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ALROSA

June 22, 2004

ALROSA Shareholders’ Annual General Meeting

On 19th June 2004 the shareholders of ALROSA Co. Ltd. held their annual general meeting, also attended by representatives of the Russian federal government and the administration of Sakha.

 

Attendance was personal or by proxy, with 188 903 shares, or 94.45% of the company’s stock voting.

 

The agenda included the following issues: the approval of the Company’s 2003 Annual Report, the 2003 financials including the P & L Statement. The speakers were V. Kalitin, president, O. Lyashenko, chief accountant, A. Surayev, senior partner of FBK, the Company’s auditor, L. Nikolayeva, chair of the Auditing Commission.

 

In 2003 the company produced US $ 1 649 million worth of rough diamonds, total diamond sales amounted to US $ 1 820.7 million, including polished diamond sales of US $ 123.4 million. Net profit totalled US $ 314.9 million. In 2003 sales of gem quality rough on the internal market were increased constituting 51.7% of total sales. The Company expanded its customer list to more than 100 companies. 11 of them accounted for over 50% of the rough sold, 38 - for 80% of the total rough diamond sales on the domestic market by value. The consumption of rough by local diamond manufacturers dropped by 12.2% in terms of carats, however in terms of value there was an increase of 2.8%. The structure of demand changed in favour of medium-sized and large goods, which consequently resulted in a higher average selling price.

 

In 2003 the Company held its first international auction for large and special-size diamonds. 32 companies took part. Out of 20 successful bidders there were 9 foreign companies, while the rest - Russian diamond manufacturers.

 

The amount of processed ore was 47 905 thousand cubic meters. The exploration expenditures totalled RUR 1 147 million, with Yakutia and the Arkhangelsk Region being the target areas.

 

For the next 10 years ALROSA’s strategic priorities will remain unchanged and include construction of new mining facilities, development of industrial infrastructure, development of resources outside Russia, setting up a distribution system in the world’s major diamond centres.

 

In 2003 investments into capital construction amounted to RUR 15 034 million. Capital assets of RUR 18 108 million were commissioned. RUR 3 032 million were allocated for technical modernization.

 

182 apartments were built last year. RUR 254.6 million was spent on healthcare, preventive therapy and recreation for ALROSA employees and their families (17 299 vouchers were bought). RUR 517 million were allocated for the pension program, RUR 58 million - for the regional development programs. 9 724 employees underwent professional training, another 250 employees are taking academic courses. Some 440 students at different colleges and universities get ALROSA scholarships.

 

The current expenses on environmental safety measures and conservation amounted to RUR 1516 million. Capital expenditures on the construction of environmental facilities were RUR 1 426 million. Land reclamation of over 231 hectares was effected.

 

The Company was active in pursuing its strategic goals outside Russia. In Angola construction of the second stage at the Catoca mine began, two new joint ventures with Angola – HIDROCHICAPA and Camatchia-Camagico Mining Co. – were established. ALROSA began construction of a new hydro power station on the Chicapa River. The ALROSA-Africa diversifed subsidiary started its operations in Angola. ALROSA representatives took part in the work of the Canada - Russia and South Africa – Russia Intergovernmental Economic Commissions.

 

Net assets grew by 23.5% amounting to RUR 48 176.7 million. In spite of unplanned losses of RUR 616 million due to a weaker dollar the company was able to solve the problem of cash revenues. The Company’s liquidity and financial stability remain at the previous year’s level.

 

The successful US $ 500 million Eurobond issue last year is seen as a confirmation of ALROSA’s high international rating.

 

The Auditor found the Companies accounts and financials reliable in all material aspects.

 

Other speakers touched upon the issues of cost optimization, development of social infrastructure, transportation facilities and diamond manufacture.

 

The meeting approved the Company’s 2003 Annual Report.

 

Vice President V. Potrubeiko briefed the shareholders on profit distribution, amount, dates and form of dividend payments for 2003. The shareholders approved the profit distribution and dividend to be paid in the amount of RUR 6 000 per share.

 

The meeting also elected the new Supervisory Board of 15 members (out of 27 nominees representing the major shareholders – the Russian federal and Sakha (Yakutia) governments, municipalities within Sakha and the Company’s employees).

 

ALROSA Supervisory Board

 

1.      A. L. Kudrin, RF Minister of Finance;

2.      V. A. Shtyrov, President of Sakha (Yakutia);

3.      V. T. Kalitin, President, ALROSA;

4.      G. F. Alekseyev,  First Deputy Chairman of the Sakha Republican Government;

5.      E. B. Beryozkin, Minister of Finance, Sakha (Yakutia);

6.      Ye. A. Borisov, Chairman of the Sakha Republican Government;

7.      G. M. Makarova, Minister of Property Relations, Sakha (Yakutia);

8.      I. S. Materov, First Deputy Minister of Economic Development and Trade, RF;

9.      Yu. M. Medvedev, First Deputy Minister of Property, RF;

10.  V. D. Milovidov, head of the Department for Financial Markets and Property of the RF Government;

11.  A. P. Morozkin, First Vice President-Executive Director, ALROSA;

12.  A. T. Popov, head of the Mirny District municipality;

13.  I. K. Demyanov, Vice President, ALROSA;

14.  A. V. Tikhonov, head of Department at the RF Ministry of Property;

15.  L. F. Tolpezhnikov, head of Department at the RF Ministry of Finance.

 

 

The new Auditing Commission was elected, and FBK, the winner in a tender among the leading providers of audit and consulting services, was approved as the Company’s Auditor for 2003.

 

The Chairman of the Supervisory Board, his first deputy and deputy will be elected at the Board’s next meeting.

 

Some amendments to the Company’s Charter were also approved.

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