Severalmaz to use 2011 profit to clear past losses
MOSCOW. May 21. (Interfax) - The Alrosa group's OJSC Severalmaz , which holds the license to the Lomonosov diamond field in the Arkhangelsk region, will use last year's net profit to pay off losses for previous years, the company said in a statement following its annual shareholders meeting on May 18.
Severalmaz saw its net profit plummet to 44.92 million rubles in 2011 from 2.095 billion rubles in 2010 after it stopped selling diamonds on the market in Q4 2011, Alrosa has said.
The net profit in 2011 was higher than sales revenue (1.097 billion rubles) and was paper profit, arising because a loan from the parent company was reduced by 2.4 billion rubles, while the loan's tenor was extended and interest increased.
Severalmaz has long been Alrosa's most distressed asset. Alrosa planned to sell 50% of the company to an investor in 2010. Interest was expressed by three parties, including Rio Tinto, but Alrosa eventually decided against selling after its subsidiary's finances stabilized and the diamond price situation improved.
Alrosa is investing $800 million in Severalmaz, which is preparing to commission the second stage of the Lomonosov mine, capacity 3 million tonnes per year. Work is due to begin early this year. The first stage processes 1 million tonnes per year. Full capacity of 5.6 million tonnes should be achieved by the end of 2015. Alrosa is hoping to keep Severalmaz at break-even level until then.
The Lomonosov field contains 20% of Russia's diamond reserves.