ALROSA Q2&6M 2019 IFRS RESULTS MOSCOW, 19 AUGUST 2019 - - PowerPoint PPT Presentation

ALROSA

MOSCOW, 19 AUGUST 2019

Q2&6M 2019 IFRS RESULTS

DISCLAIMER

For notes es:

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

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DIAMOND MARKET OVERVIEW

3

7 9 11 10 8 10 26 31 25 30 24 30 16 18 57 54

33 40 35 41 32 39 73 71

Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19 6M ' M '18 6M ' M '19

ALROSA Other

6.3 6.7 5.2

6M ' M '17 6M ' M '18 6M ' M '19 Source: Company data and analysis. 1. Data based on results of ALROSA and other diamond producers with a market share totalling c. 71% in 6M 2018 2. ALROSA, De Beers, Rio Tinto, Catoca, Petra Diamonds, Mountain Province, Stornoway Diamond

Decreas ease in global al diamon

• nd output1

Miners2 diamond

• nd sales

es were 23% down

$ bn m ct

 6M ‘19 19 glo lobal al output down 2% yoy, driven by lower DeBeers and Rio Tinto production  Stocks cks of

• f polis
• lished

ed diamon iamond at at mid mid-stream eam grew as retailers were in destocking mode on slowdown in demand  In In 6M ‘19 19 mine ners reduc uced sa sale les by by -23 23% yoy yoy as mid-stream faces tighter financing conditions and elevated polished diamonds stocks

(23%)

23%

(2%)

ALROSA PRODUCTION (1/2)

4

17.9 20.1 16.1 17.0 19.7 21.6 38.0 41.3

Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19 6M ' M '18 6M ' M '19

5.7 10.1 17.2 7.5 6.4 10.5 15.8 16.8 1.30 0.84 0.61 1.38 1.23 0.93 1.01 1.04

Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19 6M ' M '18 6M ' M '19

Grade, ct/t

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

Run-of

• f-mi

mine ore was up by 10% qоq Ore and sands processin sing goes up 65% % qoq

m t m m3

 Q2 ‘19 19 ROM OM1 or

• re up

up 10 10% qoq qoq (+ (+8% yoy

• y) to

to 21 21.6 m m3, driven by higher stripping ratio at the Nyurbinskaya pipe, pre-mining operations at Almazy Anabara, and seasonal output at alluvials. 6M ‘19 19 ROM OM or

• re was

as 9% yo yoy up up to to 41 41.3 m m3, mostly due to the launch of production at the V .Munskoye deposit.  Q2 ‘19 19 pr proc

• ces

essed ed feedstoc eedstock seas eason

• nal

ally ly gr grew ew by by 65 65% qoq qoq (+ (+4% yoy yoy). Ore and gravels processing in 6M ‘19 19 in increas eased ed 6% yo yoy to to 16 16.8 mt mt supported by the ramp- up of production at the V .Munskoye deposit and increased productivity at Nyurba Division and Udachny’s processing plants.  Q2 ‘19 19 av aver erage age grade grade was as 10 10% up up yo yoy on

• n be

bett tter er grades grades at at Several everalma maz, an and bet bette ter grades rades at at Udachn Udachny grav avels

• ls. A qoq decrease of 25% was due to seasonality.

9%

10%

ALROSA PRODUCTION (2/2)

5

5.3 4.1 3.8 6.5 6.1 5.6

2.0 2.1 1.0 3.3 1.5 2.2 0.2 2.3 5.8 0.5 0.2 1.9

9.4 11.7 4.1 3.7 2.4 2.1

7.4 8.5 10.5 10.3 7.8 9.7 15.9 17.6

Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19 6M ' M '18 6M ' M '19

Open pit Underground Alluvials

Source: Company data and analysis.

Diam amon

• nd production

ion was up by 24% qoq

m ct

 Q2 ’19 19 diamo iamond ou

• utput grew

ew 24 24% qoq to to 9.7 m cts, mostly due to seasonal activity at alluvial deposits.  Q2 ’19 19 output was up up 14 14% yoy driven by by:

• launch of production at the V

.Munskoye deposit

• increase

in higher-grade

• re

processing at the Botuobinskaya pipe (Nyurba Division)

 6M ‘19 19 diamon

• nd output grew 10

10% yoy driven by by:

• +0.7 m cts - launch of production at V

.Munskoye deposit

• +0.3 m cts – growth from Severalmaz on better grades

from richer ore

• increase in ore processing at the Botuobinskaya pipe

and productivity gains

Share 12% 21% 67%

24%

10%

INVENTORIES

6

17.5 18.3 12.3 11.7 15.5 17.0 14.3 15.9

Q3 '1 '17 Q4 '1 '17 Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19

51% 70% 59% 22% 17% 17% 26% 13% 24%

11.7 14.3 15.9

Q2 '1 '18 Q1 '1 '19 Q2 '1 '19

Other Work in progress Finished goods

Source: Company data and analysis.

