Investment projects. Verkhne-Munskoe ore field. Company profile. Gas assets. Bourevestnik

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1 Investment projects Company profile Verkhne-Munskoe ore field

2 Company profile ALROSA is a Russian Group of diamond mining companies that occupies a leading position in the industry and has the largest rough diamond reserves in the world. The Group accounts for one third of the reserves and more than a quarter of the production of the global rough diamond market. The key areas of activity, comprising the focus of the major strategic efforts of the Group, are s exploration, mining, processing and sales of rough diamonds. The core activities of ALROSA Group are concentrated in two regions of the Russian Federation, namely the Republic of Sakha (Yakutia) and the Arkhangelsk Region, as well as on the African continent. The majority of ALROSA Group revenue comes from selling rough diamonds. Rough diamonds are sold under long-term agreements to Russian and foreign diamond cutting companies. The rough diamond segment accounts for about 90% of the total Group revenue. Company profile Verkhne-Munskoe ore field

3 3mn tons of ore per year Design capacity by 2019 Verkhne-Munskoe ore field Development of a greenfield diamond Verkhne-Munskoe located in the Republic of Sakha (Yakutia) is a strategic diamond-mining project for the ALROSA Group. Its goal is to increase the Company s market capitalization and sustain the achieved diamond output volumes. The implementation of the project will contribute to social and economic development of the Republic of Sakha (Yakutia), primarily through the creation of new jobs in the region and generation of incremental income for the budget and the Company s shareholders. out of 15.5 bn rub to the federal budget 46.4 bn rub Expected tax revenues and contributions from the project over 10-year time horizon mn carats per year Planned production volume 1.8 Verkhne-Munskoe ore field

4 Verkhne-Munskoe ore field In 2015, ALROSA embarked on a major investment project to build a diamond mining facility at the Verkhne-Munskoe ore field. Verkhne-Munskoe primary lies 170 kilometers away from the Udachny Mining and Processing Division (MPD) and consists of four kimberlite pipes with aggregate reserves (С1+С2) of around 65 million tons of ore. The plan is to develop the with the use of open-pit mining techniques. Recovered ore will be processed at the Processing Plant No. 12 of the Udachny MPD. The diamond-mining facility is slated for commissioning in 2018, reaching its design capacity of 3 million carats in The will be in operation until ALROSA s planned investments will amount to about RUB 63 billion. Once completed, the investment project will create over 700 new jobs. The investment project Diamondmining facility on the basis of the Verkhne-Munskoe ore field was approved at a meeting of the Sub-commission for the implementation of investment projects in the Russian Far East, chaired by Yury Trutnev, Deputy Prime Minister and Presidential Plenipotentiary Envoy to the Far Eastern Federal District. Udachny 20 км PP 12 Aikhal 75 км 365 км Chernyshevsky HPP 104 км 150 km Tas-Yuryakh Verkhne-Munskoe Zarnitsa pipe Syuldyukar HPP Svetly 5 км Mirny 69 км 197 км Almazny 93 км Lensk Nyurba MPD highway ETL gas pipeline service lane airport Nyurba Sheya 92 км Suntar Magnitny open-pit mine 76 км Krasnoyarsk region Daldyno-Alakitsky Malo-Botyobinsky Irkutsk region Anabarsky Udachny Mirny Aikhal Suntar Anabar Republic of Sakha (Yakutia) Zapolyarny open-pit mine L a p t e v S e a Dzhardzhan Muno-Tyungsky Sredne-Markinsky Yakutsk Prilensky Sredne-Oleneksky Верхне-Мунское mn carats С1+С2 reserves Novinka pipe Komsomolskaya-Magnitnaya pipe estimated Р1 resources С1+С2 reserves mn carats mn carats mn carats estimated Р1 resources Deimos pipe Zapolyarnaya pipe

5 Year of establishment: 1959 Location: Saint Petersburg Headcount: 580 people Share of exports: 35% Geography of deliveries: Russia, Angola, South Africa, Lesotho, Zimbabwe, Botswana, Canada, Kazakhstan, Uzbekistan, Mongolia Meeting the demand of mining, industrial companies, research institutes, and other organizations in knowledge-intensive hi-tech equipment for the processing of diamondiferous and mineral ores, studying the structure and composition of substances and materials, through a broad application of innovations across all business lines of a company. Innovation Center. New production facility Since 1959, Research and Production Enterprise has been the largest facility in Russia manufacturing x-ray instruments and equipment for various purposes. Over s more than semicentennial history, its products have become widely known due to their broad fundamental capabilities, reliability, and high quality. Products manufactured at are used by the leading research institutes and largest industrial companies in Russia and abroad. High proficiency level of its employees, unique knowledge base, extensive experience in its respective area, application of innovative technologies, welldeveloped cooperation with the leading research and production organizations all these factors enable to offer high-tech equipment that can fully meet specifications of numerous customers and correspond to the world s highest technical standards. In 2017, is planning to bring new production capacities into operation, namely Innovation Center with a total area of over 24,000 square meters and potential labor intensity rate of 786,000 standard man-hours.

