An Alrosa press release this week said that at the end of last month, the shareholder board authorized the issue of a rouble-denominated bond for up to Rb44 billion ($1.46 billion) to reduce debt and develop the new Severalmaz diamond mine.

Finding foreign investors willing to take the risks of subscribing their money to Russian controlled diamond projects located in fareastern and northwestern Russia, as well as in Angola, may prove difficult.

Earlier attempts by predecessors of CEO Fyodor Andreyev to recruit a strategic partner have included De Beers, Lev Leviev, Beny Steinmetz, and a notable Indian diamond cutting group in Antwerp.

Developing a diamond mine in the northwestern Karelian Craton area - Arkhangelsk, Murmansk and Karelian regions - may also prove difficult and risky in light of the litigation over allegedly stolen mining rights at the Grib pipe; De Beers's withdrawal from two ventures in the area; and the failed Everfor junior flotation on London's Alternative Investment Market.

Alrosa’a spokesman Andrei Polyakov made a statement this week to reporters that Alrosa is considering spinning off three of its diamond mining units, and selling a minority shareholding in each at an initial public offering (IPO).

According to a news agency, Polyakov said: "It’s easier to sell shares of separate mining units as ZAO Alrosa itself has some legal constraints. It currently has a legal form of closed joint stock company, which is not suitable for share sale.”

The Moscow business daily Vedomosti reported Polyakov as saying Alrosa "can place at stock exchanges the shares of the subsidiaries Alrosa-Nyurba, Alrosa- Africa, and Severalmaz." No choice of stock exchange or volume of shares to be sold has been made, the newspaper reported.

Polyakov told PolishedPrices: “Such issues will be discussed no sooner than at the end of February.”

A press release by Alrosa, issued on January 18, said Alrosa is considering the possibility of raising private investments on capital markets, as well as through placement of exchange-traded securities of Alrosa diamond mining subsidiaries - OJSC ALROSA–Nyurba, OJSC Severalmaz and OJSC ALROSA-Africa - and by using OTC (over-the-counter) instruments.

Company papers show that Alrosa owns 88% of Alrosa-Nyurba, while the Sakha administration owns 12%. The parent company stake in Severalmaz is 95%.

Alrosa-Africa does not appear in Alrosa's financial statements, and may be planned as a new holding company for Alrosa's producing and developing mines in Angla, where it owns a 33% stake in the Catoca diamond mine, and a 44% stake in Escom-Alrosa, which in turn owns 45% of the Luo mine project, which is still being completed (20% of the mine). Other Alrosa assets in Namibia and elsewhere in Africa - mostly in the prospecting stage - may also be included in Alrosa-Africa.

The Nyurba diamond mine is the most active and profitable of the three. According to Alrosa's 2008 report, it produced $538.5 million worth of diamonds; this aggregate represents 23% of Alrosa's Russian mine total in terms of value, and 20% in terms of mined volume.

The Catoca diamond mine generated sales revenues of Rb14.5 billion in 2008, according to the last Alrosa report. Revenues at the Luo project for that year were just Rb695 million.

The trial balloon for the spinoff and IPO of the three units - Nyurba, in fareastern Sakha; Angola, in southwest Africa; and in Arkhangelsk, northwestern Russia - is one of several options facing Andreyev and the federal and regional government officials on the Alrosa supervisory board, for reducing the company's sizeable debts.

These debts have been reported at Rb112 billion ($3.73 billion) as of December 31, representing a reduction of 32% from Rb163.7 billion reported by Alrosa in its financial statements for 2008. Debt reduction is one of the priorities for Andreyev since he replaced Sergei Vybornov as chief executive in July of 2009.

In Vybornov's last year, Alrosa's borrowings had almost doubled from Rb93.4 billion at the end of 2007.