• 1. Diamond inventories at mining and processing divisions

ALROSA's s diamon

• nd inventor
• rie

ies s were up 12% qoq ALROSA's s diamon

• nd inventorie
• ries

s structure

m ct m ct

 Q2 ‘19 19 diamo iamond in invent ntor

• ries

es ad added 1.6 m ct cts (+12% qoq) 15.9 m cts as output increased by 24% qoq while sales in cts decreased by 22% qoq  36 36% yoy yoy grow

• wth in

in Q2 inv nvent ntor

• ries

es (+ (+4.2 m cts) due to lower sales (-8% yoy), while output increased (+14% yoy)

12%

36%

12%

1

ALROSA ROUGH DIAMOND SALES

7

10.1 6.3 4.7 5.3 7.9 6.0 3.2 2.7 2.0 3.7 2.7 2.3 16.4 13.9 6.0 5.0

13.4 9.0 6.7 9.0 10.6 8.3 22.4 18.9

Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19 6M ' M '18 6M ' M '19

Gem-quality diamonds Industrial quality diamonds 1,556 1,034 933 802 969 780

26 23 16 22 18 16

2,590 1,749

49 35

1,582 1,057 949 824 988 796

2,639 1,784

Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19 6M ' M '18 6M ' M '19

Gem-quality diamonds Industrial quality diamonds

Source: Company data and analysis.

Q2 diamon

• nd sale

les s went down by 22% % qoq (-8% % yoy) Q2 diamon

• nd sale

les s by value e were down by 19% qoq

$ mn m ct

 Q2 ‘19 19 sal ales es do down by by 22 22% qoq qoq (-8% yo yoy) to to 8.3 m cts ts, including a 24% qoq decline in gem-quality diamonds sales (down 5% yoy) to 6.0 m cts, due to excessive stocks

• f rough and polished diamonds in the mid-stream

 Q2 ‘19 19 sal ales es in in USD SD dec decreas eased ed by by 19 19% qoq qoq ($796 796 m) m) due to 22% qoq sales decline in carats  Q2 ‘19 19 sal ales es dec ecli lined ned 25 25% yo yoy, while sales in carats fell by 8% yoy

(22%) (19%)

Share 26% 74% Share 2% 98% (16%) (32%)

PRICE DYNAMICS

8

2% 0.3% (2%) 3% 2% 2% (2%) (3%) (2%)

1.00 1.02 1.02 1.01 1.02 1.04 1.06 1.04 1.01 1.00

Q1 '1 '17 Q2 '1 '17 Q3 '1 '17 Q4 '1 '17 Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19

Average index change Average price index

0.3% 22% 3% 11% 6% 22% (23%) (19%) 5%

117 138 169 139 154 164 199 153 123 130

Q1 '1 '17 Q2 '1 '17 Q3 '1 '17 Q4 '1 '17 Q1 '1 '18 Q2 '1 '18 Q3 '1 '18 Q4 '1 '18 Q1 '1 '19 Q2 '1 '19

Price change

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

Price index for r gem-quali lity y diamon

• nds

s was down by 2% qoq Averag age e sellin ing price2 for gem-quali lity diamon

• nds

s was up by 5% qoq

$/ct

 In In Q2 ’19 19, the dia iamo mond pric rice index ex was was -1.6% qoq, a YTD decrease of 4.6%, mainly due to lower demand from mid-stream and limited access to affordable financing for mid-stream in India  In In Q2 ’19 19, av average erage realis ealised pri rices ces fo for gem em-quality uality diamo iamonds ros

• se 5% qoq to

to $130 130/ct ct due to low base effect as in Q1 sales share of small stones (in carats) was 1.8x higher than historical average

