Sustainability Report OJSC ALROSA for 2011 Contents

Tsagelnik Ksenia, 14 years old, Mirny Sustainability Report OJSC ALROSA for 2011 Contents

3 21 42 74

Statement of the President Path of Sustainable Development Environmental Responsibility Appendix of OJSC ALROSA 22 Sustainable Development Strategy 43 Our Environmental Policy 75 Independent Auditors’ Opinion

24 Dialogues with Stakeholders 47 Managing Environmental Impact in 2011 76 Appendix 1. Table of Standard 5 Disclosures of Sustainability Reporting 27 System of Corporate Management in the About the Report Guidelines (Global Reporting Initiative) Field of Sustainable Development 52 86 Appendix 2. Main Performance Indicators 29 Risk Factors Social Responsibility 8 90 Appendix 3. Environmental Performance 33 Innovation Development 53 Our Policy in the Area of Corporate Results About our Company 34 Ethics and Stability of Global Diamond Social Responsibility 9 Basic Facts Market 56 HR-strategy 97 Glossary of Terms and Abbreviations 10 Our Products 67 Occupational Health and Safety 100 Feedback: Your oppinion counts! 12 Our Companies 36 71 Charity. Support to Local Communities 101 Contacts 19 2011 Results. 2012 Targets Economic Stability

37 Company’s Economic Targets and Results

41 Contribution in the Economic Development of the Region

Angahaev Yura, 14 years old, Mirny

2 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Contents polished diamonds totalling USD 4.5 billion have become record breaking for the entire Company’s history. We continue to steer a course of sustainable development of business through expansion of our production capacities, while implementing underground mine construction programs, developing sales systems based on long-terms trade relations, implementing innovative technologies, technical upgrade of the Company’s production assets, selling non-core assets and efficient debt management. Environmental responsibility issues have Statement of the President been and still are the focus of ALROSA’s management. We are aware of the scale of OJSC ALROSA of the environmental impact of the mining industry and set targets to minimize it. In the reporting year, we have developed the Comprehensive Action Plan for Environ- mental Protection by OJSC ALROSA for 2011 to 2018. Throughout the year, actions Dear readers, have been taken in all areas of the Com- In 2011 our Company, pursuant to business principles of pany’s environmental policy. openness and transparency made a decision to publish Our strategy of long-term sustainable ALROSA’s Sustainability Report prepared in accordance development provides for a continuous with GRI international standard and confirmed by improvement of results within the occu- It needs to be noted that preparing non- independent auditor. pational health and safety system. Unfor- financial reports has been practised by us tunately, in 2011 we did not manage to since 2007, however until today those were minimize the number of occupational inju- aimed at internal corporate use only. This ries. I am deeply saddened by the loss of report has become for us a new stage in our three employees who suffered fatal in- establishing sustainable business philoso- in accordance with the backbone principles quirements of environmental legislation juries. Despite the reduction in the general phy. We want our strategic principles and of sustainable development and responsi- and international standards; occupational injury rates within the report- approaches in the area of sustainable de- bility remained unchanged. • in the field of corporate social responsi- ing period, it needs to be acknowledged, velopment to be known to and understood We still consider ourselves to be respon- bility, for safety, health and professional that in our desire to bring fatal and severe by all stakeholders. sible: skills of our employees, for continuous accidents to zero the most drastic mea- Reporting year 2011 has become an • in the field of economics, for the efficien- open dialogue with local communities sures should be taken, including those af- important milestone for us. For the purpos- cy of business and our participation in and other stakeholders. fecting the degree of responsibility of every es of further development, ALROSA has maintaining sustainable global diamond The balanced results of 2011, both posi- employee. changed its organizational and legal struc- market, national and regional economic tive and negative, allow me to state that the Changes in ALROSA’s business pattern ture and has become an open joint stock systems; Company has fulfilled its obligations. did not affect the operation of our corpo- company (OJSC). It resulted in transforma- • in the field of environment, for the en- We have maintained leadership in rough rate social responsibility system, the devel- tions in the Company’s various areas of ac- vironmental impact of our operations, diamond mining, with the output being opment level and achievements of which tivity, whereby our vision of the prospects compliance of our projects to the re- 34.6 million carat, and sales of rough and we are justly proud of.

3 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Statement of the President of OJSC ALROSA Throughout 2011, we continued to in- Within the framework of ALROSA’s vol- primarily in the underground mining opera- pany as a legal successor of Yakutalmaz vest in the Company’s human capital untary obligations for financing the con- tions. The tasks involving prompt provision production and scientific association and through implementing both the HR pro- struction of educational, health, culture and of personnel for innovative technologies in the 20th anniversary of ALROSA. More than grams for personnel organization and de- sports facilities in the territory of the Repub- manufacturing and management, reduc- for half a century, the Company proves the velopment and the corporate social pro- lic of Sakha (Yakutia), in 2011 the Company tion of occupational injuries through the invariability of its strategic priorities and its grams in the field of health protection and transferred the total of RUB 521 million to improvement of training and motivation of ability to take any challenges not by words rehabilitation, culture and sports, additional non-profit association Target Fund for Fu- operating personnel, are still essential for but by its actions. For more than half a pension benefits, housing, including under ture Generations. We estimated our total us. In the field of social and environmental century, the Company pursues its mission the new corporate mortgaging program, 2011 social investments in the community responsibility, we have the task of consis- of a diamond producer responsible for eco- relocation of the Company’s retired veter- to be USD 94.4 million. tent implementation of international corpo- nomic stability, environmental safety and ans outside the Republic. Financial results We have many tasks to resolve in the rate management standards and their cer- people welfare, for all that is more valuable of the Company’s operations allowed us to future. First of all, these are the tasks relat- tification. than diamonds. increase the employee salary level by 37 % ed to the existing technological problems, This year we are celebrating two anni- President of ALROSA against the previous year. upgrade of the core production assets, versaries, the 55th anniversary of our Com- Fyodor Andreev

Oleksyuk Eugene, 15 years old, Mirny

4 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Statement of the President of OJSC ALROSA About the Report

Slavko Alex, 14 years old, Mirny

ALROSA continues its practice of pre- ALROSA’s sustainability report for 2011 ALROSA’s Sustainability Report for 2010, Co. Ltd. to OJSC ALROSA. The change in paring and issuing annual non-financial re- reflects the operational results from Janu- was published in September 2011. the name of the report from social report ports. This report, ALROSA’s Sustainability ary 1 to December 31 of the reporting year. There have been no material changes to sustainability report was based on the Report for 2011 (hereinafter, the Report), In the cases when a wider reporting time- in measurement methods against the pre- resolution of the ALROSA’s Executive Com- is the Company’s fifth non-financial report frame is required in order to understand vious year. The information and the Com- mittee passed in November 2011. and is published in order to inform general the Company’s sustainability results, mainly pany’s operational parameters have been stakeholders of the principles, objectives, 2009 to 2011 data was used. The report gathered by a task force team in accor- Principles for Preparing the Report results and prospects of the Company’s also contains references to the events that dance with corporate management proce- In preparing the Sustainability Report, actions in the field of sustainable develop- occurred before or later than this period but dures and reporting requirements. the Company was governed by interna- ment. may be of importance so that the readers The major change in the wordings of the tional principles for reporting in the field The report has been prepared with due could understand the information present- information in the report is related to chang- of sustainable development set out in GRI consideration of the Management’s recom- ed in the report. es in the Company’s business and legal Guidelines. mendations for sustainable development The Company’s non-financial reports status, which was changed from a closed reporting, Global Reporting Initiative (GRI) in are published annually in the third quarter joint stock company to an open joint stock Report Boundary the field of sustainable development, ver- of the year following the reporting one. The company in 2011, and subsequent chang- ALROSA’s Sustainability Report for sion 3.0. Company’s previous non-financial report, es in the abbreviated name from ALROSA 2011 covers all (unless specifically pro-

5 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About the Report Principles Principle Incorporation of non-financial reporting principles of the GRI standard in ALROSA’s Sustainability Report

The Report presents the most important results of the Company’s operations. The basis for the information to be included in the Report is its ability to describe AL- MATERIALITY ROSA’s material impacts on the economy, environment and community or have a major effect on the assessments and resolutions of the stakeholders.

While preparing to the compilation of the Report, an analysis of the stakeholders has been carried out, with key groups and organizations for ALROSA’s operations being defined. In order to define the groups of stakeholders, we used the criteria of the materiality of the impact ALROSA has on its groups, the impact of these groups STAKEHOLDERS Principles for the Company’s sustainability and the results of its operations, as well as the presence of any lawful obligations. The process of interaction with the majority of the INCLUSIVENESS contained stakeholders is a part of day-to-day operations, the interaction with the stakeholders in the course of preparing the Report was not maintained specifically for the in GRI provision of information. Standard: SUSTAINABILITY The Company strives to reflect in the Report the scale of its contribution to the sustainable development in the global, regional and local levels, as well as its intentions CONTEXT to strengthen the positive and reduce the negative effect of its operations in the economic, environmental and social spheres.

The Report contains the information on all the Company’s material impacts (economic, environmental and social). In preparing the Report, all the relevant information COMPLETENESS was taken into account that could significantly affect the perception of the results of ALROSA’s operation by stakeholders.

The Company attempts to find a reasonable balance in presenting the results of its operations and avoids a selective approach, omission of material information and BALANCE use of such formats of presenting the information that do not provide for an opportunity to make a justified assessment of the general results of the Company’s operations. The Report presents both ALROSA’s achievements and problems that need to be resolved.

The Company strives to give the stakeholders an opportunity to analyse the changes in its results and compare it with other companies. In presenting the information in the Report, the Company is guided by the GRI Guidelines and its technical protocols, as well as Sustainability Reporting Guidelines & Mining and Metals Sector COMPARABILITY Supplement. As a result, the information on the Company may be represented in such a way as to allow comparing its operations with operations of other companies. Quality A number of parameters in the report are provided for several years. Principles in GRI ACCURACY The Report presents the data that has been officially recognized by the Company and supported by internal documentation, as well as materials available to public. Standard: TIMING The Report is prepared in accordance with the schedule. The Report is issued in the third quarter of the year following the reporting one.

The Report majorly does not contain professional terms or any data that would require specialized knowledge. The Company is aiming to make the Report accessible CLARITY and clear to a wide range of stakeholders.

The reliability of the information contained in the Report is ensured by the Company’s current reporting system (collection, analysis, consolidation and quality control RELIABILITY of the reporting information) in accordance with the ALROSA’s Internal Business Code. In order to improve the level of reliability of the information provided, the Report has passed through the procedure of external certification by a third party.

vided for otherwise) the structural units of ALROSA Nyurba, OJSC Almazy Anabara, nities, consumers and business partners, as the need to comply with a number of ALROSA. The parameters of the financial OJSC Severalmaz. Apart from the finan- responsibility for environmental protection external audit principles, i.e. and economic operation as represented in cial performance results, the report provid- and use of natural resources, occupational • the audit is to be performed by the the Sustainability Report are provided for ed summary information in relation to the health and safety. groups or persons that are independent ALROSA Group in general, unless other- social and environmental responsibility of In this Report, the Company provid- of the Company’s operations; wise specified. these companies. ed data in accordance with A+ level GRI • the auditors inspect the compliance with The Report for the first time presents in- Guidelines application: the report includes the requirements of the standards for formation on the main 2011 performance GRI Application Level the information on each main parameter of the quality and content of the informa- parameters of subsidiaries specializing in The Report covers economic, environ- the Sustainability Reporting Guidelines & tion reflected in the Report; ALROSA’s core operations (diamond min- mental and social aspects of ALROSA’s Mining and Metals Sector Supplement. • the auditor’s opinion is included in the ing and geological survey) and located in sustainable development. It considers such In external verification of our non-finan- Report and published. the Russian Federation, where the Compa- areas of social responsibility as responsibil- cial reporting, we are governed by the rec- ny acts as a majority shareholder, i.e. OJSC ity towards personnel and local commu- ommendations of the GRI Standard as well

6 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About the Report GRI Application Levels

Report Application Level С С+ В В+ А А+

Report on: Report on all criteria listed for Level 1.1 C plus: G3 Profile 2.1-2.10 1.2 Same as required for Level B Disclosures

OUTPUT 3.1-3.8,3.10-3.12 3.9, 3.13 4.1-4.4, 4.14-4.15 4.5-4.13, 4.16-4.17

G3 Management Management Approach Disclosures Management Approach disclosed for Approach Not Required for each Indicator Category each Indicator Category

Disclosures OUTPUT Standard Disclosures Standard Report Externally Assured Report Externally Assured Report Externally Assured Respond on each core G3 and Sector Report on a minimum of 20 G3 Performance Report on a minimum of 10 Supplement1 indicator with due regard Performance Indicators, at least Indicators & Performance Indicators, including to the materiality Principle by either: one from each of: economic, Sector Supplement at least one from each of: social, a) publication of the information on

OUTPUT environment, human rights, labour, Performance Indicators economic and environment. the parameter or b) explanation of the society, product responsibility. reasons for its omission.

1 Sector supplement in final version

7 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About the Report Basic Facts Our Products Our Companies 2011 Results. 2012 Targets

About our Company

8 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Shalashov Kostya, 15 years old, Mirny Basic Facts

This year marks the 20th anniversary of the foundation KEY FACTS ABOUT ALROSA GROUP: of ALROSA. This milestone age, which is still young at the international scale, has in fact 55 years of history of 1st place in the world by diamond mining exploration and development of the diamond complex in volume in Russia. Owing to the support of three generations of diamond workers, ALROSA lives and continues to 27 % of the global mining develop in accordance with the principles of sustainable development and business responsibility, while 97 % diamond mining in Russia maintaining Russia’s stronger position on the global market. 34.6 million carat, diamond mining in 2011 4.5 billion US Dollars, sales of rough and In more than half a century of its history, The Company’s major shareholders polished diamonds in 2011 the Company won its rightful place and is having more than two percent share in the employees firmly staying within the ranks of the leaders shareholding capital are the Russian Fed- 30,903 in the global diamond complex. The Com- eration (50.9256%), the Republic of Sakha 8 constituent entities of the Russian pany’s operations maintain the full cycle of (Yakutia) (32.0002%), 8 uluses of Yakutia’s diamond production starting from geologi- ‘diamond province’ (8.003%), with 9.07% Federation cal survey, diamond mining and separation, shares held by legal entities and natural 30 divisions sorting, cutting to sales of diamond prod- persons (including 0.2% held by the Com- ucts. pany’s subsidiaries).

2011 was marked by an important event cow, Yakutsk, Saint Petersburg, Orel) from the point of view of the Company’s and abroad (Angola). The company also further development. ALROSA changed its includes the operation of 42 subsidiaries ALROSA is one of the world’s largest diamond organizational and legal status and became and affiliates that operate in 11 fields of producers securing leadership in rough diamond an Open Joint Stock Company. activity. production by volume. Our Company is one of the largest tax- Rough diamonds in Western Yakutia are payers in the budget of the Republic of produced by four mining and processing Having become a legal successor of Yakutalmaz Sakha (Yakutia) and makes significant con- divisions on eight kimberlite pipes and al- state production and scientific association in 1992, tribution to the economics of Russia and luvial diamond deposits by open-pit or un- ALROSA gained control over diamond exploration, the Republic. derground diamond mining method. The Company’s operational structure Our main product, natural rough dia- mining and sales on domestic and international is represented by 30 structural units and monds, is sold on the domestic and inter- markets. 5 representative offices in Russia (Mos- national markets.

9 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Our Products

The diamond reserves that have been discovered and explored for ALROSA’s mining companies are extensive in terms of their volume and are characterized as high-quality. The estimated resources of the reserves total approximately one third of the global rough diamond reserves. Zhabin Sergei, Mirny Gem- and near-gem-quality rough diamonds represent 95% of the Company’s total production. In addition to rough diamond mining, the Company also On December 23, 1980, the largest rough diamond manufactures polished diamonds. in Russia was found in the ores of the Mir pipe. It is 48x36x25 mm in size and weighs 342.5 carats (one carat equals to 0.2 g). It is transparent with a shade of lemon-yellow. Rough and polished diamonds pro- In terms of rough diamond content One of the first largest stones by size produced at duced by our Company have been in and pipe quality, the International pipe great demand among both domestic and is among the world’s three best rough Mirny mine was a rough diamond weighing 51.66 international jewellers and polished dia- diamond deposits. In April 2011, open- carat found in 1963. It is a large octahedral crystal, mond manufacturers for several decades. pit mining of the International pipe was transparent with a light shade of yellow. It was named Discovery of diamond deposits in the closed. Valentina Tereshkova in the honour of the world’s Far North of the Soviet Union is one of the Our diamonds are mostly colourless first female cosmonaut. Zlata Praga diamond was major events in XX century. The first Ya- and vary only by the degree of transpar- kutia rough diamond was discovered on ency. Heavily coloured diamonds are rare, also discovered in the Mir kimberlite pipe. Its weight August 7, 1949 by the geological party of sometimes we can see diamonds that is 38.72 carats. It is a table-faced octahedron with G. H. Fainstein on Sokolinaya bar. Indus- are brightly coloured purplish-cherry or a faded shade of yellow. Year 1966 was the most trial kimberlite pipes were discovered later. brown-cherry colour. Smoky-brown crys- ‘yielding’ in terms of large rough diamonds, when such Three pipes Mir, Udachnaya and Sytykan- tals may be also found. Apart from that, diamonds as Toktogul of 37.56 carats, Gornyak skaya were discovered in 1955 all at once. there are crystals with spots of green, At the moment, only 10 richest out of 800 sometimes blue-green and tobacco- of 44.62 carats, Letniy of 46.36 carats, 50 years kimberlite pipes that have been discov- brown, which appearance is explained by of the USSR of 71.4 carats were discovered. All ered are being developed, including Mir, a weak radioactive effect. these rough diamonds are full crystals, smooth-faced Udachnaya, Aikhal, International, Jubilee, Yakutia’s rough diamonds take a firm octahedrons, transparent with a pale shade of yellow. Nyurbinskaya, Botuobinskaya and others. place within the structure of the global di-

10 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company amond market, first of all due to their high nature, cracks and other defects. Yakutia In autumn of 1966, the largest diamond of that time quality, its main criteria being the purity of diamonds in a piece of jewellery signifies with a weight of 105.8 carats, round, lemon- the gem, i.e. small inclusions of various a priori the high quality of gems in it. yellow, was found at the newly commissioned Processing plant No. 3 by processing operator Maria Konenkina. The diamond is also unique as it was Product Quality Guarantees given a name of a regular worker, Maria.

Rough Diamonds Polished Diamonds «So many years passed, and I still cannot get used

ALROSA strictly complies with the resolutions and recom- to a thought that such a rare and expensive large The Company controls the entire pro- mendations set out in the Code of Principles of the World stone is named after my name. This is an honour cess of diamond mining, processing and Federation of Diamond Bourses that govern the behaviour cutting, that is why it can guarantee to for all the female geologists, processing operators of the parties of the global diamond market, including in its customers the authenticity of a gem, respect of artificial improvement of quality parameters of and others who tied their fortune with diamond purity of its origin and high quality of cut. rough diamonds. prospecting and mining…. I was just lucky», Maria

Polished diamonds manufactured by our Markovna says. Compliance with the established requirements is confirmed Company are strictly certified. Polished through quality control of produced diamonds and issue diamond conformity certificates contain But this is not about luck. This rough diamond of relevant documents. All the information regarding the all the information regarding the estab- received the name of Maria Markovna Konenkina established consumer properties of products is contained in lished consumer properties of polished supply contracts or diamond sales and purchase contracts. not by mere chance. While still in her young years, diamonds. Maria took part in diamond prospecting. She spent seven years in difficult and dangerous geological expeditions.» Quoted from article «Stars of Yakutia» by P. Vecherin, 1984. Today, this precious find is stored in the Diamond Fund of Russia. And the name of Maria Markovna Konenkina, the veteran of the diamond mining industry, is not only immortalized in the rough diamond but remains in memory of the people, Maria’s caring hands greened up the headquarters of ALROSA in Mirny. The employees of our Company know very well that growing flowers in the Far North conditions is not less difficult and honourable than to mine diamonds…

Olga Naumova, 12 years old, Mirny

11 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Our Companies

ALROSA Group companies

represented in chart general shareholders’ meeting

supervisory board

Executive Committee

the company’s executive management

Branch USO YAPTA Diamond Branch Brillianty Udachny MDP, Mirny MDP, Aikhal MDP, Nyurba MDP, Institute Yakutni- NIGP, ALROSA, ALROSA, Sorting Centre, ALROSA, Udachny Mirny Aikhal Nyurba proalmaz, Mirny Mirny Moscow Moscow Mirny Moscow

Almazdortrans Mirny Aviation Branch ‘ALROSA- Mirny Automobile Amakinskaya EE, Botuobinskaya EE, Mirny EE, Arctic EE, Logistic Division, Production Division, Transsnab’, Road Division, Aikhal Mirny Mirny Zhigansk Mirny Division, Lensk Mirny Zhukovsky Mirny

Housing and Capital Almazavtomatika Almazny Kray Branch Heat water-supply Staff Training Cultural-sports Farm Sovkhoz community Construction specialized broadcasting Prometheus Enterprise (HWSE), Centre, Complex, Novy, amenities Division, Division, enterprise, company, health complex, Mirny Mirny Mirny Arylakh Mirny Mirny Mirny Mirny Nebug

ALROSA Representative ALROSA ALROSA ALROSA office for the RF North ALROSA-Africa Branch, Representative office, Representative office, Representative office, West region, Luanda Moscow Yakutsk Oryol St-Petersburg

affiliated and assiciated companies

Organizations Industrial Trade, hotel, Diamonds Logistic for selling diamonds and geological Construction – 2 Credit-financial – 3 sanatorium-resort and Non-profit – 1 Factory – 6 and transport – 1 abroad – 6 survey – 10 others – 13

12 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company ALROSA’s companies operate in the The Company’s head office is located trated in the Western Yakutia, i.e. Yakutsk, The best of ALROSA’s production po- Russian Federation and a number of for- in Mirny, the Republic of Sakha (Yakutia), Mirny district (Mirny and Udachny towns, tential is represented by for mining and eign countries (England, Belgium, China, and two other main offices are located in Aikhal and Svetly settlements), Lensk dis- processing divisions, i.e. Mirny, Udachny, Israel, the UAE, the USA, Angola, Namibia, Moscow and Yakutsk. The basic produc- trict, Anabar and Nyurba uluses of the Re- Aikhal and Nyurba. Congo). tion facilities of our Company are concen- public.

Geography of ALROSA Group companies operations

Great Britain The Russian Federation

Belgium

The USA

Hong Kong UAE

Angola

Angola: Representative office of ALROSA (Luanda), Diamond trading companies Catoca Ltd. Mining Co., located in: Hydrochikapa S. A. R. L. the USA: ARCOS USA, INC. China: ARCOS HONG KONG LTD. Great Britain: ARCOS LIMITED Belgium: ARCOS BELGIUM N. V. Israel: ARCOS ISRAEL LTD. the UAE: ARCOS EAST DMCC

13 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Udachny Aikhal Mirny Nyurba Mining and Processing Division Mining and Processing Division Mining and Processing Division Mining and Processing Division This division develops two kimberlite The team of the Aikhal Mining and Pro- Being the Company’s oldest mining and The youngest of ALROSA’s mining and pipes – Udachnaya and Zarnitsa – and cessing Division carries out mining opera- processing division, Mirny MPD utilizes processing divisions, Nyurba MPD carries processes ore at Processing Plant No. 12. tions on three primary deposits, i.e. open- Mir and International underground mines, out its operations at Nakyn ore fields while Udachny mine is the world’s deepest mine pit mining at Komsomolskaya and Jubilee develops the Irelyakh, Vodorazdelnye Ga- producing diamonds from ore and sands of (610 m). The division’s mining operations pipes and underground mining at Aikhal lechniki, Gornoye and Levoberezhnaya al- the Nyurba pipe. Rough diamonds are ex- account for 9.0% in the Company’s total pipe. The mined ore is processed at two luvial mines, carries out mining operations tracted from the mined substance at sea- output. processing plants, No. 8 and No. 14. The at industrial deposit Tailings of Plant No. 5 sonal processing plant No. 15 and plant Pursuant to the plan aimed at eliminat- Aikhal Mining and Processing Division and dredging processing of bench gravel at 16, one of the world’s best plants as far ing the lag in the construction schedule of mines 12.8% of the marketable product, the Irelyakh deposit. Mirny MPD accounts as the process and process automation is Udachny mine, works were carried out in with its mining operations accounting for for 43.8% of the Company’s extracted dia- concerned. In the reporting year, Nyurba the reporting year involving mining of the 51.3% of the total volume. Jubilee mine is monds and 6.5% of mining operations. MPD accounted for 17.1% of rough dia- west and east crosscuts, cross slits be- the largest in the world. Its area totals 59 In 2011, open-pit mining at International mond production cost-wise and 33.2% of tween the shafts and sloping runway from ha. mine was closed and the mine was pre- the total mining operations of ALROSA. the shafts. Regulation has been prepared Based on 2011 year-end results, the pared for conservation required for further In 2011, reconstruction of explosives and feasibility assessment carried out for division fulfilled all the planned parameters construction of surface water removal from warehouse was completed. The ground the efficiency of deposit development at in full. The most vital issue Aikhal Mining the bottom of the closed mine. A clinker operations were carried out in order to the Zarnitsa pipe in accordance with the and Processing Division is facing in 2012 line used to prepare stowing mix has been prepare the site for the construction of an dry treatment method. is to bring Aikhal underground mine to its commissioned at the underground stowing internal water removal system at the tail- Works on the project of reconstruction design capacity after the third start-up fa- unit of the Mir mine. ings dump of the plant. In September and of Processing Plant No. 12 were continued, cilities. At the moment, the construction is October 2011, after the tests performed and SEMTEK wet autogenous tumbling at its final stage. The division continues to at Processing Plant No. 16, radiographic mill was commissioned. In 2011, the divi- retrain employees of its subdivisions in or- separator RGS-1 manufactured by NPP sion developed the mine of the Udachnaya der to increase the scope of underground Burevestnik and complying with the ap- pipe down to 640 m and commenced pit operations. proved technical requirements was com- reconstruction. Despite a number of justi- missioned. Small grade rough diamond fied challenges, the division fulfilled all the mining increased by 11% as compared to planned parameters. One of the main tasks the parameters reached in 2010. set before the Udachny mine in 2012 is to form the team of the Udachny mine and commence underground site preparation works.

14 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Among the Company’s subsidiaries in core production, i.e. diamond mining and geological prospecting, there are three open joint stock companies, namely: Severalmaz, Almazy Anabara and ALROSA Nyurba.

JSC ALROSA Nyurba is engaged in development of dia- Environmental and social responsibility practice mond deposit of the Nakyn diamond field in the north of the Based on the company’s initiative, the Institute of the Nyurba ulus of the Republic of Sakha (Yakutia) discovered OJSC Applied Ecology of the North at the Academy of Sciences in 1997. The Company carries out mining and geological of the Republic of Sakha (Yakutia) carries out regular large- prospecting in the unique deposits of the global scale, i.e. ALROSA NYURBA scale researches to assess the environmental impact of the Nyurba, Botuobinskaya pipes and alluvial deposits with the company. These researches allow taking prompt necessary same names genetically related to them. actions in order to eliminate the results of the human-in- ALROSA Nyurba is a modern diamond mining facility Rough Diamond Mining – duced impact and restore the ecosystems that have been including a complete cycle of mining and processing op- 7,477.6 thousand carat, disturbed in the mining area of the Nakyn diamond mine. erations and obtaining rough diamonds. The Company is For the purpose of the implementation of the principle actively involved in advance geological subsoil study and Rough Diamond Sales – of responsibility for the environmental, social and econom- prospecting within the licensed areas and spends more USD 726.2 million ic situation in the region, Nyurba throughout many years than RUB 400 million per annum for these purposes. Geo- ALROSA ensures preservation of the living standards of the logical prospecting and mining operations are carried out community, implements vast regional policy in the Nyurba by shift method with the engagement of ALROSA’s subdivi- ulus and the Republic of Sakha (Yakutia) in general. sions: Nyurba MPD, Botuobinskaya and Mirny exploration The funds provided by ALROSA Nyurba are allocated expeditions. for the acquisition of the equipment for producing and pro- The company uses shift method for engagement of cessing of agricultural products, ensuring clear water pro- workers and experts. The number of regular personnel in duction, assistance to educational institutions, public orga- ALROSA Nyurba totals 73 employees. nization and medical institutions. ALROSA Nyurba provides financial support in organizing and carrying out republican cultural and sports events: International Sports Contest ‘Children of Asia’, Sports contest for national sports ‘Igry Manchaary’, republican confer- ences and festivals, etc.

