Alrosa Reduces Output to Focus on Safety

RAPAPORT… Alrosa has lowered the production outlook for its
International mine from next year due to enhanced safety precautions following the Mir accident.

“In our decision to reduce pace and output we were guided by
new, stricter rules governing health-and-safety system[s],” Alrosa CEO Sergey Ivanov
said Wednesday. “Our employees’ health and safety are an absolute priority for
us.”

The miner has suspended all activity at International below 800 meters until
the end of the year, after which it will carry out limited operations while it
assesses whether the mine is dangerous.

From 2019 to 2022, Alrosa expects to produce between 3 million and 3.2 million carats per year at the deposit, compared with about 3.7 million carats in 2017 and 2018. The company expects to resume full-capacity mining at
International in 2023, though it is working to reduce that time frame. It hopes partially to compensate for the drop by increasing production at other mines.

“This decision means changes in [the] sequence of mining and
preparing the ore body,” said Igor Sobolev, Alrosa’s first deputy CEO. “Now we are
starting [to] plan for the next years, during which we will consider the existing
options to intensify production at other fields and balance the production plan.”

The precautions follow the 2017 flooding at Alrosa’s Mir
underground mine — also part of the Mirny division — which killed eight workers. At
the time, a commission determined that errors within the company had led to the
incident.

The miner has not changed its production estimate of 36.6
million carats for 2018.

The International mine had 51.3 million carats
in reserve at the beginning of 2018.