ore and sands

PRODUCTION COSTS DYNAMICS AND BREAKDOWN

23

21.5 18.2 1.1 (4.3)

Q1 1 '2 '20 Production costs Mo Move vement in inve ventory

• f ore and sands

Mo Move vement in inve ventory

• f diamonds

Q1 1 '2 '20 Production costs of sales

Direc ect t pro roduc ucti tion n re related ated costs sts of sales es up Pro roduc uction n cost st adjuste usted for inven ento tory movement ements

RUB bn RUB bn

 Q1 ‘20 20 productio uction rela lated co costs sts of

• f sa

sale les were up up by by 2% qoq to to RUB RUB 18 18.2 bn bn driven by:

• (+) movement in inventory on decrease in diamonds stock due to

sales exceeding output (+RUB 3.7 bn)

• (-) movement in inventory on increase in ores & sands stock as its
• utput exceeded processing volumes (-RUB 1.1 bn)
• (-) fuel & energy

gy -28 28% % on volumes decrease (-RUB 1.7 bn)

• (-)

) materials -36% due to seasonality and unscheduled repairs work in Q4 ’20 (-RUB 1.4 bn)

• (+) services & transpo

port t costs +91% (+RUB 1.0 bn)

 Q1 ‘20 20 productio uction rela lated co costs sts of

• f sa

sale les were down by by 26 26% yoy driven by:

• (-) decrease of negative movement in diamonds stock driven by

less excess of sales over production on the back of 11% sales decline with 2% production increase (-RUB 5.3 bn)

• (-) increase of positive movement in ores & sands stock (-RUB 1.5

bn)

Q1 ‘19 Q4 ‘19 Q1 ‘20 XX XX

• total direct production costs of sales

NON-PRODUCTION COSTS DYNAMICS AND BREAKDOWN

24

1.0

(0.8) 1.8

6.1 6.0 4.8 3.1 4.7 3.4 2.1 2.2 2.5 0.8 3.8 0.8 1.2 1.3 1.2

14.4 17.1 14.5

Q1 '19 Q4 '19 Q1 '20 Other taxes and payments Social expenses Exploration expenses SG&A Extraction tax and royalty Other non-production costs

Source: Company data and analysis. 1. Mainly includes cost of diamonds for resale and other non-production costs

Non-produc ucti tion n costs sts were re down n by 15 15% % qoq

RUB bn

 Q1 ‘20 20 no non-productio uction co costs sts were down by by 15% qoq to to RU RUB 14.5 bn bn mostly due to:

• (-) social expenses down by 4.9x

x on lower charity expenses & maintenance of local infrastructure (-RUB 3.0 bn) due to high base effect in Q4 ’20: one-off expenses on disposal of farming unit & contribution to “Yakutia’s Fund of Future Generations”.

• (-) SG&A expenses -27%

% (-RUB 1.3 bn) due to decrease of consulting and IT services

• (-) MET down by 20%

% (-RUB 1.2 bn) mostly driven by lower extracted volumes

• (+) other non-pr

produ

• duction
• n costs up by RUB 2.6 bn due to decrease of
• ther operating income and increase of other operating expense

 Q1 ‘20 20 non-productio uction costs ts were up up by by 1% yoy mostly due to:

• (+) other non-pr

produ

• duction
• n costs up by RUB 0.8 bn due to higher of other
• perating expenses
• (+) SG&A expenses up by 11% (+RUB 0.3 bn)
• (+) explor
• ration
• n expenses up by 18% (+RUB 0.4 bn) due to start of

exploration and appraisal activities on new projects (Mir, Udachnaya, Zarya pipes and others)

• (-) MET down by 22% (-RUB 1.3 bn) on lower volumes and change of

price list

Udachny hny UG UG mine VM VM1 deposit it Maiskaya pipe VG VG2 deposit it Type of mining ing Underground Open-pit Open-pit Alluvials Pro roduc uctio ion n start 2014 2018 2025 2024 Ramp-up up 2021 2019 2027 2025 Target ore re output ut pa, m t 4.0 3.0 0.3 1.1 Target pro roductio ion n pa, m ct ct 5.6 1.8 1.2 0.4 Total l CAPEX, , RUB bn bn 63.9 20.0 5.6 2.3 Invested ed share 87% 92% 6% 0% Resour urce base3, , m ct ct 207.6 40.4 12.7 4.7

KEY INVESTMENTS PROJECTS

Source: Company data 1. Verkhne-Munskoye deposit 2. Vodorazdelnye Galechniki deposit 3. Diamond mineral resources in accordance with the JORC Code as at 1 July 2018

25

1 2 3 4

Yakutsk

Mirny Udachny Nyurba

Yakutia

DIAMOND PRODUCTION BY ASSETS

26

1.3 1.2 0.8 0.7 1.1 1.0 3.2 3.0 2.4 2.1 8.8 8.0

Q4 2019 Q1 2020 Nyurba Division Aikhal Division Severalmaz Mirny Division Udachny Division

Source: Company data and analysis.

Diamo amond nd outp tput ut

m ct

 Q1 ‘20 20 diamo mond produc uction dec ecreas eased ed by by 9% qoq mainly due to lower production at the Aikhal underground mine and the Botuobinskaya pipe  Key driver ers:

• Nyur

urba Di Divis isio ion – down by by 13 13% due to lower production at the Botuobinskaya pipe partially offset by increased production at the Nyurbinskaya pipe

• Aik

ikha hal Div Divis isio ion – down by by 5% due to production decline at the Aikhal underground mine partially offset by higher production at the Jubilee pipe

(5%) (18%) (7%)

• 9%

(7%) (13%)

FX RATE

27

93% 15% 26% 75% 96% 7% 85% 74% 25% 4%

Reve venue Co Cost of sales Ca Capex Ca Cash and cash equiva valents (incl. bank deposits) Total debt

RUB USD

Source: Company data and analysis. 1. Excluding lease obligation (RUB 6.6 bn)

Finan ancial al metri rics s break reakdown by curr rrency

% of metric's total, Q1 ‘2020

 ALROSA is an exporter with more than 90% of revenue denominated in USD  Major portion of costs and capex is denominated in RUB, 96% of the Company’s debt portfolio1 is denominated in USD to create a natural hedge against FX risks  ALROSA's financial sensitivity analysis shows that a change in the USD exchange rate by +/- 1 RUB/USD leads to the following change in metrics:

• revenue – +/-1.39%
• cost of sales – +/-0.23%
• EBITDA – +/-2.69%
• capex – +/-0.38%

OPERATING CASH FLOW AND CAPEX

46 41 28 21 25 16 21 14 30 26 7 2 7 3 24 17 17 24 22 22 (5) (7) (9) (7) (4) (5) (5) (7) (3)

Q1 1 '18 '18 Q2 '18 '18 Q3 '18 '18 Q4 '18 '18 Q1 1 '19 '19 Q2 '19 '19 Q3 '19 '19 Q4 '19 '19 Q1 1 '2 '20

OCF CAPEX FCF

Operat ating ng cash h flow and capex dynam amics cs

RUB bn

Source: Company data and analysis.

• 1. OCF – operating cash flow
• 2. FCF – free cash flow is defined as OCF net of capex in the core business

28

THANK YOU!

SERGEY EY TAKHIEV EV HEAD OF CORPORATE FINANCE M: +7 985 760 55 74 E: ST@ALROSA.RU RUSSIA, 115184 MOSCOW 24 OZERKOVSKAYA EMB. DMITRY BYALOSHI SHITSK SKIY CORPORATE FINANCE M: +7 915 113 32 04 E: DB@ALROSA.RU