UPDATE 1: Alrosa Raises $1.3B as Shares Start Trading

Russian miner Alrosa raised around $1.3 billion in its public offering of shares on the Moscow MICEX Stock Exchange with trading starting today at a price set by the company of RUB35 ($1.10) per share.

Investors included Oppenheimer Funds Inc. and Lazard Ltd., said First Deputy Prime Minister Igor Shuvalov. “The fact that the deal was oversubscribed and the quality of investors is proof that the sale went successfully,” Shuvalov said in comments cited by Bloomberg News.

The Vedomosti newspaper, citing unnamed sources, reported that 60 percent of the shares were allocated to U.S. investors and 14 percent to Russian buyers. Lazard Ltd bought $300 million of the shares, according to the report.

Funds from Lazard and Oppenheimer took a “significant volume” of the portion available to U.S. investors, said Sergei Arsenyev, managing director of investment banking at Goldman Sachs Group Inc. Alrosa will trade the shares on the Moscow exchange and has no plans to list them overseas.

The offer price implies a market capitalisation for the miner of around RUB257.7 billion ($8.1 billion), at the lower end of initial forecasts.

The offering involves the sale of 7 percent of shares owned by the Russian Federation and also by the Republic of Sakha (Yakutia), where most of the company’s mines are located.

Both the Russian government and OJSC RIC Plus, wholly-owned by the Republic of Sakha, will offer up to 515,547,593 shares representing a total of around 14 percent of Alrosa's shares.

In addition, Wargan Holdings Limited, a Cyprus company controlled by Alrosa, will offer up to 150,237,555 shares representing approximately 2 percent of the miner's shares. The net proceeds of the offering to be received by Alrosa from the shares sold by Wargan Holdings Limited will be used to repay existing debt.

Alrosa said that VTB Capital plc may buy up to 10 percent of the shares on offer within 30 days of the announcement of the offer price. And Sunland Holding SA, a wholly-owned subsidiary of Alrosa, has granted VTB Capital plc an option to require Sunland Holding SA to purchase the shares up to 10 percent of the shares at the offer price.

Alrosa President Fedor Andreev said: “We are delighted with the international and domestic investors’ enthusiastic response to the offering, which has marked an important strategic step for Alrosa. Our unique position as a global leader in rough diamond production with the world’s largest reserve base, favorable industry fundamentals, a successful sales and marketing strategy, strong cash flow generation, attractive future growth prospects and an experienced management team with a proven track record have all played their part in generating significant investor interest in Alrosa and the offering. We will endeavor to further develop Alrosa as a public company and to increase value for all its shareholders.”

Alrosa is the largest diamond mining company in the world based on rough diamond production volume, and last year produced 34.4 million carats of rough diamonds, accounting for 27 percent of global rough diamond output based on carat volume, according to Kimberley Process statistics.

In the first half of this year, Alrosa produced 17.1 million carats of rough diamonds. 

The miner operates six open-pit mines, three underground mines and 13 alluvial placers. Its principal mining and processing operations are located in Yakutia, in the north-eastern part of Russia, and the Arkhangelsk region, in the north-western part of Russia.