Alrosa to Sell Assets to Reduce Debt, Issue Bonds

Russian diamond giant Alrosa plans to reduce its debt to $3.2 billion by the end of next year by selling gas and iron holdings, according to President Fyodor Andreyev Interfax reported. At the end of September, Alrosa's debt neared $4 billion.

Alrosa generated the large debt by investing in the development of three new diamond mines at a cost of approximately $1 billion each. Its cash flow was hurt by the economic crisis, which brought diamond sales to a near standstill in the last two months of 2008 and the first half of 2009.

The company, Andreyev said, could issue state-guaranteed bonds, allowing it to raise 10 billion to 30 billion rubles ($331-$334 million).

Andreyev aims to end 2009 by breaking even, after posting 14 billion rubles in net losses in the first half of the year, shrinking to 8 billion rubles at the end of the third quarter.

He lamented on the company's inability to halt production, noting that "for us, unlike De Beers, the problem cannot under any circumstances be resolved by cut-backs as this could have social and economic implications in mono-towns in Yakutia." Andreyev was hinting at unrest in towns that depend on the local diamond production. Unconfirmed reports from the region claimed that miners were demonstrating and demanding payment for their work.

Alrosa hopes to conclude the year with $2.75 billion in diamond sales, just shy of the $2.8 billion in sales made in 2008.