6 Research and Production Enterprise s product lines: sorters for diamond-bearing ore automated x-ray fluorescence analyzers for pulp and solution flows x-ray fluorescence analyzers for rocks and ores x-ray diffractometers laboratory x-ray fluorescence spectrometers Instruments for on-stream chemical analysis of liquids Flowstream pulp analyzer AP-35 Designed for on-stream chemical analysis of ore enrichment process products Diamond shape sorting machine YSA-2F Designed for automatic sorting of rough diamonds by shape into 10 groups X-ray transmission sorter RGS-2 Designed for the enrichment of diamond-bearing ore with grain size mm General-purpose X-ray diffractometer DRON-8 Designed for the analysis of phase composition and structural state of various objects

7 is a strategically pivotal project for the development of South Yakutia and the mining industry as a whole Shareholding structure of CJSC MMC Timir 51% EVRAZ 49% minus 1 share A LROS A 1share Vnesheconombank CJSC MMC Timir holds four licenses for iron ore extraction in the Republic of Sakha (Yakutia), with aggregate reserves of 3.5 billion tons for open-pit mining. The company s majority shareholders are EVRAZ and ALROSA. The project started in 2008, when ALROSA Group acquired licenses for iron ore extraction at four s in South Yakutia. In , ALROSA financed field survey and design works to build a transport and power grid infrastructure, develop a pilot site to produce 1 million tons of ore at the Tayozhnoye MPD. The company carried out field survey and design works, research on ore enrichment, drew up an investment plan, launched preparation for construction activities. In 2012, a controlling stake in CJSC MMC Timir was sold to EVRAZ Group, which in 2013 updated design concepts previously developed by ALROSA and formulated a new development strategy for the Tayozhnoye MPD. In , CJSC MMC Timir completed engineering and design works for Phase 1 of the Tayozhnoye MPD (3 million tons of ore). Currently, the project is at a pre-investment stage: an endorsement for the technical project was granted by Rosnedra Central Commission for the Development of Mineral Deposits, several expert reviews were conducted and Project development strategy Beginning of infrastructure construction Launch of Phase 1 of the mining plant Reaching design capacity of the mining plant Commisioning the metallurgical plant a positive opinion was issued, studies into ore preparability were conducted, reserves were confirmed, procurement procedures were completed; engineering and design for Phase 1 of the Tayozhnoye iron ore were completed; the project received all pertinent approvals and permissions. In 2016, work is underway to secure a discount on product shipments by rail and raise project financing from Vnesheconombank. Preparation for construction activities and an active investment phase of the project are scheduled to take place in ALROSA and EVRAZ are planning to engage in joint commercial exploitation of the Tayozhnoye (as a matter of priority), Desovskoye, Tarynnakhskoye, and Gorkitskoye iron ore s. In , the plan call for the construction of the Tayozhnoye MPD with a capacity of 3 million tons of ore per year, to be processed at a crushing-and-preparation plant (on site). Then, ore dressed by dry magnetic separation (1.9 million tons) will be transported by rail for enrichment at the Abagurskaya enrichment plant (EVRAZ) and then processed at the West Siberian metallurgical plant (EVRAZ). Total investments in the project are estimated at RUB billion, construction phase will take 3 years (construction Tayozhnoye Desovskoye Tarynnakhskoye Gorkitskoye of a branch rail line, power transmission lines, crushingand-preparation plant, rotational camp, internal infrastructure facilities, deliveries of mining and conveyor and extraction equipment, vehicles, and machinery). Funding for the implementation of the investment program will come from two sources Federal Target Program and Vnesheconombank s project finance

8 Tarynnakhskoye A+B+C1,2 reserves (open-pit mining) 1,305 million tons Fe content in ore 28% 190 kilometers distance to the railroad Stripping ratio 1.7 m 3 /t Project s advantages: unique resource base low-cost production access to infrastructure proximity to the Asian markets reliable partners state support flexible development strategy Tarynnakhskoye 190 км 200 км Gorkitskoye Desovskoye 5 км 25 км Tayozhnoye Neryungri Bam Tynda Tayozhnoye A+B+C1,2 reserves: 911 million tons open-pit mining, 478 million tons underground mining Fe content in ore 38% 5-7 kilometers distance to the railroad «Stripping ratio 0.4 m 3 /t Deposit development project has been drawn up and received positive feedback from the environmental impact assessment and the Main State Expert Review Board Gorkitskoye A+B+C1,2 reserves: 1,069 million tons open-pit mining, 844 million tons underground mining Fe content in ore 28% 200 kilometers distance to the railroad Stripping ratio 1.7 m 3 /t West Siberian Metallurgical Plant EVRAZ Timir 3755 км 260 км 2850 км border with China Nakhodka Sea Port EVRAZ Desovskoye A+B+C1,2 reserves (open-pit mining) 402 million tons Fe content in ore 28% 40 kilometers distance to the railroad Stripping ratio 1.4 m 3 /t