15 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Open Joint Stock Company Almazy Anbara carries out Environmental and social responsibility practice diamond mining in alluvial deposits located in the territory Starting from its foundation in the territory of the Anabar of the Anabar and Olenek uluses of the Republic of Sakha OJSC national ulus, OJSC Almazy Anabara has been implement- (Yakutia). Mayat alluvial diamond deposit is located in the ing the measures for protection of the fragile arctic nature. basin of the Mayat stream of River Anabar’s right tributary. ALMAZY ANABARA Considering the specific features of the tundra ecosystem, Exploration and mining operations in the alluvial deposit are the recovery of the reindeer moss cover of which requires carried out by open-pit mining starting from 1998. From a long time, the company has purchased pneumatic-tired 2004, the company carries out diamond exploration and Rough Diamond Mining – cross-country vehicles. As requested by OJSC Almazy mining in the Morgogor alluvial deposit on River Ebelyakh’s 2,534.4 thousand carat, Anabara, regular researches are carried out for the envi- right tributary. OJSC Almazy Anabara is one of the largest ronmental monitoring of natural sites, assessment of the companies in the mining industry of the Republic of Sakha Rough Diamond Sales – condition of the environment, expected and actual evalu- (Yakutia). Every year, the company actively develops and USD 244.6 million ation of the impact from industrial developments. Starting makes valuable contribution to the social and economic from 2005, Almazy Anabara uses environmental technol- development of the Republic. ogy for waste-free recycling of spent motor oils that rep- In 2011, there were 1,091 employees engaged in the resent class 3 hazard for the environment thus minimizing company’s operations. In order to attract human resources the pollution from it. from rural areas, starting from 2011 the company applies In 2011, the comply held public environmental hearing Regulations for Engagement of Rural Youth ‘Start in Life’ in respect of the planned activity at the newly created work for 2011 to 2013. sites, and a report related to nature preservation and ecology has been presented to the public. Throughout the entire period of its operation, OJSC Almazy Anabara is continuously providing sponsorship support to the national (Dolgano-Evenki) Anabar ulus, starting from road sanding, assistance to schools, kindergartens, carrying out of the annual reindeer-breeders’ event up to construction of residential houses and social infrastructure facilities.

16 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Lomonosov diamond deposit, the license for mining of Environmental and social responsibility practice which belongs to OJSC Severalmaz, represents six kimber- Severalmaz pays much attention to environmental safety lite pipes, five of which have industrial rough diamond con- OJSC issues. Due to the need to carry out a state environmen- tent. In 2011, the Lomonosov MPD of OJSC Severalmaz tal expert review of the design documentation, in October carried out operational and investment activities in Arkhan- SEVERALMAZ 2011 public hearing was held in Arkhangelsk attended by gelskaya and Karpinskogo-1 pipes, part of the Lomonosov more than 100 members. The Company carries out contin- diamond deposit. From early 2011, Pomorskaya explora- uous environmental industrial monitoring of water courses, tion expedition started its operations. OJSC Severalmaz to- Diamond Mining – ambient air, soil and cover crop as well as biodiversity of day accounts for a small share in the total volume of rough 566.8 thousand carat, the ecosystems within the territory of the district. diamond production by ALROSA Group (some 1.5%), but The priority area of OJSC Severalmaz social policy is as soon as the MPD reaches its design capacity for ore Rough Diamond Sales – the participation in the comprehensive social and economic processing, the volume of the produced rough diamonds USD 36.5 million development of the Municipal Entity Primorsky Municipal will significantly increase, and the volume of diamond prod- District that accommodates the company’s industrial facili- ucts produced by OJSC Severalmaz will be comparable to ties. In 2011, OJSC Severalmaz took part in resolving the diamond mining by the world’s largest companies. most significant problems of the Arkhangelsk region from In 2011, the number of personnel totalled 1,139 em- the social point of view. Within the framework of the Par- ployees. ticipation Agreement, the Primorsky district received support for a total of RUB 1,400 thousand. The recipients of OJSC Severalmaz’s support are children’s homes, boarding schools, kindergartens, general education schools, children hospitals, veterans of geological exploration, veterans of the World War II, the disabled.

ALROSA’s Geological Exploration tion expeditions, these facilities currently is one of the largest polished diamond pro- mining. Yakutniproalmaz Institute develops Facilities include five exploration expedi- include Specialized Geo-Scientific Re- ducers in Russia. three main fields, scientific, design and tions, i.e. Amakinskaya Exploration Expe- search Enterprise (NIGP). Industrial Infrastructure of ALROSA is economic, and acts as a general designer, dition, Botuobinskaya Exploration Expe- The Diamond Marketing and Sales represented by divisions operating in the coordinator and project generator. dition, Mirny Exploration Expedition and Divisions of our Company are represented core areas of activity. Our Company has its Operation of automated management Arctic Exploration Expedition, the latter by the Yakutsk Diamond Trading Enter- own Yakutniproalmaz Research and Design systems for technological processes and being established in order to improve the prise and the United Selling Organization Institute. The research is closely related to production of management systems, lo- efficiency of geological exploration in the of ALROSA, as well as the Diamond Sort- the Company’s industrial tasks, the most cal and computer networks in ALROSA is northern part of the Yakutia’s diamond- ing Centre and ALROSA’s own cutting and important of which is to maintain its re- carried out by Almazavtomatika specialized bearing province. Apart from the explora- polishing division Brillianty ALROSA, which source base and ensure efficient diamond enterprise. In addition to that, the enter-

17 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company prise carries out design, implementation (Yakutia) and other regions. Construction Mirny Aviation Division with its own fleet of and maintenance of communication and and erection works are carried out by the passenger and cargo planes and helicop- telecommunication equipment. The enter- Mirny and Aikhal construction and erection ters. prise’s installation and adjustment units are trusts. Mirny Specialized Mine Construction Almazdortrans Production Division con- located in all the northern industrial sites of Unit performs construction of our under- sists of Lensk Auto-Transport Enterpris- our Company and are involved in the au- ground mines, Almaztechmontazh Special- es No. 1 and 2, the Lensk River Port with tomation of technical processes in plants, ized Trust carries out installation and start- warehousing facilities and entrance termi- pits and underground mines. up operations at the Company’s industrial nals, Auto-Repair Shops. The fleet of these Considering the remoteness of the dia- facilities. units includes modern Volvo and Man cars mond mining region and harsh climatic Significant territorial remoteness of AL- and ensures continuous transportation of conditions, the Company, in addition to ROSA’s structural units from the main various cargoes to the subdivisions of our its core operations, also carries out large- transportation routes defined the naviga- Company. The workshops of the Lensk Au- scale activities involving construction and tion plan for the supply of the main part of to-Repair Company (presently, Auto-Repair development of the region’s industrial and resources. Shops) carry out capital and routine repairs infrastructural facilities. Capital Construc- The task of delivering these resources is of motor vehicles. Here independent man- tion Division performs the role of a con- successfully performed by the transporta- ufacturing of a wide range of spare parts tractor for capital construction projects and tion and procurement division represented and non-standard equipment for the needs reconstruction of the existing facilities of by the Supply and Logistics Division and its of ALROSA units is organized. Servicing ALROSA in Western Yakutia, also covering subdivisions, i.e. Almazdortrans Production stations for Volvo and Toyota vehicles are significant area of the Republic of Sakha Division, Mirny Automobile Roads Division, in operation.

18 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company 2011 Results. 2012 Targets

Targets set before ALROSA Group Results in 2011

ALROSA Group has retained the leadership of a large diamond miner having mined 34.6 million carat of Retain leadership in the global diamond market rough diamonds in 2011.

In 2011, geological exploration was carried out at 65 sites. Licenses have been obtained for geological survey of subsoil in the territories of the Muogdansky, Verkhne-Chukuksky diamond-bearing districts, for Expand mineral resources exploration and mining of primary deposits Verkhne-Munskoe, Mayskoe, Dalnyaya Pipe and alluvial deposits Ruchey Gusiny and River Ebelyakh.

In 2011, a new version of the Program for Innovation Development has been approved, the expected Implement the innovation development and upgrade program economic effect from the scientific developments implemented in 2011 will be at least RUB 455 million per annum.

The plan for the implementation of the investment projects is fulfilled by 99.6 %. Implement strategic investment projects for the construction of Mir, The lag in the construction schedule of Udachny mine has been eliminated. The construction schedule of Aikhal and Udachny underground mines Mir mine has been adjusted. In 2011, the administrative building of the Aikhal mine was commissioned. Construction of the mine’s other facilities is carried out in accordance with the plan.

In 2011, a resolution has been passed for the implementation of the iron ore project in Timir mining com- Develop the projects of the iron deposits of GMK Timir pany with the involvement of a strategic investor. An agreement has been signed on general principles of cooperation with Evraz.

Favourable market environment in 2011 allowed improving productivity which consequently resulted in the Increase productivity in order to ensure salary growth growth of salaries of the Company’s employees.

Throughout the year, the additional payment was paid on top of the employee salary up to the amount of Develop measures to increase salaries for the low-paid employee the minimum cost of living established for people able to work within the regions of the Company’s opera- categories tion with due consideration of the family load.

Together with Profalmaz trade union, increase activities aimed to re- The industrial risk rate has been reduced from 3.21 down to 2.52. The increase of the insurance premiums duce occupational injuries, increase insurance premiums for occupa- for occupational incidents has been set out in the new Collective Bargaining Agreement between OJSC tional injuries for the employees of the underground group ALROSA and Profalmaz inter-regional trade union of OJSC ALROSA employees for 2011 to 2013.

Engagement and retaining of young employees at production facilities In 2011, the Program for Provision of Mortgage Loans to ALROSA’s employees has been approved. using corporate support tools with regard to provision of mortgage 85 employees were granted mortgage loans. loans for housing.

Designing and start of construction of a hostel for the Company’s In the reporting year, development of the design documentation for ‘Aikhal. Hostel for 450 Place’ has been employees in Aikhal in 2012. commenced.

19 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Our targets for 2012 Company’s Ratings and Awards Ensure diamond mining of 34.6 million carats by ALROSA Group Credit Ratings. In October 2011, international Continue the implementation of the Program for the Geological Study of the Subsoil and Replenishment of rating agencies Standard&Poor’s and Fitch the Mineral Resources to ensure growth of the diamond reserves by 35 million carats confirmed ALROSA’s rating at ВВ-, outlook Gain the planned economic effect from the implementation of the innovation projects for the technical up- stable, Moody’s agency confirmed ALROSA grade of the production facilities Group’s rating to be at Ва3, outlook stable. Implement strategic investment projects for the construction of underground mines and bringing Aikhal mine to its design capacity of 500 thousand tons ore, increasing diamond mining at Mir mine up to 750 thousand On July 25, 2012 Moody’s rating agency tons ore and starting mine site preparation in the Udachny mine confirmed ALROSA Group’s rating to be at Ba3, Ensure fulfilment of the program set out in the technical plan for re-equipping and renovating capital assets outlook positive. Improve the quality of the professional training to ensure prompt staffing of the modern types of equipment, Other Ratings. In the rating of TOP-1000 best innovation technologies in production and management Russian managers of 2011, which is prepared Carry out diagnostics of the existing employee compensation plan on an annual basis by the Association of Russian Improve the level of training from the operating personnel and develop an incentive system for operating Managers and published in Kommersant managers in order to reduce occupational injuries newspaper, President of ALROSA Fyodor Approve and start implementing the Concept of the strategy for the development of ALROSA’s social policy Andreev is included in the first ten best top managers in the metals industry. In the same rating, ALROSA’s Chief Financial Officer Igor Kulichik has become one of the best functional (financial) managers in the sector. Based on the results of evaluation by Expert-RA agency, our Company has improved its position in Expert-400 rating by 10 points and moved from the 58th to the 48th place among the 400 largest Russian companies in terms of sales. Ratings of Subsidiaries. In April 2011, Expert RA rating agency assigned insurance company SK ALROSA reliability rating of A+ ‘very high reliability’, rating outlook stable. Apart from that, in May of the reporting year Expert RA agency increased the rating of Private Pension Fund ‘Almaznaya Osen’ (Diamond Autumn) up to A ‘high reliability’ with stable rating outlook.

20 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru About our Company Sustainable Development Dialogues with System of Corporate Risk Factors Innovation Development Ethics and Stability of Strategy Stakeholders Management in the Global Diamond Market Field of Sustainable Development

Path of Sustainable Development

21 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Vanchugova Lera, 9 years old, Mirny Sustainable Development Strategy

We are building our strategy based on the international sustainable development We implement our sustainable development concept set out in the Declaration on Environment and Development and adopted by strategy: UN Conference in Rio de Janeiro on June 3 to 14, 1992. Based on the fundamental provisions of this document, the key principle for the • in a continuous dialogue with stakeholders; implementation of our sustainable development strategy is the assessment of any decision in terms of potential environmental consequences and welfare of the living • through upgrading our corporate and future generations of people. management system based on international standards;

Sustainable development as we un- sures in ALROSA is aimed to reinforce • through developing and implementing derstand it is closely connected to the the positive and reduce the negative ef- innovation technologies; fulfilment of the measures of the corpo- fect of the operations of our Company in rate social responsibility before the wide the economic, environmental and social • while complying with the ethical standards range of stakeholders. The implemen- areas. of business practice tation of the social responsibility mea-

Our sustainable development strategy Key targets in specific areas of the strategy

Participation in maintaining the stability of the global diamond market, national and regional economies, the balance of the reasonable expectations and interests of stakeholders

Minimization of the negative industrial environmental impact, efficient use of subsoil resources, preservation of resources, compliance with international standards for ecology and environmental protection

Social responsibility for the safety, health and professional development of personnel, social and economic welfare of people in the region, support to local communities, charity work

22 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Main Areas of the Corporate Social Responsibility (CSR) by levels of implementation and groups of stakeholders

Implementation Level Groups Main Areas of the Corporate Social Responsibility

• production of diamonds and other products required for the society in a most efficient way with due consideration of the interests and expectations of stakeholders; • compliance with the requirements of international treaties, including business standards and rules set out by the Global community, industry Global Level international community; communities • application of the resource-efficient technologies, ensuring environmental and industrial safety at production facilities; • implementation of the socially significant charity projects in the social and environmental areas at national and international levels.

• creating attractive workplaces on the territories where the Company’s facilities are located; Local communities, state • implementation of the projects that contribute to the economic, social and cultural development on the territories of our authorities and local gov- operation; Local Level ernment, public organiza- • implementation of environmental and resource-efficient programs in order to minimize the negative impact on tions environment and health of local people; • rendering charity support to educational institutions, support to healthcare, science, culture and sports.

• ensuring competitive salaries, social guarantees and benefits on top of those established by laws; Personnel, employees' • establishing safe working conditions, decent conditions for preservation and recovery of health; Corporate Level trade union • facilitation of the comprehensive professional and cultural development of employees; • provision of targeted charity support to various social categories of employees and veterans of our Company.

23 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Dialogues with Stakeholders

ALROSA’s operations affect key topics and interests of many stakeholders. The most important stakeholder groups for our Company are: • Shareholders • Investors and financial community • Consumers • Employees • Employee Trade Union • Local Communities (local government, residents, public organizations) • Federal and regional state authorities • Russian and international sector community • Mass media We build dialogue with our stakeholders based on the following fundamental principles: • respect of interests, opinions and expectations of the In order to define the groups of stake- cial responsibility within the framework of stakeholders; holders, we used the criteria of the ma- changes in ALROSA’s business and legal teriality of the impact ALROSA has on its structure and upcoming privatization pro- • honesty and fairness; groups, the impact of these groups for the cess. Company’s sustainability and the results of The topics addressed by the represen- • openness and transparency; its operations, as well as the presence of tatives of the workforce teams at the Busi- any obligations provided for in legislation or ness Group Meeting of ALROSA Group in • trust and sincerity; other regulations. March 2011, meetings of the Company’s • integrity and good faith; In 2011, we had dialogues with our management and Profalmaz employee stakeholders with regard to a range of is- trade union have been included in this re- • strict compliance with laws and debt obligations; sues related to various areas. Stakehold- port in order to inform the stakeholders of ers paid much attention to maintaining the the management position and the results • consideration of the international and Russian standards, existing level of social benefits and guar- that have been achieved in the field of cor- as well as the needs of the society that may reasonably antees for employees and other measures porate social responsibility within the re- of the implementation of the corporate so- porting period. change

24 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Stakeholders Interaction Tools Reaction Interaction Efficiency

Reports for shareholders, activities of the committees under Management reports, annual reports, non-financial reports on the Supervisory Board. Company’s capitalization, improvement of investment Shareholders sustainable development, Supervisory Board, general shareholders’ In 2011, two general shareholders’ meetings took place with attractiveness, dividend policy. meetings. one absentee voting.

Activities of the Company’s IR departments, communication with Regular provision of information to the investment and Investors and financial analysis, investors, special section on the Internet site financial communities, including that on strategic develop- Development of relationship with the investment com- financial community (ratings, financial results and reports, information on securities), ment plans; IR-releases, provision of information for analytical munity, increase of information transparency. financial audits. reports and for the investors to make balanced decisions.

Consumers’ opinion is taken into account in making manage- Participation in exhibitions, product certification, specialized market- New sales strategy based on long-term contracts Consumers ment decisions in the field of sales and marketing, conclusion ing and sales divisions (USO, YAPTA). ensures stable raw material supplies. of contracts and supply of products.

Mastering the system of financial and non-financial incentives, salary adjustments, regular meetings between the representatives of the management and workforce teams The Company’s HR and social policy is considered to of the structural units, responses to employee communica- be the key focus of the corporate strategy; the value Corporate mass media (newspaper, Internet site, radio, television, tions. Consideration of employee opinion in forming the of the human capital is considered to be the main fac- information boards), letters, questionnaires to assess the level of Employees Company’s HR and social policy by means of polling, public tor of competitiveness and improvement of produc- satisfaction at work, questionnaires to assess employees’ migration discussion of relevant issues. In 2011, the meetings of the tion performance, workforce teams are loyal (average needs, collective bargaining agreement. management with representatives of the workforce teams record of employment in the Company exceeds 12 were held on March 19, during the meeting of ALROSA’s years). Business Group Meeting, as well as in accordance with the approved schedule.

Coordination of the interests of management and employee trade union, responses to communications, amendment of the collective bargaining agreement. The opinion of the trade Collective bargaining agreement, fulfilment of all the social benefits union is taken into account in forming the Company’s HR and Stability of equal contractual relations, compliance and guarantees set out in the collective bargaining agreement, Employee Trade Union social policy. with labour laws and corporate regulations in the field regular operation of bilateral Committee for regulation of social and In 2011, meetings between the management and the repre- of social and labour relations. employment relations to coordinate the interests. sentatives of Profalmaz trade union were held on March 19, during the Business Group Meeting of ALROSA Group and on November 23, with the president of ALROSA.

Local Communities Participation of the Company’s employees in legislative bodies of Implementation of the measures of the Company’s (local government in local government (town and settlement Councils/Meetings), non- Taking into account the opinion of the local government and social responsibility before the local community, the districts within the financial reporting, participation in the activities of the groups and residents in forming the social policy, the plan of cultural and including the program for employment of the native ‘diamond province’ committees on social development of the territories, official dia- sports events in the regions of the Company’s presence, residents; educational, environmental programs, sup- of the Republic of logues, activities of PR-departments, corporate mass media (news- financial support and charity, including based on communica- port of the healthcare, science, culture and sports. Sakha (Yakutia), their paper, Internet site, radio, television, information boards), letters, tions of people and public organizations. ALROSA’s investment program for the regional devel- residents, public communications. Taxes. opment. organizations)

Supervisory Board, Participation of the Company’s employees in Reports for shareholders, annual and non-financial state- the supreme legislative body of the Republic, i.e. People’s Assem- Implementation of the Company’s measures of social ments, interaction with and consideration of the position of State Authorities of bly Il Tumen, Diamond Council, Chamber of Commerce and Indus- responsibility before the residents of the region, the regional authorities in developing strategic solutions and the Republic of Sakha try of the Republic of Sakha (Yakutia), participation in the work of Contract for Social and Economic Development of the documents. (Yakutia) the groups and committees dealing with social development of the Republic of Sakha (Yakutia), ALROSA’s Investment Meetings/discussions with state authorities are held upon the territories, activities of GR departments, official dialogues, civil and Program for Regional Development. initiative of both parties. environmental legislation of the Republic of Sakha (Yakutia). Taxes.

25 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Stakeholders Interaction Tools Reaction Interaction Efficiency

Supervisory Board. Participation of ALROSA’s management in the Diamond Chamber of Russia, which is a member of the Chamber of Commerce and Industry of the Russian Federation. Company’s membership in the Council for International Coopera- tion in the Field of Geology and Subsoil Use of the Ministry of Natu- Reports for shareholders, annual and non-financial state- ral Resources and Environment of the Russian Federation, interac- ments, interaction with and consideration of the position of Federal Authorities Implementation of joint decisions and programs. tion with the representatives of other departments of the Ministry the federal authorities in developing strategic solutions and of Natural Resources and Environment of the Russian Federation, documents. Gokhran of the Russian Federation, members of the Council for the Analysis and Assessment of the Condition, Prospects of Coopera- tion in the Field of Geology and Subsoil Use with Foreign Countries, Assessment of the Mineral Resources in Foreign Countries. Taxes.

Company’s membership/foundation/participation in /support to the following organizations: Association of Russian Diamond Producers, Diamond Chamber of Organization of and participation in professional discussions Implementation of a package of measures for sus- Russian Sector the Russian Federation, Russian Union of Industrialists and Entre- and events, joint development of legislative and professional tainable development of the diamond and jewellery Community preneurs, Union of Goldminers, Russian Mining Operators, National initiatives. sectors in Russia. Association for Expert Review of Subsoil, Russian Diamond Union, Jewellers Guild exhibition.

International resolutions and standard of UN, ILO, OECD, Interna- Implementation of the joint mission of the diamond tional Council on Mining. The Company’s managers also take part business operators in order to strengthen customer in the World Federation of Diamond Bourses (WFDB) as members Organization of and participation in professional discussions demand and trust. Mutually beneficial exchange of International Sector of the Executive Committee. Starting from 2007, the Company is a and events, joint development of legislative and professional best practices. Within the framework of international Community member of the World Diamond Council. From 2006, ALROSA is a initiatives. cooperation, ALROSA represents and protects the commercial member of the World Jewellery Confederation. Kimber- interests of the Company and Russian Diamond Sec- ley Process. tor on the international market.

Interviews, meetings between the Company management and Provision of information and clarification of the Company’s po- Increasing awareness of employees, residents and Mass media representatives of mass media, press-releases, Company’s Internet sition with regard to pressing business issues, situation in the other stakeholders. Site (www.alrosa.ru) global diamond market, as well as social responsibility issues.

March 11 March 19 April 6 April 26 October 27 November 23 Working Meeting of the Deputy Chairman of the Federation Conference of the Workshop Meeting Round table Meeting meetings at Council V.A. Shtyrov with the representative of the Business Group with within the Belgium’s econom- between representa- to discuss ethnic and of the Presi- the level of government of the Republic of Sakha (Yakutia), the participation of ic mission with the participa- tives of ALROSA’s del- environmental co-man- dent of AL- local commu- Gokhran of Russia, deputies of the State Duma, the representatives tion of the Antwerp World egation and diamond agement of governmental ROSA Fyodor nities, Important Dia- Customs Service of the Russian Federation, As- of workforce teams, Diamond Centre (AWDC) and mining companies of authorities, industrial Andreev with meetings with logues in 2011 sociation of Russian Diamond Producers, Rus- employee trade representatives of ALROSA Armenia. Round table companies and native the council the Compa- sian Miners Union etc. to discuss the legislative union, Company to discuss the development to discuss economic minorities in the context of Profalmaz ny’s workforce support to the field of precious metals and gems shareholders, mass of and cooperation between development and of the implementation of trade union. teams. circulation and improvement of tax legislation in media. diamond industries in Russia bilateral cooperation. development projects the sector. and Belgium. in South Yakutia.

26 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development System of Corporate Management in the Field of Sustainable Development

Our Company’s system of corporate management ALROSA’s current corporate management incorporating all business areas and focused on sustainable system is focused on the efficient performance development is currently in its formation stage. First of of the Company’s industrial and social all, it is related to changing ALROSA’s business and legal status. Whereby, current processes of establishing the new operations, is based on the principles corporate management system reflect our desire to comply of openness and transparency of all the with the international standards, the world’s best practices stakeholders and prevention of the risk of the and modern trends in business development. conflict of interest.

Corporate Management Standards internal business mechanism, general rules eral shareholders’ meeting pursuant to the Supervisory Board. Three members of the ALROSA operates integrated manage- of organizing labour relations in the Compa- articles of association and legislation, are Supervisory Board are independent1, three ment systems in accordance with the re- ny, general rules of management account- dealt with by ALROSA’s Supervisory Board. are executive and nine non-executive. Two quirements of international standards ISO ing, reporting and control, general rules for The Chairman of the Supervisory Board is of the independent members of the Su- 14001, OHSAS 18001. The processes of interaction with the Company’s subsidiar- not the Company’s executive manager. In pervisory Board are members of the Audit the implementation of modern approaches ies. The Code is clarified, amended and 2011, Ilya Yuzhanov was elected Chairman Committee and HR and Remunerations to quality assurance based on international supplemented as needed when there are of the Supervisory Board. Committee2 standards ISO 9001:2000 are currently in any differences between the provisions of The Supervisory Board is elected by The management of the Company’s progress. ALROSA’s Yakutniproalmaz In- the Code and current legislation, the Com- the general shareholders’ meeting in ac- current operations is carried out by its ex- stitute that prepares scientific and design pany’s Articles of Association or the Com- cordance with the procedure provided for ecutive bodies, i.e. the President (the Com- documents for the Company’s core op- pany’s changed operating environment. At by the Charter of ALROSA. This manage- pany’s sole executive body) and Executive erations, has developed, implemented and the moment, the third amended and sup- ment body consists of fifteen members, Committee (the Company’s plural executive certified a quality management system plemented version is in force. including seven representatives of gov- body) consisting of 19 persons. The Presi- that complies with the requirements of ISO ernmental institutions and state authorities dent is the Chairman of the Executive Com- 9001:2008 standard. Management Structure of the Russian Federation, five of the Re- mittee. Starting from 2009, Fyodor Andreev Being aware of the importance of estab- The Company’s supreme management public of Sakha (Yakutia), two of the work- is the President of ALROSA. Igor Sobolev lishing an efficient corporate management body is General Shareholders’ Meeting. In force team and one representative of the is the First Vice President, Executive Direc- system, in 1996 the Company developed 2011, two general shareholders’ meeting Company’s founding uluses. Specialized tor and was appointed to this position in and implemented ALROSA’s Internal Cor- were held in ALROSA, one of them being committees function under the Company’s January 2012. porate Business Code with due consider- in absentia. ation of the international and Russian best The issues related to general manage- practices. ment of the Company’s operations and 1 The independence of the members of the Supervisory Board has been defined in accordance with the independence ALROSA’s Internal Corporate Business control of the activities of the Company’s parameters indicated in subpar. 2.2, par. 2, Section 3 of the Corporate Code of Conduct recommended by Resolution No. 421/r of the Federal Securities Commission of Russia of April 4, 2002. Code (hereinafter, the Code) governs the Executive Committee, apart from the issues 2 More detailed information on the members of the Supervisory Board and the committees under the Supervisory relationship between the units of ALROSA’s referred to the scope of authority of the gen- Board is published in ALROSA’s Annual Report 2011, page 44.

