OAO AK ALROSA held its annual general meeting of shareholders in Mirny on June 30, which summed up its performance in 2010. This date has now become a new landmark in the development of the diamond mining company. Its turning into a public corporation was a natural result of the procedural and institutional changes that occurred during the first decade of the new millennium.
Who is sitting on the diamond council?
There were two meetings during the same day, one general and one extraordinary, at which the company shareholders elected the Supervisory Board of AK ALROSA (OAO) nominating the following people:
1. Gennady Alekseev, First Vice Chairman of the Government of the Republic of Sakha (Yakutia);
2. Fyodor Andreev, President of OJSC ALROSA;
3. Alexander Akhpolov, Director, Administrative Department, Ministry of Finance of the Russian Federation;
4. Sergey Barsukov, Director, Financial Policy Department, Ministry of Finance of the Russian Federation;
5. Yegor Borisov, President of the Republic of Sakha (Yakutia);
6. Evgenia Grigorieva, Minister of Property and Land Relations of the Republic of Sakha (Yakutia);
7. Galina Danchikova, Chair of the Government of the Republic of Sakha (Yakutia);
8. Ivan Demyanov, Vice President of OJSC ALROSA;
9. Lyubov Dzhabrailova, Head of the Anabar national (Dolgan-Evenk) Ulus (Municipal District) of the Republic of Sakha (Yakutia);
10. Sergey Dubinin, Chairman of the Supervisory Council, VTB Bank, Member of the Board of Directors, CJSC VTB Capital;
11. Victor Yefimov, Head of the Republic of Sakha (Yakutia) Presidential and Governmental Offices;
12. Vladimir Rybkin, Head, Gokhran of the Russian Federation;
13. Anatoly Tikhonov, Member of the Supervisory Board of OJSC ALROSA;
14. Yakov Urinson, Deputy Chief Executive Officer, OJSC RUSNANO;
15. Ilya Yuzhanov, Member of the Supervisory Board of OJSC ALROSA.
On July, 25 the latter was elected Chairman of the Supervisory Board.
Earlier, Alexei Kudrin, Finance Minister of the Russian Federation, following the decision taken by Dmitry Medvedev, President of Russian Federation, to appoint independent directors to the government-owned companies, withdrew from the Supervisory Board of OAO AK ALROSA. It should be noted that the leadership of Yakutia has ignored the above decision, leaving some of its top executives to sit on the Supervisory Board, including Yegor Borisov, President of the Republic of Sakha (Yakutia). Most likely, they soon will also be replaced by independent directors.
Development prospects of the company through the prism of its performance in 2010
The new status will allow the company to attract new investments to implement its major projects involving transition to underground mining, as well as to develop new deposits of diamonds and other minerals. Currently, the company is promoting the Timir project aimed at developing iron ore deposits in South Yakutia, while in the future it may give a start to operations on the Tomtor rare earth deposit for which ALROSA has a license. The company will need significant financial investments to start mining iron ore and other minerals. Therefore, in the near future the company management may have to outline a strategy for ALROSA’s further development and decide which way should be taken to transform it – whether it will expand as a diversified mining holding or a company focused exclusively on the diamond business. In the author's opinion, the first path is more promising.
Table 1 provides a set of basic economic indicators of OAO AK ALROSA over the past five years, according to the company's annual reports for the period. For convenience, all the figures are given in Russian rubles and U.S. dollars.
Table 1
Key performance indicators of ALROSA in 2006-2010
* According to the Ministry for Economic Development of the Republic of Sakha (Yakutia).
The analysis of the above data points to a full restoration of pre-crisis indicators, while a sharp rise in prices for rough and polished diamonds in the first half of this year suggests that these figures will be significantly higher in 2011. However, there is no reason to fall into euphoria as the global economy is not stable, and crisis phenomena may occur in the coming years. This is why it is necessary to think about ways of further development of the company, as well as about opportunities to attract additional investments through an IPO, which requires accurate calculation of its timing and real value of the company’s shares.
Yuri Danilov, Ph. D., Senior Research Fellow, Institute for Regional Economics of the North and Alexandr Shaburkin, Rough&Polished, Moscow