9 CJSC Geotransgaz s reserves Urengoy Gas Company LLC s reserves 81 bn m 3 of gas 83 the Ob River bn m 3 of gas 9mn tons of condensate Salekhard Novy Urengoy Urengoy Aggregate reserves of Urengoy Gas Company LLC and CJSC Geotransgaz 21 bn mn tons of condensate* 164 bn m 3 of gas* 12 mn tons of condensate Khanty-Mansiysk ALROSA s gas assets include Urengoy Gas Company LLC and CJSC Geotransgaz, which hold licenses to explore and develop gas and gas condensate fields in the Yamalo-Nenets Autonomous District. CJSC Geotransgaz is operating at the Beregovoye field located 100 kilometers east of Novy Urengoy; the company is developing license the Pur River 19 rub blocks of the Valanginian gas condensate reservoir and Cenomanian gas reservoir. Urengoy Gas Company LLC is operating at the Ust-Yamsoveyskoye field bordering on the western side of the Beregovoye field; currently, there are no production activities, as the project is at a prospecting stage. *As of Capital investments into development of gas assets*

10 CJSC Geotransgaz The company is planning to finish installing field infrastructure in the southern section of the Beregovoye gas condensate field and reach its field development targets CJSC Geotransgaz is planning to increase the number of producing wells from 22 to 36, which will ensure annual production of 2.3 billion m 3 of gas and 0.32 million tons of gas condensate The company finalized the construction of a connecting gas pipeline and infrastructure facilities (rotational camp), put into commercial operation two integrated gas treatment plants, six producing wells (total stock consists of 22 units), drilled two exploratory wells, completed the construction of a motor road, power transmission line. Finished engineering works for a booster compressor station for the Cenomanian reservoir section. The project has achieved its operational output and sales targets. December 2015 CJSC Geotransgaz signed a three-year gas supply contract with PJSC Rosneft The company is planning to build three producing wells at the Gas Well Pad No. 2 (Valanginian section), three producing wells at the Gas Well Pad No. 30 (Cenomanian section), and a booster compressor station for the Cenomanian reservoir. Reserves are being re-estimated, addenda to reservoir management plans are being made, intensification program and well work-over operations are underway in order to stabilize and increase flow rate of the Valanginian reservoir wells. Urengoy Gas Company LLC The company conducted a range of exploration works (3D seismic, exploration drilling) aimed at the accretion and confirmation of hydrocarbon reserves. It tested a production technology of horizontal sidetracking (employing a selective hydraulic fracturing technique). Development prospects are defined by a large license block area and the availability of a universal exploration and development license Investment program provides for the commencement of the drilling of an exploratory well (Cenomanian section), conduct of a comparative feasibility study for installing ground facilities for the Cenomanian reservoir (to select options for ground facilities construction), launch of the development of the Cenomanian and Valanginian reservoirs, geological analysis of the Achimovsky and Jurassic sediments Reaching production targets Long-term development program for is geared towards the accretion of the raw materials base (thanks to the Achimovsky sediments) and field infrastructure development. Stage 1 Carrying out exploration works (2D, 3D seismic surveys) to identify promising areas. Drilling two exploratory wells (Achimovsky section). Drilling one exploratoryand-producing well with horizontal sidetracking (Valanginian reservoir). Building a geological model and drawing up a field development plan. Stage 2 Building field facilities for the Cenomanian and Valanginian reservoirs. Engineering and construction, drilling a stock of producing wells with horizontal sidetracking and selective hydraulic fracturing. Reaching annual production targets (2-2.2 billion m 3 of gas, 200, ,000 tons of condensate). Stage 3 Going forward, building field facilities for the Achimovsky sediments. Engineering and construction, drilling a stock of producing wells. Projected increase in hydrocarbon production is up to 1 billion m 3 of gas and up to 150,000 tons of condensate.

11 Mirny , Republic of Sakha (Yakutia), Lenina st., 6 Tel: Fax: +7 (41136) (41136) (495) info@alrosa.ru eng.alrosa.ru