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20 september 2018

(Interfax) - Arkhangelskgeoldobycha (the mining licence holder for the Grib diamond pipe in the Arkhangelsk Region of Russia, now officially named AGD Diamonds) consolidated a 100-percent stake in Grib Diamonds N. V., a diamond trading company, AGD Diamonds said.

Grib Diamonds sells rough diamonds produced at the Vladimir Grib Diamond Field through auctions held on the web-based platform in Antwerp.

The purchase was made to fulfill the terms of the loan agreement concluded by Otkritie Industrial Investments with VTB (VTBR), explained the head of AGD Diamonds Sergey Neruchev in an interview with the Dostoyanie Severa, an Arkhangelsk-based publication. Under this agreement, the deal had to be completed in the first half of 2018, which the parties actually did.

"The consolidation of the AGD production business with the Gib DIAMONDS trading company will in the long term create a full-cycle diamond mining company of international standing (comprising geological exploration, production and sales)," Sergey Neruchev said.

The change in the corporate name of the joint-stock company was due to its new marketing policy and the brand’s international positioning aimed at its customers - buyers of rough diamonds, the AGD said in its statement.

Earlier, the Kommersant Daily reported that in June 2018 AGD bought Grib Diamonds from Cyprus-based Lakover Trading owned by Otkritie Industrial Investments. This move was made to protect VTB's rights to the asset against the Central Bank's intentions to surcharge 335 billion rubles of debt from Otkritie Holding.

AGD - a diamond asset in which Lukoil (LKOH) invested more than $ 1 billion – was sold to Otkritie Industrial Investments for $ 1.45 billion last year. The deal was mainly financed by VTB, which received 100% of Otkritie Industrial Investments as collateral, as well as all the companies involved in the transaction and the rights to their income. Later, Otkrytie Bank controlled by Otkrytie Holding fell under the rehabilitation campaign initiated by the Central Bank.

In March 2018, AGD produced the 20 millionth ton of ore at the Grib diamond field and in May 2018 the company recovered the 15 millionth carat of diamonds, the company said.

AGD does not disclose its current production data. As Alexey Genkin, General Manager of Grib Diamonds NV said at the end of last year in an interview with Rapaport, diamond production at Grib was to reach 4.4 million carats in 2017 (an increase of 16% versus 2016). Thus, AGD, which is the only independent diamond producer in Russia, accounts for about 10% of the total diamond output in Russia. The Grib Mine is to boost its diamond output to 4.9 million carats in 2018, Genkin said.

Grib Diamonds’ sales correspond to its production, which is sold through the world diamond trading hub in Antwerp, with the exception of 5% remaining in Russia (for sale through Almazyuvelirexport, a state-owned company). Every year, Grib Diamonds holds 10 auctions for the sale of regular assortments of rough and two auctions to sell rough diamonds of special sizes (10.8 carats and above) that are held in Russia in accordance with the law.

ALROSA (ALRS), which is considered a natural probable buyer for the Grib Mine as an actual monopolist in this industry in Russia, views the price of this transaction too high. There were no new proposals made to ALROSA for the purchase of the Grib Mine, although this issue was discussed, said Alexey Filippovsky, CFO of ALROSA.

The Grib Diamond Mine is the fourth largest in Russia and the eighth in the world. The mine’s life span is estimated at 15 years.