27 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development To ensure efficient carrying out of the above documents contain the Company’s operations in accordance with ALROSA’s General Shareholders’ Meeting statements with regard to its desire to leave internal business code, there are collegial safe social, economic and environmental management bodies of ALROSA. legacy to future generations, assist sus- The Company’s management structure tainable and long-term development of the Auditing Audit Committee includes Auditing Committee, an elected in- Committee country’s economy, improve the level and (5 members) dependent body in charge of internal con- (5 members) standards of living for the employees, facili- trol of financial and business operations, President (CEO) tate stable development of the regions and and independent assessment of financial (Chairman of growth in the welfare of the residents in the the Executive and legal information. Committee) territory of its operation. Stratigic Planning The procedures to be used for defin- Committee The most important tools to be used by ing qualification and competence of the (6 members) the Company’s management to assess its members of the supreme management efficiency in the field of the corporate social Executive body for determining the company’ strat- Committee responsibility are reporting data provided by egy in economic, environmental and so- Executive Bodies Supreme (19 members) ALROSA’s functional departments, as well Supervisory Board (15 members) Supervisory Board HR Remunerations cial topics have been defined in the Regu- Committee as the annual non-financial report being lations on the Interviews with (Attestation (5 members) the document that consolidates the main of) the Individuals Holding Management management approaches and performance Positions and Experts of ALROSA within results in the economic, environmental and the Internal Company Business Code of social spheres. ALROSA. Plural Bodies’ System Plural Bodies’ System Plural Bodies’ System

Management in the Field Arbitration of Corporate Social Responsibility Regulatory Tender Commission Documents Out of the main elements of the cor- Commission porate management system in the field of Planning Commission sustainable development, the most developed at the moment is the corporate so- Disciplinary Commission cial responsibility management system, the Scientific Accounting Center history of which in our Company is rich in and Technical Board significant events and good traditions. The management in the field of corporate social responsibility is vested with the Company’s Vice President in charge of the HR management and social development issues. The corporate management system ity and reporting, as well as occupational • ensure operation of the social monitor- in this field also includes HR Management, safety. ing system and non-financial reporting. HR Training Centre, Social Development Corporate Social Responsibility Man- The main documents in the area of cor- Directorate, Almazny Kray broadcasting agement System is used in order to: porate social responsibility are ALROSA’s company, GR and PR department and so- • prepare and ensure the implementation Social Policy and the Concept of the Strat- cial infrastructure enterprises. ALROSA’s of the Company’s HR policy, corporate egy for the Development and Implementa- Chief Engineer in charge of the operation HR standards, social partnership and tion of ALROSA’s social policy. The impor- of the Occupational Health and Safety De- corporate culture; tance of ALROSA’s official position in the partment manages the issues related to • develop and implement corporate so- field of sustainable development is high for the Company’s environmental responsibil- cial and charity programs; all the key groups of our stakeholders. The

28 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Risk Factors

Risk management today has become an integral part of the corporate management system in the field of sustainable development in any company, and it is difficult to overestimate the importance of such activities. ALROSA wishes to improve its risk management system in accordance with the modern risk management concept that implies a continuous process of accounting for a wide range of risks and optimization in the quarterly report of ALROSA-Issuer of costs of their management. We understand that the success of our business posted on the corporate Website. The ex- depends directly on the ability of the Company’s management to implement promptly isting list of risks includes such groups of both preventive measures before the risks occur and measures for mitigation of risks as industry, country and regional, fi- adverse consequences. nancial and legal. Based on the risk groups described in the Issuer’s report, we defined the key factors important for the Company’s sus- The functions involving registration, ac- It must be admitted, that ALROSA’s out their expert review and determine tainable development in the long-time counting for and monitoring of the main risk management system is in its devel- risk owners. prospect and affecting the interests of our types of risks in the corporate management opment stage. At this stage the Com- Within the framework of its current op- stakeholders. Among them, there are in- system in our Company are carried out by pany carries out research and analytical erations and the implementation of invest- dustry and financial risks, social risks and the Strategic Planning and Budgeting De- procedures in order to compile the basic ment projects, the Company carries out the risks related to the Company’s envi- partment. list of risk groups (Risk Register), carry continuous monitoring of the risks reflected ronmental impact.

Main Potential Adverse Consequences Risk Groups Risk Mitigation Factors and Risk Management Risk Factors and Losses for the Company

Industry Risks Finiteness of rough Reduction of the rough diamond reserve with a high degree of prob- Due to the depletion of the prolific mineral resources available for open-pit mining of diamond diamond reserves ability may trigger the reduction in diamond mining volume and supply deposits, the Company extensively utilizes the deposits with lower diamond content and con- of rough diamonds to the market with relevant economic losses for the structs 4 underground mines aimed to compensate for the withdrawn mining volumes. Consid- Company. ering the above, the reduction of the current volume of extraction of rough diamonds in natural terms (by mass) and in terms of cost is not expected in the mid-term prospects.

Demand for Diamonds Reduction of demand for diamond products, reduction of diamond The main factor for maintaining the demand for rough and polished diamonds is the discovery jewellery consumption. This risk is one of the key ones for the diamond of new large deposits, which is unlikely in the midterm, as the resulting highly limited supply of industry since it directly affects global prices. these diamonds on the global market. The Company’s sales strategy is focused on stable trade relations. At the moment, 68 % of all the contracts for the supply of rough diamonds are long-term contracts. Along with all the major players of the rough and polished diamond market, the Company widely participates in development and implementation of marketing communications, including through development of the generic advertising of rough and polished diamonds in order to increase consumer trust and demand for the jewellery products.

Lag between the actual product cost growth rate and the forecasted The Company sells its products on the domestic and international markets at global prices. In one. Significant variance or reduction of prices for the products may order to minimize the adverse impact of this risk, the Company develops plans and implements result in relevant reduction of profit for diamond producers. programs aimed to reduce the impact from the reduction in prices for rough and polished diamonds upon its operations.

29 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Main Potential Adverse Consequences Risk Groups Risk Mitigation Factors and Risk Management Risk Factors and Losses for the Company

Country and ALROSA carries out its This factor is related to changes in general economic environment in Substantial Russia’s gold and forex reserves accumulated during the recent years allow mitigat- Regional Risks business operation in the country. Russian economy at the moment is in its transition period, ing significantly the country’s losses from sale of energy products on the international market the territory of the Rus- business infrastructure and legislative framework is being developed, and provide a possibility to support domestic producers during the crisis period so that they sian Federation. the reforms aimed at establishing the banking, judicial, tax and leg- could implement their planned investment programs. For that purpose, the governmental islative systems have not been completed yet. Financial problems or committee established a list of core companies that are guaranteed to have state support in the acute perception of risks for the investment in the countries with obtaining state loans. The Company is included in the list of 295 such companies. Therefore, developing economy may reduce the amount of foreign investments in considering the existing risks and the uncertainty in loan provision, a portion of such risks has Russia and affect Russian economy. been taken by the state.

ALROSA carries out The major portion of the Company’s assets is located in the Republic The Republic is considered to be one of the politically, economically and socially stable regions its business opera- of Sakha (Yakutia), therefore the regional risks are related to the risks of the Russian Federation. Credit Ratings Service of Standard & Poor’s reviewed its forecast for tion in the territory of attributable to this constituent entity of the Russian Federation. the ratings of the Republic of Sakha (Yakutia) from ‘stable’ to ‘positive’ and confirmed the long the Republic of Sakha The Company carries out its core operations, i.e. diamond mining, term credit rating of BB- and national rating of ruAA-. The Fitch Ratings agency confirmed its (Yakutia) in Far North (Western Yakutia) regions having extreme weather and ‘positive’ forecast for long-term ratings of the Republic of Sakha (Yakutia) in foreign and national climate conditions and complicated transportation patter for supply of currency and confirmed these ratings at the level of BB+. Other ratings of the Republic have material and technical resources. also been confirmed, the short-term rating in foreign currency of B and national long-term rating of AA (rus) stable. The reliability of the transportation pattern for the supply of material and technical resources is maintained: in summer by uninterrupted delivery of cargoes from Lena railway station (Ust-Kut) along River Lena up to Lensk and then by the all-year motor road Lensk-Mirny-Aikhal-Udachny, and in winder (additionally) by winter motor road from Ust-Kut to Mirny and then by motor road up to Udachny; and all year round – by planes to Mirny and Udachny where the airports are able to accommodate planes of any type. Energy supply to the Company’s enterprises is carried out as follows: electric power – from the cascade of Vilyui GES1,2 and VGES-3 that supply power via double circuit lines VL-220. There are reserve sources for supply of electric power, i.e. gas turbine generation stations, and thermal energy, i.e. electric boilers (electric heating), boilerhouses using gas fuel and boilerhouses using liquid fuel (oil, fuel oil). The availability of reserve sources of power and thermal energy supply minimizes the risks associated with potential technogenic accidents and natural disasters.

Financial Risks Variance of US Dollar It is highly likely that the amount of the Company’s profit and the gen- In 2006, after the significant weakening of US dollar against RF rouble, a five-year program for exchange rate against eral economic performance indicators will change. hedging currency risks has been developed and implemented in order to reduce currency risks Russian rouble and compensate for the losses from re-valuation of foreign currency revenue in US dollars. A series of forward contracts has been concluded for the sale of US dollars for Russian roubles in the amounts comparable to major portion of the Company’s foreign currency earnings. The program provided for quarterly performance of the transactions with equal amounts before Q3 2011. At the moment ALROSA monitors currency risks in order to control the emergence of adverse consequences of potential weakening of US dollar exchange rate against Russian rouble and the impact of this process upon the Company’s financial results and holds negotia- tions with the world’s and Russia’s leading banks for potential conclusion of hedging transactions. In addition to that, the Company arranges long-term and short-term borrowings mainly in US dollars, i.e. in the currency its earnings are generated.

Inflation Changes in the consumer price index influence in a certain way the If critical level is reached, the Company shall take actions aimed to reduce accounts receivable Company’s profitability level and, therefore, its financial status, without as well as reduce production costs and accounts payable. having direct correlation. Significant inflation growth above 40 % per year (critical level) may result in the sharp growth of interest rates on available financial resources, which may render unprofitable the investments made out of the borrowed funds arranged through the issue of debt securities and through bank loans.

30 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Main Potential Adverse Consequences Risk Groups Risk Mitigation Factors and Risk Management Risk Factors and Losses for the Company

Contractors’ Insolvency The Company’s financial operations are related to the risk of the con- Cash and cash equivalents shall be deposited only in those banks that at the moment of their tractors’ insolvency. This factor may affect the stability of the business deposition are assessed by the management of ALROSA as having minimum default risk. Since and is related to cash and cash equivalents, including outstanding most of the Company’s contractors do not have an individual international credit rating, AL- trade receivables, issued loans and other financial assets. ROSA has some procedures developed ensuring that sales of goods, rendering of services as well as extension of loans is carried out only for the contracts with positive credit history. These procedures include the evaluation of financial status, experience in the past years and other factors. In order to secure accounts receivable of some customers of the diamond products, the Company may apply a pledge system, demand provision of a bank guarantee or surety from third-parties.

Risk of Reduced As- The Company’s operations are also associated with the risk of reduced Due to a dynamic nature of the business, the Company’s management, within the framework sets Liquidity assets liquidity. This factor may affect the stability of the business and of liquidity risk management, maintains sufficient amount of cash available, retains flexibility of performance of the obligations before the stakeholders. financing ensuring availability of credit facilities and expected cash flows from operations. The management monitors current forecasts in respect of liquid assets reserve (consisting of un- used portion of borrowings, cash and cash equivalents) depending on the expected cash flow. The monitoring is carried out on a monthly and annual basis.

Legal Risks The Company’s Changes in tax, customs, forestry and land legislation, rules of cur- The Company continuously monitors legislation in all fields of its operation, which allows react- obligations for the rency regulation, conditions for use of subsurface resources, regulatory ing promptly on its changes and, when necessary, adjust the procedure for business opera- compliance with the documents for licensing, environmental regulations and rules may af- tions. standards of the inter- fect the stability of business and performance of the obligations before At the moment, the Company does not participate and does not foresee any participation in national, Russian and the stakeholders. any legal proceedings that may significantly affect its operations. regional legislation

Industrial Risks Mining and Geologi- Potential deterioration of the conditions of mining operations at the cal Parameters of the underground mines under construction, and consequently lagging Deposits from the construction schedule, the mines’ failure to reach their design capacity, delays in deposit development timeframes.

The Company’s Indus- Accidents, emergencies and incidents at the Company’s industrial In order to reduce adverse impact of the technical and industrial risks, the Company uses a trial Facilities facilities may have a highly negative impact upon the production cycle, comprehensive management system for occupational health and safety, including insurance and in case of major emergencies, upon the Company’s production programs. Pursuant to legislation on industrial safety of hazardous manufacturing facilities, 227 potential in general, with the Company thus incurring significant eco- Company facilities have been registered in the Unified Register of Hazardous Manufacturing nomic losses. Facilities of the Russian Federation, including underground structures, pits, motor transport, gas Major hazards associated with open-pit mining include: collapse of the supply, explosion work areas. All of them have been insured against civil liability by Insurance pit’s slopes and benches; pit flooding. The hazards associated with un- Company SK ALROSA. derground mining include, first of all, underground fires and explosions, landslides and cave-ins, gas and toxic substance emissions, flooding, sink hole generation and rock subsidence; hazards related to mineralized underground water removal.

Environmental The Company’s core Mining of subsoil resources is associated with the risk of environmental ALROSA attaches much value to the implementation of the environmental policy aimed at Risks operations involving contamination. The main environmental issues the Company encoun- minimization of the adverse environmental impact, efficient and careful use of natural resources. natural diamond mining ters include discharge of high-concentration brines from some pits The Company applies a corporate system for the environmental monitoring of hydrochemical and mines, as well as pollution caused by a mixture of exhaust gases, water composition of water in the rivers in the areas where the Company’s divisions operate. gaseous product of explosion operations, carbon dioxide and methane At regular intervals, an internal audit is carried out to check the performance of the Company’s emissions in mines. Certain environmental risks are also associated procedural requirements. Before constructing any manufacturing or household facilities, the with the areas of disturbed soils. Company carries out all the required environmental designs where a potential adverse environ- Regardless of the scale of the estimated impact upon the environment mental impact is estimated and actions are proposed to prevent or mitigate it. All the materials and the health of residents, environmental consequences may affect pass through a preliminary approval and, after their discussion at public hearing, are sent for a the Company’s reputation and image, attitude from local communities state expert review. Mining solutions pass through an expert review of industrial safety and sub- and public in general. soil protection. Apart from the obligations set out in the environmental legislation, the Company acts as a volunteer initiator of a number of actions aimed to reduce the adverse impact of its operations upon environment.

31 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Main Potential Adverse Consequences Risk Groups Risk Mitigation Factors and Risk Management Risk Factors and Losses for the Company

Company’s main indus- Environmental contamination resulting from accidents at hazardous In order to mitigate the adverse impact of the environmental risks resulting from industrial ac- trial facilities industrial facilities may have a severe negative impact upon the health cidents, the Company applies a comprehensive System for management of occupational health of employees and residents and damage the Company’s reputation and safety, including the programs for insurance against civil liability for any damage to the and image. environment resulting from accidents at hazardous industrial facilities.

Social Risks Natural and climatic The main Company’s facilities are located in adverse natural and cli- ALROSA attaches great importance to the issues of social security of its employees. The Com- conditions of work, matic conditions, where 94 % of the total number of the personnel are pany implements a wide range of social programs aimed at training and adaptation of person- remoteness of the employed. The harsh natural and climatic conditions of the Far North, nel, improvement of working conditions and improvement of quality of life and living standards. region where the main as well as the impact of a number of other factors may create certain An extended social package (the system of corporate benefits and guarantees in addition to Company’s industrial risks associated with engaging personnel having the required profes- those established by legislation), as well as decent rate of remuneration help mitigate the risks facilities are located. sional skills and qualifications and with their retention. of insufficient attraction of well-qualified personnel.

Specific nature of min- The adverse impact of this risk factor may, first of all, be the increased The Company’s entire package of measures in the field of occupational health and safety is ing operation, hazard- rate of occupational injuries and occupational deceases. The accidents used as a tool for managing such risks and reducing the number of their factors. In addition ous industrial facilities at mining operations include the accidents related to use of the equip- to mandatory insurance of employees against occupational injuries and occupational diseases ment for extraction and transportation of mined rock at large mines, pursuant to federal legislation, the Company has undertaken voluntary obligations for insurance other accidents and conditions occurring as a result of drilling, explo- of its employees as set out in the provisions of the Collective Bargaining Agreement between sions, mined rock removal from underground shafts. This factor affects OJSC ALROSA and inter-regional employee trade union Profalmaz for 2011 to 2013. A specific the Company’s workforce capacity and results in significant financial insured amount is established for each type of insured events. and non-financial costs.

ALROSA is a town- ALROSA’s companies employ the major part of all the people able to In preparing mid- and long-term plans for its operations, ALROSA is focused on forming its forming company work in the Mirny district of the Republic of Sakha (Yakutia), therefore workforce capacity out of local residents. The Company has special-purpose social programs the Company has a definitive impact upon the level of employment and functioning in order to support local communities, render patronage or sponsor assistance and influences the infrastructure and social problems resolution. charity. Culture and Sports corporate program in accordance with which the Company spon- If the Company’s participation in life of the district is insufficient, it is sors almost all cultural and sports events in the district’s populated localities, facilitates promo- possible that the living standards and quality of life of the local resi- tion of healthy lifestyle and organization of the leisure activities for the residents. dents may decline, social and psychological climate may deteriorate and the indicators of the region’s social and economic development, i.e. migration, employment rate, demographic load may reduce, and anti-social destabilising conditions may grow.

32 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Innovation Development

One of the key areas of sustainable development in our Company is In 2011, Innovation Development Centre has been established the implementation of the innovation technologies and solutions that on the basis of Yakutniproalmaz Institute, its main task being ensure its competitiveness. ALROSA continues to give its attention the successful implementation of the Innovation Development to the most advanced scientific and technical developments. Program of ALROSA for 2011 to 2018 approved by the Company’s Supervisory Board in February 2011. The program should become a ‘catalyst’ for the Company’s The Company has its own scientific LLC NTTs Gornoe Delo (Mining) and many sustainable development, increase in its capitalization and and design facilities represented by Yakut- others. The main areas of ALROSA’s high- investment attractiveness through: niproalmaz Institute and Specialized Geo- priority scientific research are the following: Scientific Research Enterprise (NIGP). • development of efficient technologies for • increased economic efficiency; In 2011, the institute implemented 27 mining of poor deposits; • increased power efficiency; research works in production. The actual • development of safe technologies for economic effect for the first half of the re- mining of super-deep kimberlite pits us- • industrial and environmental safety of the production porting year totalled RUB 150 million. In ing remote control of mining and trans- addition to that, in the reporting year the portation equipment and sinking unit for facilities; institute has prepared design and estimate pit cleaning-up; • sustainable social and economic development. documentation for all constructed facilities • research of regularities in changes of the from Yakutia up to Angola: technical de- mined rock properties under alternating signs for Aikhal, Mir and Udachny under- temperature impacts; ground mines and Lomonosovsky MPD; • development of the new design for pit new concept for deposit opening and min- slopes and benches and the methods in 20111. In 2012, Yakutniproalmaz Insti- In 2011, our Company has passed a ing below 820 m mark at the International for calculation of their stability; tute of ALROSA together with the North- technological audit, where Ernst&Young mine; design and detained documentation • research of the rough diamond preser- Eastern Federal University will complete the acted as the auditor. Based on the audit for OJSC Timir and OJSC Severalmaz; vation during mining operations and pro- works under the project of critical impor- results, as well as with due consideration of technical designs for the reconstruction of cessing; tance ‘Establishing Comprehensive Envi- the recommendation from the Task Force the airport in Mirny. • development and implementation of the ronmental Safety of the Innovation Process Team for the development of the public- Throughout many years, the Company advanced types of pit transport, mining of Diamond Ore Mining and Processing in private partnership in the field of innova- has been successfully cooperating the and processing equipment; the conditions of the Far North’. tion under the Governmental Committee institutes and scientific centres of the Si- • research for further development of the Innovation activity in our Company is for High Technology and Innovations of the berian and Ural divisions of the Russian methods for the block modelling of de- characterized by a high level of the imple- Russian Federation of July 11, 2011, a new Academy of Science, Institute of the Re- posits, methods for calculation of re- mentation of protection documents. With- version of the Program for Innovation De- gional Economics of the North, the Insti- serves and assessment of the possibility in five years, this level is more than 18 %, velopment and Technological Upgrade of tute of Comprehensive Exploitation of Min- to mine poor deposits. which is significantly higher than the aver- ALROSA for 2011 to 2018 has been ap- eral Resources of the RAS, North-Eastern ALROSA has received RUB 65 million age figures in the global practice. proved. Federal University, the Ural State Mining from budgetary funds for carrying out of the University, Krivoy Rog Technical University, research and development works, which is Saint-Petersburg State Institute of Technol- approximately one third of the amount of 1 More detailed information on the state support received in 2011 is available from ALROSA’s Annual Report for 2011, ogy (Technical University), NTTs PO BelAZ, the state support received by the Company page 75.

33 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Ethics and Stability of Global Diamond Market Maintaining the stability and balance in the global rough diamond market is a mutually beneficial task for all players and we, in our turn, express our full commitment to do Until recently, diamond mining industry in general has been extremely closed and non-transparent, which undoubtedly affected its image. anything we can for that: Today, in the period of counteracting the destabilizing crisis factors, the players of the diamond market are facing the tasks for the maximum • strictly comply with legislation and business ethics increase of transparency and gaining trust from the consumers of standards and, among others, demand that our partners diamond products and the public in general. comply with the legislation as well; • by all means perform the obligations we have undertaken on time and on the terms and conditions set out by contractual relations; The strategy of ALROSA’s sustainable favourable effect on the environment of the development provides for the Company’s industry market in general. • promptly take measures for the stabilization and devotion to high ethical standards of open In the global market, natural gem-quality adequate regulation of the pricing processes in the and honest business operations in order diamonds and their end products are con- global diamond market. to improve corporate culture, adhere to sidered to be a symbol of the social status the best practices in the corporate man- and an item of luxury. Their sales require agement and maintain ALROSA’s business that the producers comply with the impec- reputation at an adequate level. cable ethics standards, good professional Having become the first public company skills and highest technical level. Starting of such scale within the industry, we clearly from 1991, ALROSA is a member of the understand that: Russian PR Association (RASO) and fully • openness and transparency are the supports the Russian Code of the Profes- main tool for achieving these goals, sional and Ethical Principles established by • impeccable reputation has not only be- RASO. come a competitive advantage, but also the most important condition for the de- Kimberley Process velopment of the diamond business. The global diamond industry was one of ALROSA’s ethical business principles in the first to encounter the problem of illegal respect of such stakeholders as consum- and uncontrolled use of profit from criminal ers and representatives of industry com- mining of natural diamonds from financing, munities (including competitors) are estab- among others, of the internal armed con- lished based on the global trends within flicts in a number of African countries. In the industry. We believe that sales strategy order to break the link between the illegal based on transparent long-term contracts diamond mining and armed conflicts and that has been applied in our Company fa- terrorist activity, in 2000, the governments cilitates stability of trade relations and has a of a number of states, the diamond indus-

34 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Our customers may rest assured that ALROSA mines the major part of its diamonds on the sovereign territory of the Russian Federation, which is an absolute guarantee of the stability of the supplies of ‘clean’ rough diamonds to the global market.

try, representatives of the civil society de- • belong to a state that does not have the and employees, regardless of their posi- 4 persons removed from their positions and clared the foundation of the Kimberley Pro- status of an official member of the Kim- tions, being involved in corrupt practices. 112 persons received reprimands. cess, which on the one hand is a unique berley Process; Our Company’s regulatory framework Economic Safety and Regime Depart- tool for the international cooperation, and • do not comply with the international for anti-corruption operations is based on ment is in charge of the system of corpo- on the other hand is the indicator of the Kimberly Process Diamond Certification the standards of international and Russian rate management of anti-corruption activi- increased civil consciousness in business. Scheme (KPCS); anti-corruption legislation and consists of a ties. In 2011, 45 of our employees have At the moment, 71 countries take part in • violate the procedure of separate sales number of provisions, methodological rec- been trained in anti-corruption policies and the Kimberley Process and perform their of natural, synthetic and treated natural ommendations and administrative docu- procedure, which is 0.4 % of the total num- obligations in full. diamonds and their end products estab- ments. We attach specific attention to legal ber of managers, experts and clerks. In order to resolve the tasks of the Kim- lished in the global practice; regulation of the purchasing activity being berley Process at the inter-governmental • violate the requirements of tax, customs the area of the increased risk for engaging level, registration and publishing of informa- and other legislation; affiliated companies. The company applies tion has been arranged for both volumes of • are in the process of restructuring, liqui- the approved List of Attributes (Criteria) for mining and volumes of all the export and dation or insolvency; the Contractors Participating in the Com- import operations with rough diamonds; • have provided inaccurate information pany’s Purchasing Procedures and should any export supplies of rough diamonds are about themselves. a contractor meet certain criteria it may be accompanied with a special Kimberley Pro- referred to a category of ‘fly-by-night’ com- cess certificate by which the member state Anti-Corruption Activity panies. of the Process confirms the origin of dia- The same as the majority of large com- Starting from December 2011, our monds. panies, we have to admit that corruption Company applies Order No. А01 / 0286‑P The accessibility and openness of the more and more often becomes one of the of December 20, 2011 On Carrying out operations in the Kimberley Process also most significant impediments for sustain- Anti-Corruption Inspections. facilitates higher transparency of the dia- able development in any area, since it is In general, within the reporting period, mond market and building of consumer now part not only of the governmental and the Company’s internal security depart- trust in our products. administrative, but also business realms. ments carried out 152 procedures related ALROSA, together with Russian gov- This problem requires prompt resolution, to detection of the instances of corrup- ernmental authorities, is actively engaged development of the policies, principles and tion among the Company’s employees and in the operations of the Kimberley Process counteraction measures for each specific business partners. All ALROSA’s structural since it was established, and on the ba- company. units have been reviewed with regard to the sis of its strong and principled position AL- ALROSA in its turn actively supports the risks related to corruption and based on the ROSA does not supply rough diamonds to efforts of the global community in fighting results of the inspections a series of admin- legal entities and individual entrepreneurs in the corruption and sets a goal to minimize istrative sanctions has been applied against case if they: the risk for the Company’s management the offenders. 13 persons have been fired,

35 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Path of Sustainable Development Company’s Economic Contribution in the Targets and Results Economic Development of the Region

Economic Stability

36 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Ilya Shilov, 14 years old, Mirny Company’s Economic Targets and Results

Long-term economic growth is a priority task for our Company, as both a business structure and a participant in the regional, Russian and global economic processes.

Our Policies in the Field • increasing Company capitalization and its investment at- of Economic Stability tractiveness; ALROSA’s major economic goals at the moment are: • participating in securing the stability of the industry, re- • ensuring Company efficiency by focusing on core type gional, Russian and global economic systems. of business, i.e. diamond mining; In order to achieve the goals that have been set, our • increasing competitiveness among major players of the policies in the field of economic stability are being devel- global rough and polished diamonds market; oped in the main areas:

In the area of core product manufacturing The Company’s major production goal is associated with our desire to maintain current volume of rough diamonds mined.

Our policy is aimed at the extension of production facilities, first of all, through transition to underground methods of diamond mining. The increase in the volumes Mining and Processing Operations of rough diamond mining allows us to set ambitious targets for maintaining leadership in this field.

The Company’s policy in the field of geological prospecting is defined by the understanding that without prompt replenishing of the mineral resources it is not pos- Geological Prospecting sible to maintain the Company’s leadership in diamond mining or ensure prospects for development of diamond mining industry in Russia in general.

