Moscow, 16 July 2021 – ALROSA, a global leader in diamond production, reports its Q2 2021 diamond production of 7.0 m carats and sales of 11.4 m carats. Proceeds from rough and polished diamond sales totalled $1.2 bn.

Q2 and 6M 2021 trading update:

• Q2 ore & gravels output declined by 8% qoq (-19% yoy) to 8.0 mt mainly due lower production at Severalmaz (optimisation of mining fleet, see p.7) and at the Jubilee pipe (increase in stripping operations). 6M output decreased by 14% to 16.6 mt mostly as a result of a decision to suspend mining at the Zarya and Zarnitsa pipes (from May 2020 to June 2021) and a decline in mining operations at Almazy Anabara.

• Q2 ore & gravels processing grew by 26% qoq (-1% yoy) to 7.3 mt driven by a seasonal growth in the processing of gravels from alluvial deposits and an increase in ore processing at Severalmaz ( processing plant restart on 1 March 2021 after a temporary suspension in October 2020). 6M volumes were 13.0 mt (-2%).

• Q2 diamonds output was down 8% qoq (+22% yoy) to 7.0 m ct mainly due to the seasonal increase in the processing of low-grade gravels. 6Ì output rose by 6% to 14.5 m ct driven by the low base effect of 2020, which came on the back of the measures taken to cut output in 2020, including by suspending operations at the Aikhal and Zarya pipes and decreasing production volumes at Severalmaz.

• Q2 diamond grade was seasonally down 27% qoq (+24% yoy) to 0.96 cpt on the back of increased production at alluvials. 6M grade went 8% up to 1.11 cpt as a result of a drop in the share of gravel processing at Almazy Anabara.

• Q2 diamond sales declined by 26% qoq to 11.4 m ct (incl. 4.5 m ct from inventories) on the back of the high base effect of Q1 (Q1 sales totalled 15.5 m ct, incl. 8 m ct of stock sales). Sales of gem-quality and industrial diamonds in Q2 amounted to 7.5 m ct and 4.0 m ct, respectively. 6M sales were up 2.7x to 27 m ct, incl. 12.5 m ct from inventories.

• Diamond stocks as at the end of Q2 decreased to 8.4 m ct (vs 12.8 m ct in Q1 and 26.3 m ct in Q2 2020). Ore and gravels stocks amounted to 14.4 mt (+5% qoq and -11% yoy).

• Average realised price for gem-quality diamonds in Q2 grew by 28% qoq to $145/ct due to a higher price index (+7% qoq) and normalised sales mix (no impact of sales of lower quality inventories accumulated over the previous years). The 27% yoy decline was due to the higher share of large-size diamonds in the Q2 2020 sales mix, while sales volumes were at 0.6 m ct.

• Q2 average price index gained 7% qoq (+3% yoy), a YTD growth was 16%, exceeding the pre-COVID level of early 2020 by 4%.

• Proceeds from rough and polished diamond sales in Q2 amounted to $1,176 m (+1% qoq and +13.5x yoy), incl. $1,103 m from rough diamond sales and $73 m from polished diamonds. 6M sales grew to $2,335 m (+2.4x), incl. $2,229 m - rough diamond sales (excl. polished diamonds) (+2.3x).

• Market update: jewelry demand remains strong in all the key markets. At the same time, miners’ rough diamond inventories hit a rock bottom levels as supply structurally dropped. The Company sees a limited risk of any meaningful supply response globally. Midstream is also witnessing a decline in the inventories of rough and polished diamonds.

* Balance inventories of ore and gravels (excl. off-balance inventories).

** For gem-quality diamonds. For quarterly indicators Q1 2017 = 1.00.

Diamond market overview

• End demand: the demand for diamond jewelry in the key markets (USA and China) was strong in Q2 2021. Furthermore, certain EU countries gradually relaxed some of the restrictions introduced earlier, which provided support to the rebound in consumer activity.

• Midstream: the continuing strong demand for polished diamonds from retailers and end consumers coupled with a gradual decline in the supply of rough diamonds keeps inventories in the polishing sector at low levels.

• Demand for rough diamonds outstripped supply amid the recovery in production in Indian midstream and continuous demand for diamond jewelry in the key markets – the USA and China. Diamond shortages boost demand and creates upward pressure for rough diamond prices.

Hereinafter, data on Q2 and 6M 2021 production, sales, prices, and inventories is preliminary and may be updated. Data on the diamond market is the Company’s estimate.