Moscow, 22 October 2018 – ALROSA, a global leader in diamond production, reports its Q3 2018 and 9M 2018 production and sales update.

Key highlights:

• Q3 2018 diamond production grew by 23% q-o-q (up 2% y-o-y) to 10.5 m caratsdue to seasonal growth in output at alluvial deposits, an increase in ore and gravels processing, and the ramp-up of the recently launched assets to design capacity.

An 11% decrease in 9M output 2018 to 26.4 m caratswas mainly due to the shutdown of the Mir underground mine (UM) and the completion of open-pit mining at the Udachnaya pipe.

• In Q3 2018, the volume of processed ore and gravels grew by 70% q-o-q (up 10% y-o-y) to 17.2 m tonnes, due to seasonal return to production at alluvial deposits.

The volume of processed ore and gravelsin 9M 2018 rose by 4% to 33 m tonnes, mainly driven by an increase in ore processing at alluvial deposits.

• In Q3 2018, the average diamond grade per tonne of ore was lower by 28% q-o-q (down 7% y-o-y) to 0.61 cpt, mainly due to seasonal growth of production at alluvial deposits. A 14% decrease in diamond grade in 9M 2018 to 0.8 cpt was caused by the closure of the Mir UM in 2017 and production growth at lower-grade assets.
• Q3 Group rough diamond sales (ex. polished diamond sales) were 6.7 m carats (down 26% q-o-q), including 4.7 m carats of gem-quality diamonds (down 26% q-o-q) and 2.0 m carats of industrial diamonds (down 27% q-o-q). 9M diamond sales were 29.1 m carats (down 9% y-o-y), including 21.1 m carats of gem-quality diamonds (down 12% y-o-y) and 8.0 m carats of industrial diamonds (up 1% y-o-y).
• Inventories as at the end of Q3 2018 were up by 42% q-o-q (down 11% y-o-y) to 15.5 m carats, driven by a seasonal production growth at alluvial deposits and lower sales volumes.
• Growth of average realised prices for gem-quality diamonds: following sales in July through September, average realised prices* (including product mix change effect) grew by 22% q-o-q (up 18% y-o-y) to $199/ct due to improved mix as sales of +10.8 and +2 carat stones grew.
• The diamond price index grew by 5.2%year-to-date, driven by improved demand.
• Q3 sales decreased by 10% q-o-q to $973 m (up 13% y-o-y), with gem quality diamond sales (ex. polished and industrial diamonds) amounting to $949 m.
• 2018 forecast:production outlook remains unchanged at 36.6 m carats, a decrease of 8% y-o-y.

Market overview

• In H1 2018, the diamond jewellery market grew by 6% as all key markets enjoyed rising sales, with the exception of India. The stagnant growth in India was due to local banks' reluctance to fund the diamond industry.
• In H1 2018, the diamond jewellery market was in the positive territory, among other things, due to the robust growth of major markets in the US and China. The North American market saw diamond jewellery sales rise by 5% y-o-y. In Asia and Europe, sales in dollar terms added 8% y-o-y (up 3% and down 3%, respectively, at constant exchange rates).
• In Q3 2018, the rough diamond market experienced a traditional seasonal slowdown due to summer holidays. Beginning in the second half of August, cutters were loading production facilities to accumulate sufficient diamond inventory ahead of the Diwali festival holidays starting on 7 November. Resumed market activity following the summer slowdown saw weaker demand for inexpensive goods due, in part, to the depreciation of the world currencies against the US dollar.

Hereinafter data on 2018 Q3 and 9M 2018 production, sales, prices, inventories is preliminary and can be updated. Data on the diamond market is the Company’s estimate.

*Average realised prices (sales revenue divided by the sales volumes in carat terms) is also impacted by changes in product mix throughout the reported period.