ALROSA: Thoughts on the Mir Mine Accident
We believe that ALROSA’s shares have underperformed the market on uncertainty regarding Mir mine’s future after the 4 Aug accident. In this note, which we publish ahead of the release of the company’s 2Q17 financials, we seek to answer the following questions: 1) What is the market currently pricing in in terms of production/reserves loss and recovery capex? 2) What are the negative implications for FY17 dividends? 3) Is there anything to be read between the lines of the news about the accident? We expect ALROSA’s 2Q17 EBITDA to grow 6% QoQ on a better product mix. We also hope that management will provide greater clarity on the troubled mine during the conference call on 31 Aug that will help the company’s shares to recover.
AK Alrosa PAO. AK Alrosa PAO (Aktsionernaya kompaniya ALROSA PAO or ALROSA Company PJSC), formerly AK Alrosa OAO, is a Russia-based company which is principally engaged in the exploration, mining, manufacture and sales of diamonds. Its operations include five Integrated Mining and Processing Complexes: Mirny, Udachny, Aikhal, Anabar and Nyurba located in the Sakha Republic; sorting divisions and diamond cutting and polishing division. The Company is a member of variable diamonds associations. It operates through several representative offices, branches and subsidiaries, including Alrosa-Nyurba OAO, Almazy Anabara OAO and Severalmaz OAO.
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