Moody’s Upgrades Alrosa Rating

Moscow: Moody’s Investors Service has upgraded Russian diamond miner ALROSA’s corporate rating while reducing the rating on the probability of default. “The upgrade of ALROSA’s ratings primarily reflects the company’s strengthened business and financial profile; Moody’s expectation that its financial metrics will remain robust, despite demand and price volatility for diamonds; the company’s high profitability, positive free cash flow generation and strong liquidity,” the ratings agency wrote.

Moody’s said its decision reflects the fact that ALROSA’s financial metrics “have remained strong versus global peers” and will remain robust, “owing to the company’s status as a major producer and exporter of diamonds and weak rouble, the company’s 29% share in the global diamond output, its low-cost reserve base, technical mining expertise, solid liquidity and conservative financial policy.”

At the same time, Alrosa’s rating factors in “the volatile demand and prices for diamonds and the company’s exposure to the Russian macroeconomic environment, despite the high exports, given that its operating facilities are located in Russia.” Moody’s says the reason the outlook the rating remains negative is based on state-ownership of the company and the potential downgrade of Russia’s sovereign rating. At the same time the ratings agency also takes into account the “moderate probability of government support in the event of financial distress.” The rating comes as the Russian government plans to sell 10.9% of its stake in the mining giant.