1

FINANCIAL HIGHLIGHTS

9

72 70 57 41 31 25 57% 44% 44%

Q2 '1 '18 Q1 '1 '19 Q2 '1 '19

Revenue EBITDA EBITDA margin

1.9x 1.9x 1.7x 0.5x 0.7x 0.4x 0.3x 0.3x

2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 Q1 '1 '19 Q2 '1 '19 Source: Company data and analysis. 1. Net debt/LTM EBITDA at the end of Q1 ’19 was restated due to inclusion of operating lease obligation and amounted to 0.3x

Margin ins s are stable le qoq Leverag age e remain ins s low

Net debt/LTM EBITDA, x-times RUB bn

 Q2 ‘19 19 rev evenu nue ca came at at RU RUB 57 57 bn bn (-19 19% qoq) due to a 24% decline in gem-diamond sales in carats. 21 21% yoy yoy dec ecreas ease due to decrease in both sales volumes and like-for-like prices.  Q2 ‘19 19 EBI BITD TDA wa was RU RUB 25 25 bn bn (-20 20% qoq and -39 39% yoy) largely due to top line decrease.  Q2 ‘19 19 EBITDA margin in was flat at at 44 44% (-13 p.p. yoy)  Q2 ‘19 19 net et in income come was was down wn to to RU RUB 13 13 bn bn (-44% qoq, -47% yoy) due to revenue decline and decrease of FX gains.  Q2 ‘19 19 FCF amounted to to RUB 2.4 bn bn  Net debt / LTM EBITDA remains unchanged at 0.3x1

GEM-QUALITY DIAMONDS REVENUE DRIVERS

10

64 50 3 (15) (0.2) (1)

Q1 '19 Re Revenu nue Sale Sales volum lume Sale Sales m mix ix Pr Pric icing ing li like-for-li like FX FX Q2 '19 Re Revenu nue

64 50 2 (3) (10) (3)

Q2 '18 Re Reve venue Sale Sales vo volum lume Sale Sales m mix ix Pr Pric icing ing lik like-for-lik like FX FX Q2 '19 Re Reve venue

Source: Company data and analysis.

Q2 gem-quali lity y rough diamon

• nd revenue bridge (qoq)

Q2 gem-quali lity y rough diamon

• nd revenue bridge (yoy)

RUB bn RUB bn

 Q2 ‘19 19 gem em-diamo iamond sa sales es wer were dow

• wn by

by 21 21% qoq to to RUB 50 50 bn bn driven by by:

• (-) 24% decrease in sales volumes (in carats)
• (+) normalized product mix
• (-) softer like-for-like prices (av. index change – -1.6%)
• (-) FX rate impact on stronger RUB

 22 22% yoy decrease se driven by by:

• (-) 8% reduction in sales volumes (in carats)
• (-) weaker product mix
• (-) softer like-for-like prices (av. index change – -4.5%)
• (+) positive FX rate impact as RUB weakened

0.5 0.2 0.2

10.3 12.2 12.2 4.7 4.0 3.8 2.5 2.6 3.1 2.6 2.0 2.0

(4.0) (2.8) (3.0)

16.7 18.3 18.3

Q2 '1 '18 Q1 '1 '19 Q2 '1 '19 Movement of ore and sands Services and transportation Materials costs Fuel and energy Labor costs Other production costs

Produc

• duction

ion costs ts remain ined ed uncha hang nged d qoq

COSTS DYNAMICS AND BREAKDOWN

11

(0.7) 1.0 1.4

2.8 6.4 (1.0) 4.6 6.1 4.7 3.6 3.0 4.3 1.5 2.2 1.7 1.3 0.8 1.6 1.4 1.2 1.2

14.5 20.8 13.9

Q2 '1 '18 Q1 '1 '19 Q2 '1 '19 Other taxes and payments Social expenses Exploration expenses SG&A Extraction tax and royalty Movements of diamonds in inventory Other non-production costs

 Q2 ‘19 19 total

• tal cos

costs wer ere dow

• wn by

by 18 18% qoq to RUB 32.2 bn mostly due to decrease of sales in carats by 22%  Q2 ‘19 19 total al cos costs wer ere up up by by 3% yo yoy mostly due to increase of production

Non-pr produ

• duction

ion costs ts were e down by 33% qoq

1

Source: Company data and analysis.

