Russia ready to open Alrosa’s books for share placement

Russia plans to open state-controlled diamond producer Alrosa’s books later on Wednesday for a share placement in Moscow as part of the government’s privatisation programme, two financial sources and a source familiar with the process said.

Alrosa

The Russian government has previously said it aims to get more than 60 billion roubles ($928 million) from selling 10.9 percent of its 44 percent stake in Alrosa.

Russia is raising funds in response to weak oil prices with the aim of keeping the budget deficit within 3 percent of GDP.

The share placing is expected to be completed with an “accelerated book building”, one of the financial sources told Reuters. The pricing is expected on July 8, the third source said.

Shares in Alrosa were flat in Moscow on Wednesday at 69.59 roubles per share. Its market capitalisation is up 24 percent so far this year to 517 billion roubles, as the diamond market has improved, which values the 10.9 percent stake at 56.5 billion roubles.

Diamond sales stagnated in 2015, hit by a slowdown in the Chinese economy. However, producers are seeing scope for recovery – Alrosa sees global demand for diamonds rising by up to 2 percent in 2016.

Two of the sources, one financial and one familiar with the process, said that the Russian Direct Investment Fund (RDIF) together with foreign funds could buy not less than half of the placement.

Russian pension funds and some of Alrosa’s current minorities could also take part in the deal, the financial source added.

Alrosa declined to comment. RDIF has previously said that it would consider taking part in Alrosa’s privatisation subject to the placement conditions.

Alrosa is the world’s largest producer of rough diamonds in carat terms. Together with Anglo American’s unit De Beers, they produce about half the world’s rough diamonds.

Its first-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 38 percent to a record 59.3 billion roubles. The net debt was at 131 billion roubles at the end of March.

The government of the Yakutia region and its districts, where Alrosa’s main producing assets are based in Russia’s far east, will keep their stake in the company unchanged at 33 percent.

Alrosa’s free-float is currently at 23 percent. In 2013, Russia sold a 16 percent stake in it to the market, raising $1.3 billion.

$1 = 64.6368 roubles

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 # Alrosa,# Anglo American,# De Beers

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