World's second-largest diamond miner considering IPO

The head of the world's second-largest diamond miner, Alrosa, has revealed details of a possible international IPO, as well as the latest in takeover talks for Russia's biggest gold producer Polyus.

The Sakha Republic, the richest region for natural resources in Russia, has come to the capital to promote its wares and sign new deals. Sakha has 99% of Russia's diamonds and more than 25% of the world’s.

Now the Yakutia-based diamond monopoly, Alrosa, plans to finance expansion in Kyrgyzstan, Armenia and Namibia by offering its stocks on a foreign exchange. Its boss, Sergey Vibornov, revealed the next steps.

“In March we'll complete the move from a closed to an open-stock company. Our shareholders believe that a subsequent IPO is absolutely reasonable and possible. By Russian law we first have to list in Moscow, and only then can we issue abroad. This will either be in Toronto or London, which are equally good for our share offering. Our planned capital investment is U.S. $5 billion dollars over the next five years, and no investment bank in the world at this moment could tell you our likely market capitalisation,” Vibornov said.

The head of Alrosa also spoke about the possible takeover of Polyus Gold.

“We're currently in the middle of takeover negotiations. It's for them to name an acceptable price, not us. But I'm confident we can reach a deal,” Vibornov said.

A key stumbling block over Polyus is the gold price. The 27-year high $US 800-per-ounce price tag is thought to be making the seller raise its asking price.

Some analysts agree that the gold price has now peaked. According to the world’s biggest gold miner, Barrick, gold production could fall faster than the expected 10% within five years.

But Polyus thinks the gold price will keep rising. With a goal to be a top-five gold miner by 2015, Polyus must expand abroad.

The key problem is that Russia’s running out of easy-access mines. This means either digging deeper, or into ever more inhospitable areas. Either strategy would require more time and money. So expansion might be the answer for Polyus.