Page 121 - RusRPTJun20

9.2.11 ​Metallurgy & mining corporate news
● Gold & Diamonds
Alrosa’s April rough diamond sales down 91% m/m and 96% y/y to $13.1mn. ​Total diamond sales declined 90% m/m and 95% y/y to $15.6mn. Alrosa virtually stopped selling rough and polished diamonds as governments across the globe were taking active steps to prevent the spread of the coronavirus, while Alrosa remained committed to its price over volume strategy, according to the company press release. The company expects to see an upward trend in demand for diamonds as early as in the beginning of 3Q20.
Diamond producer ​Alrosa ​warned on May 5 that its production plans for this year may change as it prepares to suspend two mining projects ​due to falling demand and sales caused by the coronavirus outbreak, Reuters writes​. From May 15 it will halt the Aikhal underground mine and Zarya open pit, which account for roughly 7% of the company’s diamond output in carat terms. They produced 2.6mn carats of rough diamonds last year. The Russian state-controlled company said its supervisory board will meet this month and consider changing the production plan for 2020 adding that the company hopes to resume production at suspended projects as the market improves. Alrosa currently plans to produce 34.2mn carats this year, down from 38.5mn carats in 2019.
Polymetal​ International will sell its North Kaluga deposit in line with its strategy to dispose of non-core assets​. According to a company press release, Polymetal has entered into a legally binding agreement to sell North Kaluga to North Kaluga Mining Limited. The deal amount is $27mn. Of this, $13.5mn is to be paid in cash, with the remainder being 5% NSR and 50% royalty on excess revenues. Group CEO Vitaly Nesis noted that this deal would bring some cash to Polymetal and retain its exposure to commodity prices. According to VTBC calculations, the North Kaluga EV/Resources indicator on this deal is $127/oz, which is significantly above the median of CIS M&A deals over the last eleven years. The cash inflows in 2020 for Polymetal due to this deal ($13.5mn) are equal to 2.2% of free cash flow (FCF) in 2020F. That could contribute to the company deleveraging and might increase the probability of special dividends being paid at the end of the year.
Polyus Gold​’ Board of Directors has proposed issuing 3.13mn new shares, according to a company press release, in order to i) return the stock loan from a shareholder to cover the convertible bonds obligations; ii) fund the acquisition of a 5% stake in Sukhoi Log in 2021; and iii) fund the 2018-20 LTIP (long-term incentive programme for top management) in the amount of a maximum of 394,398 shares to be vested in 2021. The shares are to be placed under a closed subscription to its own subsidiary, Polyus Krasnoyarsk, with the possibility for shareholders to execute their pre-emptive rights.
● Steel
Evraz​ reported its 1Q20 trading update. ​Steel sales volumes were solid and the sales mixed improved, while coking coal sales volumes hit a record quarterly high and the cost performance was good thanks to the weaker ruble. Consolidated steel product sales fell 10% q/q from a high base of 4Q19 but
121​ RUSSIA Country Report​ June 2020 ​ ​www.intellinews.com