President of Russia Vladimir Putin: Good afternoon, Mr Ivanov. What interesting items have you brought?
ALROSA CEO Sergei Ivanov: Mr President, we mined two unique diamonds in late 2017. They are the most expensive diamonds in the entire history of diamond mining in Russia and the Soviet Union. This unique 28-carat pink diamond has unique colour characteristics.
Vladimir Putin: Is it considered big?
Sergei Ivanov: Yes, and most importantly, pink diamonds are always the most expensive auction lots.
Vladimir Putin: Are they rare?
Sergei Ivanov: Yes, as well as the yellow ones, which have a very intense colouring. Their characteristics are unique. Nature helped us late last year.
Vladimir Putin: They do not even look like diamonds.
Sergei Ivanov: Yes, they look like pieces of glass. They were mined at placer deposits by our subsidiary Almazy Anabara (Diamonds of Anabar).
Mr President, allow me to report on the company’s performance in 2017 and in January 2018. In late 2017, the company attained record-breaking diamond production volumes, the highest since 1990. We mined almost 40 million carats of diamonds.
The company remains the largest tax contributor to the budget of the Republic of Sakha (Yakutia). In 2017, over 66 billion rubles worth of tax proceeds were channelled into budgets of all levels.
The company has also paid record-breaking dividends, including about 22 billion rubles into the republican budget and also about 22 billion rubles into the federal budget.
The company continues creating jobs. We are launching a unique project, the Verkhne-Munskoye deposit. Some 700 jobs will be created there. We would like to invite you to the launch in the autumn.
Road trains, among other machinery, will deliver ore to our 12th plant in Udachny, 150 kilometres from the deposit. The first ore batch has been tested; we have delivered 75,000 tonnes of ore with a high content of diamonds. It will boost the economy and support the Republic of Sakha and provide additional capacities to ALROSA.
As of today, we employ over 36,000 people. Their average monthly salary is good; it is three times higher than the Russian average. We have been adjusting salaries in accordance with the collective labour treaty.
We also continue to invest in social infrastructure facilities, our resorts, a rehabilitation centre and hospitals. In 2017, such investments accounted for over 9 billion rubles.
Vladimir Putin: Did you manage to cope with the accident?
Sergei Ivanov: I was a serious challenge for us. After the search and rescue efforts we focused on supporting the families of the killed miners. We managed to rescue 143 people, while eight miners, unfortunately, were left underground.
Following this, in accordance with your instructions, over 1,000 workers from the Mir mine were given jobs.
I would like to report that we have given jobs to over 700 people at ALROSA; it took us four months to do so. Several hundred people who came to work from other regions chose to receive a significant severance pay and returned to their home regions.
As of now, some 50 more people need to be employed. Our job bank has over 350 positions, so I am sure we will solve this problem. In addition, some of the workers will be given jobs at the Verkhne-Munskoye deposit in the 4th quarter.
Vladimir Putin: Do you know what caused the accident?
Sergei Ivanov: Mr President, a commission of the Federal Service for the Supervision of Environment, Technology and Nuclear Management investigated the accident. Alexei Aleshin and I went there immediately. We attracted over 16 of the most reputable Russian expert organisations. It was an unbiased investigation; experts found three possible causes of the accident.
The first one is project mistakes made in the 2000s. The second one is the flooding of the mine in 2011, when several pumps broke. The third cause is the hydrogeological complexity of the deposit. We have organised work on all of these conclusions.
We are making major changes to the industrial safety system inside the company so that all accidents are immediately reviewed and decisions are made on each of them. It is our main task for 2018.
Vladimir Putin: How are you helping the families of the killed miners?
Sergei Ivanov: All the families have received insurance payments as well as direct support from ALROSA and the support from the Sakha budget.
There are four families who lived in Mirny, and four families of workers from Belgorod. The Belgorod Region Governor also made a decision to provide targeted support from the region's budget.
Vladimir Putin: Did you meet with them?
Sergei Ivanov: Yes, we met with the families. Of course, during the search and rescue efforts all the killed miners were declared missing, so it was very hard for their families.
Vladimir Putin: If they were missing, then their families would not receive any money.
Sergei Ivanov: Mr President, all issues were settled in a prompt manner. The courts in Mirny urgently made relevant decisions and within a few weeks, we made the first payments and then monitored all the others. All payments have been made.
Vladimir Putin: I see. What are your immediate plans?
Sergei Ivanov: The launch of the Verkhne-Munskoye field. We have also managed to increase the stock of our subsidiary in Angola to 42 percent. In the 1990s ALROSA’s share was ‘dispersed’.
In Angola, our plan is to develop one of the world’s largest diamond deposits, Luaxe. We are currently conducting a feasibility study. We have met with the President of Angola. Everything is on schedule. I am certain it will be a significant asset that will help us maintain our leadership.
Vladimir Putin: We are currently discussing their President’s visit to Russia. I think it will happen very soon, this year for certain. It is very likely that we will talk about your business in Angola.
What is ALROSA’s status in the global market?
Sergei Ivanov: Mr President, ALROSA remains the world leader and our competitors are far behind. The accident will, of course, affect the company’s production in the next few years but we will still hold on to our leading position.
The company has accumulated very strong reserves. Some of these reserves will be sold within the next few years so in terms of sales ALROSA is expecting a slight decline.
As concerns technology and, particularly, access to the latest technology, we are closely following projects around the world.
We have switched to crude oil for some energy facilities thus cutting costs on diesel supplies. We are introducing the dry-stack tailing technology. As for procurement and expenses, we managed to maintain our costs at the 2016 level. Our costs have hardly been subject to inflation.
The company has launched some serious import replacement programmes. We have switched to Russian oils and are switching to Russian pumps. We have replaced some of American equipment such as Caterpillar trucks with Belarusian BELAZ trucks.
In our procurement structure, small and medium-sized businesses account for around 43 percent while 23 percent goes to the so-called preferential procurement for small and medium-sized businesses that is only tended to SMEs. ALROSA is one of the leading companies and we are closely cooperating with the corporation for small and medium-sized businesses.
Vladimir Putin: Good.