July 6, 2016 / 9:56 AM / 3 years ago

UPDATE 2-Russia starts sale of stake in diamond producer Alrosa

(Updates after sale launched, adds new detail)

MOSCOW, July 6 (Reuters) - Russia on Wednesday launched the sale of a stake in diamond producer Alrosa as part of a privatisation programme to help to bolster government finances which have been hit by weak oil prices.

Alrosa is the world’s largest producer of rough diamonds in carat terms. Together with Anglo American’s unit De Beers, they produce about half the world’s rough diamonds.

Russia, trying to keep its budget deficit within 3 percent of gross domestic product, is also planning to sell stakes in other companies, including Rosneft and Bashneft and VTB Bank.

Alrosa said the process to sell 10.9 percent of its ordinary shares owned by the government had been launched, confirming what sources had told Reuters earlier.

Alrosa’s market capitalisation is up around 23 percent so far this year as the diamond market has improved. As a result, the market value of the 10.9 percent stake is around 55 billion roubles, based on Reuters’ calculations.

Diamond sales stagnated in 2015, hit by a slowdown in the Chinese economy. But producers are seeing scope for recovery. Alrosa forecasts global demand for diamonds rising by up to 2 percent in 2016.

The government has previously said it aimed to get more than 60 billion roubles ($928 million) from selling 10.9 percent of its 44 percent stake in Alrosa.

Economy Minister Alexei Ulyukayev said proceeds from the sale would contribute to general budget expenditure.

Two financial market sources said the books on the Alrosa share placement were expected to close on July 8 but that they could close earlier.

One source said the deal’s organisers expected the shares being sold would start trading on July 11.

Shares in Alrosa fell 1.3 percent in Moscow on Wednesday to close at 68.71 roubles per share.

Two sources, one financial and one familiar with the process, said the Russian Direct Investment Fund (RDIF) together with foreign funds could buy part of the stake.

Russian pension funds and some of Alrosa’s current minority shareholders could also buy shares, the financial source said.

The government of the Yakutia region and its districts, where Alrosa’s main producing assets are based in Russia’s far east, will keep their 33 percent stake in the company.

Alrosa’s free-float is currently at 23 percent. In 2013, Russia sold a 16 percent stake in it to the market, raising $1.3 billion.

$1 = 64.6368 roubles Reporting by Anastasia Lyrchikova, Olga Popova, Polina Devitt and Darya Korsunskaya; Writing by Polina Devitt and Alexander Winning; Editing by Elaine Hardcastle and Jane Merriman

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