The main objective of ALROSA’s finance policy is long-term capitalization as well as securing the balance between tasks of the maximization of financial In the area of the Company’s finance resources results and ensuring the Company’s financial stability. management The tasks of long-term capitalization provide for a package of measures for the efficient capital management and link the financial aspects of the operations to strategic goals.

We continue the implementation of our new sales policy in the environment of the competitive rough diamond market with a focus on long-term trade agreements Sales and geographical diversification of the sales network. Our system for distribution of rough diamonds includes both sales based on long-term agreements and carrying out of tenders.

Development of the production capacities in our mining divisions is, first of all, related to prompt implementation of strategic investment projects for the construc- Investments tion and commissioning of Mir, Aikhal and Udachny mines.

We believe the activities aimed at development and implementation of the innovations into production to be the most important component of our Company’s sus- Innovations tainable development strategy and one of the main factors for the improvement of economic efficiency in production.

The Company’s financial stability depends, to a large extent, on the efficiency of the management of debt obligations. Approximately 70 % of our obligations are represented by loans in foreign currency. Therefore, the main financial risks in our production that has an express export tendency are related to currency and other Debt management risks of the global financial and credit system. Our main goal in this area is to reduce the debt load and establish an optimum amount and structure for the Company’s credit portfolio.

37 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Economic Stability Diamond Mining Mined Rock Yield per ton ore USD Million thousand m3 USD/ton ore

AIKHAL MINING 256.0 13,948.1 29.3 AND PROCESSING 2009 2009 2009 DIVISION 291.4 18,094.8 25.4 +7.1% 2010 2010 2010

303.8 18,217.1 27.2 2011 2011 2011

MIRNY MINING 607.7 3,178.7 245.0 AND PROCESSING 2009 2009 2009 DIVISION 701.6 4,378.5 215.5 +51.2% 2010 2010 2010

1,037.4 2,317.0 325.8 2011 2011 2011

UDACHNY MINING 797.7 4,879.2 110.9 AND PROCESSING 2009 2009 2009 DIVISION 735.9 4,618.4 119.9 2010 2010 2010

620.4 3,185.7 97.7 2011 2011 2011

NYURBA MINING 431.5 8,220.8 258.4 AND PROCESSING 2009 2009 2009 DIVISION 451.1 9,851.5 192.0 +0.7% 2010 2010 2010

405.9 11,773.9 193.3 2011 2011 2011

38 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Economic Stability Diamond Mining Volumes in 2010 and 2011 (by volume), million carats

Our 2011 Results Mining and Processing Operations. Based on 2011 results, ALROSA once again became the largest diamond producer, having increased annual diamond production from 34.3 million carats in 2010 to 34.6 million carats in 2011. Moreover, we are the only diamond producers in the world that were able to increase significantly the output during the post-crisis period while improving the profitability. In 2011, we over-fulfilled our diamond 2.89 2.07 2010 processing plans and ensured product yield 13.84 11.73 34.3 34.6 33.0 31.33 of USD 94.8 per ton ore. Reduced yield of 2011 marketable product per ton ore in Udachny MPD is explained by the reduced diamond BHP Billiton Rio Tinto ALROSA Group De Beers content in the ore from Udachny pipe. Geological Prospecting. In 2011, we obtained licenses for geological survey of subsoil in the territories of the Muogdansky, Verkhne-Chukuksky diamond-bearing districts, for exploration and mining of primary Sales of Rough and Polished Diamonds in 2010–2011, USD billion deposits Verkhne-Munskoe, Mayskoe, Dal- nyaya Pipe and alluvial deposits Ruchey Gusiny and River Ebelyakh. In the reporting year, the funds allocated to exploration works out of ALROSA’s own expense totalled RUB 4,121.3 million, which is 44.8 % more than last year. As a result of the significant amount of prospecting, prospecting and assessment, and exploration works we have ensured the aggregate growth of C1, C2 stock by 29.7 million carats and estimated resources of P1 category by 46.9 million carats. 2010 0.94 0.94 0.68 0.73 3.48 4.46 4.70 6.47 2011

BHP Billiton Rio Tinto ALROSA Group De Beers

39 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Economic Stability In the area of finance mining operations in the pits etc., with 14 the stability of the supplies under long-term resources management: protection documents for inventions being agreements allows the companies to main- The main lines of our financial policy are received. The planned effect from the de- tain stable operation and high level of sales. increasing rough diamond sales volumes, signs implemented in 2011 will be at least According to the estimate of analysts, managing the investment activity and en- RUB 455 million per annum. De Beers shows the best results in this sure the profitability of projects, providing Credit Portfolio. The amount of ALRO- area, the network of this company is well financial resources, efficient managing the SA’s debt obligations in 2011 has been re- developed and wisely organized. In 2011, Company’s debt obligations, controlling duced from USD 3.1 billion down to USD the share of sales under long-term agree- production cost and minimizing financial 2.9 billion. The share of long-term obliga- ments in ALROSA was 68 %. In the un- risks. tions as at the end of the reporting year stable market environment of the second Sales. Based on 2011 results, the ag- was 80.5 % of the total amount of debt. half of 2011, these companies managed to gregate volume of sales of rough and pol- maintain their prices in the industry market ished diamonds by ALROSA Group has The Company’s Position and secure its stability. become the record-breaking throughout on the Global Diamond Market the Company’s entire history and totalled The supply of rough diamonds on the USD 4,454.8 million (including USD 4,273.7 market is generated by four main global million for rough diamonds and USD 181.1 leaders, i.e. De Beers, ALROSA, Rio Tinto, million for polished diamonds), which is BHP Billiton, as well as a number of minor 27.9 % more than in 2010. producers. Therefore, our Company oper- We have been consistently implement- ates in the environment of sharp compe- ing our plans for geographic diversity tition among diamond mining companies of sales and expand the list of partners and regulation of sales of rough and pol- through introduction of the companies ished diamonds. representing dynamic markets, first of all, ALROSA and De Beers are focused on in India and China. Cooperation with the producing rough and polished diamonds. companies in the Republic of Armenia is Two other players of the diamond mar- rapidly developing. ket are transnational and widely diversified Investments. In 2011, the amount of companies, Rio Tinto’s and BHP Billiton’s our investments in the fixed assets aimed share in the total sales is 2 % and 1 % re- at the construction of underground mines spectively. This year, both companies de- saw a growth of 10.4 % against 2010, and cided to sell their diamond divisions and the amount of our investments in the tech- potential outcome of these events may be nical upgrade of the companies increased a merger of the assets of both companies. by 64.4 %. Multidirectional trends in the physical Innovations. Pursuant to the program for volumes of mining in 2011 resulted in the innovation development and technical up- increase of ALROSA’s share in the structure grade of production facilities in 2011, we of the global diamond mining. invested RUB 184.1 million in the scien- The sales system in the diamond in- tific and research and other works related dustry is built upon long-term agreements to the improvement of the processes we and tenders. Whereas sales policy of AL- apply and the organization of the produc- ROSA, De Beers and Rio Tinto combines tion process. Within the reporting period, both areas, BHP Billiton and a number of we have implemented 27 scientific and other diamond producers are focused on technical designs for diamond processing, competitive sales only. In case of any vari- cost savings, improvement of safety of the ance in the demand for rough diamonds,

40 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Economic Stability Contribution in the Economic Development of the Region

48.0 % of the residents of Mirny district able to work are employed by ALROSA companies Diamond mining industry represented by our Company 704 residents from uluses of the ‘diamond plays a major role in the economy of Russia’s largest region providing employment to the residents of the province’ are employees of ALROSA under Western Yakutia and significant tax contributions to the open-end employment contracts. budgets at all levels.

Employment • our continuous focus on stable eco- The Company paid its tax obligations to 33 % of the total ALROSA being a town-forming com- nomic growth allows us to maintain and the federal budget in the amount of RUB incoming profit tax in pany with the infrastructure located in one- improve the living standard and quality 2,651.2 million. Within the reporting year, the budget of the Sakha company towns of Western Yakutia is the of life of the residents; ALROSA transferred RUB 13,362.7 mil- Republic (Yakutia) was main employer and provides workplaces for • availability of workplaces, demand for lion to the budget of the Republic of Sakha the residents of towns of Mirny, Udachny, high-skilled employees is a strong mo- (Yakutia), which is 42.8 % more than in the received from ALROSA Nyurba, Lensk, settlements Aikhal, Cher- tivation for young people, their profes- previous year. Group. nyshevsk, Zarya, Vitim, Markoka, villages sional and career growth which is an More than half of all the taxes, duties Suntar, Olenek, Arylakh, Syuldyukar, Taas- important demographic factor for the and charges for use of natural resources Yuryakh. economy of the region; received by the republican budget in 2011 Our Company’s HR policy is strategically • low level of unemployment, high share consisted of the Company’s payment of focused on attracting local residents which of young people within the age structure the tax on extraction of mineral resources. is one of the areas of the mutually beneficial of the residents, decent salary and a Within the aggregate group of property tax- cooperation with our stakeholders: state wide social package guaranteed for the es in the republican budget, 44.5 % are the authorities and municipal government, lo- employees, all this facilitates favourable taxes paid by ALROSA. cal communities. social and psychological environment in ALROSA’s tax contributions to municipal We believe that forming our personnel the region. budgets and budgets of other constituent out of local residents is a significant con- entities of the Russian Federation totalled tribution to the sustainable development of Taxes RUB 468.4 million which is 44 % more than the region and a solution for a whole range The total amount of the tax obligations in 2010. of tasks: paid by our Company to budgets and non- • providing employment for the residents budgetary funds in 2011 was RUB 24,125.1 which is one of the main indicators of million, which is 1.5 times as much as in the level of social and economic devel- 2010. The share of taxes in product sales opment of any region; was 17.7 %.

41 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Economic Stability Our Environmental Policy Managing Environmental Impact in 2011

Environmental Responsibility

42 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Alina Popova, 15 years old, Mirny Reduction of the adverse impact of production Our Environmental Policy upon environment is one of the major aspects of ALROSA’s activities as part of sustainable development. In implementing the environmental ALROSA is one of the largest users of natural resources in policy, the Company relies upon the following main the Republic of Sakha (Yakutia), with its field of operation principles: covering the entire territory of the Western Yakutia. Diamond mining includes three main stages, i.e. geological • need to minimize the damage caused to exploration, ore mining and processing and is related to environment in carrying out business operations; three types of production that have significant anthropogenic influence upon the state of the environment. In order to • restoring damaged ecosystems and compensate reduce adverse effect and manage environmental risks, our for the irreparable damage caused by industrial Company implements a large-scale environmental policy. operations; • optimizing economic costs of the environmental facilities; • public agreement in respect of environmental ALROSA’s main environmental impact is • reduction of the amount of emissions, issues. represented by emission of contaminants discharges and waste disposal through into air, their discharge into water bod- the implementation of the best available ies, disturbance of soil during exploration technologies, equipment, materials: and mining operations, disposal of indus- • implementation of the measures aimed cordance with the Program, in 2011 RUB Our current environmental expenses trial and household wastes. This impact is at restoration of ecosystems and replen- 688.9 million were allocated to the perfor- saw an increase of 29.5 % against 2010, explained by man-induced features of our ishing the lost resources of the animal mance of the measures, including RUB namely the expenses for air protection in- production and is unavoidable for any min- and plant life; 468.6 million of capital investments in the creased by 8.7 %, for protection of land re- ing company. • preparation and implementation of the construction of environmental facilities. sources by 29.4 %, for protection of water The Company believes itself to be re- environmental management system, In the beginning of this year, the Min- resources by 41.6 %. sponsible for the efficient and wise use of including carrying out of environmental istry of Environment of the Republic of ALROSA’s investments in the fixed capi- natural resources and bringing our environ- audit and certification; Sakha (Yakutia) and ALROSA concluded tal for environmental protection and efficient mental indicators up to the best interna- • personal responsibility of ALROSA’s the Agreement for the cooperation in the use of natural resources in 2011 totalled tional standards. management and structural units for environmental protection and ensuring en- RUB 506.1 million, which is 43.3 % more Our Environmental Policy1 contains dec- maximum involvement of the Company vironmental safety in the entire territory of than in 2010. larations of the Company’s desire to ensure: employees and contractor organizations the Company’s operations in Yakutia. The funds allocated to protection and • adequacy of the environmental activities in the implementation of environmental efficient use of water resources were with regard to the nature and scale of policy. Environmental Costs and Investments used for the construction and reconstruc- the adverse environmental impact; In December 2011, the President of the Our aggregate environmental expenses tion of: • performance of the requirements of the Company approved the Comprehensive in 2011 totalled RUB 2,253.7 million. • biological waste water treatment station Russian and international environmental Program for Environmental Protection of The aggregate payment for permissible in Lensk; legislation, standards and rules; OJSC ALROSA for 2011 to 2018. In ac- and above-level emissions (discharges) of • circulation water supply system in un- contaminants in the reporting year totalled derground mine Mir; RUB 70.1 million, the reduction versus the • disposal field for drainage water in Ny- 1 Environmental Policy of OJSC ALROSA has been approved by ALROSA’s Executive Committee on May 25, 2012. previous year being 45.7 %. urba open pit and injection wells;

43 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility The Structure of Environmental Costs in 2011, million roubles

Costs for capital repairs of capital stock for EP

1,406.1 Payment for permissible and above- level emissions (discharges) of contaminants

Operational expenses for 2,135.2 environmental protection:

Protection and efficient use of 40.4 water resources 48.4

70.1 Atmospheric air protection 338.1 Environmental protection 350.6 Recultivation of lands

• water guiding facilities in underground (SEM) of OJSC ALROSA and Regulations The main areas of our environmental mines Mir and Udachny; on Manufacturing Environmental Con- policy are: • protection from overflow and under- trol of ALROSA. Based on these internal flooding of the area and facilities in un- standards, all the Company’s structural • Water use and protection of water derground mine International, engineer- divisions developed and approved internal bodies ing facilities in the open pit of Jubilee regulations on manufacturing environmen- pipe. tal control. • Air protection Environmental activities in our Company Special Features of Corporate are coordinated by the Company’s Chief • Use of lands Management in the Field Engineer, and the functions of the main of Environment executive body have been vested in Oc- • Efficient consumption of power The Company’s core production op- cupational Safety Department that includes and power saving erations are carried out in strict compli- environmental section. ance with the Constitution of the Russian In all the Company’s production units • Industrial Waste Treatment Federation, Federal Law On Environmen- there are environmental sections. The re- • Preservation of biodiversity of tal Protection, other federal laws, as well sponsibilities of the experts in environmen- as regulations of the Russian Federation tal sections include control over the com- ecosystems. and the Republic of Sakha (Yakutia). The pliance with the requirements of state and Company applies the Regulations on the corporate environmental norms and stan- System of Environmental Management dards, performance of the resolutions and

44 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility planned measures for the implementation of the Company’s environmental policy. In April 2011, the international scientific and practical conference ‘Problems The structure of management of the en- and Ways for Efficient Mining of Diamond-Bearing Deposits’ have been held in vironmental activities also includes special- Yakutniproalmaz Institute. The conference included the section of Pit Geology, ized analytical, industrial and hygiene labs Hydrogeology and Environmental Problems of Diamond Mining Industry. More than in the Company’s divisions that have been 30 representatives of mining companies and institutions, scientific, research and accredited to confirm their technical competence. The main function of the labs is to design organizations and universities took part in the activities of this section. carry out environmental monitoring in the areas of the Company’s production opera- More than 19 reports have been heard and discussed in relation to the urgent tions. issues of development of cryogenic processes in mining diamond-bearing deposits All the information is consolidated in the at deep horizons, environmentally safe methods for burial of highly mineralized laboratory for the analysis of the environ- drainage water, problems of treatment of mineralized multi-component water for mental status in the Yakutniproalmaz Insti- ore processing, methods of bio-indicational assessment of environmental status, tute of ALROSA. The laboratory also develops regulatory environmental documents environmental monitoring of the status of water and air basin in the territory of for the Company’s subdivisions, draft regu- the Western Yakutia, comprehensive environmental monitoring of the condition of lations for maximum admissible emissions, terrestrial ecosystems in the area of deposit mining, problems of reclamation of draft regulations for waste generation and disturbed soils in the north-taiga areas of the diamond province, application of the limits for their disposal. In the nearest fu- ground penetrating radar method in mining and exploration of primary and alluvial ture, the laboratory plans to develop draft regulations for maximum admissible dis- diamond deposits, geological and hydro-geological support to mining operations. charges. Analytical results, conclusions and documents are submitted to the environmental section of the Occupational Safety Department of ALROSA and management for making management decisions. The activity of our production units is car- solutions pass through an expert review of of environmental management system of the public and future generations. Despite ried out based on licenses, approvals and industrial safety and subsoil protection. The ALROSA in accordance with international the fact that environmental aspects of the expert reviews in strict compliance with the costs associated with payments for emis- standards. operation of the institute itself do not have general environmental regulations scheme. sions and discharges of contaminants and Implementation of environmental man- serious environmental influence, its policy in All the Company’s mining and technical waste disposal, the cost of construction of agement system in Yakutniproalmaz Insti- this area is aimed at compliance with the operations are subject to an inspection by environmental facilities and compensation tute of ALROSA serves as an example of principles of efficient, wise and environmen- supervisory authorities at least twice a year, costs for remediation of disturbed soils and the development of environmental respon- tally-safe use of resources in performing with all the requirements and instructions replenishing biological resources are re- sibility. scientific, research and design operations. based on their results being performed. corded in the consolidated cost estimates In November 2010, Yakutniproalmaz of The environmental management system Before constructing any manufacturing of the relevant projects. ALROSA passed a certification audit of the has been established on the basis of the or household facilities, the Company car- environmental management system car- institute’s quality management system and ries out all the required environmental de- Environmental Management System ried out to confirm the compliance with the process model. In each process, the as- signs where a potential adverse environ- The Comprehensive Program for Envi- requirements of international standard ISO pects that contain potential hazards for en- mental impact is estimated and actions are ronmental Protection of OJSC ALROSA for 14001:2004. vironment have been revealed and relevant proposed to prevent or mitigate it. The ma- 2011 to 2018 provides for the upgrade of Being the leading scientific centre in the enforcement actions have been provided terials pass through a preliminary approval the existing and development and adop- Western Yakutia, Yakutniproalmaz Institute for. and, after their discussion at public hearing, tion of the new intracompany environmen- strives to improve and promote the cul- Within the framework of the implemen- are sent for a state expert review. Mining tal standards, preparing and certification ture of environmental responsibility before tation of the environmental management

45 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility system in the institute, assessment of en- on the main contaminant substances, i.e. Based on the results of the environmen- risks. The most ambitious projects in the vironmental consequences in the institute nitrogen oxide, nitrogen dioxide, carbon ox- tal monitoring, Yakutniproalmaz Institute history of environmental audit within the is a mandatory condition in carrying out ide, sulphur dioxide, suspended solids. of ALROSA prepares an annual analytical companies of ALROSA Group are volun- scientific experiments (tests). Employees of Environmental monitoring of hydro- report on the environmental impact of the tary audits of OJSC Almazy Anabara with Yakutniproalmaz Institute have developed a chemical water composition of water bod- Company’s business operations. the involvement of Russian environmental method for carrying out the assessment of ies is carried out for the most important Assessment of Environmental Impact auditors as well as specialized scientific or- environmental impact that was included in contaminant substances, including sus- ALROSA’s subsidiary mining companies, ganizations. the document ‘Recommendations for Pre- pended solids, turbidity, phenols, oil prod- i.e. OJSC ALROSA Nyurba and Almazy paring Methodologies for Carrying out of ucts, synthetic surfactants, zinc, copper, Anabara, also set out research initiatives Experiments (Tests) ’. cadmium, dithiophosphate. Water samples for assessment of environmental impact on The Institute’s Engineering Research are taken during winter, spring (flood) and a regular basis. In this area of activity, those Department has carried out a number of summer / autumn low water. Every year the companies carry out longstanding cooper- activities within the framework of the envi- Company’s industrial labs take approxi- ation with the Institute of the Applied Ecol- ronmental management system that were mately 360 samples and perform 8,000 ogy of the North at the Russian Academy aimed at reduction of soil contamination analyses. of Science (Yakutsk). with oil products and core samples during Thus, the results of 2011 environmental Research efforts aimed to assess the en- carrying out of research operations. monitoring revealed that fisheries’ regula- vironmental impact of the companies within tions for iron, copper, zinc, oil products and ALROSA Group include a comprehensive Environmental Monitoring phenol have been exceeded in background analysis of the man-induced impact upon In order to study the environmental situ- water of rivers Irelyakh, Malaya Botuobiya, atmospheric air, geocryological conditions, ation and assess the anthropogenic envi- Vilyuy, Daldyn, Cokhsolookh, Lena. The water systems and resources, water bio- ronmental impact, our Company applies most active anthropogenic impact affects coenosis and fish reserves, snow and soil the system of environmental monitoring of lower stream of river Irelyakh. cover, flora, avifauna, potential impact upon contaminant emissions to the air and hydro- The above natural objects are the most health of residents and employees. In ad- chemical composition of surface water in important sources of water for satisfying dition to that, the research efforts include a the area of the Company’s operations. household needs of the Western Yakutia. forecast of the expected environmental and The basis of the atmospheric air moni- The rivers and lakes in the basin of such social and economic consequences of the toring system consists of the network of large rivers as Vilyuy and Lena are rich in implementation of industrial projects, pro- control points on the border of sanitary fish, with two of the defined species, Si- posals for the organization of environmental protection zones of the companies and in berian sturgeon and nelma being entered monitoring and, are in fact a type of volun- the residential area in Mirny, Udachny and in the Red Book of the Republic of Sakha tary environmental audit used as a preven- Aikhal. Contamination is monitored based (Yakutia). tive measure for managing environmental

46 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility Managing Environmental Impact in 20111

Environmentally-stable development is a Priority areas of activities aimed at protection prerequisite for successful environment of future of environment and ensuring environmental safety generations. Being aware of the scale of our environmental impact and assessing potential Efficient consumption environmental challenges, we are striving to Carrying out of a package Implementation of Power of power and power of measures for efficient use Saving Program not only ensure the required level of safety saving of water resources aimed to for ecosystems and residents, but implement reduce the intake of fresh measures for prevention of adverse consequences water for process needs as well.

Control over the condition Water use and and elimination of leaks in the Implementation of the protection of water pipeline for household water Projects Aimed at Resolving bodies Water use and protection of water bodies supply and heating the Problem of Industrial ALROSA’s divisions use water both in the technological Waste Disposal process of ore processing and for household needs. Intake Ensuring environmental of water for household, drinking and industrial purposes is purity of water streams through reduced discharge Expansion of the areas carried out from various sources, including natural bodies: and volumes of use and of contaminants in surface Industrial Waste neutralization of main rivers Irelyakh, Bolshaya Botuobiya, Malaya Botuobiya, Vily- water bodies Treatment industrial wastes (overburden uy, Lena, Taas-Yuryakh, Olenek, water reservoir on stream rocks and process tailings) Oyuur-Yurege and river Markha, on the left stream of river Use of non-damaging Khannya as well as Sytykanskoe and Irelyakhskoe water blasting process reservoirs, lake Sordonnokh and artesian wells. Implementation of the The said water bodies are the main source of house- projects aimed at resolving Provision of diagnostics and the problem of disposal of hold drinking water supply to residents of the Western controlling and regulation Air protection industrial waste (motor tyres, Yakutia and companies of the diamond mining industry equipment to motor transport spent oil, wood processing (Appendix 3). companies wastes etc.) In order to reduce the man-induced pressure, the Com-

pany implements a package of measures aimed to reduce Dust control on motor roads; the intake of clean water, the efficiency of which is con- utilization of dust collection firmed through performance indicators monitored on a systems regular basis. Preservation of The information on water removal (discharge of waste Technological and biological Development of Natural Park Use of lands biodiversity of reclamation of lands Natural Diamonds of Yakutia water in surface water bodies, discharge of water into hold- ecosystems

1 Since ALROSA’s core production facilities are concentrated in the territory of Western Yakutia, the information of environmental performance indicators has been consolidated and presented in the report for the divisions located in the territory of the Republic of Sakha (Yakutia).

47 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility Performance Indicators Main Activities spheric air from permanent sources. Our vs 2010 Company’s main task in the area of air pro- Total water intake Reduced by 5.9 % tection is a continuous reduction of con- Measurement and saving of fresh water, changing water supply process charts taminant emissions. In order to reduce dust Water intake from natural sources for (reduction of the standard for water consumption per 1 ton ore processed in the Reduced by 8.8 % generation in pits, it is planned to water pit industrial needs Company’s plants), reduction of water intake for dredger No. 201 and liquidation roads and places of operation of trans- of dilapidated houses in Nadezhny settlement. portation equipment in summer period. Pit Water consumption Reduced by 7.0 % equipment is fitted with catalytic analysers. Recycling of process water in the water supply scheme of plant 14, use of rain- Technical departments regularly control the Total volume of recycled water supply Increased by 1.3 % water for watering process roads (UMPD, AMPD). condition of car pool, functioning of control and regulation points for testing the toxic- Increase in recycled water supply in the Company’s processing plants operating ity of exhaust gases of internal combus- with closed-cycle water supply system. Use of recycled water allows reducing and / or stopping discharge of contami- tion engines, breaking-in of engines and nants in water bodies, which improves the quality of water in all surface water adjustment of fuel equipment after repairs. Volume of recycled water supply Increased by 26.2 % streams. In order to reduce gas and dust genera- Operation of dredges (floating processing plants) is arranged in closed pits that tion during drilling operation, it is planned to are safely insulated from River Irelyakh. The dredges use the same recycled apply emulsion explosion substances with water, which is pumped over by powerful pumps from one pit into the other in a near-zero oxygen balance, as well as use closed cycle as needed. wet dust collection system. In order to reduce other atmospheric In order to ensure environmental purity of water streams, for over 20 years the emissions, technical equipment in our sub- Company applies the method for the return of waste brines to the depth of per- Water discharge into underground divisions is fitted with high-performance Increased by 1.0 % mafrost through backfilling. horizons In 2011, the volume of mineralized water pumped from the holding basin on cleaning equipment: stream Tymtaydaakh was increased. • processing plants are equipped with dust separation units PVM-5S, PVM-20S with operational efficiency of 70‑90 %; • construction materials plants are equipped with cyclonic collectors TsN- ing basins and underground horizons) is erations upon atmospheric air is localised ous year. There was a 19.4 % increase in 11, TsN-15, sleeve filters SMTs-166B, also published in Appendix 3. within the sanitary protection zones of its emission of solids (dust) into atmospheric electric precipitators EV-1 with opera- companies. air, which resulted from the increase in tional efficiency of 70‑90 %; Air protection In order to calculate atmospheric emis- the amount of mining operations, restart • repair workshops are equipped with The most significant impact upon atmo- sions, the subdivisions’ environmental de- of operations in individual workshops and dust separation systems ZIL-900, PU- spheric air is caused by rock mining and partments use a wide range of method- sectors in Aikhal and Udachny MPD, com- 1500 which are fitted in metal-working transportation processes. The atmospheric ological tools (both direct measurements missioning of new facilities in Mirny MPD. equipment. impact occurs during drilling and blasting and calculations based on the information Together with that, a decline of 1.0 % has operations, movement of pit motor trans- for each specific facility, based on average been registered in emission of gaseous and Industrial Waste Treatment port, operation of mining machines and data), as well as draft standards for maxi- liquid substances (sulphur dioxide, nitrogen In 2011, the Company’s entities gener- process equipment and processing plants, mum admissible emissions. oxide), which resulted from the transition of ated 114 types of waste, its total amount as well as combustion of fuel in boiler units In 2011, the amount of atmospheric boilers with liquid fuel in boiler houses to being 86,463,773.1 tons, which is 8.9 % of the boiler houses. That is why the main emissions of contaminants from permanent gaseous fuel (Appendix 3). more than in 2010. The increase in the vol- sources of pollution of atmospheric air are sources of the Company’s subdivisions The environmental impact from trans- ume of waste generation is related to the mining and processing divisions (70 %) located in the territory of the Republic of portation of products, materials and work- expansion of mining operations. and heat and power companies (9 %). The Sakha (Yakutia) totalled 8.6 thousand tons force is taken into account in the permits 99.8 % of the Company’s industrial negative impact of ALROSA’s industrial op- and increased 5.3 % as compared to previ- for emission of contaminants in atmo- waste is referred to non-environmentally-

48 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility Discharge of waste water Discharge of contaminants in surface water bodies, million m3 in surface water bodies, tons

-16% -20.7% In order to neutralize such waste as spent oil, sludge, oil and other filters soiled with oil products, our entities use state-of-the-art mobile units: Forsazh-2M and heat generator Zhar-25 allowing to dispose of oil-containing waste referred to hazard class III in an environmentally-safe way.

