Standard & Poor's Raises Long-Term Credit Rating of ALROSA

Standard & Poor's is raising the long-term credit rating of ALROSA from B- to B. The ratings agency announced that this is because the Russian diamond mining company received a five-year quota for the export of diamonds in March 2003. The outlook is 'stable.'

'ALROSA's rating is being raised for several reasons. Firstly, it has received a quota to export diamonds, which will make it easier to predict company sales, also the company now has better working conditions in Russia and access to international financial markets and, what is more, the company has made progress in underground mining,' said Yelena Anankina, a credit analyst with Standard & Poor's. 'The rating was not raised any higher due to a decrease in sales, a high and growing level of debts, many of which are short-term obligations, and also close ties with the Sakha (or Yakutia) Republic, which has no rating. The raise was also limited as a result of a large-scale capital investment programme, which was implemented without a sufficient level of long-term financial support, which is a result of national factors and industry regulation. On the other hand, the rating also reflects positive factors such as the company's highly profitable sales to the South African diamonds giant De Beers, a relatively strong position in the diamond industry and a significant level of reserves (although this has not been confirmed by independent experts).

Standard & Poor's does not believe that the Russian government will definitely support ALROSA financially if the company should have financial difficulties.

'The stable outlook reflects Standard & Poor's expectation that ALROSA will continue to cooperate with De Beers and that the company's export level will not drop significantly in comparison recent years,' Ms Anankina added. 'Standard&Poor's expects that ALROSA's level of expenditure will be limited for several years after completing the current programme of capital investments and that the company will make sure these investments are carefully made.'

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