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Development of lomonosov diamond field
IG Alrosa considers three options for Severalmaz mine
By: Diamond World News Service
Feb 21 2006 12:00AM
Reference: 259  


Alrosa, Russias state-owned diamond mining company, is considering three options for the development of its Lomonosov diamond field in the Arkhangelsk region of northwestern Russia. Alexei Mikhailovsky, Deputy General Director of Investment Group Alrosa (IGA), told Polished Prices that the financial foundation of the project could be the raising of debt, secured by the off-take of diamonds; by a reverse takeover of the project company into a listed vehicle already operating in the diamond sector; or the placement of a bloc of shares in an initial public offering (IPO). Mikhailovsky said the three options have been under consideration for some time, indicating no personal preference himself.

IGA is the wholly owned subsidiary of Alrosa, with mandates to develop a variety of assets outside Alrosas core business of mining diamonds in the Sakha region.
IGA recently completed the highly profitable sale of its gold mining assets in the region to Norilsk Nickels gold company, Polyus. IGA has been mandated for some time to pursue the development options for Severalmaz, the company which holds the mining licenses for the Lomonosov field. Negotiations have been held with diamond companies like Rosy Blue, as well as mining companies such as BHP Billiton. They have been inconclusive .A fund-raising effort by London-based Fleming Family & Partners was also without result.

De Beers decided to sell its stake in Severalmaz to Alrosa after concluding that it lacked confidence that it could achieve its target rate of return. De Beers then concentrated on developing the Grib pipe, in the nearby Verkhotina tract, through Archangel Diamond Corporation (ADC). That effort has been blocked by claim-jumping by the Lukoil Company and its CEO, Vagit Alekperov. Both the Lomonbosov pipes and the Grib pipe share technical mining difficulties, including heavy water-logging of the soil, and water disposal problems.

Severalmaz estimates that its diamond property holds reserves of 160.9 million tons of ore that could be processed into 200 million carats of rough diamonds. The value of this production exceeds $1.5 billion at current prices. Pilot mining and milling of ore began at the site last year, and is funded by a loan from ING Bank.

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