22.32 19.84 16.67 11,229.5 8,199.5 6,504.2

2009 2010 2011 2009 2010 2011

hazardous waste. The share of other waste industrial facilities and roads constructed (mined rock), in underground mining opera- In 2011, we summarized the results of represents 0.2 %. on fill-up soil, cause destruction of terrain tions (ore mining in underground mines) as the performance of technical measures The annual analytical report on the en- and changes in the areas of natural envi- well as during ore processing. pursuant to the Program for Saving of En- vironmental impact of ALROSA’s business ronment, our company uses only a part of Centralized power supply system is ergy in the Companies of OJSC ALROSA operations prepared by Yakutniproalmaz overburden rock and tailings for construc- based on generating sources of power, for 2009 to 2011. Institute contains detailed information on tion purposes. In 2011, 15.1 % of all the ac- i.e. Vilyuyskaya GES 1, 2 of OJSC Ya- Within the reporting year, we reduced the use, neutralization, transportation and cumulated and generated overburden rock kutskenergo and Svetlinskaya GES of the amount of energy consumed for gen- disposal of industrial and household waste and no more than 1.3 % of processing tail- OJSC Vilyuyskaya GES-3. Independent eration of heat by electric boiler houses by at our entities. A part of waste is transferred ings were used. power sources are represented by the 280.3 GJ and by boiler houses using liquid to ZAO Ekologiya PromService for its dis- diesel power station with utilization of heat fuel by 636.1 GJ. posal and burial. We dispose of more than Efficient Power Consumption and at Nakynskoe ore filed and small diesel As a result of the implementation of the 93% of all the industrial waste at our own Power Saving power stations. programmed activities, reduction of specific facilities (Appendix 3). The Company’s subdivisions consume In 2011, there was a reduction in gen- consumption rates as well as deviation of The major portion of our waste is repre- much electric power and thermal energy, eration of thermal energy by gas boiler actual temperature of ambient air against sented by overburden rock (hazard class IV petroleum and diesel fuel. Diesel fuel is houses as compared to 2010 by 418.0 statistics average, in 2011 we saved RUB and V), i.e. 63,050,930.6 tons (72.9 %), and used for refuelling pit equipment, genera- thousand GJ (Appendix 3). The total direct 307.2 million in ‘Energy’ item and RUB concentration tailings (hazard class V), i.e. tion of heat and electric power. Coal is consumption of energy corresponds to the 366.6 million in ‘Fuel’ item. 23,269,636.6 tons (26.9 %). Waste of these used for generation of thermal energy in amount of purchased direct primary energy types is stored in specifically allocated plac- boiler houses for heating industrial facili- represented by natural gas, oil, diesel oil, Use of Lands es and dumps. Since the fills consisting of ties. Major part of electric power is used in coal used by ALROSA to produce electric In 2011, our companies carried out min- overburden rock and tailings, as well as production process of open-pit ore mining power and heat for own needs. ing, exploration and construction opera-

49 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility Power Efficiency, tions related to disturbance of soil in nine Main Technical Activities districts of the Republic of Sakha (Yakutia). Resources vs 2010 The main portion of the disturbed lands Saved Installation of fuel consumption metering devices; consists of exploration land (92.9 %). The Fuel 39.3 thousand GJ Use of non-conventional power sources: air heating unit operating on spent oil total area of disturbed land in 2011 was 10,941.2 ha, with Mirny district accounting for 93.6 % of it. Installation of metering devices for electric power consumed; In 2011, we allocated RUB 40.4 million Use of frequency electric drive for pumping equipment in order to save power and water for carrying out reclamation works in dis- consumption; turbed lands. Within the reporting year, we Implementation of photodiode power-saving lights, photodiode power-saving lamps, Saved implementation of other power saving lights; continued technical and biological reclama- Electric Power 57.2 thousand GJ Installation of motion sensors in order to change operating regimes for internal and outdoor tion of Stages I and II of tailings storage in lighting; processing plant No. 3 of Mirny MPD and Use of infra-red electric heaters with automated temperature control; technical reclamation of the lands of Botu- Implementation of filtering and compensating unit in the substation of Mir mine in order to obinskaya GRE. improve the quality of electric power supplied and reduce its consumption. All in all, in 2011 our Company reclaimed 1,343.9 ha of land, which is 1.4 times as Installation of metering devices for thermal energy consumed; much as in the previous year due to the Use of dosing equipment for chemical complexonates in treatment of water for boiler increased land reclamation area in Suntar- houses in order to reduce losses of thermal energy; sky, Zhigansky, Nyurbinsky and Verkhnev- Installation of state-of-the-art heat exchangers (plate, Fisonic) instead of shell-and-tube ilyuysky districts. ones; Saved Thermal Energy Installation of electric induction boilers to replace electric heaters and electrode boilers; 23.6 thousand GJ Preservation of Biological Diversity Use of infra-red electric heaters with automated temperature control; Until recently, there were no specially Installation of local steam generators instead of centralized steam supply; protected territories within the area of the Installation of local Atlas Copco compressor units instead of centralized air supply; Company’s direct operation as well as with- Installation of modular heating unit; in the zone of its potential impact. In 2006, Implementation of heat exchanger cleaning equipment. ALROSA, in supporting the initiative of the government of the Republic, undertook voluntary obligations for the participation in and financing of the large-scale environmental project aimed at maintaining biological diversity of ecosystems in the Western In accordance with the research car- Western Yakutia is populated with a wide be protected at the level of global commu- Yakutia. ried out by specialized scientific and re- range of animal species entered in the Red nity and the Russian Federation, however a In accordance with the agreement, con- search institutes, i.e. the Institute of Bio- Book of the Republic of Sakha (Yakutia) number of species are entered in the Red cluded between the Ministry of Environ- logical Problems of Cryolithic Zone of the and the Red List of the International Union Book of the Republic of Sakha (Yakutia), ment of the Republic of Sakha (Yakutia) and Russian Academy of Sciences (IBPK SO for Conservation of Nature (IUCN), whereby i.e. Salix saposhnikovii, water lily, Marta- ALROSA, we allocated more than RUB 60 RAN) and the Institute of Applied Ecology in all cases these species do not have any gon, Siberian Columbine, Siberian larkspur, million for establishing a specially protected of the North of the Academy of Science of close connection with the territory in ques- Spotted Lady’s Slipper, Common Spotted- territory, Living Diamonds of Yakutia natu- the Republic of Sakha (Yakutia) (IPES AN tion. Their introduction in the lists of spe- orchid, Trichophorum uniflorum, Petasites ral park. Pursuant to the special program RS (Ya)), the Company does not have any cially protected species is mostly related to radiatus. ‘Restoration of Biological Diversity’, bea- negative impact upon the biologic diver- global trends or their status in the region in In general, within the last 20 years bio- vers, musk oxen and buffalos were brought sity of the specially protected territory. To- general. logical diversity indicators in the area of the to Yakutia and are now well adjusted to the gether with that, the region of the presence Within the area of the Company’s opera- Company’s operation beyond protected environment of the Far North. of the Company’s main subdivisions in the tions, there are no plant species that may territories are either stable or showing sig-

50 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility nificant improvement of the situation. The ated with further development and main- Living Diamonds of Yakutia park was opened on April 9, latter circumstance is especially related to tenance of Living Diamonds of Yakutia 2009 near lake Chuonalyr, 15 km from Mirny. The total area the condition of water ecosystems in Riv- natural park. In addition to that, the ac- of the park is more than 32 thousand ha and the length ers Daldyn, Markha and Malaya Botuobiya. tivities aimed at managing the biodiversity of its border is 90 km. At the moment, the fenced area is Improvement of the status of the said rivers include the plans for planting of fish in the populated by twelve musk oxen, two Manchurian wapiti, a resulted from significant efforts taken by the water bodies within the area of the opera- Company to limit adverse impact on water tion of the Company’s entities in order to yak, a spotted deer and Yakut horses. All of them are kept ecosystems. compensate for the damage caused to in open-air enclosures in the environment close to natural. Our plans for managing the impact biological resources. These activities are Besides a number of household structures, one of the bases upon biological diversity are reflected in carried out under trilateral contracts with includes also national heritage museum facilities, i.e. stylized the Comprehensive Program for Environ- Lensk Territorial Office of the Russian Fed- summer and winter lodgings of ancient Yakuts, Yakut hitching mental Protection of OJSC ALROSA for eral Fisheries Agency and Chernyshevsky 2011 to 2018 and are, first of all, associ- Fish Farm. posts. The park is open for all who wish to visit. During three years of its existence, the park has not only become habitat and breeding place for its dwellers but also a favourite place of leisure for the townspeople who come there to relax and introduce their children to Yakutia’s wildlife. In 2011, during the meeting of the board of trustees with the participation of the representatives of the Company, a project was presented for the development of the park till 2014, that provides for planned improvement of the functioning of this project. In particular, a gradual expansion of the species composition and number of animals was planned; in the near future, the park will welcome reindeers, wood buffalos, elks, roe deer, as well as several species of aquatic birds for which natural water bodies will be accommodated. As soon as the period of adaptation to living in enclosure is completed, the Ungulates (apart from musk oxen) will be transferred to semi-unrestricted regime. Park visitors will study the life of the animals dwelling in the environment close to natural as much as possible. In order to carry out such tours, specialized routes and paths will be developed and equipped, temporary camps and stations will be constructed, children’s playgrounds will be accommodated. The Company continues to render financial support to the part within the framework of its charitable activity.

51 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Environmental Responsibility Our Policy in the Area of HR-strategy Occupational Health and Charity. Support to Local Corporate Social Responsibility Safety Communities

Social Responsibility

52 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Бородулина Катя, 14 лет, г. Мирный Our Policy in the Area of Corporate Social Responsibility

Main Areas of CSR Social policy is an integral part of ALROSA’s sustainable development strategy in the long-term prospects and

is aimed at establishing the conditions Occupational Charity. Communities’ HR-Strategy for social welfare and improvement of Health and Safety Support the quality of life for both the personnel and all the residents in the regions of the Company’s operations.

ALROSA’s social policy has been formed and is imple- • charitable and sponsor activities; mented in close cooperation with Inter-Regional Employee • maintaining money savings of employees, protection Social policy is implemented Trade Union of ALROSA ‘Profalmaz’, state and municipal of their financial and other material savings (shares, based on the following principles: authorities based on the Company’s regulatory documents other securities etc.) within the framework of special- and current legislation of the Russian Federation and the ized joint programs with Mirny commercial bank KB • consistency and unanimity of Republic of Sakha (Yakutia). MAK-bank (LLC); goals, principles, methods and In order to maintain competitive position in labour mar- • information responsibility and transparency, support and technologies of social work; ket and secure the benefits of a socially oriented company development of corporate and local mass media, pro- in carrying out the activities related to enhancement of the motion of the best traditions of the first generations of • democratic character, social Company’s investment attractiveness and free circulation of diamond miners. equity in resolving social issues; its shares, ALROSA implements social policy in the following main areas: Social Partnership in the Area of Labour • legal relevance, compliance • establishing safe working conditions; We acknowledge the right of our employees to join in with and respect for human • protection of health of employees and their family mem- organizations of their choice, which is an integral element of rights; bers, support of healthy lifestyle; the right to freedom of association and freedom of negotia- • improvement of employees’ living conditions; tion. The authorized representative of the Company’s em- • legal and social security. • private pension plans within the framework of the agree- ployees is Inter-Regional Employee Trade Union of OJSC ment with Private Pension Fund (PPF) Almaznaya Osen ALROSA ‘Profalmaz’. (Diamond Autumn); The relationship between the Company and employees • support to and development of social infrastructure; in social and employment area is based on the principles • participation in social and economic development of the of social partnership and is set out in the provisions of the regions; Collective Bargaining Agreement. This format of the rela-

53 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility employment relations and other relations race, skin colour, nationality, language, ori- The Collective Bargaining Agreement between ALROSA directly related thereto shall be performed gin, financial, social status and official ca- and inter-regional employee trade union Profalmaz for 2011 by the Company in accordance with the pacity, age, place of residence, attitude to- to 2013, which is the fourth in the Company’s history, was standards of the International Labour Or- wards religion, political views, affiliation or signed on November 26, 2010 by the President of ALROSA ganization and current legislation. non-affiliation to any public association as Fyodor Andreev and Chairman of Profalmaz trade union Rishat We do not use labour of the individuals well as other circumstances not related to who are younger than 16 years, we do not an employee’s business qualities. Yuzmukhametov. use forced labour and strictly comply with the standards on inadmissibility of women’s Equal Opportunities The new Collective Bargaining Agreement not only retained the labour in works with severe and hazardous The Company provides equal opportu- existing benefits and guarantees for employees of ALROSA, working conditions in mining industry. AL- nities for all employees to implement their but also introduced a number of the new ones. ROSA rigorously complies with the stan- potential in the process of their professional dards of the Labour Code of the Russian life, fair assessment of their results, recruit- Federation that prohibit using the labour of ment and job promotion based on profes- the individuals below 18 years old in works sional skills, knowledge and experience. tionship between the employer and em- union and territorial employment service of with harmful and (or) hazardous working ALROSA applies a system of prevention, ployees of ALROSA has twenty years of the potential mass termination of employ- conditions. detection and, when necessary, taking ac- history. ees no later than three months in advance. In ALROSA, any form of discrimination is tions to eliminate violations of the social and The Collective Bargaining Agreement The Collective Bargaining Agreement inadmissible, i.e. each employee has equal economic rights of employees. The system applies to all Company employees who includes provisions of the Company’s ob- opportunities for the implementation of their includes a commission of labour disputes concluded a labour contract, including tem- ligations to take the following measures employment rights regardless of their sex, both at the level of the Company and at porary and part-time employees. In terms aimed at retention of HR potential before of territory, the Collective Bargaining Agree- making decisions on reduction of number ment applies to all the Company’s struc- of personnel or personnel pool: liquidation tural subdivisions located in the Republic of vacancies, internal rotation of personnel, of Sakha (Yakutia), Moscow, Saint Peters- transition of employees to partial work day burg, Arkhangelskoe, Oryol, Krasnodar Ter- scheme, reduction of the Company’s costs, ritory and other regions of its operations. including administration and management The main body of the parties’ social expenses. partnership is Commission for Regulating The Company and Profalmaz trade union Social and Employment Relations in the jointly develop actions for the employment Company, which consists of authorized of the released personnel. The Company representatives of the parties on a parity arranges re-training for the employees that basis. are being terminated due to reduction of In the event of major changes in ALRO- the number of personnel or personnel pool SA’s activities, in particular, if any resolutions within the structure of intra-company per- are taken to reduce the number of person- sonnel training. nel or personnel pool and potential termination of labour contracts with employees, Human Rights the provisions of the Collective Bargaining ALROSA declares its mandatory obser- Agreement set out the Company’s obliga- vance of human rights in accordance with tion to inform Profalmaz trade union in writ- the Constitution of the Russian Federation ing no later than two months before the be- and Russian legislation. Based on the rec- ginning of termination of labour contracts ognized principles and standards of the with employees and inform Profalmaz trade international legislation, legal regulation of

54 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility the level of structural subdivisions, where The Company ensures application of the representatives of employees and the em- principles of equal remuneration for men ployer make decisions on individual labour and women for the labour of equal value disputes on a parity basis. (Convention 100 of the International Labour As far as protection of human rights is Organization). The ratio between the basic concerned, we pay much attention to pro- tariff rate (base salary) for women and the tection of the rights of women, youth and basic tariff rate (base salary) for men is one, native residents, while providing equal op- R=1. portunities to everyone, including those for professional and career growth.

The share of individual social groups in total number of personnel and among managers

30.4

10.3

6.2

Personnel ratio, %

9.8 21.1 37.4 Senior management ratio, %

Native residents Young employees Women under 30

55 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility HR-strategy

The highest professional qualities of the The Company’s HR strategy is aimed at building high- personnel are ALROSA’s main competitive skilled and high-qualified personnel, efficient use of their advantage, the issues of personnel safety and working potential, providing employees with favourable health are recognized as the Company’s key values, and we believe the funds allocated to conditions and equal opportunities to demonstrate and development of HR potential to be strategic apply their professional skills and improving production investments in human capital. productivity.

PICTURE OF THE PERSONNEL Territorial distribution of personnel in ALROSA The total number of employees in AL- ROSA as at the end of the reporting period is 30,903 employees, with the reduction 42.0 % against the previous year being 0.4 %. Mirny (Western Yakutia) 94 % of our employees are employed in the territory of the national Republic of 16.1 % Sakha (Yakutia) in the Far North of Russia, Udachny (Western Yakutia) with 6 % working in other regions of the Russian Federation. 23.0 % ALROSA is a mining company and its Aikhal (Western Yakutia) main strength is its workers, their share being 66 % of the total number of personnel. 7.0 % The mining division of our Company em- Lensk (Western Yakutia) ploys around 43 % of all its employees. The ratio of men and women in ALRO- 4.3 % SA’s subdivisions is determined by specific other districts of the Western Yakutia features of the mining industry, where the number of male employees significantly 1.6 % exceeds the number of female ones, and Yakutsk and other districts they dominate in working jobs. In 2011, the of the Republic of Sakha (Yakutia) gender ratio in the Company was 61.3 % 4.4 % men against 38.7 % women. Moscow Age composition of our personnel is also stable. In the reporting year there were 1.6 % slight changes here. The share of employ- Other regions ees between 41 and 50 years old reduced of the Russian Federation

56 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Distribution of ALROSA employees Distribution of employees of ALROSA’s mining division in personnel categories in personnel categories

12.1

20.8 78.5 10.1

Workers 11.1 1.3 65.9 Office workers Specialists Senior management 0.4

by 1.9 %, and the share of youth increased PICTURE OF PERSONNEL: tion of local labour resources in diamond by 0.8 %. mining industry and their retention. Among the individuals within the Com- Average staff number: 30,295 persons, The level of personnel turnover in 2011 1 pany’s supreme management bodies , the workers, totalled 9.8 %, which is somewhat higher share of managers within the age group 20,358 as compared to the previous year among from 30 to 50 years old is 28.1 %, above 50 61,3 % – men workers. Turnover ratio in ALROSA’s mining years old – 71.9 %. The average age of the divisions does not exceed 7.5 %. Company’s employees in 2011 remained average age – 40.8 years, The level of turnover among men (12.7 %) at the same level and was 40.8 years old. significantly exceeds this parameter among Maintaining the optimum age structure of average period of employment in the Company – 12.8 years women (6.1 %). the personnel is one of our key HR goals. In 2011, the turnover ratio in various We strive to maintain efficient and stable age groups2 was as follows: among work- employment relations with each employee. ers below 30 years old – 14.4 %, between Personnel’s average period of employment We pride ourselves on such level of loyalty pany implements a package of measures 31 and 40 years old – 5.9 %, between 41 in our Company totals 12.8 years. Udachny and devotion of our employees. aimed at the performance of Resolution No. and 50 years old – 10.2 %, between 51 MPD is distinguished by the longest aver- In 2011, 7,099 employees left our com- 254 of the Government of the Republic of and 60 years old – 5.5 %, above 60 years age employment record within the division, pany due to various reasons, including Sakha (Yakutia) of June 28, 2008 On attrac- old – 3.4 %. which is 16 years. This factor plays an im- 3,640 employees left on their own wish and portant role in preserving continuity and 23 % of them left due to retirement. 1 Members of ALROSA’s Supervisory Board and Executive Committee. professional mentoring, which is highly rel- We are actively involved in the implemen- 2 Calculation of personnel turnover with a split into age groups has been prepared for 14 ALROSA’s main subdivisions evant for such specific industry as mining. tation of the national HR policy. The Com- with the aggregate number of personnel representing more than 80% of the total number of the Company’s personnel.

57 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility • implementing new HR technologies and one-company towns, the Company, first of information systems for personnel man- all, is focused on internal reserves, with a In order to attract highly-professional staff, the agement. number of what we believe to be most im- Company uses its own comprehensive recruitment Being a town-forming company with portant policies being implemented for their system without engaging any recruiting agencies and manufacturing infrastructure located in development. selects candidates on a competitive basis using internal and external sources for that purpose. Personnel selection and recruitment practice in the Young Employee Company allows to: Adaptation • support professional family dynasties, increase Training, Monitoring of career Re-Training and Skill and professional employee loyalty; Development Career guidance work, development • assist in recruitment of graduates from basic-level pre-university training of of employees pupils at schools, work schools, secondary and higher professional education with university students institutions etc., • resolve the problem of native residents’ employment; • minimize the costs associated with the engagement of personnel from other regions of the country. Career guidance work, pre-university personnel replenishing. In addition to that, training of pupils at schools, work with the program is aimed at assisting school- university students children in balanced personal decisions in The Company applies a Comprehensive choosing the profession related to ALRO- Program for Career Guidance Activities in SA’s operations. STAGES OF PERSONNEL TRAINING • developing intra-company system for the Mirny District of the Republic of Sakha Selection and training of future experts AND DEVELOPMENT HR-training; (Yakutia) for 2008 to 2012, with the amount starts with career guidance work with senior At the moment, ALROSA is one of the • improving the labour incentive system, of financing out of ALROSA’s expense be- school students. Based on the department most attractive employers in the Republic maintaining current level of the social ing RUB 11,198.4 thousand. The Program of pre-university training established jointly of Sakha (Yakutia), which provides its em- benefits and compensations; has been prepared jointly with the Mirny with leading technical universities in Russia, ployees with better working conditions, de- • attracting and retaining employees out District Department of Education. Its main senior school students are trained to gain cent salary, ensures opportunities for the of native residents; target is to ensure the Company’s advance access to profession-oriented departments development of their potential and profes- • developing personnel assessment sys- sional growth. tem; The main targets of our HR-strategy are • improving the activities aimed at the pro- as follows: motion of young experts and establish- 88.5 % of those employed • maintaining and replenishing high-skilled ing succession pool; by the Company’s divisions HR potential, its efficient use; in 2011 were local residents. • improving personnel selection, allocation employees were recruited out and retention system; 627 of the representatives of the native residents.

58 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Training, Re-Training and Skills ing high-skilled workers in new or related Development professions, which is conditioned upon the OUR PROFESSIONAL ‘CAPITAL’: Our personnel have an opportunity to technological conversion of the core pro- enjoy continuous training owing to the duction related to the transition to under- More than 53 % of ALROSA’s employees have higher Company’s current training, re-training and ground diamond mining. or secondary vocational education, whereby in 2011 the skill development system. Those efforts are Training of workers is carried out in ac- number of employees having university degree has risen taken on the basis of HR Training Centre cordance with the list of training programs up to 71.4 % among managers, experts and clerks. and its training workshops, independent that includes more than 100 professions In the Company’s mining divisions, more than one third non-profit organization Regional Technical and special-purpose training courses. In College, vocational schools No. 28 and 2011 8,178 employees (more than 40 % of of our workers have higher or secondary vocational No. 30, as well as training centres of the the total number of workers) took part in education. Russian Federation. The on-going train- training and skill development and various ing is provided to experts and workers in types of training. The average qualification category of the workers in accordance with the Training, Re-Training Corporate programs for the upgrade mining divisions is 4.6 in general and 5.1 among men. and Skill Development Plan for Experts and of professional and educational level have Workers, production needs and the Com- been provided for engineering, technical 74 employees have an academic degree, including pany’s technical development. and management staff. Those include in- 66 candidates of science and 8 doctors of science. Owing to the corporate training sys- ternal and external workshops and training tem, the Company’s working personnel re- courses in relevant spheres. ceives additional professional knowledge in When our employees are sent to educa- the existing professions, which in its turn tional institutions for skill development, pro- impacts job tariffing and employee salary fessional re-training, getting higher profes- level. In addition to that, the Company car- sional education or an academic degree, ries out planned activities aimed at train- the Company compensates them for their in the Moscow State Mining University, granting ALROSA scholarship to the stu- the Saint Petersburg State Mining Institute dents studying for profession-oriented (Technical University), the Siberian Federal disciplines, which allows them to receive University (Krasnoyarsk); the Irkutsk State compensation for transfers from the place Technical University; the North-Eastern of study and back, additional corporate The Company supports its position of a priority Federal University named after M. K. Am- scholarship, an opportunity to have prac- employer on the labour market by adequate mosov (Yakutsk), the Mirny Polytechnic In- tical training in manufacturing facilities as remuneration and competitive level of social stitute (a branch of the North-Eastern Fed- well as employment in the Company’s divi- benefits and guarantees. eral University in Mirny); the Russian State sion upon graduation from the educational Geological Exploration University (Moscow). institution. In 2011, the number of those ALROSA’s policy in the area of salaries and Those attending pre-university training receiving ALROSA’s scholarship totalled financial motivation for employees is based department take part in regional academ- 113 individuals. In order to promote dili- ic competitions, based on the results of gent studies and honour the memory of on strict compliance with Russian legislation, which they may be enrolled in Universities the first director general of Yakutalmaz, governmental standards for the regions of the in places supported by budgetary funds. the Company applies the Regulations on Far North and current Collective Bargaining In 2011, the Company provided funds for Scholarship of ALROSA in the name of Agreement. The salary is paid on time and regional academic competitions under the V. I. Tikhonov, that provide for payment of in full. contracts with universities in the amount of individual scholarship to overachievers of RUB 840,898. the Universities in the amount of two tariff One of the most important areas of rates of qualification class I of ALROSA’s the career guidance work program is Unified Tariff System.

