PJSC ALROSA announced yesterday at that at the “absentee voting” on September 10, the Company’s Supervisory Board “will consider terminating its participation in the share capital of PJSC ALROSA-Nyurba by way of voluntary liquidation of the company”.

If the Supervisory Board approves of the proposal, ALROSA will submit the proposal for voluntary liquidation to the Board of Directors of ALROSA-Nyurba for its consideration; and subsequently, to the Extraordinary General Meeting of the ALROSA-Nyurba shareholders.

PJSC ALROSA’s stake in ALROSA-Nyurba amounts to a whopping 97.4878%; with the remaining 2.5122% of shares being held by minority shareholders.

“The shares of ALROSA-Nyurba are quoted in the open market (the equities market of the Moscow Exchange),” ALROSA said. “The company’s 2018 revenue amounted to RUB 44 billion, net profit – to RUB 16.6 billion.”

Though ALROSA-Nyurba currently holds two subsoil licenses (Botuobinskaya and Nyurbinskaya pipes), it is not directly engaged in any production operations. “The whole production cycle – from geological exploration, mining and rough diamond processing to sorting, presales preparation and subsequent sales – is carried out on contract terms by ALROSA’s business units: Nyurba Mining and Processing Division, Vilyuyskaya Exploration Expedition, United Selling Organization, and Diamond Sorting Center,” the Company explained.  ALROSA-Nyurba currently employs 30 people, most of whom are management staff.

Explaining the reasoning behind the move, ALROSA said: “As part of the strategy aimed at improving the management efficiency and optimizing the ALROSA Group structure, ALROSA’s management deems it expedient to consolidate core assets, including licenses, on the parent company’s balance sheet by liquidating ALROSA-Nyurba.”

ALROSA stressed that should the shareholders of ALROSA-Nyurba accept the move, “the company will be liquidated in strict compliance with legal requirements”. The subsequent process is expected to be completed by the end of 2020. “According to the law, upon the completion of settlements with creditors, the remaining funds of the liquidation fund of ALROSA-Nyurba will be distributed among the shareholders in proportion to their stakes in the company’s share capital,” ALROSA clarified, adding that liquidation of ALROSA-Nyurba will not affect the accounting of ALROSA Group under the IFRS.

Sergey Ivanov, ALROSA’s CEO commented: “The company’s top management believes that consolidation of core mining assets on ALROSA’s balance sheet will result in the improvement of their management efficiency, remove duplicate functions, cut administrative and management costs, eliminate redundant operations in sorting and sale of rough diamonds, etc. All of this will lead to reduced costs and increased earnings before taxes. I would like to note that the Republic of Sakha (Yakutia) will not lose anything in terms of taxes, as ALROSA will pay taxes instead of ALROSA-Nyurba, while the cost savings will mean bigger tax base. Besides, last year we entered into an agreement on social and economic development of Nyurbinsky Ulus on the same terms and in the same volumes as with ALROSA-Nyurba. We will also closely monitor that the content and further distribution of the liquidation fund is as transparent as possible and equally takes into account the interests of all shareholders of ALROSA-Nyurba.”