Industry News by Nemesis

ALROSA’s President May Be Replaced

February 20, 2017

The government is discussing the possibility of an early resignation of ALROSA’s President: Andrey Zharkov, who is heading the company since April 2015 may be replaced by Sergey Ivanov, Jr., Vice-President of Sberbank and the son of Sergey Ivanov, the former head of the Russian President’s Administration, as Bloomberg reported citing sources.


The information was confirmed by the Kommersant Daily’s sources in the government and by those close to the company’s shareholders (the Federal Property Management Agency and Yakutia are holding each a 33-percent stake in ALROSA) and to the Ministry of Finance.


The views expressed by Andrey Zharkov on a number of strategic issues were at variance with the views of the officials holding the majority of seats on the Supervisory Board of ALROSA, Bloomberg said.


One of the Kommersant’s sources said the differences arose on the sale of the controlling stake in OJSC Diamond World by the Federal Property Management Agency (until recently, Diamond World was the only customs terminal processing diamonds in the Russian Federation), where ALROSA had a more than 47-percent shareholding, as well on the approval of the company's budget for 2017 – while the Ministry of Finance insisted on its reduction, Mr. Zharkov was against it.


Other sources of Kommersant said that the head of ALROSA had a difficult relationship with the officials, except for Deputy Prime Minister Yury Trutnev, who is supervising the company and who nominated Andrey Zharkov to this position in 2015. The Deputy Prime Minister insisted on the development of diamond manufacturing business by ALROSA, being opposed by the former head of the company Fyodor Andreev (died in January 2015). Andrey Zharkov in team with customs broker TBSS opened the Eurasian Diamond Center in Vladivostok last year, which made unhappy Yakutia (the latter expected that the project will be implemented in this Republic), one of the Kommersant’s interviewees said.


"It was expected that Andrey Zharkov would preserve the status quo existed at the time of Fyodor Andreev, but the new head of the company began to operate quite independently, changing the team of top managers and apparently not understanding the hints from key government officials," said the source close to the Supervisory Board of ALROSA. According to this source, the possibility of replacing Mr. Zharkov was discussed many times, but in December, 2016 most officials were inclined not to renew the contract with him (valid until April 2018). A sharp deterioration in relations between the top manager and the Ministry of Finance changed the situation. "In fact, the only remaining defender of Andrey Zharkov is Yury Trutnev, but he is unlikely to oppose the candidacy of Sergey Ivanov, Jr.", the source said.


According to one source of Kommersant close to the Supervisory Board of ALROSA, the idea to appoint Sergey Ivanov is supported by the Ministry of Finance. "His candidacy is currently being agreed within the Ministry, and it is possible to say that it is virtually agreed," he says. "The candidacy has passed all the stages of approval, except for the deputy prime minister supervising the company", said another source of Kommersant. In line with the Charter of ALROSA, the contract with the company’s president is signed by the head of the Supervisory Board. But so far there were no official papers passed at the level of the Supervisory Board, the source said.


Spokespersons for ALROSA, Yury Trutnev, the Ministry of Finance and Sberbank declined to comment. Sergey Ivanov was unavailable for comment on Sunday, and the sources of Kommersant in his entourage say that he is "a very busy person." It is noteworthy that in 2016, when Mr. Ivanov was changing his position, being at that time the head of SOGAZ, for a position at Sberbank, he said he did not intend to change jobs in an interview with Kommersant two weeks before his transfer.


In the opinion of Sergey Donskoy of Societe Generale, in the event ALROSA will change its president, Sergey Ivanov, Jr. "may have bigger ambitions than Andrey Zharkov." The analyst does not foresee immediate changes in the company’s strategy, but investors will wait to see if the new leadership will maintain the course for developing the company’s mining business and divesting non-core assets.


Source: Rough-polished


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