• 1. Mainly includes cost of diamonds for resale and other non-production costs

RUB bn RUB bn

PROFITABILITY ANALYSIS

12

31 25 8 3 (16) (0.2) (1) (0.6)

Q1 '1 '19 EBIT BITDA DA Sales les volu lume COG OGS red educt ctio ion

• n sales v

ales volu lume me Sales m les mix ix Pr Pricin icing like- like-fo for-like

• like

FX FX Oth Other er Q2 '1 '19 EBIT BITDA DA

41 26 2 (4) (10) (3) (1)

Q2 '1 '18 EBIT BITDA DA Sales les volu lume Sales m les mix ix Pr Pricin icing like- like-fo for-like

• like

FX FX Oth Other er Q2 '1 '19 EBIT BITDA DA Source: Company data and analysis.

Q2 EBITDA – key drivers s (qoq) Q2 EBITDA – key drivers s (yoy)

RUB bn RUB bn

 Q2 ‘19 19 EBITDA was down by by 20 20% qoq driven by by:

• (-) 22% decrease in volumes -RUB 16 bn
• (+) COGS reduction on sales volume: +RUB 8 bn
• (+) sales mix +RUB 3 bn
• (-) like-for-like prices: -RUB 0.2 bn
• (-) FX rate: -RUB 1 bn
• (-) other factors: net impact -RUB 0.6 bn

 … 39 39% yoy decrease se driven by by:

• (-) 8% reduction in carat sales: -RUB 4 bn
• (-) sales mix: -RUB 10 bn
• (-) like-for-like prices: -RUB 3 bn
• (+) FX rate: +RUB 2 bn
• (-) other factors: net impact -RUB 1 bn

CAPEX

13

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

4.8 7.2 8.8 7.0 3.9 4.5

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

Infrastructure Mining capacity Equipment maintenance

38.2 36.1 34.2 31.8 26.9 27.8 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 Source: Company data and analysis.

Q2 capex increas eased by 17% % qoq 2019 capex outloo

• ok revised

ed down to RUB 23 bn bn

RUB bn RUB bn

 Q2 ’19 19 cape capex grew +17 17% qoq to RUB 4.5 bn driven by:

• Maintenance capex seasonally up by RUB 0.3 bn (+26%)
• Zarya pipe capex up by RUB 0.3 bn (+70% qoq)

 -37 37% yoy yoy mainly due to lower capex in V .Munskoye deposit by 88% yoy and Udachny UM by 87% yoy  2019 capex outloo

• ok was reduced to RUB 23.4 bn

17%

23.4 26 28 22 16 18 28.7 26 28 20 15 18 2019E 2019E 2020E 2020E 2021E 2021E 2022E 2022E 2023E 2023E 2024E 2024E

New capex outlook Old capex outlook

DEBT POSITION

14

3,062 2,347 1,622 1,535 1,646 1,415 2,781 1,374 1,494 971 599 561

1.7x 0.5x 0.7x 0.4x 0.3x 0.3x

2015 2015 2016 2016 2017 2017 2018 2018 Q1 '1 '19 Q2 '1 '19

Total Debt Net Debt Net Debt / LTM EBITDA, x

853 3,282 13 496 310 14 9 501 4,135

Q2 '1 '19 2019E 2019E 2020E 2020E 2021E 2021E 2022E 2022E 2023E 2023E 2024E 2024E

Eurobonds Bank Loans

Source: Company data and analysis. 1. Including operating lease obligation starting from 2019Y (RUB 4.7 bn in Q2 ‘19) 2. Based on EBITDA and Net Debt denominated in rubles 3. Excluding operating lease obligation (RUB 4.7 bn in Q2 ‘19) and amortization of discount

Sound finan ancial cial profil ile Liquidity y position ion Debt3 repaymen ent schedule

$ mn $ mn $ mn

 Tota tal debt in Q2 decreased by 14% to $1.4 bn bn  Q2 ‘19 19 liqu liquidi idity ty decreased 19% qoq to $0.9 bn bn due to repayment of bank loans in May-June 2019  Net debt in in USD decreased by by 6% qoq to $561 561 m on

• n FCF growt

wth  In Q2 ’19, Net debt / EBITDA remains unchanged at 0.3x  April ’19 – a 5Y $500 m Eurobond placed with a 4.65% pa coupon  June ‘19 – a 2Y $300 m bank loan raised to refinance ST debt 2.7 2.9 2.1 1.4 1.1 2.8

2015 2015 2016 2016 2017 2017 2018 2018 Q1 '1 '19 Q2 '1 '19

Weighted averag rage debt maturit ity extended

years

2

Cash and Equivalents (incl. deposits) Credit Lines

1

DEBT ANALYSIS

15

38.7 35.4 4.1 (2.4) (3.0) (1.7) (0.2)

Net Net Deb Debt Q1 '1 '19 FCF FCF Div Divid iden ends rece eceiv ived fr from ass associ ciat ates es In Inter erest est rece eceiv ived ed/paid aid FX FX Oth Other er Net Net Deb Debt Q2 '1 '19 Source: Company data and analysis. 1. Including finance lease liabilities 2. Mainly includes income from grants, operating lease obligation change, etc.