59 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility travel expenses for transfer to the educa- sional development of employees, with the tional institution and back, accommodation, best of them being included in succession as well as daily allowance equal to the daily pool to fill vacancies to ensure their vertical allowance established for business trips. or horizontal growth. At the moment, the salary level in Young Employee Adaptation The succession pool is formed, among ALROSA corresponds to the leading Within the Company’s HR-strategy, spe- others, based on the results of the annu- positions established among mining cific attention is paid to adaptation of young al appraisal of the Company’s managers, companies in Russia. personnel. All the activities are set out in experts and clerks carried out in order to the Collective Bargaining Agreement be- assess the professional activities of each In 2011, the amount of average tween employee trade union and ALROSA employee and define their further business monthly salary of the employees in for 2011 to 2013. Regulations on Young career. Experts in ALROSA is the document gov- our Company increased by 37 % erning the obligations and rights of young STAFF MOTIVATION and totalled RUB 62.9 thousand. experts in the field of social partnership. Remuneration of labour of our employ- In addition to that, such institutes as ees varies depending on the level of the professional mentorship, Young Experts labour’s complexity, as well as in order to Association, Young Manager School have compensate for negative impact of ad- been successfully operating for a long time. verse working conditions certified as to In order to facilitate professional and their severity, harmfulness or hazardous- minimum salary in the Republic of Sakha the honorary title of ‘The Merited Employee career growth, motivate young managers ness. Along with working conditions, the (Yakutia). of OJSC ALROSA’ and awarded with the who achieved the best results in produc- incentive and compensation allowances The System of Benefits and Guarantees Certificate of Merit of OJSC ALROSA are tion, scientific and management activities, and additional payments are established ALROSA ensures the level of social entered in our Company’s Book of Hon- the Company established the award in the that allow our employees to aim for maxi- benefits and guarantees that, in addition to our and the pictures of the employees who name of L. L. Soldatov to young manag- mum use of their professional and creative salaries, allow to efficiently motivate, attract received the awards are displayed in the ers of ALROSA’s subdivisions. Winners are potential. and retain personnel. Apart from those Company’s Honours Board. Certificates awarded with the title of the laureate of the In order to facilitate the environment of provided for by legislation, the Company’s of Merit and the certificates confirming the L. L. Soldatov’s award of the relevant year, replenishing workforce in extreme natural employees also receive benefits and guar- honorary titles are awarded by the Com- given a diploma of an established format, a and climatic conditions, on top of that the antees in accordance with the Collective pany’s President, or in his name and on his badge of the laureate of the L. L. Soldatov’s employees of the entities located in the ter- Bargaining Agreement and the social pro- behalf, to the awarded employee personally award and a monetary award. ritories of the Far North and equated areas grams being implemented. during a special ceremony. In order to reduce the period of adapta- receive payments in accordance with the Incentive and Awards Pursuant to the Regulations on Employ- tion in a workforce team, reveal business established regional coefficient and North- Non-monetary motivation system in- ment Competition, the Company’s struc- qualities and administrative skills among ern allowance. The amount of the regional cludes corporate awards (honours, cer- tural divisions display the photos of the young employees, the heads of the Com- coefficient payments equals to 70 % of the tificates of merits) and incentives (letters winners of the competition and foremost pany’s structural subdivisions assign men- basic tariff rate of the employees in Mirny, of acknowledgement, title of ‘The Best in workers on the Honours Board in the rel- tors out of the number of experienced 100 % of the basic tariff rate of the employ- Trade’, ‘The Best Innovator’ and ‘The Best evant department. high-skilled experts and workers to newly ees in Udachny and Aikhal. The payments Inventor’). In accordance with the regula- Awarding of the best employees and recruited young employees. of the Northern allowance may reach up to tions On Honorary Titles and Awards in honouring the veterans represents a sol- Monitoring of Career and Profession 80 % of the basic tariff rate depending on OJSC ALROSA, the title of ‘The Merited emn corporate ceremony and, as a rule, Development of Employees the period of employment in the regions of Employee of OJSC ALROSA’ and the title is timed to coincide with the annual Busi- In order to retain high-demand and the Far North. of ‘The Veteran of OJSC ALROSA’ are hon- ness Group Meeting of ALROSA Group, promising employees and workers at our A minimum salary in the Company as orary titles, and the Certificate of Merit of anniversary celebrations in the Company’s companies, HR-departments and heads of calculated based on the basic tariff rate for OJSC ALROSA is an award. subdivisions, as well as celebration of the the Company’s subdivisions carry out con- grade I of ALROSA’s Unified Tariff System The pictures, summary background, Steelworker’s Day, the professional holiday tinuous monitoring of career and profes- is 2.4 times as much as the established description of the achievements that won of diamond miners.

60 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Areas Additional benefits and guarantees provided to employees of ALROSA pursuant to Collective Bargaining Agreement

creating conditions for the improvement of professional skills within the framework of the educational programs and the employees’ professional growth with due consider- Employment and Personnel Training ation of employee competences and aspirations based on the annual personnel appraisal

Working hours, leisure time providing additional paid leave for two calendar days to the employees participating in the activities of teams facilitating public order

Remuneration of labour and work rates carrying out of the annual employee salary adjustment to protect them from the increased level of the prices for consumer goods and services setting

monthly reimbursement of the expenses for the transfers from the place of residence to the collecting point and back to the employees who work in shift method and live in the populated locations located within the distance of eight uluses (districts) of the ‘diamond province’; reimbursement of the expenses for the cost of daily transfer to the place of work and back; payment of the cost of transfer, including luggage transportation, to the place of vacation and back; reimbursement of the expenses for the transfer to the place of vacation for the employees and their family members once in two years within the territory of the Russian Federation and CIS; annual compensation of the expenses for transfer of children being full-time students; annual compensation of the expenses for transfer of minor children or adult children attending general education schools for the Company’s employees who are single mothers or single fathers; reimbursement of the expenses for transfer, accommodation and payment of daily allowance to the employees who combine work and education or who are sent for the training by the Company; additional monthly payment in the amount of 30 % of a minimum tariff rate for grade I including regional coefficient for the employees who are in maternity leave to take Guarantees and compensations care of the children under 3 years old; single payment in the amount of two basic through tariff rates for grade I to the employees who came back to the Company after their service in the Russian Army; additional payment to the employees of shortage professions (jobs) who are engaged in the Company’s subdivisions located in the regions of the Far North: • payment of single allowance in the amount of two base salaries; • payment of the cost of transfer of employees and their family members within the territory of the Russian Federation, as well as the cost of luggage transportation within 5 tons per family; • establishing additional payment that would compensate for the lack (partial amount) of the additional percentage paid for the period of employment in the regions of the Far North; payment of the cost of transfer and transportation of luggage not exceeding 5 tons per family in case of departure for the regions of the Far North; in case of death of an employee’s close relatives, as well as to one of the family members of a deceased Company employee or a retired employee: • payment of a single financial aid that equals six minimum tariff rates of grade I; • reimbursement of the expenses related to delivery of human remains; • reimbursement of the expenses for the transfer (to and from) to an employee or one of the family members of a deceased employee accompanying the human remains.

private pension plan under Pension Fund Almaznaya Osen (Diamond Autumn); additional medical services under the program of voluntary medical insurance (VMI); centralized purchasing of and payment for health and resort treatment tours for the employees and promotion of health of their children including reimbursement of the Social support measures, pension plan, cost of the tour package out of employee’s own funds in the amount of 20 % to 30 %. healthcare services and provision of providing employees with vouchers for treatment and recreation: once in two years, or annually in off-season; housing providing presents for newborns and New Year presents for children; improvement of housing conditions and provision of housing to Company employees; allocation of funds for the construction of residential buildings in the central regions of Russia (Oryol) in order to provide housing for the retired Company’s veterans who depart from the Republic of Sakha (Yakutia).

compensation of expenses for payments under real estate lease agreements in the amount of the minimum tariff rate of grade 1; Benefits and guarantees to young company when a young expert is invited to work in the Company, assisting in the employment of the other family member within the Company’s divisions; employees payment for the services of pre-school institutions in the amount of 50 % of the established fee, in case if two or more children attend.

implementation of the Comprehensive Program for Environmental Protection of OJSC ALROSA for 2011 to 2018; Employee’s occupational health and safety, voluntary insurance against industrial accidents and occupational diseases; environmental safety quarterly bonuses to occupational safety personnel for their active involvement and high quality of the performance of their functions.

61 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Allocation of vouchers for health resort treatment in 2011

In accordance with the main target of ALROSA’s social policy, the priority is given to corporate programs for development and Prometheus health complex social security of the personnel.

38.7% 17.6% Sanatorium For many years, the Company has been Golubaya Volna implementing the programs Health Pansionat ALROSA Improvement and Leisure of Employees and 0.6% in Anapa Their Children, Health, Culture and Sports, Other sanatoriums Housing Program, Private Pension Plan. Local health and All the above programs are aimed to establish 19.5% recreation resorts conditions for additional motivation for 0.7% Local recreation for children 1.0% employment in the Company, retention of 21.9% high-skilled personnel, healthy psychological Away recreation for children environment within the team.

In 2011, 639 Company employees have establish favourable social environment for off-season between October 1 and April 1), leading treatment and scientific and medi- received corporate awards, including 606 all residents in the regions of the Compa- a Company employee has a possibility to cal institutions of the Russian Federation employees who received the title of the vet- ny’s industrial and business operations. obtain a voucher for health resort treatment and the Republic of Sakha (Yakutia). eran of ALROSA and 39 employees who Health Promotion and Leisure and leisure in the Company’s health treat- Rendering the high-skilled medical ser- became laureates of the governmental Promotion of employee health is main- ment facilities and pays 30 per cent of its vices under the corporate program includes awards of the Republic of Sakha (Yakutia). ly ensured at own state-of-the-art facili- cost for oneself and 20 % for one’s child. medical examination and treatment of the ties for all-season health resort treatment During the summer period, the Compa- employees and their family members, as CORPORATE SOCIAL PROGRAMS and leisure that include four prophylactic ny ensures health treatment and leisure of well as the Company’s pensioners, both Pursuant to the principles of corporate sanatoriums located at the Company’s in- employees’ children in children’s healthcare in medical institution at the place of their social responsibility, ALROSA, on its own dustrial sites in the Western Yakutia, i.e. camps Orlyonok and Almaz located in the residence and that requiring transfers to volition and initiative, has undertaken the Gornyak sanatorium (Mirny), Sanatorium territory of the Mirny and Lensk districts of specialized medical centres of the Russian obligations for the Company’s socially re- of G. E. Cholbodukov (Kempendyay settle- the Republic of Sakha (Yakutia). Federation. sponsible involvement in the life of its em- ment, Suntar district), Cedar sanatorium Health In addition to that, pursuant to the ployees. (Lensk), Zarnitsa sanatorium (Udachny); To ensure occupational health of its Health program, the Company’s medical The Company implements a wide range three sanatoriums at the Black Sea Coast – employees, the Company implements the departments annually take efforts to carry of special-purpose programs aimed at es- Prometheus health complex (Nebug settle- comprehensive program ‘Health’. Medical out prompt measures for immunological tablishing competitive advantages of AL- ment, Tuapse district), CJSC Sanatorium treatment under Health program is provid- prophylaxis against flu. ROSA as a socially responsible organiza- Golubaya Volna, a subsidiary of ALROSA ed under the programs of voluntary medical The package of healthcare measures tion and an attractive employer in order to (Gelendzhik), Pansionat ALROSA (Anapa). insurance via Insurance Company ALROSA carried out in 2011 resulted in 1.6 % re- attract and retain high-skilled personnel, Once in two years (or once a year during and represents a number of contracts with duction in the disease incidence rate of

62 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Pursuant to the employee healthcare program and with due consideration of the local children’s leisure and preventive treatment in prophylactic sanatoriums, in 2011, the Company In 2011, we allocated RUB 140.0 million for purchased 12,813 vouchers for a total of RUB the organization and carrying out of events 569.7 million. pursuant to the Culture and Sports program. Within the area of its operation in Western Yakutia, the Company supports 9 Community our employees as compared to the previ- chological environment. For that purpose, Centres and clubs, 4 museums, 2 libraries, ous year by the number of incidents and the Company implements the ‘Culture and 12 gyms, 2 stadiums, 4 swimming pools, 10.5 % reduction by the number of lost Sports’ program. ALROSA’s Culture and 2 shooting ranges and a ski centre. The days of work. Sports Centre (CSC) is in charge of man- structure of ALROSA includes 250 permanent Culture and Sports aging the activity aimed at the organiza- sections and clubs, with 12 thousand One of the essential areas of the social tion and coordination of mass culture and policy is the development of the corporate sports and leisure activities. employees attending them. culture, corporate spirit, employee identi- The main events of the mass cultural fication of themselves and their personal and sports and healthcare efforts of AL- achievements with the Company. Estab- ROSA in 2011 are as follows: lishing the conditions for the arrangement • anniversary events dedicated to the 55th of a good leisure time for the employees anniversary of motor transport base and • All-Russia junior tournament in freestyle Egor Borisov and the President of ALROSA and residents facilitates healthy lifestyle and the 45th anniversary of plant No. 3 of wrestling dedicated to the memory of Fyodor Andreev. improves the level of the social and psy- the Mirny MPD; Olympic Champion Roman Dmitriev, Housing Program where ALROSA acted as a title sponsor; The housing program is based on new • Chess Championship of the Republic of approaches to strategic management Sakha (Yakutia); of the relationship in the field of housing • Russian Championship in indoor soccer and is aimed at strengthening the Com- In 2011, we invested RUB 156.0 million among Premier League teams; pany’s HR potential, expansion of the op- in the Health program, including RUB • Russian Competition in indoor soccer; portunities for employees to improve their 147.6 million for the provision of medical • Republican figure skating tournament; housing conditions through mobilization services under the program of voluntary • Republican competition in motocross; of personal funds and for that purpose a • Boxing Championship of the Republic of corporate portfolio of tools has been es- medical insurance. 2,331 individuals have Sakha (Yakutia); tablished including: been examined and treated in the regional and • Russian Swimming Championship; • corporate support to employees of AL- Russian medical centres out of the Company’s • Bluebird song contest; ROSA in their purchasing of housing fa- expense, including 259 non-working retired • XIX Festival Tuoy-Khaya. cilities; veterans of ALROSA and children of the We continue to make investments in • program for provision of mortgage loans 91 construction and development of sports to employees of ALROSA for 2011 to Company’s employees. and culture facilities at our industrial sites. 2018; In June 2011, a formal opening of new • construction of residential facilities in Ice Sports Centre Snezhinka took place in Oryol; Udachny with the participation of the Presi- • establishing special-purpose housing dent of the Republic of Sakha (Yakutia) fund.

63 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility The establishing of the special purpose • private pension under a shared pension housing fund is aimed at prompt resolution contract; The junior tournament in freestyle wrestling dedicated to of the issues related to the accommoda- • private survivor’s pension. the memory of Olympic Champion Roman Dmitriev was tion of the young and newly-recruited spe- The program of supplementary pension carried out at a high level and matched the international cialists. Purchasing of apartments out of plan is carried out via private pension fund tournaments, this was the unanimous opinion of ALROSA’s expense is provided for high- Almaznaya Osen (Diamond Autumn), which the executive director of the Russian Federation of skilled experts and construction of hostels started working with the funded portion of for workers. the retirement pension in the area of state Wrestling and extra-class referees. Those who attended Private Pension Plan pension insurance, which allows employ- the tournament also expressed their gratitude to the The Private Pension Plan program is ees to safely deposit their pension contri- providers, including Culture and Sports Centre of aimed to ensure both adequate living stan- butions and receive a guaranteed invest- ALROSA. dards for our employees after their retirement income. ment, as well as to attract, retain and mo- The Fund’s founders are OJSC AL- Corporate newspaper Vestnik ALROSA, tivate personnel for long-term service in the ROSA, Inter-Regional Trade Union of Em- February 2012. Company. ployees of OJSC ALROSA ‘Profalmaz’ and The system of the supplementary pen- JSCB Derzhava. The Fund’s supreme man- sion has been practiced in ALROSA since agement body is the Board of the Private 1995 and includes: Pension Fund Almaznaya Osen and oper- • private pension for long service; ational management is carried out by the The employees of ALROSA who pur- skilled personnel in the Company and • private special-award pension; executive director. chase housing out of their own expense are provides for extension of mortgage loans provided with a targeted corporate support to employees via KB MAK-bank (LLC) on in various forms, including: beneficial terms, i.e. 9 % per annum with re- • compensation of the expense for pay- payment period of 10 years and the Com- ment of the accrued interest under pany’s reimbursement of expenses for the mortgage loans for house purchasing; payment of the interest under the mortgage Today, ALROSA is the only company in the • sales of residential space out of the loans. In 2011, 85 employees received Russia’s Far East that successfully resolves Company’s own housing fund to em- mortgage loans. the issue of transferring its retired employees ployees living there under a contract; In order to resolve the strategic goal of to the cities of central Russia having • purchasing of housing by employees on attracting high-skilled personnel, as well as favourable climate conditions and convenient terms of shared participation with the motivate transfer of the retired veterans of Company; ALROSA from the areas of the Far North infrastructure. Our policy for provision of • employees’ carrying out of the transac- to more favourable places of residence, the housing to the employees at the place of their tions for the exchange of their housing Company carries out construction of hous- residence and for retired veterans of ALROSA for the residential space out of the cor- ing in the town of Oryol. The housing space who leave the Republic of Sakha (Yakutia) porate housing fund in the places of the vacated by the retired veterans in the North is aimed at strengthening the Company’s Company’s operation, among others, allows us to maintain our own special-pur- beyond the territories of the Far North. pose housing fund aimed at resolving our HR potential, expansion of the opportunities Within the period from 2008 to 2011, production issues. for employees to improve their housing 404 employees received corporate support In 2011, we commissioned a 172‑apart- conditions. in purchasing residential premises. ment residential building in Zarechinsky The program for the provision of mort- settlement, town of Oryol, and 15 individ- gage loans to employees of ALROSA with ual five-room mansard residential country a period of loan extension up to 2018 is houses in Bolshoe Sotnikovo village, Oryol being implemented in order to retain high- region.

64 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Corporate Pension Plan Indicators

3,771 3,460 3,231 2,935 2,768 2,520 2,305 2,136 In 2011, private corporate pension was increased by 6.5 % and on the average totalled RUB 588 3,771 per month. 0 11,259 11,973 12,775 13,366 13,932 14,458 15,273 16,042

1998 2004 2005 2006 2007 2008 2009 2010 2011

Number of pensioners, persons Average pension amount, RUB

Starting from 2002, Private Pension 2011, Expert RA rating agency assigned take part in the Program of ALROSA’s pri- other support to the Public Association of Fund Almaznaya Osen is among the largest the fund a reliability rating of A level (highly vate pension plan. Veterans in order to: private pension funds in Russia. The Fund reliable). Public Associations of Veterans (PAV) of • increase the veterans’ social life and en- has a certificate confirming the compliance Support ARLOSA at the moment function in Mos- gage them in socially beneficial activities of the quality management system to the to Company Veterans cow, Saint-Petersburg, Oryol. and participation in public events; requirements of GOST R ISO 9001:2008 The principled position of the Company’s The provision of support to veterans is • render support in protecting the veter- standard. In the reporting year, Almaznaya social responsibility is the care for and sup- governed by the Regulations On Interac- ans’ rights and legitimate interest in their Osen has successfully performed its obliga- port of its veterans, former employees of tion with Public Association of Veterans of relationship with the pension and social tions for the security of the pension funds ALROSA who have been awarded an hon- ALROSA adopted in 2009 which defines security authorities and other govern- and payment of private pensions. In May orary title of a veteran of ALROSA and / or the mechanisms of rendering financial and mental bodies;

65 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility • jointly resolve various social problems • in order for the veterans to take part in that the Company veterans may en- creating corporate spirit and facilitation counter at their place of residence; of respect to corporate traditions among • render financial aid and moral and psy- the young Company employees. chological support to the veterans that The Company has voluntarily under- may need medical examination, in-pa- taken the obligations for establishing most The annual meetings with veterans are tient treatment, health resort treatment; favourable environment for the activities of carried out in order to improve the level • arrange assistance for the veterans that PAV and for the support in arranging its of their awareness of the Company’s find themselves in a critical financial operation, including provision of stationery, industrial tasks and economic status, to state under emergency circumstances; premises and transport. engage them in the participation in the social events arranged by the Company. For the purpose of education and in … Private Fund Almaznaya Osen pays specific attention to order to promote the respect of the work with those who already receive private pension. These labour and the history of ALROSA, are the people who dedicated major part of their lives to the annual round tables and meetings are North and how have an additional income on top of the state arranged with young experts, university pension. students, the Company’s scholarship holders that are dedicated to the history The indicator of this work is numerous letters of gratitude of the formation and development of the received from various cities of Russia, CIS and non-CIS states diamond mining industry. Corporate newspaper Vestnik ALROSA, In 2011, a trip to Belorussia has been February 2012 arranged for the veterans.

66 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Occupational Health and Safety

We set a goal for a steady reduction of occupation risks down to the level that corresponds to the international occupational health and safety standards. In its occupational health and safety policy, ALROSA implements a comprehensive approach and is based on the following principles: • priority of life and health of employees above the production performance indicators, • the interest of the Company’s management in establishing healthy and safe working conditions; • generate employees’ stable motivation for safe conduct in production

In its operation, ALROSA strictly ad- ments in the area of occupational health in the area of occupational health and in Companies Utilizing Hazardous Manu- heres to the principle that ‘No economic, and safety; safety. facturing Facilities approved by Resolu- technical or other industrial goals may be • continuous improvement of ALROSA’s tion No. 41 of the Supervisory Board of the ranked above life, health and safety of the occupational health and safety manage- Corporate Management System for System of Expert Reviews of Occupational Company’s employees’. ment system; Occupational Health and Safety Safety of May 05, 2005, as well as with due • developing a corporate strategy, busi- The occupational health and safety consideration of the generally accepted in- Main Areas of the Occupational ness plans and investment projects with management system (OHSMS) has been ternational standards for management of Health and Safety Policy due consideration of the level of occu- implemented in our Company in 2008 and occupational health and safety: Much attention has been paid to the oc- pational health and safety; at the moment it represents a package of • OHSAS 18001:1999 Occupational cupational health and safety issues in AL- • continuous improvement of the level of regulations and administrative and techni- Health and Safety Management System. ROSA’s entities, which is explained not only employee competence and awareness cal activities aimed at safe and accident- Specifications; by the specific working conditions in mining of occupational health and safety as- free work of the entire personnel within • ILO-OSH 2001 Guidelines on Occupa- industry but also natural and climatic fea- pects; the structural subdivisions in all types of tional Safety and Health Management tures of the Far North. • establishing personal responsibility and activity. Systems. Our occupational health and safety pol- motivating employees in the area of oc- The requirements of the Occupational OHSMS is used to maintain continuous icy is aimed at: cupational health and safety; Health and Safety Management System in influence upon occupational health and • ensuring safe production based on • maintaining dialogue with all stake- ALROSA have been developed based on safety aimed at prevention and liquidation management of industrial risks, absolute holders and ensuring openness and Russian legislation, Main Requirements to of emergencies, accidents and incidents at compliance with legal and other require- transparency of the Company’s results Occupational Safety Management Systems hazardous manufacturing facilities.

67 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility The Company’s Chief Engineer ensures CORPORATE MANAGEMENT SYSTEM management of the implementation of the Chief Engineer FOR OCCUPATIONAL HEALTH AND SAFETY occupational health and safety policy. Underground mining operations and Occupational Health and Heads of the Company’s subdivisions construction operations are the areas of Safety Department high industrial risk. Specific attention is paid Subdivisions’ Occupational Health to compliance with OHSMS in these areas Councils Plural bodies in the subdivisions of operation. (representatives of subdivision For example, in performing underground consider the following issues: management, workers, representatives of – compliance by managers and officials of mining operations, supplementary special the trade union) Company all ranks with legislative acts, regulations activities of gas regime are elaborated and Employees the passports for faces and drilling and and current rules on occupational health; Industrial Control Commissions (at – status of occupational injury rate; blasting operations and emergency re- the entities that utilize hazardous Job Descriptions sponse plans are approved by and agreed – performance of the occupational health facilities) action plans and urgent measures for with the Mirny branch of the 23rd Yakutia contain rights and bringing workplaces, equipment, techno- paramilitary mine rescue team of the North prevention of emergencies, incidents and responsibilities in logical processes, buildings and struc- East. ensuring preparedness of the organiza- the area of occu- tures into compliance with the existing In performing the construction operations to localization and liquidation of pational health and requirements. consequences of emergencies at hazard- tions, method statements are prepared safety ous manufacturing facilities through the and approved by the chief engineer of performance of a number of administra- the construction subdivision with the indi- tive and technical measures for preven- cation of all the occupational health and tion of occupational injuries. safety as well as fire safety measures re- Public control of the performance of the contractual obligations pursuant The Commissions review each accident quired to ensure safe carrying out of work to the terms and conditions of the Collective bargaining agreement that occurred at production, reveal its at the site. Safety of work performance in is carried out by the authorized representatives of the subdivisions’ causes and elaborate actions to prevent the construction subdivision is controlled professional committees included in the Industrial Control Commissions. its re-occurrence. in three stages. Stage One – level of the As at the end of 2011, the share of authorized persons was 709 foreman, site-engineer, section manager. employees (2.3 % of the total number of personnel). Stage Two – level of experts and managers in the construction department. Stage Three – level of experts and managers in • technical re-tooling and upgrade of pro- all of them being insured against civil liability For the purpose of prevention and ear- the construction trust. duction; in Insurance Company ALROSA. ly diagnostics of occupational diseases, • insurance against risks; In addition to mandatory insurance of the Company carries out preliminary and Occupational Injury Risk Management • control of compliance with the instruc- employees against occupational injuries planned medical examinations in the ab- Among the most likely risks in the area tions and requirements of OHSMS; and occupational diseases pursuant to sence of which, as well as in case if there of occupational health and safety are the • OHS training for employees; federal legislation, the Company has under- are any medical contradictions, perfor- risks of accidents and emergencies at haz- • preliminary and planned medical exami- taken voluntary obligations for insurance of mance of one’s employment duties in our ardous manufacturing facilities, risks of oc- nation of employees; its employees as set out in the provisions subdivisions is prohibited. cupational injuries and occupational dis- • provision of resources, including person- of the Collective Bargaining Agreement be- In order to prevent occupational diseas- eases. The Company’s entire package of al protection equipment and protective tween OJSC ALROSA and inter-regional es of the employees, our Company prohib- measures in the field of occupational health clothing. employee trade union Profalmaz for 2011 its recruiting (transferring) for the work: and safety is used as a tool for managing 227 ALROSA’s hazardous manufactur- to 2013. • involving harmful working conditions – such risks and reducing the number of their ing facilities are registered in the state reg- A specific insured amount is established individuals that have any occupational factors, the measures are: ister of hazardous manufacturing facilities, for each type of insured events. disease;

68 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility in Western Yakutia: in Capital Construction rates. This decision has been declared to Pursuant to par. 11.1.1 of the Collective Bargaining Department, at Mirny and Udachny MPD. be ALROSA’s planned target for 2012. Agreement, the Company and Profalmaz trade The fatal accident that occurred in May union acknowledge high priority of financing 2011 in Aikhal Construction and Erection occupational health activities. Trust of the Capital Construction Depart- ment was caused by a fall from heights In 2011, ALROSA allocated RUB 458 million to resulting from failure to comply with the oc- the implementation of the occupational health and cupational health and safety instruction and the manufacturer’s passport for the use of safety activities, which is 19 % more than in 2010. construction instrument the injured person was made aware of. Based on the results of the investigation of the accident, the officials of the Company’s subdivision have been subject to disciplinary sanctions. • individuals who have any signs of the meals to the employees involved in opera- Following an analysis of the injuries that impact of harmful industrial factors upon tions under harmful working conditions. occurred in production in 2011, Company their organism, as confirmed by medical ALROSA provides its employees with management made a decision to improve institutions licensed to carry out relevant protective clothing, shoes and other per- the level of training for line personnel and type of medical operation; sonal protective equipment in accordance elaborate a motivation system for line man- • without performing a preliminary medical with the standard rates, and for certain agers in order to reduce occupational injury examination at the time of recruitment, types of operations establishes the rates including an express diagnostics of nar- of issue that improve employee protection cotic substances content in body fluids. from harmful and hazardous factors, spe- Shift foremen and authorized occupa- cial temperature conditions and contami- tional health representatives in ALROSA’s nation as compared to the standard rates In order to increase the level of responsibility of shafts and pits are provided with portable of issue. In 2011, our Company elaborated the line personnel, the Company’s subdivisions express gas analysers. The Company’s en- a new corporate catalogue of protective adopted the 5 GOOD DEEDS system aimed tities that have steam plants use automatic clothing manufactured using modern fab- at daily elimination of at least 5 violations and gas analysers to control air conditions. The rics and finishing, comfortable and practi- defects at work sections (correct application employees within exploration crews, the cal shoes and other cutting age personal employees performing remote operations, protection equipment. of tools and devices, installation of warning vehicle groups and crews, employees with- In 2011, 1,638 engineering and techni- signs and plates, correct storage of materials, in road and line services and miners are cal employees have been trained and re- cleaning of equipment as well as other provided with means of communication ceived certificates in industrial safety in HR operations that help to improve the safety (radiophone, radio stations etc.). Training Centre of ALROSA. status at workplaces). The system proved We also undertook obligations for the implementation of the known techniques 2011 Occupational Health and Safety to be successful at underground mines for neutralization of drinking water in order Parameters. 2012 Targets International and Mir. to exclude harmful influence of chlorine on A total of 24 accidents occurred in our health of our employees. Company in 2011, with 27 persons being The Company ensures provision of injured as a result of them. Much to our re- healthful and dietary meals to the employ- gret, three of our employees died as a result ees involved in underground mining op- of the industrial injuries suffered. All three erations as well as provision of specialized fatalities occurred at the industrial facilities

69 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Distribution of incidents depending Lost Time Injure on their causes Severity Rate (LTIFR) Lost Time Injury 4.2 % Frequency Rate 0.16 0.11 0.09 Personal negligence (LTISR) Occupational Unsatisfactory Disease Rate (ODR) 20.8 % maintenance and 10.9 14.4 11.4 8.3 % problems with work place arrangement

Road traffic rules 0.05 0.03 0.04 12.5 % violation

Technological process violation

Mined rock fall 12.5 % 41.7 % Others 2009 2010 2011

2009 2010 2011

Our 2012 Occupational Health and Safety Goals

Elaboration of a motivation system for line managers, foremen and workers that would provide for a financial interest in prevention of failure to comply with occupational health requirements at workplaces.

