Industry News by Nemesis

Russia's Sale of Stake in Diamond Producer Alrosa Raises $820m – Source

July 11, 2016

The Russian government has priced the shares it is selling in diamond producer Alrosa at 65 roubles ($1.02), raising almost $820-million, a source close to the placement told Reuters on Saturday, as Moscowkickstarts a privatisation drive.

 

A share issue by Alrosa -- the world's largest producer of rough diamonds in carat terms – is Russia's largest privatisation in just under four years as the country seeks ways to bolster finances which have been hit by weak oil prices.

 

According to the source close to the placement, the sale of a 10.9% stake was priced at 65 roubles per share, bringing in around $820 million.

 

The Kommersant newspaper reported earlier this week that officials had been targeting an issue price of 71 roubles per share, citing unnamed sources.

 

The pricing represents a discount of 3.8% to the closing price on Friday.

 

Government officials and Alrosa were not immediately available for comment.

 

It is not yet clear how much of the demand came from foreign institutional investors, who have largely shunned Russiasince the country was hit by Western sanctions and slumpingoil prices in 2014, depressing stock prices.

 

Before the placement, the Vedomosti newspaper reported that the Russian Direct Investment Fund, a state-backed vehicle, would be an anchor investor.

 

Other companies slated for privatisation this or next year include oil companies Rosneft and Bashneft, VTB bank and shipping company Sovkomflot.

 

The $820-million raised from Alrosa's sale compares with around $11-billion expected for the sale of a stake in Rosneft, which officials have said may be more difficult.

 

Alrosa accounts for over a third of the world's rough diamond production and it has the largest reserves. It reported record earnings in the first quarter as the market for diamonds used in jewellery and for industrial cutting tools and abrasives recovers.

 

"We find Alrosa's long-term story attractive," analysts at Russian brokerage Aton said in a recent report. They said the stock benefits from a low enterprise value to earnings multiple of 4.3 compared with rivals and a dividend yield of around 10%. 

 

Source: Mining Weekly

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