Q2 Net Debt1 bridge Q2 T

• tal

l Debt1 bridge

RUB bn RUB bn

 In Q2 ‘19 net debt in RUB was down by 9% qoq to RUB 35.4 bn due to:

• (-) free cash flow (-RUB 2.4 bn)
• (-) dividends received from Catoca (-RUB 3.0 bn)
• (+) net interest expense (+RUB 4.1 bn)
• (-) FX rate (-RUB 1.7 bn)
• (-) other factors (-RUB 0.2 bn)

 In Q2 ‘19 total debt in RUB decreased by 16% qoq to RUB 89.2 bn due to:

• (+) 5Y Eurobond of $500 m and received RUB 16.0 bn

bank loan

• (-) repayment of Eurobond 2020 of $400 m, bank loans
• f $300 m and bank overdraft of RUB 18.2 bn
• (-) FX rate (-RUB 2.6 bn)
• (-) change of operating lease obligation

0.3x 0.3x

2

0.3x 0.3x

Net Debt/ LTM EBITDA

106.6 89.2 49.5 (64.0) (2.6) (0.2)

Total al Deb ebt Q1 '1 '19 Lo Loan an rece eceiv ived Lo Loan an rep epaid aid FX FX Change e of f oper erat atin ing leas lease e obli ligatio ion Total al Deb ebt Q2 '1 '19

FREE CASH FLOW

16

31.4 25.1 6.9 2.4 (6.2) (11.9) (5.7) (0.6) (4.5) Q1 Q1 E EBITD TDA Chan Change in e in p profita fitabilit ility Q2 Q2 E EBITD TDA Chan Changes es in in NWC NWC Inco come tax me tax Oth Other er Op Opera eratin ing cash flo cash flow Ca Capex ex Free ca ee cash flow flow

Source: Company data and analysis.

EBITDA A to Free cash flow

• w bridge

RUB bn

 Q2 ‘19 FCF decreased to RUB 2.4 bn (vs. RUB 25.8 bn in Q1) mainly due to:

 Profitability decline by 20% qoq (-39% yoy)  Working capital growth by RUB 11.9 bn or +15% qoq (+15% yoy) mainly due to:

• (+) increase of diamond inventories by RUB 1.8 bn due

to excess production volumes over sales volumes

• (+) seasonal growth of ores and sands inventories by

RUB 3.0 bn primarily on alluvial deposits

• (+) seasonal growth of mining and construction materials

by RUB 3.8 bn due to the beginning of the navigation period

• (+) increase of trade and other receivables by RUB 2.9 bn
• (+) increase of other taxes payable by RUB 0.4 bn

DIVIDENDS

17

10.8 15.4 65.8 38.6 43.7 (H1’18) 30.3 (H2’18)

1.47 2.09 8.93 5.24 10.04

2014 2014 2015 2015 2016 2016 2017 2017 2018 2018

10.8 10.8 15.4 65.7 38.0 (12M’17) 42.71 (H1’18)

2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 Source: Company data and analysis. 1. Dividends paid less than dividends accrued for RUB 1 bn due to exclusion of dividends for treasury shares.

Divide idend accru ruals als Divide idend payments

RUB bn RUB bn RUB per share

 On 26 June the AGM approved H2’18 dividends - 100% of FCF (RUB 30.3 bn or RUB 4.11 per share)  26 Aug. - Board will discuss recommendation to the shareholders on H1'19 dividends  ALROSA's dividend policy adopted in 2018: FCF-linked with the payout ratios depending

• n

the level

• f

Net debt/LTM EBITDA ratio

35% 50% 50% 50% 75% 94% 70% 26% 37% 59% 52% 70% 100%

2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 H1 H1 '1 '18 H2 H2 '1 '18 Payment ratio based on IFRS net income Payment ratio based on FCF