Organization of training for line personnel in all Company subdivisions to be carried out twice a year in occupational safety offices within the subdivisions’ workshops and sections on the aspects of safe work performance, control of employees during their performance of shift job orders, carrying out of drills at workplaces and maintaining documents for occupational health within the section.

Adoption of the new Regulations On Labour Competition of OJSC ALROSA, that would significantly tighten the rates that affect the total score within a department not only in respect of an accident, fire or incident that has occurred but also for the violations that may result in such occur- rences.

Further development of the institute of authorized occupational safety representatives within the Company’s subdivisions and workshops.

Continued efforts for improving the internal regulatory document base that defines the Company’s policy in the area of occupational health and safety in accordance with legislation and regulations of the Russian Federation.

70 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Charity. Support to Local Communities ALROSA makes social investments in the community within the framework of such programs as Financial Support and Sponsorship and Investment Program for ALROSA acts as a supporter of long-term social Regional Development. investments aimed at comprehensive and systematic resolution of a number of social issues that exist The programs represent an efficient tool of interaction with within the community. the residents of the regions where the Company carries out its industrial activities, with state and municipal authorities and other institutes of the community.

Financial Support • participation in provision of funds for In accordance with our estimates, the total amount of and Sponsorship purchasing medical equipment for the ALROSA’s investments in community in 2011 totalled USD The social program of Financial Support children’s division of the Mirny Central 94.4 million. and Sponsorship is aimed at the target- District Hospital; ed financial support and the Company’s • financial support to North-Eastern and sponsorship of non-profit projects having Northern (Arctic) Federal Universities; social value. The activities aimed at ren- • provision of funds for the construction dering targeted financial support is man- and reconstruction of orthodox church- aged by a corporate plural body, Com- es in the town of Vilyuysk, Churapcha mission for Financial Support, Patronage settlement, city of Arkhangelsk. and Sponsorship which reviews applica- In 2011, the Company also rendered tions from citizens and legal entities on a sponsorship assistance to a number of monthly basis. regional, national and international cultural In 2011, the most significant social and sports projects, among them being: projects under the program of Financial • sponsorship of 2018 World Football Support and Sponsorship included the Championship; following: • title sponsorship of the V International • patronage assistance to schools, and Youth Sports Games Children of Asia; pre-school institutions; • financing of activities aimed at prepara- • patronage assistance to ALROSA sub- tion for and participation in international marine; freestyle wrestling championship; • pavement and repair of roads in popu- • financing of the reconstruction of Almaz lated localities of the Company’s indus- stadium in Udachny; trial sites (towns Mirny, Udachny, Lensk, • sponsorship assistance in making a Aikhal settlement); documentary about geologists; • construction of a children’s arts centre in • financial support to Mariinsky Theatre Khandyga settlement; (Saint Petersburg);

71 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility • financial support for the construction of In accordance with the Contract for Pursuant to this program, our social sical equipment, construction materials the centre of culture and spiritual devel- Social and Economic Development of the investments in the community in 2011 to- for uluses. opment in Churapcha settlement. Republic of Sakha (Yakutia), in 2011 the talled RUB 72.5 million and were aimed at: In order to ensure employment of ru- Company transferred RUB 521 million to • arranging children’s leisure (228 children ral local residents (Arylakh settlement, Support to local non-profit association Target Fund for Fu- from the uluses within the ‘diamond Syuldyukar and Taas Yuryakh villages), the communities ture Generations of the Republic of Sakha province’ spent their holidays in chil- Company’s structure includes its own mul- Within the framework of ALROSA’s re- (Yakutia) in order to ensure the construc- dren’s camps of ALROSA); tifunctional farm Sovkhoz Novy. The farm’s structuring into an open joint stock com- tion of educational, healthcare, cultural • transfer of children to holiday destina- core activity is production and supply of pany, the Company declared its intent to and sports facilities in the territory of the tions; ecologically and technologically clean ‘live’ keep its social obligations before the main region. • children’s New Year presents; milk, eggs and meat to satisfy the needs of region of its operation. In March 2011, • provision of funds for arranging Ysyakh the Company’s employees related to com- main conditions of the cooperation be- Investment Program event; pensation for severe and harmful working tween the Government of the Republic for Regional Development • provision of funds for repairs in general conditions, supplies to kindergartens and and ALROSA were laid down in the Con- The Investment Program for Regional education schools of the uluses and in schools as well as free sale of natural pro- tract for Social and Economic Develop- Development covers eight districts of the Nikolskaya church in the Verkhnevily- duce to the residents of the district. ment of the Republic of Sakha (Yakutia) in republic, i.e. Mirny, Verkhnevilyuysky, Ole- uysky ulus; The Company’s entities also operate force until December 31, 2020, that was neksky, Anabarsky, Suntarsky, Vilyuysky, • purchasing equipment for processing in the territory of the Sadynsky national signed by the parties. Lensky and Nyurbinsky uluses. agricultural produce; medical and mu- agricultural community of the Mirny dis-

In July 2011, sponsored submarine ALROSA, after the participating in Along with its significant contribution to international exercise, represented Russian Navy in the international exercise the budgets at all levels represented as of rescue forces Bold Monarch 2011 and then crossed the Atlantic Ocean tax payments, ALROSA pays specific to reach the base of the Baltic Fleet. For the first time in 22 years, ALROSA attention to the implementation of the submarine left the boundaries of the coastal zone, and for the first time the principles of high responsibility for the submarine crew took part in such serious, large and specific navy rescue social and economic environment in the forces. «On the Ship’s day we received congratulations from ALROSA region, maintaining the employment rate, delegation», says captain Anton Zaytsev. ‘We appreciate the opportunity improvement of the living standards and to go on holiday to sanatorium Golubaya Volna that was presented to the quality of life for the residents of uluses submariners. It is true that real friendship knows neither distance nor borders. (districts) of the Republic of Sakha (Yakutia). We were happy to report to our chefs that the crew have performed all the tasks set before them with honour.» The captain of the submarine believes that this should be credited to the chefs, i.e. ALROSA. Corporate newspaper Vestnik ALROSA, February 2012.

72 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility trict and national Anabarsky ulus which sembly of Nations of the Republic of Sakha is home to the Dolgans, the Evenkis and (Yakutia). other representatives of native minorities The Company is always open to dia- In January 2012, Deputy Chairperson of the of the North. ALROSA and its subsidiar- logue and cooperation with the Assembly’s Government of the Republic of Sakha (Yakutia) ies pay much attention to such areas of branch. An example of such support in Feodosia Gabysheva handed in a Letter of the social policy as support of the ances- 2011 has become ALROSA’s title sponsor- Gratitude for active participation in preparing tral communes of reindeer-breeders and ship in preparing and carrying out national and carrying out of the republican national fishermen, financial support in carrying ceremonial event Ysyakh Olonkho, dedicat- out agricultural and traditional fishery ac- ed to Olonkho, the national epic art of the event Ysyakh Olonkho to Igor Sobolev, First tivities, charitable events for children. The Sakha people (Yakuts) that has been rec- Vice President / Executive Director of ALROSA. Company’s participation in the prepara- ognized by UNESCO as a masterpiece of tions for and carrying out of the annual verbal and intangible cultural heritage of the reindeer-breeders’ event has become a humanity. The Yakutian national event has good tradition. become a symbol of unity and friendship There are 17 national communes in the between peoples and a milestone event in territory of the Mirny district. Most of them the life of all national communes in the dis- are included in the Mirny Branch of the As- trict that took active participation in it.

73 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Appendix

74 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Ryabko Tatiana, 15 years old, Mirny 75 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Social Responsibility Appendix 1

Table of standard disclosures of sustainability reporting guidelines (global reporting initiative)

№№ Report Section / Parameter of GRI Guidelines Report Section, reference to other sources, comments PAGES

1. STRATEGY AND ANALYSIS

Statement from the most senior decision-maker of the organization about the relevance of 1.1 Statement of the President of ALROSA. sustainability to the organization and its strategy.

1.2 Description of key impacts, risks, and opportunities. SUSTAINABLE DEVELOPMENT STRATEGY. Risk Factors.

2. ORGANIZATIONAL PROFILE

2.1 Name of the organization. ABOUT OUR COMPANY. Basic Facts.

2.2 Primary brands, products, and / or services. ABOUT OUR COMPANY. Our Products.

Operational structure of the organization, including main divisions, operating companies, 2.3 ABOUT OUR COMPANY. Our companies. subsidiaries, and joint ventures.

ABOUT OUR COMPANY. Our companies. 2.4 Location of organization’s headquarters. CONTACTS.

Number of countries where the organization operates, and names of countries with either 2.5 major operations or that are specifically relevant to the sustainability issues covered in the ABOUT OUR COMPANY. Our companies. report.

PRESIDENT’S STATEMENT. 2.6 Nature of ownership and legal form. ABOUT OUR COMPANY. Basic Facts.

Markets served (including geographic breakdown, sectors served and types of custom- ABOUT OUR COMPANY. Our companies. 2.7 ers / beneficiaries). ECONOMIC STABILITY. Our 2011 Results.

ABOUT OUR COMPANY. Basic Facts. 2.8 Scale of the reporting organization. Our companies.

Statement of the President of ALROSA. 2.9 Significant changes during the reporting period regarding size, structure or ownership. ABOUT THE REPORT. ABOUT OUR COMPANY. Basic Facts.

2.10 Awards received in the reporting period. ABOUT OUR COMPANY. Company’s ratings and awards.

3. REPORT PARAMETERS

3.1 Reporting period for information provided. ABOUT THE REPORT.

3.2 Date of most recent previous report (if there were any published). ABOUT THE REPORT.

3.3 Reporting cycle. ABOUT THE REPORT.

3.4 Contact points for questions regarding the report or its contents. CONTACTS.

ABOUT THE REPORT. 3.5 Process for defining report content. At the moment, the Company carries out active work for the elaboration of the procedure for the collection and consolidation of the information to be included in the non-financial reporting.

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Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ven- 3.6 ABOUT THE REPORT. tures, suppliers).

3.7 State any specific limitations on the scope or boundary of the report. ABOUT THE REPORT.

Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations 3.8 and other entities that can significantly affect comparability from period to period and / or ABOUT THE REPORT. between organizations.

Data measurement techniques and the bases of calculations, including assumptions and 3.9 techniques underlying estimations applied to the compilation of the Indicators and other ABOUT THE REPORT. information in the report.

Explanation of the effect of any re-statements of information provided in earlier reports, 3.10 and the reasons for such re-statement (e.g., mergers / acquisitions, change of base ABOUT THE REPORT. years / periods, nature of business, measurement methods).

Data measurement techniques and the bases of calculations, including assumptions and 3.11 techniques underlying estimations applied to the compilation of the Indicators and other ABOUT THE REPORT. information in the report.

3.12 Table identifying the location of the Standard Disclosures in the report. APPENDICES. Appendix 1. Content Index of Standard Elements within Report.

ABOUT THE REPORT. 3.13 Policy and current practice with regard to seeking external assurance for the report. INDEPENDENT AUDIT CONCLUSION.

4 GOVERNANCE, COMMITMENTS AND ENGAGEMENT

PATH OF SUSTAINABLE DEVELOPMENT. System of corporate management in the field of sustainable development. Governance structure of the organization, including committees under the highest gover- 4.1 Detailed information on members and authorities of the committees at the Supervisory Board of nance body responsible for specific tasks. ALROSA is contained in the Annual Report of ALROSA for 2011, section ‘Corporate Manage- ment. Supervisory Board Committees’ (www.alrosa.ru).

Indicate whether the Chair of the highest governance body is also an executive officer PATH OF SUSTAINABLE DEVELOPMENT. 4.2 (and, if so, their function within the organization’s management and the reasons for this System of corporate management in the field of sustainable development. arrangement).

For organizations that have a unitary board structure, state the number and gender of PATH OF SUSTAINABLE DEVELOPMENT. System of corporate management in the field of sus- 4.3 members of the highest governance body that are independent and/or non-executive tainable development. members.

Mechanisms for shareholders and employees to provide recommendations or direction to 4.4. PATH OF SUSTAINABLE DEVELOPMENT. Dialogues with stakeholders. the highest governance body.

Linkage between compensation for members of the highest governance body, senior PATH OF SUSTAINABLE DEVELOPMENT. System of corporate management in the field of sus- 4.5 managers, and executives (including departure arrangements), and the organization’s tainable development. performance (including social and environmental performance).

Processes in place for the highest governance body to ensure conflicts of interest are PATH OF SUSTAINABLE DEVELOPMENT. System of corporate management in the field of sus- 4.6 avoided. tainable development.

Process for determining the qualifications and expertise of the members of the highest PATH OF SUSTAINABLE DEVELOPMENT. System of corporate management in the field of sus- 4.7 governance body for guiding the organization’s strategy on economic, environmental, and tainable development. social topics.

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PATH OF SUSTAINABLE DEVELOPMENT. System of corporate management in the field of sustainable development Management in the Internally developed statements of mission or values, codes of conduct, and principles Field of Corporate Social Responsibility. 4.8 relevant to economic, environmental, and social performance and the status of their imple- Mission and strategy. Company’s corporate site www.alrosa.ru. mentation. ALROSA’s social policy. The Concept of the Development and Implementation of ALROSA’s Social Policy.

PATH OF SUSTAINABLE DEVELOPMENT. Procedures of the highest governance body for overseeing the organization’s identification System of corporate management in the field of sustainable development. and management of economic, environmental, and social performance, including relevant 4.9 ALROSA’s Sustainability Reports issued annually and contains information on the main parameters risks and opportunities, and adherence or compliance with internationally agreed stan- of economic, environmental, and social performance, including risks and opportunities in accor- dards, codes of conduct, and principles. dance with the international GRI standard, version 3.0.

Processes for evaluating the highest governance body’s own performance, particularly PATH OF SUSTAINABLE DEVELOPMENT. System of corporate management in the field of sus- 4.10 with respect to the organization’s economic, environmental, and social performance. tainable development. Management in the Field of Corporate Social Responsibility.

Explanation of whether and how the precautionary approach or principle is addressed by PATH OF SUSTAINABLE DEVELOPMENT. Risk Factors. 4.11 the organization. ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact.

Externally developed economic, environmental, and social charters, principles, or other 4.12 PATH OF SUSTAINABLE DEVELOPMENT. Ethics and sustainability in the global diamond market. initiatives to which the organization subscribes or endorses

Memberships in associations (such as industry associations) and/or national/international PATH OF SUSTAINABLE DEVELOPMENT. Dialogues with stakeholders. 4.13 advocacy organizations. PATH OF SUSTAINABLE DEVELOPMENT. Ethics and sustainability in the global diamond market.

4.14 List of stakeholder groups engaged by the organization. PATH OF SUSTAINABLE DEVELOPMENT. Dialogues with stakeholders.

4.15 Basis for identification and selection of stakeholders with whom to engage. PATH OF SUSTAINABLE DEVELOPMENT. Dialogues with stakeholders.

Approaches to stakeholder engagement, including frequency of engagement by type and 4.16 PATH OF SUSTAINABLE DEVELOPMENT. Dialogues with stakeholders. by stakeholder group.

Key topics and concerns that have been raised through stakeholder engagement, and 4.17 how the organization has responded to those key topics and concerns, including through PATH OF SUSTAINABLE DEVELOPMENT. Dialogues with stakeholders. its reporting.

ECONOMIC PERFORMANCE INDICATORS

Aspect: Economic Performance

Direct economic value generated and distributed, including revenues, operating costs, ECONOMIC STABILITY. The Company’s economic targets and results. EC1 employee compensation, donations and other community investments, retained earnings, Appendix 2 MAIN PERFORMANCE INDICATORS. Economic Performance Results. and payments to capital providers and governments.

Financial implications and other risks and opportunities for the organization’s activities due No data have been found in any scientific research on climate change in the regions of ALROSA’s EC2 to climate change. operation that contains description of risks and opportunities for the Company.

SOCIAL RESPONSIBILITY. HR-STRATEGY. Corporate social programs. Appendix 2. MAIN PERFORMANCE INDICATORS. Social Performance Indicators. Expenses for EC3 Coverage of the organization’s defined benefit plan obligations. the implementation of social programs. The share of contributions of ALROSA to the Pension Fund of the Russian Federation is 5.3% of the salary pool.

EC4 Significant financial assistance received from government. PATH OF SUSTAINABLE DEVELOPMENT. Innovation Development.

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Aspect: Market Presence

Range of ratios of standard entry level wage compared to local minimum wage at signifi- SOCIAL RESPONSIBILITY. EC5 cant locations of operation. HR-STRATEGY. Personnel Motivation.

Geographic definition of ‘local suppliers’ in this Report refers to goods manufacturers and service providers in the territory of the Russian Federation. The amount of contracts for the supply of domestic resource including spare parts for process Policy, practices, and proportion of spending on locally-based suppliers at significant loca- EC6 equipment metal goods, oils and lubricants, construction materials and protective clothing and tions of operation. equipment totalled 86% of ALROSA’s free budget for purchasing material and technical resources. Whereby, at the moment the Company does not have any specifically developed preferential policy for local suppliers.

SOCIAL RESPONSIBILITY. Our policies in the area of corporate Procedures for local hiring and proportion of senior management and workforce hired from EC7 social responsibility. Equal Opportunities. the local community at locations of significant operation. SOCIAL RESPONSIBILITY. HR-STRATEGY. Picture of Personnel.

Aspect: Indirect Economic Impact

Development and impact of infrastructure investments and services provided primarily for EC8 public benefit through commercial, in-kind, or pro bono engagement.

Understanding and describing significant indirect economic impacts, including the extent EC9 of impacts.

ENVIRONMENTAL PERFORMANCE INDICATORS

Aspect: Materials

Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS. EN1 Materials used by weight or volume. Based on 2011 results, the expense for purchasing of goods per unit of finished product reduced by 10% and totalled 10.46 RUB / USD against the planned 10.55 RUB / USD.

Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS. Percentage of materials representing processed or recycled waste in the total use amount of all EN2 Percentage of materials used that are recycled input materials. materials used was not calculated due to lack of consolidated information on the amounts of all materials used in production within the reporting period.

Aspect: Energy

EN3 Direct energy consumption by primary energy source. Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS.

EN4 Indirect energy consumption by primary source. Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS.

ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Efficient con- EN5 Energy saved due to conservation and efficiency improvements. sumption of power and power saving.

Initiatives to provide energy-efficient or renewable energy based products and services, ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Efficient con- EN6 and reductions in energy requirements as a result of these initiatives. sumption of power and power saving.

ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Efficient con- EN7 Initiatives to reduce indirect energy consumption and reductions achieved. sumption of power and power saving.

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Aspect: Water

ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Water use and EN8 Total water withdrawal by source. protection of water bodies. Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS.

EN9 Water sources significantly affected by withdrawal of water. The Company does not have any significant water withdrawal.

Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS. EN10 Percentage and total volume of water recycled and reused. The percentage of recycled and reused water in the total volume of withdrawn water was not calculated due to lack of accounting for additional water reuse cycles.

Aspect: Biodiversity

Location and size of land owned, leased, managed in, or adjacent to protected areas and ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Preservation of EN11 areas of high biodiversity value outside protected areas. Biological Diversity.

Description of significant impacts of activities, products, and services on biodiversity in ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Preservation of EN12 protected areas and areas of high biodiversity value outside protected areas. Biological Diversity.

Amount of land (owned or leased, and managed for production activities or extractive use) ММ1 ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Use of lands. disturbed or rehabilitated.

EN13 Habitats protected or restored. ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Use of lands.

ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Preservation of EN14 Strategies, current actions, and future plans for managing impacts on biodiversity. Biological Diversity.

The number and percentage of total sites identified as requiring biodiversity management ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Preservation of ММ2 plans according to stated criteria, and the number (percentage) of those sites with plans in Biological Diversity. place.

Number of IUCN Red List species and national conservation list species with habitats in EN15 Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS. areas affected by operations, by level of extinction risk.

Aspect: Emissions, Effluents, and Wastes.

In Russian Federation CO2 is not included in the List of harmful (contaminant) substances subject to registration and emission rating (Order of the Ministry of Natural Resources and Environment of the Russian Federation of December 31, 2010), and the Company does not have any separate registration of greenhouse emissions. EN16 Total direct and indirect greenhouse gas emissions by weight. In our strategic aspiration to comply with the international standards of corporate management, including those in the area of environment, corporate environmental experts are currently initiating the development of a methodology for calculation of greenhouse emissions and introduction of the results in the Company’s environmental reporting.

In Russian Federation CO2 is not included in the List of harmful (contaminant) substances subject to registration and emission rating (Order of the Ministry of Natural Resources and Environment of the Russian Federation of December 31, 2010), and the Company does not have any separate registration of greenhouse emissions. EN17 Other relevant indirect greenhouse gas emissions by weight. In our strategic aspiration to comply with the international standards of corporate management, including those in the area of environment, corporate environmental experts are currently initiating the development of a methodology for calculation of greenhouse emissions and introduction of the results in the Company’s environmental reporting.

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EN19 Emissions of ozone-depleting substances by weight. ALROSA does not use or emit ozone-depleting substances.

ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact in 2011. Air Protection EN20 NOx, SOx, and other significant air emissions by type and weight. Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS.

EN21 Total water discharge by quality and destination. Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS.

EN22 Total weight of waste by type and disposal method. Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS.

ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact. ММ3 Total amounts of overburden, rock, tailings, and sludges and their associated risks. Industrial Waste Treatment.

EN23 Total number and volume of significant spills. In 2011, the Company did not register any instances of significant spills of chemicals, oils or fuel.

Weight of transported, imported, exported, or treated waste deemed hazardous under EN24 the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported ALROSA does not import or export any industrial waste. waste shipped internationally.

Identity, size, protected status, and biodiversity value of water bodies and related habitats ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact. Environmental Monitoring. EN25 significantly affected by the reporting organization’s discharges of water and runoff. The Company’s discharges do not have any significant impact on water bodies.

Aspect: Products and Services

Initiatives to mitigate environmental impacts of products and services, and extent of im- At the moment the information on the environmental impact of rough and polished diamond prod- EN26 pact mitigation. ucts as well as goods made with their use is not available.

Rough and polished diamond products and their packaging are not returned to the Company for EN27 Percentage of products sold and their packaging materials that are reclaimed by category. their disposal, reuse or recycling.

Aspect: Compliance

Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS. In 2011, Prosecutor’s office of Mirny, the Republic of Sakha (Yakutia) launched three cases of administrative offence provided for in arts. 8.5, 8.21 of the Code of Administrative Offence of the Russian Federation against OJSC ALROSA in relation to the emission by Mirny MPD of harmful substances (hydrogen sulphide) from the stratal water of Mir pit that was mothballed in 2001. Monetary value of significant fines and total number of non-monetary sanctions for non- EN28 By the award of the Arbitration Court of the Republic of Sakha (Yakutia) in case No. A58– compliance with environmental laws and regulations. 6821 / 2011 of March 14, 2012, the resolution of the Office of the Federal Service for Supervision in the Sphere of Natural Resource Use in the Republic of Sakha (Yakutia) regarding the imposition of administrative penalty (administrative fine) as well as the recommendation of this supervisory body to eliminate the causes and conditions that facilitated the commission of the administrative offence were recognized as unlawful and cancelled in full.

Aspect: Transport

Significant environmental impacts of transporting products and other goods and materials EN29 ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact. Air Protection. used for the organization’s operations, and transporting members of the workforce.

Aspect: Overall

EN30 Total environmental protection expenditures and investments by type. ENVIRONMENTAL RESPONSIBILITY. Our Environmental Policy.

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LABOUR PRACTICES AND DECENT WORK PERFORMANCE INDICATORS

Aspect: Employment

SOCIAL RESPONSIBILITY. HR-STRATEGY. Picture of Personnel. The Company does not keep any record of the personnel by employment contract (permanent, LA1 Total workforce by employment type, employment contract, and region. temporary / fixed-term). Annual reporting data from ALROSA’s HR departments contain information on the number of employees terminated or recruited under fixed-term labour contracts. The Com- pany does not have any information on the number of personnel by type of employment contract.

SOCIAL RESPONSIBILITY. HR-STRATEGY. Picture of Personnel. LA2 Total number and rate of employee turnover by age group, gender, and region. Appendix 2. MAIN PERFORMANCE INDICATORS. Social Performance Indicators. Personnel structure, turnover and salary.

Aspect: Labor/Management Relations

SOCIAL RESPONSIBILITY. LA4 Percentage of employees covered by collective bargaining agreements. Our policies in the area of corporate social responsibility. Social Partnership in the Area of Labour.

SOCIAL RESPONSIBILITY. Minimum notice period (s) regarding significant operational changes, including whether it is LA5 Our policies in the area of corporate social responsibility. specified in collective agreements. Social Partnership in the Area of Labour.

Aspect: Health and Safety at Workplace

Percentage of total workforce represented in formal joint management-worker health and SOCIAL RESPONSIBILITY. Occupational health and safety. LA6 safety committees that help monitor and advise on occupational health and safety pro- The information on the total number of employees that take part in the activities of the production grams. control committees in subdivisions has not been consolidated at the moment.

In 2011, no instances of strikes exceeding one week have been registered in the Company's ММ4 Number of strikes and lock-outs exceeding one week’s duration, by country. subdivisions.

SOCIAL RESPONSIBILITY. Occupational health and safety. Rates of injury, occupational diseases, lost days, and absenteeism, and number of work- LA7 Rates of injury, occupational diseases, lost days by region were not calculated due to lack of infor- related fatalities by region. mation.

Education and counselling events regarding serious diseases in the regions of the Company’s Education, training, counseling, prevention, and risk-control programs in place to assist LA8 operation are carried out by healthcare authorities and public movements. ALROSA does not have workforce members, their families, or community members regarding serious diseases. any such programs at the moment.

LA9 Health and safety topics covered in formal agreements with trade unions. SOCIAL RESPONSIBILITY. Occupational health and safety.

Aspect: Training and Education

Appendix 2. MAIN PERFORMANCE INDICATORS. Social Performance Indicators. Personnel train- LA10 Average hours of training per year per employee by employee category. ing in 2011.

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SOCIAL RESPONSIBILITY. HR-STRATEGY. Personnel forming and developing stages. SOCIAL RESPONSIBILITY. Programs for skills management and lifelong learning that support the continued employ- HR-STRATEGY. Corporate social programs Housing Program LA11 ability of employees and assist them in managing career endings. SOCIAL RESPONSIBILITY. HR-STRATEGY. Corporate social programs. Private Pension Plan SOCIAL RESPONSIBILITY. HR-STRATEGY. Personnel motivation. Incentive and Awards

SOCIAL RESPONSIBILITY. LA12 Percentage of employees receiving regular performance and career development reviews. HR-STRATEGY. Personnel forming and developing stages.

Aspect: Diversity and Equal Opportunities

SOCIAL RESPONSIBILITY. Our policies in the area of corporate Composition of governance bodies and breakdown of employees per category according social responsibility. Equal Opportunities LA13 to gender, age group, minority group membership, and other indicators of diversity. SOCIAL RESPONSIBILITY. HR-STRATEGY. Picture of Personnel. Appendix 2. MAIN PERFORMANCE INDICATORS. Social performance indicators.

SOCIAL RESPONSIBILITY. Our policies in the area of corporate LA14 Ratio of basic salary of men to women by employee category. social responsibility. Equal Opportunities.

HUMAN RIGHTS PERFORMANCE INDICATORS

Aspect: Investment and Procurement Practices

Percentage and total number of significant investment agreements that include human HR1 At the moment, the Company does not evaluate this aspect in the activity of its business partners. rights clauses or that have undergone human rights screening.

