Top diamond producer Alrosa plans $1.8 billion float

Top diamond producer Alrosa plans $1.8 billion float

MOSCOW - The world's top diamond producer Alrosa announced on Wednesday that it would float 16 per cent of its state-held shares as part of the Russian government's teetering privatisation campaign.

A stock valuation released by one of the Russian banks involved in the issue on Moscow's MICEX exchange has put a price tag of about US$1.4-$1.6 billion (1.0-1.2 billion euros or S$1.8 billion) on the stake.

"We expect that the offering will help to reinforce our unique position in the global diamond industry," said Alrosa chief executive Fyodor Andreyev.

"We also expect that the offering will expand our access to the international capital markets and help to unlock the value of the company."

Alrosa had remained one of Russia's most secretive companies despite its global ambitions and long history of providing the federal government with budget revenues at times of economic malaise.

It is also keen to find the resources necessary to launch new mining projects that would make up for its slowly-depleting Soviet-era base.

Alrosa had said in 2011 that its existing mines would provide it with diamonds for the coming four decades only.

Russia remains a tempting but unpredictable market for foreign investors who are interested in tapping its enormous mineral wealth.

Foreign direct investment has been slowed by a perceived lack of court independence and weak ownership laws that turn investing in Russia into an unduly high risk.

President Vladimir Putin appeared to acknowledge the problem during a speech at a business forum in Moscow in which he pledged once again to pursue overdue structural reform.

"We will follow through on all our intended reforms, including the structural modernisation of entire industries," said Putin.

"We will definitely keep our focus on development and the creation of a strong economy."

Russian media said a fund linked to South Africa's De Beers diamonds miner and trader as well as some top Chinese investors had already expressed interest in the Alrosa shares.

The east Siberian firm accounts for roughly a quarter of the world's diamond production and has reported reserves of 1.28 billion carats.

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