Divide idend payout ratios ios

Marke ket outlook

• ok

 Diamond jewelry sales in 2019, following a several consecutive years of growth, are expected to stabilize at around 2018 (all- time high as per industry records) levels  Long term fundamentals for the jewelry demand growth remain strong in both Developed and Emerging markets  In H2’2019 market will continue to gradually restore supply and demand balance – supply of rough diamonds was quickly adjusted, while polished stocks at mid-stream are expected to decrease as season approaches  Mid-term view on global supply of rough diamonds suggests the market supply to become tighter as major players close their

• perations

Company any performance

• rmance

 2019 capex outloo

• ok revised

ed down from RUB 28 bn to RUB 23 bn with no effect on operational performance  2019 2019 produc uctio ion outlo utlook

• k is

is expect cted ed to to sli slightly ly ex exce ceed ed our ur prev eviou ious gui uidanc nce of 38 m cts to ~38.5 m cts driven by efficiency gains  2019 2019 sa sale les ar are exp xpected to to co come me lo lower wer tha han pla lann nned ed to to 32 32-33 33 m ct ct due to market conditions. ALROSA’s price over volume strategy offers more flexibility and accuracy when it comes to defining sales, hence holding back pressure on the market.

OUTLOOK

Source: Company data and analysis.

18

APPENDIX

Udach achny UG UG mine VM VM1 deposit it Zar aria ia pipe Mais iska kaya ya pipe VG VG2 deposit it Type of minin ing Underground Open-pit Open-pit Open-pit Alluvials Productio ction star art 2014 2018 2020 2025 2022 Ramp mp-up up 2021 2020 2021 2027 2022 T ar arget et ore e output tput pa, a, m t 4.0 3.0 1.2 0.3 1.1 T ar arget et production ction pa, , m ct ct 5.6 1.8 0.4 1.2 0.4 Tota tal l CAPEX, , RUB bn bn 63.9 22.3 8.4 5.6 2.3 Inves ested ted shar are 86% 80% 88% 2% 0% Resource ce base3, , m ct ct 207.6 40.4 7.1 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

20

Yakutsk Mirny Udachny Aikhal

1 2 3 4 5

1 2 3 4

Nyurba

5

1.0 0.9 1.4 1.3 2.2 2.4 2.8 2.9 0.5 1.0

1.2

7.8 9.7

Q1 '19 Q2 '19 Almazy Anabara Mirny Division Aikhal Division Nyurba Division Udachny Division Severalmaz

DIAMOND PRODUCTION BY ASSETS

21

Source: Company data and analysis.

Diam amon

• nd output

m ct

 Key driv river ers of

• f diamo

iamond productio uction incr creas ease in in Q2 ‘19 19 (+ (+24 24% qoq

• q) mainly due to seasonal return

to production at alluvial deposits  Driv ivers affec fectin ing Q2 ‘19 19 perfor

• rman

mance ce:

• Alma

mazy zy Anabara - seasonal return to production

• Mir

irny Division Division – output was up up 2.1 times times due to a 2.2 times increase in ore processing at the International pipe, as in Q1 2019 ore was processed in February only due to complications caused by gas-dynamic phenomena

4% 2.1x 6% (6%) (3%)

24%

90% 16% 26% 60% 91% 10% 84% 74% 40% 9%

Rev Reven enue Cost st of f sales ales Cap apex ex Cash ash an and ca cash sh eq equivalen lents (in incl.

• cl. ban

ank k dep eposits) sits) Total al deb ebt

RUB USD

FX RATE

22

Source: Company data and analysis.

Financial cial metrics ics breakdown

• wn by curren

ency

% of metric's total

 ALROSA is an exporter with 94% of revenue denominated in USD  Major portion (74%)

• f

costs and capex is denominated in RUB 95% of the Company’s debt portfolio 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 – +/-1.40%
• cost of sales – +/-0.24%
• EBITDA – +/-2.92%
• capex – +/-0.40%

OPERATING CASH FLOW AND CAPEX

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

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

OCF CAPEX FCF

2 1

Operati ating ng cash h flow and capex ex dynamics amics

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

THANK YOU!

SERGE RGEY Y TAKHI HIEV HEAD OF CORPORATE FINANCE M: +7 985 760 55 74 E: ST@ALROSA.RU RUSSIA, 115184 MOSCOW 24 OZERKOVSKAYA EMB. DMITRY TRY BYALOSH SHITSKIY SKIY CORPORATE FINANCE M: : +7 915 113 32 04 E: DB@ALROSA.RU