Percentage of significant suppliers and contractors that have undergone screening on hu- HR2 At the moment, the Company does not evaluate this aspect in the activity of its business partners. man rights and actions taken.

Aspect: Non-Discrimination

SOCIAL RESPONSIBILITY. Our policies in the area of corporate HR4 Total number of incidents of discrimination and actions taken. social responsibility. Human Rights.

Aspect: Freedom of Association and Collective Bargaining

SOCIAL RESPONSIBILITY. Operations identified in which the right to exercise freedom of association and collective Our policies in the area of corporate HR5 bargaining may be at significant risk, and actions taken to support these rights. social responsibility. Social Partnership in the Area of Labour

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SOCIAL RESPONSIBILITY. Total number of operations taking place in or adjacent to Indigenous Peoples’ territories, Charity. Support to local communities. Investment Program for Regional Development ММ5 and number and percentage of operations or sites where there are formal agreements At the moment, the Company does not have any agreements with Indigenous (Minority) Peoples’ with Indigenous Peoples’ communities. communities.

Aspect: Child Labour

SOCIAL RESPONSIBILITY. Operations identified as having significant risk for incidents of child labour, and measures Our policies in the area of corporate HR6 taken to contribute to the elimination of child labour. social responsibility. Human Rights.

Aspect: Forced and Compulsory Labor

SOCIAL RESPONSIBILITY. Operations identified as having significant risk for incidents of forced or compulsory labor, Our policies in the area of corporate HR7 and measures to contribute to the elimination of forced or compulsory labor. social responsibility. Human Rights.

Aspect: Indigenous Rights

Total number of incidents of violations involving rights of indigenous people and actions In 2011, there were no instances of complaints related to violation of rights of indigenous and HR9 taken. minority peoples registered in the Company’s operation.

SOCIETY PERFORMANCE INDICATORS

Aspect: Community

SOCIAL RESPONSIBILITY. Nature, scope, and effectiveness of any programs and practices that assess and manage Charity. Support to local communities. SO1 the impacts of operations on communities, including entering, operating, and exiting. SOCIAL RESPONSIBILITY. Charity. Support to local communities Investment Program for Regional Development.

Number and description of significant disputes relating to land use, customary rights of In 2011, the Company did not register any complaints or legal actions in relation to land use, rights MM6 local communities and Indigenous Peoples. of local communities and indigenous peoples.

The extent to which grievance mechanisms were used to resolve disputes relating to land In 2011, the Company did not register any complaints or legal actions in relation to land use, rights MM7 use, customary rights of local communities and Indigenous Peoples, and the outcomes. of local communities and indigenous peoples.

Number and description of significant disputes relating to land use, customary rights of There are no companies or sites in ALROSA’s structure where artisan or small-scale mining takes MM8 local communities and Indigenous Peoples. place.

Sites where resettlements took place, the number of households resettled in each, and MM9 There are no instances of resettlement due to any reasons in the reporting period. how their livelihoods were affected in the process.

In 2011, no companies within ALROSA’s structure were liquidated. Liquidation of companies with MM10 Number and percentage of operations with closure plans. mass release of employees is not planned in the short-term period.

Aspect: Corruption

PATH OF SUSTAINABLE DEVELOPMENT. Ethics and sustainability in the global diamond market. SO2 Percentage and total number of business units analysed for risks related to corruption. Anti-Corruption Activity.

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PATH OF SUSTAINABLE DEVELOPMENT. Ethics and sustainability in the global diamond market. SO3 Percentage of employees trained in organization’s anti-corruption policies and procedures. Anti-Corruption Activity.

PATH OF SUSTAINABLE DEVELOPMENT. Ethics and sustainability in the global diamond market. SO4 Actions taken in response to incidents of corruption. Anti-Corruption Activity.

Aspect: Public Policy

SO5 Public policy positions and participation in public policy development and lobbying. PATH OF SUSTAINABLE DEVELOPMENT. Dialogues with stakeholders.

Aspect: Compliance

Monetary value of significant fines and total number of non-monetary sanctions for non- SO8 Appendix 3. ENVIRONMENTAL PERFORMANCE INDICATORS. compliance with laws and regulations.

PRODUCT RESPONSIBILITY PERFORMANCE INDICATORS

Aspect: Consumer Health and Safety

Life cycle stages in which health and safety impacts of products and services are as- The Company’s rough and polished diamond products due to their natural characteristics and lack PR1 sessed for improvement, and percentage of significant products and services categories of any information on potential harm to health or threat to safety are not evaluated in terms of their subject to such procedures. impact on consumer health and safety.

ENVIRONMENTAL RESPONSIBILITY. Managing Environmental Impact. Water use and protection MM11 Programs and progress relating to materials stewardship. of water bodies. Efficient consumption of power and power saving.

Aspect: Product and Service Labeling

Type of product and service information required by procedures, and percentage of signifi- PR3 ABOUT OUR COMPANY. Our Products. cant products and services subject to such information requirements.

Aspect: Marketing Communications

Programs for adherence to laws, standards, and voluntary codes related to marketing All events related to marketing communications, including advertising of ALROSA’s jewellery are PR6 communications, including advertising, promotion, and sponsorship. evaluated by relevant Company department as to their compliance with the current legislation.

Aspect: Compliance

Monetary value of significant fines for non-compliance with laws and regulations concern- In 2011, no fines for failure to comply with legislation and regulations concerning use of cure pro- PR9 ing the provision and use of products and services. ductions were imposed on the Company.

85 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Appendix 2

MAIN PERFORMANCE INDICATORS

Economic Performance Indicators

Main Finance and Economic Performance Indicators of ALROSA Group

Parameter UoM 2009 2010 2011 % vs 2010 % vs 2009

Diamond mining, total USD million 2,268.2 2,338.1 2, 567.5 109.8 113.2

thousand carat 32,791.4 34,331.4 34,551.4 100.6 105.4

ALROSA 1,661.3 1,728.9 1,961.6 113.5 118.1

22,944.5 24,040.5 23,982.7 99.8 104.5

OJSC ALROSA Nyurba 431.5 451.1 405.9 90.0 94.1

8,015.5 8,371.4 7,477.6 89.3 93.3

OJSC Almazy Anabara 152.1 136.3 175.4 128.7 115.3

1,337.0 1,415.3 2,534.4 179.1 189.6

OJSC Severalmaz 23.3 21.8 24.6 113.0 105.7

494.4 504.2 556.8 110.4 112.6

Production of polished diamonds and grinding powder USD million

Production of grinding powder 1.5 2.0 1.7 84.7 108.7

Production of polished diamonds 63.9 137.8 174.0 126.3 272.3

Revenue from sales of core products, total USD million 2,212.6 3,483.6 4,454.8 127.9 201.3

– rough diamonds 2,152.2 3,337.8 4,273.7 128.0 198.6

– polished diamonds 60.4 145.8 181.1 124.2 299.8

ALROSA 1,665.8 2,699.6 3,447.5 127.7 207.0

– rough diamonds 1,605.4 2,553.9 3,266.4 127.9 203.5

– polished diamonds 60.4 145.8 181.1 124.2 299.8

OJSC ALROSA Nyurba 379.9 536.9 726.2 135.3 191.2

OJSC Almazy Anabara 129.5 208.2 244.6 117.5 188.9

OJSC Severalmaz 37.4 38.9 36.5 93.8 97.6

Yield per ton ore USD / t 87.2 82.5 94.8 114.8 108.7

86 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Parameter UoM 2009 2010 2011 % vs 2010 % vs 2009

Net Profit1 USD million 74.0 248,4 1,004.4 404.4 1,356.6

Investments in construction of new underground mines USD million 242.7 206,9 236.2 114.1 97.3

Outstanding credits and loans as at the end of the period1 USD million 3,496.0 3,130,0 2,865.9 91.6 82.0

Dividend payment RUB million 249.9 1,833.2 7,438.6 405.8 2,976.6

Labour Costs2 RUB million 15,824.3 17,132.4 22,779.3 133.0 144.0

1 Information is provided in accordance with RAS for OJSC ALROSA 2 Information is provided for OJSC ALROSA

Social Performance Indicators3

Personnel structure, turnover and salary

Indicators UoM 2009 2010 2011

Number of personnel as at the end of the reporting period persons 32,562 31,026 30,903

Average headcount persons 33,238 31,291 30,295

Gender structure of personnel %

men 60.3 60.9 61.3

women 39.7 39.1 38.7

Age structure of personnel %

below 30 years old 19.8 20.9 21.7

30‑50 57.7 57.3 54.9

above 50 years old 22.5 21.8 23.4

Employee turnover % 9.4 9.1 9.8

Average monthly salary RUB thousand 40.2 45.9 62.9

3 The information provided in the tables of the sub-section refers to ALROSA

87 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Personnel Training in 2011

2009 2010 2011 Indicators Managers, Managers, experts Managers, experts Workers Workers Workers experts and clerks and clerks and clerks

Total number of personnel by category, persons 11,005 21,557 10,517 20,509 10,545 20,358

Average number of training hours, hours per 1 person 17.8 25.2 22.6 24.0 33.3 25.7

Training and skill development costs, RUB thousand per 1 person 2.8 1.7 2.3 2.1 2.7 3.5

Costs of implementation of social programs, RUB million

Program 2009 2010 2011

Corporate Social Programs

Health Promotion and Leisure 1,461.0 505.8 569.7

Health 161.7 146.7 156.0

Culture and Sports 79.3 72.4 140.0

Housing program (purchasing of housing) 89.6 281.0 140.0

Contributions to private pension fund Almaznaya Osen (Diamond Autumn) 945.1 476.0 1,476.3

Charity and Support of Local Communities

Financial Support and Sponsorship 229.4 449.0 1,062.0

including Investment Program for Regional Development 11.4 17.7 72.5

88 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Performance Indicators for Occupational Health and Safety

Results of Occupational Health and Safety Measures

Indicators 2009 2010 2011

Total number of incidents, including 30 24 24

– number of group incidents 1 1 1

– number of severe incidents 4 5 5

– number of fatal incidents 4 4 3

Total number of injuries (injured) 38 26 27

Occupational diseases (newly detected) 11 7 12

Rate of occupational injuries per 1,000 employees 1.14 0.83 0.89

Lost Time Injury Severity Rate (LTIFR) 0.16 0.11 0.09

Occupational disease rate (ODR) 0.05 0.03 0.04

Lost Time Injury Frequency Rate1 (LTISR) 10.9 14.4 11.4

1 In calculating lost days, calendar days of temporary disability related to occupational incidents were taken into account, calculation of ‘lost days’ starts from day 1 after the incident.

Cost of Occupational Health and Safety Measures

Indicators 2009 2010 2011

Cost of occupational health and safety measures, RUB million 354.4 385.0 458.0

Cost of occupational health and safety measures per one employee, RUB thousand 10.7 12.3 15.1

89 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Appendix 3

ENVIRONMENTAL PERFORMANCE RESULTS1

EN1 Materials used2

Basic materials, thousand m3

Indicators 2009 2010 2011

Mined Rock 30,226.8 36,943.2 35,493.7

including:

ore and sands 9,451.5 11,983.0 8,433.83

Company’s material costs of production and sales of core products, RUB million

Indicators 2009 2010 2011

Material costs, including: 20,932.7 25,676.5 29,440.3

raw and auxiliary materials, purchased semi-finished goods, consumables 4,214.4 6,647.0 7,713.5

fuel 5,267.3 5,188.2 5,159.2

power 5,111.4 5,826.8 5,894.2

1 The information contained in this Appendix has been prepared based on the data of the subdivisions located in the Republic of Sakha (Yakutia) 2 At the moment, the Company’s information on the amounts of other materials used in production in the reporting period has not been consolidated. 3 yield per ton ore in 2011 increased by 14.9 %

90 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix EN2 Percentage of materials used that are recycled input materials

Wastes re-used for production of core products, thousand ton

Indicators 2009 2010 2011

Overburden rock 989.103 1,667.500 5,240.600

Overburden rock, non-salinized - - 311.426

Processing tailings 251.600 273.200 311.200

Lime and dolomite in lumps (overburden rock) - - 163.000

Spent oils 1.755 1.419 0.899

Spent tyres 0.015 0.171 0.008

Spent tyre casings 0.426 0.597 0.553

Black metal scrap 0.123 0.001 0.110

EN3 Direct energy consumption by primary energy source

Energy consumption by primary source, thousand GJ

Indicators 2009 2010 2011

Electric power generated by GES 5,749.5 5,744.9 5,461.3

Natural gas 7,286.4 7,772.4 6,171.7

Oil 2,116.6 1,467.6 629.2

Diesel fuel 1,109.7 854.0 830.7

Coal 398.4 206.4 165.2

EN4 Indirect energy consumption by primary source

Indirect energy consumption for heat generation by primary source, thousand GJ

Indicators 2009 2010 2011

Boiler houses on coal 249.8 101.4 102.2

Boiler houses on liquid fuel 1,844.8 1,290.7 654.6

Boiler houses on gas 5,443.1 5,565.5 5,147.5

Electric boiler houses 2,264.0 2,067.6 1,787.3

91 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix EN8 Total water withdrawal by source

Total water withdrawal by source in 2011, million m3

Indicators 2011

Water withdrawal from natural sources, including: 27,028

River Irelyakh 0,041

River Malaya Botuobiya 0,339

Irelyakh water reservoir 12,067

Sytykan water reservoir, hydro system on River Sytykan 5,603

water reservoir on Oyuur-Yurege stream 6,953

Water reservoir on River Markha 1,670

buffer water reservoir on the left tributary of River Khannya 0,248

wells 0,047

River Lena 0,022

River Olenek 0,001

artesian well No. 116‑E 0,014

Lake Sordonookh 0,006

River Vilyuy 0,011

River Taas-Yuryakh 0,004

River Bolshaya Botuobiya 0,002

Heat and water supply company networks 1,345

Other companies 0,210

Total water withdrawal 28,583

92 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix EN10 Percentage and total volume of water recycled and reused

Total volume of water recycled and reused, million m3

Indicators 2009 2010 2011

Mineralized water withdrawal from underground reservoirs 13.78 12.63 12.07

Reused water supply 64.43 76.63 77.63

Recycled water supply 145.36 121.56 153.46

Total water withdrawal 31.32 30.38 28.58

EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk

PROTECTION LEVEL Type International Union for 1 Red Book of the Russian Red Book of the Republic Threat Level under IUCN Conservation of Nature Federation of Sakha (Yakutia)

Moor Frog +

Viviparous lizard +

Baikal Teal + LC + +

Lesser White-fronted Goose + LC + +

Peregrine Falcon + LC +

White-tailed Eagle + LC + +

Golden Eagle + +

Osprey + +

Hooded Crane + LC + +

Eastern Curlew + LC + +

Bewick’s swan + +

Whooper Swan +

Terek Sandpiper +

Red-footed Falcon +

1 LC threat rate denotes the categories that raise the least fears in accordance with the Categories and criteria of the Red List of IUCN, version 3.1, 2000. Red Books of the Russian Federation and the Republic of Sakha (Yakutia) do not include any information regarding threat to the existence of the species.

93 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix PROTECTION LEVEL Type International Union for 1 Red Book of the Russian Red Book of the Republic Threat Level under IUCN Conservation of Nature Federation of Sakha (Yakutia)

Common Crane +

Gadwall +

Little Curlew +

Altai mole +

European otter +

Musk Ox +

EN20 NOх, SOх and other significant air emissions by type and weight, tons

Indicators 2009 2010 2011

Contaminant emissions, total including: 8,114.1 8,158.9 8,592.4

Solids 2,252.3 2,537.4 3,029.2

Gaseous and liquid substances, including: 5,861.8 5,621.5 5,563.2

Sulphur dioxide 944.9 721.6 502.5

Carbon monoxide 2,868.1 2,878.3 3,037.1

Nitrogen oxides (calculated as NO2) 1,455.1 1,461.6 1,444.7 Hydrocarbons (without volatile organic compounds) 207.9 141.9 149.5

Volatile organic compounds 208.8 257.5 291.2

Other gaseous and liquid contaminants 177.0 160.6 138.2

94 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix EN21 Total water discharge by quality and destination, million m3

Indicators 2009 2010 2011

Discharge into surface waters, total 22.32 19.84 16.67

Contaminated (without treatment) 0.00 0.77 0.60

Contaminated (insufficiently treated) 22.19 19.04 16.05

Treated pursuant to standards 0.13 0.03 0.02

Water discharge into holding basins of tailings storage, settling pools 4.41 5.29 3.87

Water discharge into underground horizons 14.50 15.28 15.44

Water discharge to terrain 0.13 4.02 0.12

EN22 Total weight of waste by type and disposal method

Information on generation, use, neutralization and disposal of industrial and household waste in companies of ALROSA in 2011

Total Wastes by hazard class, thousand ton Indicators thousand ton class 1 class 2 class 3 class 4 class 5

Wastes stock as at the beginning of the reporting year 5,015.053 0.000 0.026 0.191 5.727 5,009.109

Waste generation during the reporting period 86,463.773 0.015 0.018 14.082 163.540 86,286.118

Received from other companies 0.181 0.000 0.094 0.077 0.010 0.000

Wastes used 6,053.560 0.000 0.000 2.416 80.694 5,970.450

Wastes neutralized 1.574 0.000 0.009 0.006 1.559 0.000

Transferred to other companies, including: 99.675 0.014 0.110 11.544 80.315 7.692

for use 2.778 0.000 0.000 0.212 0.000 2.566

for neutralizations 87.564 0.014 0.110 11.324 75.689 0.427

for storage 1.964 0.000 0.000 0.004 0.140 1.820

for burial 7.369 0.000 0.000 0.004 4.486 2.879

Waste disposal in own facilities for burial 78,387.540 0.000 0.000 0.007 0.360 78,387.173

Wastes stock as at the end of the reporting year 6,936.658 0.001 0.019 0.377 6.349 6,929.912

95 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Indicators 2009 2010 2011

Fines related to violation of environmental legislation, RUB thousand 16.0 70.5 4.01

1 A penalty (fine) of RUB 4.0 thousand was imposed on a Company officer, which is not significant for OJSC ALROSA

Information on environmental payments by ALROSA companies

Indicators 2009 2010 2011

Payment for admissible emissions (discharges) of contaminants and disposal of industrial and household waste, RUB million: 36.5 29.5 44.9 including:

for discharges into water bodies 1.4 0.9 0.7

for emissions 1.7 1.9 1.9

for disposal of industrial and household waste 33.4 26.7 42.3

Payment for above-level emissions (discharges) of contaminants and disposal of industrial and household waste, RUB million: 39.0 99.7 25.2

for discharges into water bodies 29.3 22.5 12.3

for emissions 3.2 2.4 2.7

for disposal of industrial and household waste 6.5 74.8 10.2

96 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Glossary of Terms and Abbreviations

Charitable activity means company activity involving Corporate social program means the company’s stability, social welfare and environmental stability targets disinterested transfer (free of charge or on beneficial voluntary social, economic and environmental activity included in its mission or strategic development plans. terms) of property to citizens or legal entities, including that has consistent nature, is related to business mission monetary funds, disinterested performance of work, and strategy and is aimed at satisfying the requests of Occupational health and safety means a system for provision of services, rendering other support stakeholders. ensuring health and safety of employees during their work activities, including legal, social and economic, Safe Working Conditions mean working conditions Collective Bargaining Agreement means a legal act that administration and technical, hygiene and technical, where the impact of harmful or hazardous industrial governs social and employment relations in the company healthcare and prophylactic, rehabilitation and other factors is excluded, or the level of such impact does not and sets out benefits and guarantees provided at the activities. exceed hygiene standards. employer’s own expense. Environmental activities and preservation of resources Interaction with stakeholders means company activities Corporate values mean the elements of corporate means an area of the company’s programs that are aimed to identify the expectations and concerns of culture that have a special value in the mind of company carried out upon the company’s initiative in order to stakeholders and have them involved in the decision- employees and therefore govern their social conduct. reduce the environmental impact. making process. Mission means the meaning of existence, company Personnel management processes mean an open Global Reporting Initiative means the independent purpose that distinguishes it from other similar companies. personnel management system that includes all stages organization with a mission to develop and distribute of interaction between the employees and the company the Guidelines for reporting in sustainable development Motivation means a way to influence the growth starting from employee recruitment, adaptation and applied internationally. in performance and labour efficiency; a process of retention in the company and up to their retirement. stimulating employee or a group of employees to perform Stakeholders mean physical persons and legal entities, the activities aimed at achieving the company targets. Programs for support of development of local or groups of entities that influence, or are influenced by, communities mean an area of the company’s social the company’s operations and have the right to bring Young experts mean university of vocational school programs that are carried out on a voluntary basis and direct claims against the company pursuant to legislation graduates with a work record after graduation not are aimed to contribute to the development of the local and international conventions. Stakeholders include exceeding three years. community. company shareholders, investors, employees, suppliers, contractors, consumers, trade unions and other public Corporate Social Responsibility Report (non-financial Occupational Disease means an employee’s disease organizations, state authorities and local government, report) means a comprehensible, accurate and balanced that originated and developed under the influence of mass media in the area of the company’s operation, etc. description of the main aspects of the company’s a regular and long-term impact of industrial factors operations and the results achieved in the areas related to attributable to this profession, or a complex of working Corporate social responsibility means a philosophy of the values, targets, sustainable development policy related conditions characteristic only of the specific production. conduct and a concept used by business community, to the issues key stakeholders may be most interested companies and individual business players to build their in. This is a public tool for informing shareholders, Risk means a threat of a negative impact of the external activities aimed at satisfying stakeholders’ expectations employees, partners and other stakeholders on how and and internal factors upon achieving the company’s for the purpose of sustainable development. in what steps the company implements the economic corporate targets.

97 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Certification means a confirmation of the compliance Standard means a regulatory and methodological USO means United Selling Organization of quality parameters to the level required by a quality document establishing a package of norms, rules and standard. requirements to the object of the standardization. ISO means International Standardization Organization

GRI Reporting System means a generally accepted Company’s structural subdivisions mean the CSC means Culture and Sports Centre system of non-financial reporting in the area of sustainable subdivisions of the Company’s branches, subsidiaries, development based on the company’s economic, affiliates and industry divisions involved in manufacturing CSR means Corporate Social Responsibility environmental and social performance indicators. The company goods and provision of company services System includes Sustainable Development Reporting and having own organizational structure, plans and KP means Kimberley Process Guidelines, technical protocols and industry supplements. employees. ICC means Industrial Control Commission Social Reporting means an informational reflection of the Sustainable Development means a concept developed company’s corporate responsibility using regular internal by UN and acknowledging the role of business in MMPD means Mirny Mining and Processing Division and external reports in the areas related to sustainable ensuring sustainable development of the community. The development. global community development concept that accounts for IFRS means International Financial Reporting Standards the interests not only of the living but also of the future Company’s social policy means the activities of generations (proposed at the Global Summit in Rio de IUCN means International Union for Conservation of employers, management and hired employees aimed at Janeiro in 1992). Nature maintaining and changing their social status, satisfying social needs, exercising their social rights and social ALROSA means Open Joint Stock Company ALROSA MTR means Material and technical resources guarantees, providing social services and ensuring employees’ social security. APEC means the Agency for Political and Economic PPF Almaznaya Osen (Diamond Autumn) means Communications Private Pension Fund Almaznaya Osen (Diamond Autumn) Social Partnership means the interaction between employees (representatives of the employees), employers AMPD means Aikhal Mining and Processing Division NIGP means Specialized Geo-Scientific Research (representatives of the employers), state authorities and Enterprise local government aimed at ensuring the agreement of the WTO means World Trade Organization employee and employer interests in the issues related to R&D means research and development operations regulation of labour relations and other relations directly WFDB means World Federation of Diamond Bourses related thereto. NOTs IRES means Scientific and Educational Centre GDP means Gross Domestic Product Innovation Development of Economic Systems Social Programs mean the Company’s voluntary activities involving personnel formation and development, University means a higher educational institution NTTs PO BELAZ means Science and Technical Centre of establishing favourable working conditions, development Industrial Equipment BELAZ of corporate culture, as well as support of the local MMD means Mining and Metallurgical Division communities and charity; the activities are regular, related KB MAK-bank means Mirny Commercial Bank MAK- to business structure and aimed at satisfying balanced EE means Exploration Expedition bank (Limited Liability Company) requirements of its stakeholders. From the management point of view, a social program is a package of measures GES means Hydroelectric power plant OJSC means Open Joint Stock Company linking the resources, performers and implementation timeframe and ensuring efficient resolution of internal MPD means Mining and Processing Division UAE means United Arab Emirates (internal corporate program) and external corporate tasks (external corporate program). VMI means Voluntary medical insurance EP means Environmental Protection

CJSC Closed Joint Stock Company PNO means Production and Science Association

98 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix PM means Production Management IC ALROSA means Insurance Company ALROSA HUA means Housing and Utilities Agency

GRI (Global Reporting Initiatives) Guidelines mean SMI means Mass Media URAN UPKON RAN means the Ural Branch of the Sustainable Development Reporting Guidelines elaborated Russian Academy of Science Research Institute of by Global Reporting Initiatives, version 3.0 QMS means Quality Management System Comprehensive Exploitation of Mineral Resources of the Russian Academy of Science RF means the Russian Federation EMS means Environmental Management System UGGU means Ural State Mining University RS (Y) means the Republic of Sakha (Yakutia) CIS means the Commonwealth of Independent States UKK means Training School RASO means Russian PR Association OHSMS means Occupational Health and Safety Management System FFMS means Federal Financial Markets Service MEC means Managers, Experts and Clerks SPGTI (TU) means Saint Petersburg State Technological TsPK means HR Training Centre USA means the United States of America Institute (Technical University) RSA means the Republic of South Africa ST means Specialized Trust TRK Almazny Kray means Broadcasting Company Almazny Kray

99 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Feedback: Your oppinion counts!

1. Did you learn anything new about the Company from this Report? yes no

If so, what exactly? Thank you!

Completed form to be sent

by fax (411-36) 3‑19‑92 2. Your rating: or by mail: 39 Ul. Lenina, Mirny, the Republic of Sakha (Yakutia) 678170, Completeness of the information 5 4 3 2 Yakutniproalmaz Institute Wordings and style 5 4 3 2 of OJSC ALROSA, Design and drawings 5 4 3 2 Social and Economic Studies Lab, or by e-mail: [email protected] General score 5 4 3 2

5 – excellent, 4 – good, 3 – adequate, 2 – inadequate

3. What kind of additional information would you like to see in the next ALROSA’s Sustainability Report? The drawings made by pupils of the arts section of the Children Arts School of Mirny were used in this report.

4. Your comments, proposals and wishes:

5. Your relationship with the Company: Employee Supplier Shareholder

Consumer Representative of a non-profit organization

Representative of mass media Resident of the territory of the Company’s location

Other (to be specified)

100 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix Contacts

OJSC ALROSA Office: 6 Ul.Lenina, Mirny, Republic of Sakha (Yakutia) 678170 Tel.: (411-36) 3-01-80 Fax: (411-36) 3-04-51, (495) 745-80-61 E-mail: [email protected]

Office: 10-12, 1-st Kazachy per., Moscow 119017, Russian Federation Tel.: (495) 620-92-50, (495) 662-36-26 fax: (495) 411-75-15 E-mail: [email protected]

Office: 8 Ul.Ammosova, Yakutsk, Republic of Sakha (Yakutia) 677018 Tel.: (411-2) 42-18-15 fax: (411-2) 42-33-28 E-mail: [email protected]

Corporate Internet Site: http://www.alrosa.ru

Administration of ALROSA Office: 6 Ul.Lenina, Mirny, Republic of Sakha (Yakutia) 678170 Social Development Department Tel.: (411-36) 3-47-60 GR and PR Department Tel.: (411-36) 9-02-62

Yakutniproalmaz Institute Office: 39 Ul.Lenina, Mirny, Republic of Sakha (Yakutia) 678170 Social and Economic Studies Lab Tel.: (411-36) 9-08-28 [email protected]

101 Sustainability Report OJSC ALROSA for 2011 | www.alrosa.ru Appendix